Report No. 2730-CV COPYThe Republic of Cape VerdeEconomic Development in a Small ArchipelagoVolume 1: Main Report

May 30, 1980

Western Africa Regional Office

FOR OFFICIAL USE ONLY

Document of the World Bank

This document has a restricted distribution and may be used by recipientsonly in the performance of their official duties. Its contents may nototherwise be disclosed without World Bank authorization.

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CURRENCY EQUIVALENTS

The currency unit is the Cape Verde escudo, which is presently pegged to abasket of 18 currencies.

Cape Verde escudos per US dollarPeriod Period Average End of Period

1970 28.6 28.8

1971 28.2 27.6

1972 27.0 27.0

1973 24.7 25.8

1974 25.4 24.6

1975 25.6 27.5

1976 30.1 31.5

1977 33.9 33.9

1978 35.0 35.0

1979 on 35.0 (assumed) -

GOVERNMENT FISCAL YEAR

January 1 - December 31

FOR OFFICIAL USE ONLY

THE REPUBLIC OF CAPE VERDE: ECONOMIC DEVELOPMENT IN ASMALL ARCHIPELAGO

Table of Contents

VOLUME IPage No.

PREFACE i

SUMMARY AND CONCLUSIONS ....................... . ...... v - ix

I. INTRODUCTION ..........................................

Natural Resources ................ ......................Economic History ........ ..................... ..... 2

Emigration and Population ...... ....................... 3Recent Political Developments .-*..................... 3

II. ECONOMIC BACKGROUND ................................... 5

Structure of the Economy . ...... ........ ............... 5

Expenditure on Available Resources .................. .. 6Public Finance ................................... ...... 7

Money and Credit ....................................... 10

Balance of Payments . .................................. 12

Import Marketing System .... ............... .......... ... 15

Employment and Wages ....... ........................... 16

Prices ................................................ . 17

III. SECTORAL PERFORMANCE AND ISSUES .............. ......... 19

Agriculture ................... .......................... 20

Fisheries ............................... ......... ..... 26

Mining and Manufacturing ..... ......................... 31

Roads ................................................. 34

Ports ....................................................... 35Shipping .............................................. 38Air Transport ............ .... .......................... 39

Telecommunications ................ ..... .. .... .... . 40

Tourism ..................................... .......... 41

Water Supply and Electric Power ....................... 42Education ............... . ..... 44

Health .......................... 0 ............................ 46

IV. DEVELOPMENT STRATEGY AND PROSPECTS .................... 47

Government Development Policies .................... ... 47Assessment of Development Policies ................ .... 48Alternatives .... ..................................... 48

Recommendations ....................................... 51

Prospects ............................................. 53

ANNOTATED BIBLIOGRAPHY . ........................ 58

STATISTICAL APPENDIX...... ........ 60

This document hu a etricted distribution and may be used by recipients only in the performanceof their offcial dutis. Its contents may not otherwise be disclosed without World Bank authorization.

I

List of Text Tables

Table Page no.

1. Structure of GDP, 1978 ................................. 5

2. Expenditure on available resources ..... ............ 7

3. Public finance summary, 1975-78 .. 8

4. Public investment, 1978 and 1979 . . 95. Monetary survey, 1974-78. 11

6. Summary balance of payments, 1970-78 . .13

7. Imports, 1974-77 .. 14

8. Consumer price index .................. .................. 18

9. GDP Projection ..................... ..................... 54

10. Projected Balance of Payments ..... ...................... 55

11. Public Finance Projections ............. .. ............... 56

PREFACE

This is the first World Bank economic report on Cape Verde,prepared by a mission which visited the islands in March-April L979.The mission team was composed of Messrs. D. Bovet (chief of mission),H. Bachmann (senior economist), C. Gois (irrigation engineer), andP. Koenig (loan officer) of the Bank, and G. Gerhardsen (fisheriesspecialist), consultant. This report was reviewed within the Bank onOctober 9, 1979. The Government authorities agreed to discuss the re-port in January 1980. The report was subsequently updated and revisedby Mr. D. Bovet and Ms. A. Paiva (loan officer/economist).

The purpose of this report is twofold: to acquaint the Bankwith the broad characteristics of a new member co atry and its sectoralpriorities, and to initiate with the Government of Cape Verde a construc-tive dialogue on economic policy and project issues. The timeframecovered, while emphasizing the years since independence in 1975, includesearlier periods of the islands' history where appropriate. This reportdraws heavily upon other studies of Cape Verde, including the IMF's RecentEconomic Developments dated May 16, 1979, and USAID's Assessment of theAgricultural Sector, dated August 1978.

