Cape Verde

Politics:

• Analysis

  Cape Verde politics: Quick View - Local election results are another blow f

  Event

  Cape Verde's parliamentary opposition party, the MPD, scored a strong victory against the ruling PAICV in local elections held on July 1st.

  Analysis

  The poll passed off without major incident, apart from some complaints of abuse filed by both the MPD and the PAICV, which will not affect the outcome. Following the vote, the MPD now holds 13 out of 22 municipalities, one more than four years ago, while the PAICV holds eight, from ten previously. The final municipality, of Sal island, went to Jorge Figueiredo, an independent candidate, who ran for the GIMCS, a small local party. The MPD did not present any candidate in Sal and backed Mr Figueiredo.

  The result is significant insofar as local politicians in Cape Verde have significantly more power than in other parts of Africa, being currently allotted 10% of the national budget, a figure expected to increase to 25% by 2016.

  It is also symbolic politically. The prime minister, Jose Maria Neves, was at the forefront of the PAICV's campaign, directly selecting some candidates and transforming the poll into a plebiscite on his policies. The PAICV's defeat, which comes on top of the election of an MPD president last year, is a personal defeat for the prime minister. After the demonstrations on June 1st, this popular disavowal will put even more pressure on him, from both within and outside his party.

  Looking forward, the extension of the MPD's local base will constitute a substantial asset when it comes to the next parliamentary poll (due in 2016). Meanwhile, as the PAICV is looking increasingly disadvantaged in Cape Verde's political cohabitation, tensions with the MPD will escalate, which could lead to blockages and slower implementation of reforms.

  July 05, 2012

• Background

  Cape Verde: Political forces

  Since 1991 Cape Verde has had a multiparty system, dominated by the PAICV and the MPD, with other parties having failed to make a substantial or lasting impact. Only one other opposition party, Uniao Caboverdiana Independente e Democratica (UCID), holds seats in the National Assembly.

  The return of the PAICV

  The PAICV is the historical party of independence, having fought Portuguese colonialism and then ruled Cape Verde as a one-party Marxist state from 1975 to 1991. After losing power, an ageing old-guard leadership was displaced by younger and more pragmatic members in July 2000 when their leader, Mr Neves, became the new party president, for the first time providing a credible alternative to the MPD. The party emerged from ten years in the political wilderness to win the elections in 2001-02, and has since then established a solid record of competent governance.

  The MPD

  The MPD was formed in opposition to the one-party state, and drew its leadership from among professionals and Cape Verdeans in exile in Portugal. During its ten years in power from 1991 the party promoted economic and constitutional reforms, which moved Cape Verde towards democratic pluralism and substantial economic and social gains. It remains the main opposition party. Its defeat in 2001 was the result of a divisive succession battle, an economic crisis brought on by fiscal mismanagement and the perception among ordinary Cape Verdeans that the party had become distant from their concerns. Under its new leader, Mr Lopes, the MPD won a symbolic victory in the March 2004 municipal elections, raising hopes that the party could return to power in the 2006 legislative and presidential elections. However, it was resoundingly defeated by the PAICV in both elections, leading to Mr Lopes's replacement by Mr Santos. The party is undergoing a painful period of self-examination in order to determine how it can win back the electorate's support.

  Other parties

  The only other party with seats in the National Assembly, the UCID, is led by Antonio Delgado Monteiro, who was previously elected to Mindelo's city council in the 2004 local elections. The UCID ran as part of the ADM in the 2001 elections, along with the PCD and the PTS. The alliance has since been disbanded, and neither the PCD nor the PTS ran in the 2006 election. The PRD, which received less than 1% of the vote in the 2006 legislative election, is led by Victor Fidalgo, who is also president of the Agencia Cabo-verdiana de Investimentos. The Partido Socialista Democratico, which received just 0.4% of the vote in the 2006 election, is led by Joao Alem.

