Cape Verde

Cape Verde is a republic located in the Atlantic Ocean, about 570 km west of Senegal on the coast of West Africa. The country is made up of ten main islands and some smaller islets, with a total area of about 4,033 km². The most populated islands are Santiago (which hosts the capital, Praia), São Vicente, and Santo Antão. According to 2023 estimates, the total population is around 550,000 people. The capital, Praia, has 160,000 inhabitants, while other significant cities include Mindelo, located on São Vicente Island, with approximately 80,000 inhabitants. The population is young, with a large Cape Verdean diaspora living abroad, particularly in Europe (Portugal, France) and the United States.

Economic Overview

Cape Verde’s economy relies heavily on the services sector, particularly tourism, which accounts for 25% of the national GDP. The country has developed a reputation for political and institutional stability, making it a relatively secure destination for foreign investments. In 2023, Cape Verde’s GDP was estimated at $2 billion, marking a growth of 4% compared to the previous year, mainly due to the post-pandemic tourism recovery and investments in renewable energy. The GDP per capita stands at approximately $3,600.

Cape Verde’s exports are limited, with fish and salt as the main products. Imports far exceed exports, creating a significant trade deficit, as the country heavily depends on imports for food, fuel, and consumer goods. The country receives substantial remittances from the diaspora, which account for about 10-15% of the GDP. Public debt remains high, at 130% of the GDP in 2023. Inflation has been moderate, around 3%, though import-related inflation pressures and energy costs are ongoing concerns.

Outlook

Economic prospects for Cape Verde are positive, with expected growth of 4-5% in 2024, supported by tourism recovery and investments in infrastructure and renewable energy projects. However, the country’s vulnerability to external shocks, such as global economic crises or fluctuations in the tourism sector, remains a significant challenge.

Country Risk

Cape Verde presents low political risk, with a stable and democratic environment, but high economic risk due to its dependence on imports, tourism, and foreign remittances. Vulnerability to extreme climate events, such as droughts and tropical storms, poses an additional risk to the country’s economy.

Foreign Direct Investments

FDI in Cape Verde is mainly concentrated in tourism and infrastructure, with growing interest in renewable energy development. Countries such as Portugal, Spain, and China are among the main investors. The government has implemented policies favorable to attracting foreign investment, offering tax incentives and support for new business development, especially in the green energy and digitalization sectors.

Geopolitical Analysis

Despite its small size and developing economy, Cape Verde plays a significant role in the geopolitical context of West Africa and the Atlantic region. The archipelago’s strategic location along key maritime routes between Europe, Africa, and Latin America makes it an important partner for international cooperation, particularly in maritime and security matters.

Relations with the European Union and Portugal

Cape Verde maintains strong ties with the European Union, especially with Portugal, its former colonial power. The cooperation between Cape Verde and the EU is based on partnership agreements, particularly in trade, security, and migration management. The EU is one of Cape Verde’s main donors and trading partners, with investments aimed at sectors such as sustainable development, governance, and maritime security.

Transatlantic Relations

The United States is a key partner for Cape Verde, particularly in maritime security and counter-narcotics efforts. The archipelago lies along a major narcotics trafficking route from Latin America to Europe, placing Cape Verde at the center of international efforts to combat organized crime. Cape Verdean security forces work closely with U.S. and European forces.

Relations with Africa

Cape Verde is a member of the African Union and the Economic Community of West African States (ECOWAS), though its economy and social structure differ from many other member states. Despite economic challenges, Cape Verde has maintained a strong reputation in Africa for its political stability and capacity for mediation. The country has strengthened economic relations with African nations such as Senegal and Angola, promoting trade and cooperation in sectors like fishing and tourism.

Geopolitical Challenges

Cape Verde faces significant challenges related to its climate vulnerability and economic dependence on tourism and remittances from its diaspora. The impacts of climate change, especially droughts, threaten the country’s food and water security, while global economic uncertainty could negatively affect tourism.

Migration Policy and Security

Migration management is a crucial issue for Cape Verde. As a country of origin and transit, the government has aimed to maintain balanced policies that facilitate legal migration and cooperation with Europe to prevent irregular migration. Maritime security and drug trafficking remain strategic priorities, with a need to improve border control capabilities and enhance international cooperation to address these issues.