This report consists of two volumes:

Volume I: Main Report

Volume II: Annex A (proposed project outlines)Annex B (ongoing and planned investment

projects)

Page 1 of 2 pages

COUNTRY DATA - CAPE VERDE

AREA POPULATION DENSITYf4,033.3 km2 300,000 (1978) 77.6 per km'

Rate of Growth: 1.9% (1975-80)

POPULATION CHARACTERISTICS HEALTHCrude Birth Rate (per 1,000) 32.8 (1970-75) Population per physicianCrude Death Rate (per 1,000) Population per hospital bedLife expectancy at birth (years) 50.0 (1975-80)

INCOME DISTRIBUTION DISTRIBUTION OF LAND OWNERSHIP% of national income, highest quintile .. % owned by top 1VA of owners

lowest quintile .. % owned by smallest 10% of owners

EDUCATIONAdult literacy rate % (1978) 35.0Primary school enrollment % 88.0

GNP PER CAPITA in 1978: US$262 1/

GROSS NATIONAL PRODUCT IN 1978 GOVERNMENT FINANCE

US$ Mln. Central Government(US$ Mln.) % of GDP

GNP at Market Prices 78 1977 1978 2/ 1977 1978Gross Domestic investment 33Gross National Savings 0.33 Current Receipts 11.7 14.5 25 27Current Account Balance -32 Current Expenditure 16.2 15.9 35 29Exports of Goods, NFS 5 Current Surplus (+) -4.5 -1.4 9 2.5Imports of Goods, NFS 61 Capital Expenditures 27.1 30.4 58 56

1/ Mission Estimates.2/ Estimated... not available.

Page 2 of 2 pagesCOUNTRY DATA - CAPE VERDE

MONEY, CREDIT and PRICES 1974 1975 1977 1978 3/

Money and quasi-money 603.3 787.1 1467.1 1549.0Bank Credit to Public Sector 1.6 -1.3 -108.9 6.1Bank Credit to Private Sector 274.5 316.8 394.9 534.4

BALANCE OF PAYMENTS MERCHANDISE EXPORTS (AVERAGE 1974-77)

1975 1976 1977 1978 3/ US$ Mln. %(Millions US$)

Frozen fish and shell fish 0.43 21.0Exports of Goods, NFS 6.8 2.7 1.2 4.7 Canned fish 0.29 14.0Imports of Goods, NFS 31.4 39.5 48.0 61.3 Salt 0.18 8.7Resource Gap (deficit = -) -24.5 -36.8 -46.8 -56.6 Bananas 0.15 7.3

All other commod'ities 1.0 49.0Interest Payments (net) -0.09 0.24 0.98 0.64 Total 2.05 100.0Private Transfers (net) 6.9 16.8 23.5 23.7Balance on Current Account -17.69 -19.76 -22.3 -32.2

EXTERNAL DEBT, DECEMBER 31, 1978Direct Private Foreign Investment -0.05 0.00 0.07 - (including undisbursed)Official transfer (net) 13.8 14.7 28.1 23.4 US$ Mln.Official borrowing (net) 5.1 11.8 2.3 1.6Errors and Omissions 3.5 10.3 3.8 4.7 Public Debt, incl. guaranteed 25.4Increase in Reserves (+) 4.6 17.0 11.2 -2.5 Non-Guaranteed Private Debt

Total outstanding & DisbursedNet Reserves (end year) 4/ 19.5 33.8 41.9 39.6

liET DEBT SERVICE RATIO for 1978 5/RATE OF EXCHANGE X

Public Debt, incl. guaranteed 2.4Period Cape Verde escudos per US dollar Non-Guaranteed Private Debt

Period Average End of Period Total outstanding & Disbursed1974 25.4 24.61975 25.6 27.5 IBRD/IDA LENDING, (Dec. 31, 1979) (Million US$):1976 30.1 31.51977 33.9 33.9 IBRD IDA1978 35.0 35.0

Outstanding & DisbursedUndisbursedOutstanding incl. Undisbursed

3/ Provisional, based on first two quarters.2/ Net foreign assets of the banking system.5/ Debt service as percentage of exports of goods and NFS. WA2DA