  Legislative election results
  	1995		2001		2006
  	Seats	% of vote	Seats	% of vote	Seats	% of vote
  Partido Africano da Independencia de Cabo Verde	21	29.8	40	47.3	41	52.3
  Movimento para a Democracia	50	61.3	30	39.8	29	44.0
  Uniao Caboverdiana Independente e Democratica(a)	-	-	-	-	2	2.6
  Partido da Convergencia Democratica(a)	1	6.7	2	6.0	-	-
  Partido da Renovacao Democratica	-	-	0	3.2	0	0.6
  Partido Socialista Democratico	-	-	0	0.4	0	0.4
  Total(b)	72	100.0	72	100.0	72	100.0
  Turnout	-	76.2	-	55.0	-	54.0
  (a) Ran in 2001 as part of the Alianca para a Mudanca, which also included the Partido de Trabalho e da Solidariedade. (b) Includes blank and void votes.
  Source: Economist Intelligence Unit.

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  February 26, 2007

• Structure

  Cape Verde: Political structure

  Official name

  República de Cabo Verde

  Form of state

  Unitary republic

  Legal system

  Based on the constitution adopted in September 1992; revised in July 1999 to give more powers to the president

  National legislature

  National Assembly; 66 deputies are elected in Cape Verde by universal suffrage under a system of proportional representation, and six are elected by Cape Verdeans living abroad (two each for Africa, the Americas and the rest of the world); all serve five-year terms

  National elections

  February 2011 (legislative), August 2011 (presidential); the next presidential and legislative elections are due in 2016

  Head of state

  President, elected for a five-year term by universal suffrage; currently Jorge Carlos Fonseca

  National government

  The prime minister and his appointed Council of Ministers; the government was reshuffled in March 2011

  Main political parties

  Two main political parties: the ruling party, Partido Africano da Independência de Cabo Verde (PAICV), and the main opposition, Movimento para a Democracia (MPD); other, smaller opposition parties include União Caboverdiana Independente e Democrática (UCID), Partido do Trabalho e da Solidariedade (PTS), Partido Democrático Cristão (PDC), Partido da Renovação Democrática (PRD), and Partido Social Democrático (PSD)

  Key ministers

  Prime minister & minister for state reform: José Maria Neves

  Communities: Maria Tavares Fernandes

  Culture: Mario de Sousa Mendes

  Education & sport: Fernanda Maria de Brito Marques

  Environment, housing & territorial management: Antero Veiga

  Finance and planning: Cristina Duarte

  Foreign affairs: Jorge da Silva Borges

  Health: Cristina Fontes Lima

  Higher education, science & innovation: Antonio Correia e Silva

  Industry, tourism & energy: Humberto Santos de Brito

  Infrastructure & maritime resources: Sara Maria Duarte Lopes

  Internal administration: Marisa Morais

  Justice: Jose Carlos Lopes Correia

  Labour, family & social solidarity: Madalena Brito Neves

  Rural development: Eva Verona Teixeira Ortet

  Youth, employment & human resources: Janira Isabel Fonseca Hopffer Almada

  Central bank governor

  Carlos Burgo

  October 03, 2012

Economy:

• Background

  Cape Verde: Population

  Population, 2006
  Population, mid-year ('000)	519
  Population growth rate (2005-10; annual av; %)	3.5
  Fertility rate (children per woman)	3.49
  Life expectancy (years)	71.0
  Projected population in 2050 ('000)	1,002
  Sources: UN Population Fund, State of World Population 2006.

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  Improving human development

  The 2006 Human Development Index compiled by the UN Development Programme (UNDP), which combines indicators of social wellbeing such as income, literacy and life expectancy, ranked Cape Verde 106th out of 177 countries, based on data for 2004. Of the 43 countries of Sub-Saharan Africa included, this is the third-highest ranking, behind Seychelles and Mauritius. In 2008 the General Assembly of the UN Conference on Trade and Development is expected to confirm that Cape Verde has been upgraded to medium-developed country (MDC) status from least-developed country (LDC) status. Although Cape Verde's ranking is better than other African countries with similar or higher income per capita, such as Gabon and Equatorial Guinea, it compares poorly with some countries from other regions with similar income per capita, highlighting the country's need to expand its education system.

