VZCZCXRO1065
PP RUEHPA
DE RUEHPA #0194/01 2881700
ZNR UUUUU ZZH
P R 151700Z OCT 09
FM AMEMBASSY PRAIA
TO RUEHC/SECSTATE WASHDC PRIORITY 1846
INFO RUCPDOC/USDOC WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUEHDK/AMEMBASSY DAKAR 0623
RUEHPA/AMEMBASSY PRAIA 2727

UNCLAS SECTION 01 OF 06 PRAIA 000194 
 
SENSITIVE 
SIPDIS 
 
AF/EPS FOR MALLORY, USTR FOR HAMILTON, COMMERCE FOR BOYD, 
TREASURY FOR IERONIMO, ITA/MAC FOR LOUCIF 
 
E.O. 12958: N/A 
TAGS: ETRD ECON EAGR ENRG PHUM XY CV
SUBJECT: 2009 AGOA ELIGIBILITY REVIEW FOR CAPE VERDE 
 
REF: STATE 097769 
 
¶1. SUMMARY: In response to reftel request, post provides the 
following information on Cape Verde's AGOA Eligibility Report. 
The full text will also be sent in Word format by e-mail. END 
SUMMARY 
 
 
 
--------------------------------------------- ----------------- 
 
TPSC SUBCOMMITTEE ON AGOA IMPLEMENTATION 
 
COUNTRY ELIGIBILITY RECOMMENDATIONS 2009 
 
STATE SUBMISSIONS 
 
--------------------------------------------- ------------------ 
 
Country: CAPE VERDE 
 
Current AGOA Status: Eligible 
 
 
 
COUNTRY BACKGROUND SUMMARY:  The Republic of Cape Verde is an 
archipelago located in the North Atlantic Ocean 300 miles due 
west of Senegal, off Africa's west coast.  Cape Verde has a 
population of approximately 500,000 people spread over nine 
inhabited islands.  The country's climate is extremely arid, and 
prolonged drought frequently affects its economy.  Only 
one-tenth of its land is arable.  Devastating famine and poor 
agriculture production has led to a history of emigration. 
 
 
 
There are more ethnic Cape Verdeans living abroad than living in 
Cape Verde, mostly in the United States.  This Cape Verdean 
contingent keeps close ties with its country of origin and 
contributes substantially to the nation's economy through 
remittances.  Cape Verde's geography, low proportion of arable 
land, scant rainfall, lack of natural resources, and small 
population make it a high cost economy, principally because 
economies of scale in infrastructure and government programs 
cannot be easily attained.  The economy is service-oriented, 
with commerce, transport, tourism, and public services 
accounting for more than 60% of GDP.  Cape Verde enjoys a 
multi-party parliamentary democracy.  Elections have been free 
and fair, and the government has generally respected the human 
rights of its citizens. 
 
 
 
 
 
Comments on Eligibility Requirements 
 
 
 
¶I. Market-based Economy 
 
 
 
¶A. Major Strengths Identified 
 
 
 
-  A great effort has been made over the past ten years to 
promote a market-oriented economic model.  Policies have been 
endorsed and supported by the World Bank, IMF, United States, 
and many other donors.  The government of Cape Verde (GOCV) 
looks to private investment as the future engine of the 
country's economic growth, with a focus on export-oriented 
industries, tourism, transportation services, and attraction of 
foreign investment. 
 
 
 
-  The World Bank's October 2009 annual report points to a 
slight growth in business conditions in Cape Verde.  The 
archipelago moved up by one position on the Doing Business 2010 
ranking to 146. 
 
 
 
-   In 2007-2008, Cape Verde signed a special partnership 
agreement with the European Union, acceded to World Trade 
Organization (WTO), and was the second nation ever to graduate 
 
PRAIA 00000194  002 OF 006 
 
 
from Least Developed Country (LDC) status. 
 
 
 
-  On July 23, 2008 Cape Verde became WTO's 153rd member after 
eight years of negotiations.  Cape Verde was the first African 
country and the second LDC to ever join the WTO through a 
negotiation settlement. 
 
 
 
-  The country's macroeconomic evolution continues to be 
monitored by the IMF under a Policy Support Instrument since it 
was signed in July 2006.  According to the October 2009 IMF 
report, Cape Verde fully achieved its Policy Support Instrument 
(PSI) objectives, particularly with regard to foreign reserves, 
and reduction of budget and public debt.  Cape Verde's economic 
and policy performance remains strong and was able to overcome 
the global financial crisis due to prudent choices in 
macroeconomic policies that allowed the country to created 
buffer through an increase of international reserves and low 
domestic debt. 
 