June 1980

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ABBREVIATIONS AND ACRONYMS

AfDF African Development Fund

BADEA Arab Bank for Economic Development in Africa

BCV Banco de Cabo Verde

BNU Banco Nacional Ultramarino

EMPA Empresa Publica de Abastecimento

FAO Food and Agriculture Organization

GDP Gross Domestic Product

ILO International Labour Office

IMF International Monetary Fund

JAP Junto Autonomo dos Portos de Cabo Verde

MDR Ministry of Rural Development

NDB National Development Bank of Portugal

PAIGC African Party for the independence of Guinea-Bissauand Cape Verde

SCAPA Sociedade de Comercializacao e Apoio a Pesca Artesanal

UNCTAD United Nations Conference on Trade and Development

UNESCO United Nations Educational, Scientific and CulturalOrganization

UNDP United Nations Development Programme

USAID United States Agency for International Development

WFP World Food Programme

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SUMMARY AND CONCLUSIONS

Background

i. Cape Verde consists of nine inhabited islands spread in a horseshoe

300 km wide, located in the South Atlantic roughly 650 km off the west coast

of Africa. The population numbers about 300,000 persons (in 1978). Several

fundamental problems face this island nation:

- a remote location entailing costly external transport

links;

- diseconomies of scale in providing required infrastructuredue to the dispersion of population over nine islands;

- a weak agricultural base due to low and unreliablerainfall and rugged topography;

- a very limited endowment of other natural resources; and

- a small population and low income level, hence small local market.

ii. These constraints have faced the islands' inhabitants since the

Cape Verde islands were first settled around 1462. In fact, prior to the

establishment of Portuguese colonists and African slaves, the islands were

totally uninhabited. Periodic droughts and famines have plagued the islanders

from the first, and the productive base of the economy has always been fragile.

Cape Verde's transit role in international trade and shipping has been of

major importance in the islands' economic history, but the income derived from

this function has increased little in recent years. As a result of the

precarious existence on the islands, Cape Verdeans have emigrated heavily

since the early 1800s, and more of their descendants now live abroad (par-

ticularly in the United States and Europe) than in the country. Cape Verde

gained independence from Portugal in 1975.

iii. Today Cape Verde is suffering from the effects of an eleven-year

drought, and is treated by the United Nations as one of the least-developed

nations. The estimated GDP per capita in 1978 is US$170 (bearing in mind

that basic macroeconomic data are largely preliminary estimates). The struc-

ture of domestic production is heavily service-oriented, with 52% of GDP

originating in the tertiary sector. Agriculture, though most of the country's

population is rural, produces only about 20% of GDP. Construction accounts

for 17% of GDP due mainly to the rural works programs set up by the Government

to provide employment during the drought. Manufacturing and fisheries are

both at a low level of development.

iv. Cape Verde's external economic relations are characterized by

a sharp imbalance on the trade account (exports cover only about 5% of im-

ports) which is fully offset by heavy inflows of remittances from overseas

Cape Verdeans and by foreign aid. The trade deficit in recent years has

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been equal to the entire value of GDP. Foreign aid, mainly grants, hasrun as high as US$80-100 per capita per annum. Remittances add about US$70per islander per year. Thus, total resources available to the economy aretwice the level of domestic production, and consumption considerably exceedsGDP. Investment is running at about 60% of GDP, as the Government undertakesan all-out effort to drought-proof the agricultural sector. Public financeshave been prudently conducted, with foreign resources financing the entirecapital expenditure budget and a small current deficit being recordedin most years.

Position and Issues Confronting Major Sectors

v. Agriculture consists mainly of smallholder subsistence farming,with maize, beans and cassava predominating. Sugarcane is grown to pro-duce rum, and bananas are exported. However, only about 3% of the cropped'area is irrigated, and this makes the economy and the domestic food supplycritically dependent on rainfall which has historically been low and erratic.Watershed management and development of water resources have been accordedthe first priority by the Government, and the rural works program is pre-sently building thousands of stone retention structures to prevent erosionand to recharge groundwater supplies. Several large integrated rural develop-ment projects are also underway. But greater technical assistance is necessaryto help implement these projects, and to help establish an applied researchcapability. The introduction of improved seeds, inputs and cultivationtechniques can undoubtedly raise the productivity of rainfed cropland.Irrigation expansion, particularly for high-value crops, will also raiseagricultural output, though surface water needs to be more fully exploitedfor irrigation purposes. Great improvements can be made in agriculture, butthe cost will be high as well, and the long-term potential for meeting thedomestic food demand and absorbing additional manpower is limited.