  February 26, 2007

• Structure

  Cape Verde: Economic structure

  Economic structure: Annual indicators

  	2008a	2009a	2010a	2011b	2012b
  GDP at market prices (CVEsc bn)	125.0b	127.1b	138.4b	151.0	160.6
  GDP (US$ m)	1,660.5b	1,601.2b	1,662.3b	1,903.6	1,857.8
  Real GDP growth (%)	6.2b	3.7b	5.4b	5.2	4.8
  Consumer price inflation (av; %)	6.8	1.0	2.1	4.5	2.4
  Population ('000)	487	492	496	501	505
  Exports of goods fob (US$ m)	115.7	93.9	135.8	211.0	205.1
  Imports of goods fob (US$ m)	830.7	770.8	818.0	1,059.9	1,037.8
  Current-account balance (US$ m)	-205.5	-247.6	-212.9	-287.8	-257.9
  Foreign-exchange reserves excl gold (US$ m)	361.0	398.0	382.0	339.0a	393.5
  Exchange rate (av) CVEsc:US$	75.28	79.38	83.26	79.32	86.42
  a Actual. b Economist Intelligence Unit estimates.

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  Origins of gross domestic product 2006	% of total	Components of gross domestic product 2005	% of total
  Agriculture & fishing	9.6	Total consumption	96.1
  Industry	16.6	Gross domestic investment	37.9
  Services	73.8	Exports of goods & services	16.9
  		Imports of goods & services	50.9
  Principal exports 2006	US$ m	Principal imports 2006	US$ m
  Fuel	68.7	Consumer goods	165.0
  Fish & crustaceans	7.2	Intermediary goods	105.8
  Clothing	6.7	Capital goods	58.8
  Shoes & shoe parts	2.5	Petroleum	32.6
  Main destinations of exports 2011a	% of total	Main origins of imports 2011a	% of total
  Spain	65.9	Portugal	37.0
  Portugal	18.9	Netherlands	25.4
  Bermuda	2.2	Spain	7.0
  US	2.2	Italy	5.2
  a Derived from partners' trade returns.

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  October 03, 2012

• Outlook

  Cape Verde: Country outlook

  Cape Verde: Country outlook

  FROM THE ECONOMIST INTELLIGENCE UNIT

  OVERVIEW: Cape Verde is set to remain among the most stable countries in Africa in the 2013-14 forecast period. A small risk of social unrest exists owing to high unemployment, rising living costs and contagion from Europe's economic woes. The Partido Africano da Independência de Cabo Verde (PAICV), which has a majority in parliament, and the main opposition party, Movimento para a Democracia (MPD), which has the presidency and a majority of municipalities, will continue to share power. After holding up at 4.8% in 2012, despite Europe's economic slowdown, Cape Verde's economic growth rate is expected to pick up to reach 5% in 2014, owing to public investment and a strong tourism sector. The fiscal deficit is forecast to narrow from 10% of GDP in 2012 to 9.5% of GDP in 2013 and 9% of GDP in 2014, on the back of better tax collection, fiscal prudence and solid economic growth. Average inflation will moderate from 2.4% in 2012 to 2.3% in 2013, before increasing to 2.5% in 2014 in line with trends in import prices. The current-account deficit is forecast to narrow from an estimated 13.9% of GDP in 2012 to 12.7% of GDP in 2013-14, as the services and transfer surpluses will only partially offset a high trade deficit.