 
 
-  Real GDP growth rate in 2008 was 5.9%, down from 6.7% in 
2007, as a result of declining foreign direct investment in the 
tourism and private investments.  Average inflation rose from 
4.4% in 2007 to 6.8% in 2008, largely in response to the 
increase in oil and food prices.  In 2010, inflation is expected 
to remain low based on current predictions for a good harvest in 
2009, as well as low food and energy import prices. 
 
 
 
-  The banking system continued to show strength, according to 
several indicators of profitability and stability.  The low 
exposure to international market was the resilience factor, 
however, the sector has some vulnerabilities associated mainly 
credit risk, heavy reliance on emigrant deposits and excessive 
credit exposure in real estate. 
 
 
 
-  The exchange rate peg continues to serve Cape Verde well as 
an anchor for financial stability. 
 
 
 
-   Due to the rapid growth in financial services, the Central 
Bank continues to work towards strengthening its supervisory 
capacity in order to maintain the reputation of the country's 
banking.  As a result, the growth of offshore operations will be 
limited. 
 
 
 
-  In July 2005, Cape Verde became the third country to sign a 
five-year Compact with the Millennium Challenge Corporation. 
The $110 million Compact supports Cape Verde's overall national 
development goal of transforming its economy from aid-dependency 
to sustainable, private-sector led growth.  Cape Verde is 
expected to be the first country to finish successfully the 
Compact by June 2010.  The Compact's funds have been used to 
improve the country's investment climate and reform the 
financial sector; improve infrastructure to support increased 
economic activity and provide access to markets, employment, and 
social services; and increase agricultural productivity and 
raise the income of the rural population as well as carry out 
key policy reforms needed for sustained economic growth. 
 
 
 
-  Foreign investors receive substantial advantages and fiscal 
and customs incentives.  Over 20 state-owned enterprises have 
been privatized including the national telecommunications 
company, the banks, and the power supply company.  In 2002 and 
2003, the government privatized the public urban transportation 
company (TRANSCOR) and the food import and distribution company 
(EMPA).  The GOCV intends to move forward with privatization of 
the port authority (ENAPOR), and the pharmaceuticals 
distribution company (EMPROFAC); privatization of cold storage 
facilities for fishing products (INTERBASE) took place in late 
¶2005. 
 
 
 
 
PRAIA 00000194  003 OF 006 
 
 
 -  The government has been successful in its fiscal and 
monetary reforms, particularly with the implementation of a 
value-added tax (VAT) since January 2004.  Although the 
government reduced the income tax rate in 2008 (up to 10% for 
individuals and 5% for companies) tax revenue is expected to 
continue to grow quickly, in line with steady economic growth. 
 
 
 
-  Procurement processes are open and transparent. 
 
 
 
 
 
¶B. Major Issues/Problems Identified 
 
 
 
-  Cape Verde's economy continues to be highly vulnerable to 
external factors and dependent on development and donor 
assistance.  Therefore, authorities continue their efforts to 
ensure ongoing donor support and access to concessional lending 
as Cape Verde graduated to medium-developed country (MDC) status 
in January 2008. 
 
 
 
-  The Government has copyright laws and signed treaties that 
provide protection for intellectual property rights (IPR), but 
it has not ratified international agreements on IPR protection. 
 
 
 
-  The privatization of the national airline, TACV has once 
again been postponed.  The government has still not decided on 
the privatization of the national airline (TACV), although the 
company is having serious financial problems the privatization 
of TACV is a very sensitive issue given the proximity of the 
legislative and presidential elections. 
 
 
 
-  Current energy generation continues to be insufficient to 
meet current needs of the population and therefore inadequate to 
cover for the projected growth of the tourism industry.  Cape 
Verde is highly dependent on fuel from external sources for 
energy production. 
 
 
 
 
 
II. Political Reforms/Rule of Law/Anti-Corruption 
 
 
 
¶A. Major Strengths Identified 
 
 
 
-  The law provides for an independent judiciary, and the 
government generally respects this provision. The constitution 
provides for the rule of law, due process, fair trials, and 
equal protection under the law. 
 
 
 
-  Corruption is criminally punishable, and parliament has added 
three additional prosecutors to enforce these laws.  There is no 
indication that corruption is a significant problem. 
 
 
 
-  In 2009, Cape Verde moved up two places in the ranking of the 
International Transparency report (from 49th to 47th of 180 
countries) and continues to have the second leading positions 
among African nations after Mauritius. 
 
 
 
- 2009's Ibrahim Index of African Governance shows Cape Verde as 
the second best performing country in Africa.  Mauritius, 
Seychelles and Cape Verde were Africa's best-governed countries, 
according to Harvard University's Kennedy School of Government 
2009 Report. 
 
 
PRAIA 00000194  004 OF 006 
 
 
 
 
-  Due to political and social stability, there have been no 
political or religious conflicts. 
 