vi. Fisheries is a sector with potential, based on Cape Verde'scontrol of 600,000 km2 of ocean resources. Development so far has beenat a very low level, with production of about 9,000 tons annually by some3,000 fishermen mostly using small European-style rowboats. The fish of majorinterest is the tuna, which constitutes most of the catch, and which ispresently canned, salted, or frozen for export. A small quantity of lobsteris also caught and shipped (live, by air) to Portugal. Bottomfish resourcesare limited due to the absence of a continental shelf, and the potential catchof pelagic species needs to be assessed by a resource survey in the nearfuture. Estimations are that a yield of 30,000 tons of fish per year could bereached in the next decade, if certain obstacles can be overcome. Thesebottlenecks include the low level of fisheries technology employed, thelimited range of operations, an obsolescent fleet, and poor marketing andtransport facilities. A Government fisheries development policy has graduallyevolved with the objectives of upgrading the existing fishing fleet, improvingthe fish storage and transport system, and better linking the small-scalefishermen with the tuna export market.

- vii -

vii. Mining and manufacturing contribute little so far to the economy.Salt and pozzolana (an additive used in cement manufacture) are exploited,but at very low levels. Manufacturing consists chiefly of the activities ofa modern flour mill, a handful of small import-substitution enterprises,and the artisanal production of rum from sugarcane. An industrial develop-ment program could be envisaged that would focus upon skill-intensive indus-tries linked to the fisheries, such as ship repair; and upon local resource-based operations, such as salt, cement, or other construction materials.The lack of local entrepreneurs experienced in manufacturing (the privatesector having traditionally focussed upon the import business) suggests thatthe Government may wish to discuss these industrial possibilities withforeign business firms. Better technical and business management trainingalso needs to be developed.

viii. Tourism is an industry which may have considerable potentialin Cape Verde, though it is practically non-existent now. The islands'assets include a proximity to Europe (four hours by air), an internationaljet airport, a year-round sunny and pleasant climate, attractive beaches andrugged volcanoes, and excellent conditions for scuba diving. Disadvantagescenter upon the lack of any tourist infrastructure at present, the probablehigh cost of imported inputs and services, and possible social impact. TheGovernment is planning to undertake a study of the tourism potential, whichshould include investment, marketing, and economic and social analyses.Despite the Government's cautious approach to this sector, tourism representsa possible avenue of growth in foreign exchange revenues and employment, andthereby warrants serious consideration. The recently-created public-privatemixed enterprise for hotel management is presently planning to add about 300rooms on Sal, Santiago, and Fogo islands; more ambitious projects shouldawait the completion of the sector study. At a later stage, the interest ofoverseas Cap Verdeans in tourism investment could be solicited.

ix. Transport is one of the key infrastructure problems in Cape Verde.International links are provided by two ports (Mindelo and Praia) and by aninternational airport on Sal Island. But cargo and passengers must then bedistributed by ship or air amongst the nine islands. The domestic airline isconstantly augmenting its services, and additional aircraft are presentlyrequired to meet demand. Two of the islands do not yet have airstrips.Interisland shipping is thus of major significance, and the overaged fleet isin need of replacement with more suitable vessel types. A systems study ofinterisland transport is needed to determine the optimal vessel and portinfrastructure. Managerial assistance is also needed. The future developmentof the port of Mindelo is a serious question, since recent declines in thetraffic volume, largely related to declines in the tonnage of bunkers providedto ships in transit, have contributed to high unemployment in the country'ssecond-largest city. It is recommended that a marketing and strategic analysisbe carried out covering the possible options for future development: as abunkering port, a transshipment terminal, a fisheries center, or a nationalport.

x. The social sectors -- education and health -- have received con-siderable attention since independence, and the present literacy rate of 35

- viii -

percent is rising. Education is a key sector in Cape Verde, since theislands' human potential is their greatest resource. Two major problems ineducation are the lack of classroom space and the inadequate teacher training;both these shortcomings are being addressed by the Government at present,with foreign assistance. There are also programs to upgrade the technicalschool at Mindelo. Health conditions, though better than in many WestAfrican countries, are still affected by nutritional problems. Studies ofnutrition underway should shed light on this question, but it is known thatthe rural works program, by providing employment, has had a major effect onallowing better nutrition. Family planning is fully supported by the Govern-ment, and a project with Swedish assistance is being implemented.