  DOMESTIC POLITICS: The Economist Intelligence Unit expects Cape Verde to remain among the most stable countries in Africa in 2013-14. Real GDP growth is set comfortably to outstrip the increase in the population, implying a rise in living standards during the period. Moreover, inter-ethnic strife, which is a major cause of instability elsewhere in the continent, is unlikely given the country's relative ethnic homogeneity. The smooth handover of the presidency to Jorge Carlos Fonseca of the MPD, in August 2011 reflects the strength of the country's democracy. However, there are small but significant risks to this outlook. The risk of policy paralysis has risen following the presidential election in August 2011, as the opposition president may not support the PAICV's agenda in those areas where he has influence, as demonstrated by his attempt to veto a controversial ecological tax law in July 2012. This risk is reinforced by the MPD's control of 13 out of 22 municipalities following local elections in July 2012, which created an unprecedented system of political cohabitation in the country. Another risk is that price rises-combined with a public-sector pay freeze, a drop in remittances, high unemployment and water shortages-could provoke outbursts of civil unrest, such as the protests witnessed in the capital, Praia, in mid-2011. Most importantly, there are large risks to the rosy economic outlook, related to the situation in major European economies. We expect the economies of Portugal and Spain, Cape Verde's biggest trading partners and investment sources, to contract further in 2013 (after recession in 2012), before returning to sluggish growth in 2014, meaning weaker investment inflows. If tourism inflows also disappoint, damaging Cape Verde's driving economic sector, discontent and unrest could arise, especially given the high rate of unemployment among urban youth (estimated at 25%).

  INTERNATIONAL RELATIONS: Improving and deepening relations with the EU will remain central to the foreign policy. The government will give priority to obtaining visa waivers for Cape Verdean citizens visiting EU countries and implementing the measures contained in the bilateral "special partnership" agreement, including increased co-operation in trade and investment and the fight against illegal immigration, drug-trafficking and organised crime. Portugal will remain the preferred partner in most matters, but increased investment and more tourist arrivals from other European countries, particularly the UK, are reducing this dependency. Although the EU will remain its main economic partner, Cape Verde will seek to strengthen "South-South" co-operation, especially with Brazil and China, to take advantage of its privileged strategic position for trans-Atlantic trade. Relations with Angola are also becoming closer, reflecting growing business links. Although Cape Verde is unlikely to pursue greater regional integration with its West African neighbours, it will seek to maintain existing links with them in order to develop stronger commercial relations.

  POLICY TRENDS: The most recent 15-month unfunded policy support instrument with the IMF expired in early 2012, and there is no indication of whether it will be renewed. As a result, policy orientation in 2013-14 will essentially be guided by the 2011-16 government plan. Its priority is to promote robust and inclusive economic growth by developing the private sector, attracting investment, investing in human capital and modernising infrastructure. In 2012 the government introduced its Mudar para competir ("Change to compete") strategy, moving the emphasis towards competitiveness, economic diversification, state efficiency and reduced dependence on aid and private transfers. This means that the government will work to reduce the level of red tape and rationalise state structures. It will also continue efforts to improve the business environment and invest in electricity, transport and communications infrastructure, and is likely to cultivate trade and investment links with emerging markets to lessen the country's overwhelming dependence on the currently shaky euro zone. Given the expected slowdown in inward direct investment and export demand from Europe, the government is set to increase capital spending to help to sustain economic growth in 2013-14. The government's disciplined stance in withdrawing consumer price subsidies on energy in the face of public opposition is expected to persist. Overall, we forecast that the fiscal deficit will narrow gradually in 2013-14, from an estimated 10% of GDP in 2012 to 9.5% of GDP in 2013 and 9% of GDP in 2014. Monetary policy will continue to be constrained by the need to maintain the currency peg to the euro; the Banco de Cabo Verde (the central bank) is expected to follow the trends set by the European Central Bank (ECB). In July 2012 the ECB cut its refinancing rate by 25 basis points (bps) to a new record low of 0.75%. We expect the ECB to have cut it by another 25 bps by the end of 2012, so that it will stand at 0.5% in 2013, before being raised to 1% in 2014.