 
 
-  The December 2006 legislative and presidential elections were 
judged free and fair by international observers, although the 
need for amendment to the Electoral Code was recognized and a 
need for stricter voter identification and registration 
processes. 
 
 
 
-  Nationwide municipal elections were held in May 2008; the 
main opposition party made significant gains, and these gains 
were fully respected. 
 
 
 
-  Significant reforms were made to the money laundering law 
reinforcing Cape Verde's determination to combat corruption and 
drug related crimes. 
 
 
 
 
 
¶B. Major Issues/Problems Identified 
 
 
 
-  The judicial system is overburdened and lengthy delays in 
trials and lengthy pre-trial detention are common.  There were 
credible reports that police continued to beat persons in 
custody and in detention, despite Government efforts to stop 
such practices. 
 
 
 
-  While there were mechanisms for investigating citizen 
complaints of police abuse and beatings of detainees, police 
officers have acted with impunity. 
 
 
 
-  Although a 1999 constitutional revision mandates the creation 
of an independent ombudsman with defined powers, no ombudsman 
has been elected to date. 
 
 
 
 
 
III. Poverty Reduction 
 
 
 
Major Strengths Identified 
 
 
 
-   Ninety-eight percent of school-aged children are enrolled in 
school and complete basic compulsory education, with no major 
difference between rates for boys and girls. 
 
 
 
-  National Poverty Alleviation Plan enacted with World Bank 
funding.  In March 2002, the IMF/World Bank rated Cape Verde's 
Interim Poverty Reduction Strategy Paper as "good" and approved 
a 3-year, $11 million Poverty Reduction and Growth Facility in 
April 2003. 
 
 
 
-  Relative to other African countries, Cape Verde has a lower 
percentage of population living in poverty, lower HIV/AIDS 
infection rate, lower birth rate, and longer life expectancy. 
 
 
 
-  Cape Verde has one of the highest literacy rates of Africa 
approximately 80%, and among the ages of 15-25 it reaches the 
96% rate. 
 
 
PRAIA 00000194  005 OF 006 
 
 
 
 
 
 
¶B. Major Issues/Problems Identified 
 
 
 
-  Limited data on poverty. 
 
 
 
IV. Workers' Rights/Child Labor/Human Rights 
 
 
 
¶A. Major Strengths Identified 
 
 
 
-  The Government generally respects the human rights of its 
citizens. 
 
 
 
-  The Constitution recognizes core international labor 
standards and the law prohibits forced or compulsory labor, 
including by children.  The GOCV has ratified ILO Convention 182 
on the worst forms of child labor. 
 
 
 
-   Recent legislation criminalized child trafficking, as well 
as the use of children in prostitution or pornography.  Victims 
can collect compensation in civil courts. 
 
 
 
 
 
¶B. Major Issues/Problems Identified 
 
 
 
-  The government seldom enforces labor laws and conducts 
minimal labor inspections.  Workers and children generally do 
not benefit from the legal protection of labor laws. 
 
 
 
-  There are no established minimum wage rates in the private 
sector. 
 
 
 
-  Child labor remains a problem. 
 
 
 
-  ILO Convention 138 on minimum age has not been ratified. 
 
 
 
-  Juveniles are incarcerated together with adults and pre-trial 
detainees with the general prison population. 
 
 
 
-  Violence and discrimination against women, domestic violence, 
child abuse, child labor, and juvenile crime were problems. 
 
 
 
¶V. International Terrorism/U.S. National Security 
 
 
 
¶A. Major Strengths Identified 
 
 
 
-  Full public support for United States; overflight and use of 
air bases offered in wake of September 11, 2001 attacks.  In 
2002, the GOCV ratified 10 counterterrorism conventions.  The 
GOCV enacted a strong anti money-laundering law in December 
¶2002. 
 
 
PRAIA 00000194  006 OF 006 
 
 
 
 
-  New security equipment (supplied under the Safe Skies for 
Africa Program) installed in late 2003/early 2004.  Cape Verde 
received Category 1 status for its civil aviation in September 
¶2003.  TACV's (Cape Verde's National Airline) Boeing fleet 
received ETOPS Certification in 2005. 
 
 
 
-   European council officials approved in late 2007 the special 
partnership agreement with Cape Verde.  The EU sees this special 
partnership as advantageous due to Cape Verde's exceptional 
geopolitical position.  Issues of security are of particular 
interest given that it allows EU to extend its peripheral 
borders.  This partnership also defines the financing procedures 
through the European Development Fund (EDF) with the approval of 
the European Investment Bank (EIB). 
 
 
 
- Cape Verde continues to cooperate jointly with the United 
States and Europe in security matters. 
 
 
 
¶B. Major Issues/Problems Identified 
 
 
 
None. 
STEWART