Development Strategy

xi. The initial efforts of the Cape Verdean Government, followingindependence, were aimed at securing adequate food supplies from foreigndonors. This preoccupation has now evolved into a more project-orienteddevelopment approach, with major aid agencies allocated specific islandsand priority sectors. Most public investment at present is being devotedto water resource development and associated agricultural programs, in aneffort to raise domestic food production and cut back on food import needs.

xii. In the future, development will need to be increasingly directedtoward industry and services, since agricultural possibilities are limitedover the long-term. First, Government's policy of encouraging local privatesector investment in productive enterprises must be supported by appropriatetechnical assistance, training, and credit. Second, foreign industrialknow-how, particularly in marketing and production management, should besought. International institutions, such as the U.N. Industrial DevelopmentOrganization and the International Finance Corporation, can be used asintermediaries in attracting foreign investment under the right conditions.Third, the foreign aid presently received could be better utilized by increas-ing certain types of technical assistance and by more explicit coordination.The Government should, with appropriate help from international organizations,periodically issue status reports on the numerous project activities underwayand planned. Fourth, the importance of collaboration with Guinea-Bissau isrecognized; existing ties could be reinforced through successful participationin joint industrial and perhaps fishing ventures. Finally, it is recommendedthat the valuable resource of overseas Cape Verdeans should be consideredwhen searching for technical, managerial and investment partners in thedevelopment process.

Outlook

xiii. The longer-term economic outlook for Cape Verde is particularlydifficult to forecast at this juncture. The discontinuity caused by thesharp rise in public investment following independence introduces con-siderable uncertainty. There are few clear results so far from the Govern-ment's development efforts to indicate whether these projects can effectivelycounter the pernicious drought cycle and general stagnation which haveheretofore plagued the islands. On the other hand, the very low level ofproduction at present and the remarkably high investment level provide somebasis for expecting an upturn. This report therefore adopts, first, a rather

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optimistic macroeconomic scenario based upon major assumptions that (i)present high investment levels can be maintained with continued foreign aidand remittances, (ii) pre-drought weather conditions return soon, and (iii)present and planned development projects meet with some success in expandingproduction. A very high capital-output ratio is assumed, reflecting the highinfrastructure investments required. We attempt, second, to indicate thesubstantial downside risks to Cape Verde's fragile economy.

xiv. The optimistic scenario is for average real GDP growth of 4-5percent per annum through 1990 without, however, graduating from the low-income group of developing countries. The structure of the economy, underthese assumptions, would shift toward certain productive sectors (such asagriculture and fisheries) and foreign-exchange generating services (suchas shipping). The corresponding balance of payments outlook would be cha-racterized, over the next decade, by a smaller current account deficit, inrelation to GDP, brought about by higher exports of goods and services. Thisdeficit would be made up by foreign assistance, still on highly concessionaryterms, so that the overall balance would permit the maintenance of adequatereserve levels.

xv. Cape Verde's economic outlook also contains important downsiderisks and limitations. These include (i) the risk that rainfall may notreliably return to long-run average levels, (ii) the possibility that foreignaid may decrease in real terms either due to a perceived decline in thecountry's food shortfall or due to other exogenous factors, (iii) the possibi-lity of delayed project implementation due to shortages of managers andtechnicians, and (iv) the chance that production and transport costs in CapeVerde may prove to be so high that expanded exports are not feasible. Thepace of economic growth will in any case be limited by the lack of high-valuemineral resources, the high cost of expanding agricultural output and thehigh external transport costs, despite the high level of current and plannedinvestment. It is also considered likely that the economy will encountercontinuing difficulty in absorbing a growing labor force, with the resultthat emigration will remain a key alternative.,

xvi. The role of the World Bank Group in Cape Verde must take intoaccount the uncertainty surrounding the country's economic outlook. A highper capita level of IDA financing appears appropriate in sectors which canabsorb the funds in order to rapidly establish certain minimum standards ofinfrastructure. However, a prudent view of Cape Verde's future would precludeIBRD or commercial-term creditworthiness for some time because of the verylow value of exports. IDA-financed projects should be oriented in parttoward generating export revenues needed to strengthen creditworthiness.Rural development calls for IDA attention as soon as the Government hasgained some experience with the current ambitious program. The most promisingarea for initial IDA operations in Cape Verde appears to be interislandtransport. Fisheries and other sectors have already received substantialexternal financing. Over the longer term, possibilities in agriculture,development banking, and other economic infrastructure would seem to exist.