  ECONOMIC GROWTH: Tourism is set to remain the key driver of Cape Verde's economy in 2013-14. The sector, which accounts for around one-quarter of the archipelago's GDP, has showed resilience since the beginning of the euro zone crisis and we expect it to keep growing in 2013-14 in line with a sluggish recovery in Europe, supporting a solid growth rate in the services sector. The modest industrial sector is forecast to be the fastest-growing part of the economy, averaging growth of 5.9% a year in 2013-14 on the back of the government's capital spending programme. Indeed, public-sector capital investment will be an increasingly important driver of growth in 2013-14, as inward direct investment is set to stagnate as a result of poor economic conditions in European economies (the main source of foreign investment into Cape Verde). Growth in agriculture is expected to average an anaemic 2.1% a year, in the absence of any major planned investments in the sector and assuming that weather patterns conform with historical averages. Overall, we expect real GDP growth to accelerate from an estimated 4.8% in 2012 to 4.9% in 2013 and 5% in 2014. Consumer price inflation in Cape Verde closely tracks movements in global prices for food and fuel, given the archipelago's high dependence on imports of these commodities. Inflation moderated in 2012 owing to an easing of import prices and a tightening of monetary policy, averaging an estimated 2.4%. We forecast that global oil prices will drop further in 2013 before rebounding in 2014, while food prices are set to decline moderately in 2013 and more rapidly in 2014. In line with these trends, we expect consumer prices to increase by 2.3% in 2013 and by 2.5% in 2014.

  EXTERNAL ACCOUNT: The current-account deficit is set to fall from 13.9% of GDP in 2012 to an average of 12.7% of GDP in 2013-14. Goods exports are forecast to undergo a moderate decline in 2013 before edging back up in 2014 in line with global oil prices, as re-exports of fuel are the main source of goods exports. Overall, we expect goods exports to reach US$203m in 2013 and US$206m in 2014, against US$205m in 2012. The likely increase in capital goods imports for tourism-sector developments and the government's infrastructure projects will keep the import bill high. Total goods imports are forecast to grow from US$1.04bn in 2012 to US$1.05bn in 2013 and US$1.07bn in 2014. This will result in a trade deficit equivalent to 42.7% of GDP in 2013 and 41.2% of GDP in 2014. We expect a services surplus of US$276m in 2013 and US$279m in 2014. Tourism, the major source of service exports, is expected to hold up well, owing to investment in the sector and political unrest in rival destinations in North Africa. The income deficit will also stay largely unchanged in 2013-14, averaging 3.2% of GDP, as profit repatriation by foreign companies should be fairly steady. Economic difficulties in donor countries, not the least in Cape Verde's historic partner, Portugal, will lead to a contraction in aid inflows. However, expatriates' remittances-which count for a significant chunk of Cape Verde's transfers account and have held up amid faltering economic growth in developed countries in 2011-12-are expected to expand further in 2013-14 in line with a brighter global economic outlook (high risks to this core forecast notwithstanding). Overall, these trends will lead the transfers surplus to grow from US$369m in 2012 to US$387m in 2014. The current-account deficits should be offset on the overall balance of payments by long-term debt disbursements from official creditors and-to a lesser extent-by foreign direct investment inflows, particularly to the tourism sector.

  October 04, 2012

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Country Briefing

Land area

4,033 sq km

Population

503,713 (2012, World Gazetteer estimate)

Main towns

Population (2012, World Gazetteer estimates)

Praia (capital): 134,900

Mindelo (São Vicente island): 71,952

Santa Maria (Sal island): 26,550

Pedra Badejo (Santiago island): 9,530

Climate

Dry and tropical; rainfall is erratic and there are long periods without rain; average temperature 20-27°C

Languages

Portuguese, Crioulo

Measures

Metric system

Currency

Cape Verde escudo (CVEsc) = 100 centavos; in July 1998 the Cape Verde escudo was pegged to the Portuguese escudo at a rate of CVEsc0.55:Esc1; the peg was transferred to the euro in January 2002 at a rate of CVEsc110.265:€1

Time

1 hour behind GMT

Public holidays

January 1st, 20th; May 1st; July 5th (Independence Day); August 15th; November 1st; September 12th; December 25th

July 05, 2012