1. INTRODUCTION

1. Cape Verde is an archipelago of nine inhabited islands and severaluninhabited islets, located about 650 km west of Senegal. The SaheliancLimate makes. the country's name a misnomer. Drought and famines have plaguedCape Verde for centuries, and the country is presently suffering from aneleven-year drought. The Cape Verde islands are of volcanic origin and allexcept three are mountainous and typified by steep eroded slopes. The islandsare widely dispersed, in two groups, and cover a total land area of 4,000km2

. The largest island is Santiago, where the capital (Praia) and abouthalf the population are located. The 200-mile economic zone for fisheriescontrols an estimated 600,000 km2 of ocean. The islands obtained theirindependence from Portugal in 1975. Population is about 300,000 (1978).

Natural Resources

2. The Cape Verdean climate is characterized by very low and erraticrainfall. Not only Is there a high degree of variability from year to yearbut there is also a strong tendency for periods of drought lasting severalyears; the present drought is particularlv severe. The rains which do fallare concentrated within the period from August to October, and fall largelyin a few torrential storms. It is not uncommon for half a year's rainfallto occur in a single storm. This concentration of rainfall makes the situa-tion in Cape Verde much more difficult than that prevailing in the CanaryIslands, for instance, where similar rainfall (about 300 mm) is spread evenlyover an eight month period. Annual rainfall varies widely from island toisland and within the same island. Average figures are from about 200 us. anthe low islands to 1,300 mm at high elevations on the mountainous islands,with large areas receiving less than 500 mm.

3. The Cape Verde islands are mainly very steep and rocky, especiallythe largest and most populated ones. At lower elevations, arid rock plains(or achadas) are found which drop abruptly to rocky shores, lacerated bynarrow rock-wall gulches that channel rains from higher slopes. Virtuallyall the archipelago soils are derived from volcanic rocks, and the mostwidely used agricultural soils for rainfed cultivation are found in thecooler, moister portions of the islands and cn the achadas. Irrigation iscommonly practiced on alluvial and colluvial soils in valley bottoms and alongthe lower slopes of valleys.

4. Water resources are limited and unreliable. Repeated droughtshave periodically practically eliminated all rainfed crops and led to massivestarvation. Irrigation has become the sole reliable possibility of developingagriculture and therefore the assessment of water potential (surface andgroundwater) is of major importance. At present, most surface water islost to the sea because of the torrential nature of the rainfall and thesteepness of the terrain. Reservoirs to store surface water are difficult tolocate and sabject to rapid filling with erosional debris. However, the useof small retention and diversion structures aimed at recharging the ground-water is possible and desirable. Groundwater is presently the major source of

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irrigation and domestic water supply in Cape Verde, but desalting plants areincreasingly used in certain islands. Although scarce and unreliable rain-fall, relatively high evaporation potentials and the torrential nature of therainfall resulting in high surface. run-off, losses severely limit accruals togroundwater, it may be possible to, increase the exploitation of groundwaterresources. Caution must be exercised in groundwater development, however, toprevent possible seawater infiltration of aquifers.

Economic History

5. The highlights of Cape Verde's economic history are the continuingimportance of maritime trading links and human migration, as contrastedwith the low level of production and precarious subsistence conditions pre-vailing over the past five centuries. Development here more than elsewhereseems to have depended on trade between other countries for which the islandsprovided a convenient stopover point. Before the Portuguese first discoveredthe archipelago in 1460, the Cape Verde islands were quite uninhabited. Theywere discovered during the intense period of exploration sponsored by PrinceHenry the Navigator, and soon became favored watering and ship supply portsfor vessels trading to Brazil and around Africa from Europe. Santiago,the largest island and least unfavorable to,agriculture and habitation, wasfirst settled in 1462. During the sixteenth century Santiago played itspart in Atlantic commerce by revictualing ships, essentially with saltedgoatmeat and fresh water.

6. Recurrent droughts caused famines recorded since the earliestyears of settlement in Cape Verde,. and soon made it clear that the islands'agricultural vocation was limited. Cotton was the major crop on Santiago inthe early years, grown on large plantations for which slaves were importedfrom the Guinea coast. This cotton was woven into textiles known as panoswhich were highly regarded as trade goods along the West African coast andin Brazil. Portuguese settlers, especially those based on Santiago, wereheavily involved in the slave trade from the sixteenth to the eighteenthcenturies. On other islands, particularly Brava, a smallholder agriculturedeveloped. Export commodities were cotton and a lichen dyestuff known asurzela, meats and hides, and salt from Maio island, as well as a littlesugarcane and citrus. However, urzela and sugarcane exports greatly dimin-ished in the nineteenth century as cheaper suppliers arose. Foodcrops con-sisted largely of rainfed maize (introduced from Brazil), yams, cassava, beansand squash.

7. During the nineteenth century, the Cape Verdean economy reliedprincipally upon the supply of stores to ships. Salt has continuously beenexported from the flat islands of Maio, Sai and Boa Vista, and in themid-1800's some 20-30,000 tons were being exported annually to the New World.Despite the large quantities invol'ved, the islanders profited very little fromthe salt trade, receiving items of food and. old clothing in exchange for theirlabor in loading and transferring the salt. Beginning around 1850, thenatural harbor at Kindelo on Sao Vicente became an important coaling andwatering station for ships on the England-Brazil run and those rounding Africato the East Indies. Some 1,500 ships per year called at Mindelo in the late

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1800s, but again the Cape Verdeans earned little from the trade, in partbecause the coaling business was largely in the hands of foreign (British)firms. Sales of oil replaced the coaling trade in the twentieth century,peaking in the 1950s, but competition from rival ports such as Dakar hasreduced Mindelo's role in ship bunkering. The only really new element in CapeVerde's economy in the twentieth century, prior to independence, has been theconstruction of an international airport on Sal island, extending the islands'role as a stopover point to a new mode of travel.

Emigration and Population

8. The escape from the persistent poverty of the islands and theperiodic famines has been, since the early eighteenth century, emigration.It started with Cape Verdeans signing aboard American whaling ships, whicheventually deposited them in the New Bedford area of the northeastern UnitedStates. These Cape Verdeans worked in the U.S. as sailors, as farm handsin the cranberry bogs, and especially as mill workers in the burgeoningtextile industry of nineteenth century New England. In the early 1900s,3,000 people or 2% of the population, were leaving Cape Verde annually.Today there are some 300,000 persons of Cape Verdean descent living in theU.S., and cultural, language and family ties remain strong. Around 1915 theU.S. began to restrict immigration, however, and many Cape Verdeans in thiscentury were forced to accept low-wage contracts on the cocoa plantationsof Sao Tome and Principe to avoid starvation. In the 1950s a wave of CapeVerdeans emigrated to the Netherlands, many working in the merchant marine.The past twenty years have witnessed heavy flows of migrants to Europe,particularly to Portugal where Cape Verdean construction workers replacedPortuguese who had themselves taken jobs in wealthier European countries.In the mid-1970s, emigration has been as high as 18,000 a year (or 6% ofthe population). Since independence, more favorable quotas have increasedthe flow of Cape Verdeans to the United States.

9. The population of Cape Verde is young, with 47% under 15 years old(in 1977). During the famines in the twentieth century alone, some 84,000persons died of starvation, giving an average annual increase of the popula-tion of only about 1.3% over the past hundred years. Better health conditionsresulted in a high growth rate of the population of 3.2% per year during the1960s, but this has declined to an estimated 1.9% in the seventies due to theheavy net emigration. Population density overall is about 67.5 inhabitantsper square kilometer, but this varies greatly by island. The most populatedare Santiago (almost half the total), Santo Antao, Sao Vicente and Fogo; theislands of Maio, Boa Vista, Sal, and Brava each count fewer than 10,000persons.

Recent Political Developments

10. The long history of Portuguese colonial rule began to come toan end in 1956, when the African Party for the Independence of Guinea-Bissau and Cape Verde (PAIGC) was founded in Bissau. The PAIGC, headedby Amilcar Cabral, sought to improve social, economic and political conditionsin the two colonies, but was eventually forced into waging a guerrilla war on

the mainland (during which Cabral was assassinated) which lasted until thePortuguese revolution of April 1974. Although the PAIGC had a clandestineorganization in Cape Verde during this time, the fighting was confined toGuinea-Bissau.

11. The basis for independence and governmental organization was agreedbetween the PAIGC and Portugal in December 1974. In June 1975, 80% of CapeVerde's eligible voters elected 56 deputies (not necessarily Party members) tothe legislative branch of government, the National Assembly. This Assemblyproclaimed independence from Portugal on July 5, 1975.

12. The Government of Cape Verde has been headed since independenceby Mr. Aristides Pereira, the President, who is appointed by the NationalAssembly. The Prime Minister is named by the President, with the Assembly'sapproval, and the Prime Minister proposes the Council of Ministers to thePresident. This executive branch formulates decrees and laws which musteventually be ratified by the legislative branch. The National Assemblymeets only twice a year, and at other times delegates its power to theCouncil of Ministers. The judicial system is headed by the National Councilof Justice, consisting of three judges named by the Government and sixassessors elected by the people. There is no definitive constitution yet.

13. The PAIGC is the only political party in both Guinea-Bissau and CapeVerde, and the central organization of the party is bi-national. The PAIGCCongress, which has met every four years, elects a Superior Council of theStruggle (90 members) which meets at least once a year to decide on policymatters. In the interim, 26 members of the Superior Council form the Execu-tive Council of the Struggle. This is in turn directed by the PermanentSecretariat consisting of the Secretary-General (Mr. Aristides Pereira of CapeVerde), the Deputy Secretary-General (Mr. Luis Cabral of Guinea-Bissau), andfive other party officials of the two countries. The national PAIGC organwithin Cape Verde is the National Council of Cape Verde, composed of 31members and headed presently by the Prime Minister, which defines politicalstrategies for the country.

14. The political situation in Cape Verde since independence has beenmarked by stability, pragmatic socialism, and a non-aligned foreign policy.The chief members of the Government and of the PAIGC have not changed in thepast four years. National policy remains in the hands of the sole politicalparty, but decision-making does not appear to be dogmatic. The islandnation has carefully maintained a moderate and non-aligned foreign policywhich allows for friendly relations with major eastern and western powers, andwarm relations with Portugal. One of the major goals of the Party is theeventual unification of Guinea-Bissau and Cape Verde, and extremely closecontacts are maintained between the sister, republics. Cooperation includesjoint commissions and frequent meetings among sector specialists; a jointshipping company; a customs union; constant cultural exchanges; and the singlePAIGC structure. The governments of both countries are conscious of the timeand care which will be required over the long-term to achieve greater politicalunification.

II. ECONOMIC BACKGROUND

Structure of the Economy

15. The economic resources available in Cape Verde are contributedin nearly equal measure by domestic production and by foreign resources.This means, in effect, that the standard of living in the islands is consid-erably higher than what could be supported on the basis of Cape Verde'sown resources. Total expenditures were 203% of GDP in 1978; i.e., CapeVerdeans had access to twice the level of resources provided by the domesticeconomy. The divergence between total resources and domestic production mustbe borne in mind when considering the economic statistics discussed below.

16. Cape Verde's GDP is estimated at 1,900 million CV escudos incurrent market prices in 1978. This is equivalent to about US$170 per capita.Since all national accounts have been estimated (1973 by UNDP; 1977 and 1978by the mission), it is not possible to give official figures, adequate timeseries, or constant-price data. However, comparison of the 1978 estimate withan earlier roughly comparable figure for 1973 (Statistical Appendix Table 2.1)indicates a 12% annual growth rate of GDP in nominal CV escudo terms. How-ever, in per capita terms and taking into account the depreciation of thelocal currency (which is tied to a basket of currencies) versus the dollar,the situation appears to have changed very little: US$150 per capita in 1973versus US$170 per capita in 1978. Thus, GDP per capita in constant-price USdollar terms has probably declined.

17. The make-up of GDP has nct changed much over the 1973-78 period,and appears mainly to reflect the annual rainfall situation. Thus, 1978was a better year for precipitation than the preceding ten years. It isnotable that primary production--mainly agriculture and fisheries--accountsfor only about 25% of GDP (Table 1). This is extremely low in the Africancontext, and emphasizes the weak natural resource position. Manufacturingis still of very modest dimensions, at 6% of GDP; this consists mainly oflocal aguardente (rum) distilling and the production of flour from importedwheat. Construction, mainly on employment-oriented rural works programsand other development projects, accounts for a substantial 17% of GDP.The tertiary sector (including indirect taxes) makes up just over 50% of GDP.The service-oriented nature of the Cape Verdean economy, noted throughoutits history, remains a striking aspect.

Table 1. STRUCTURE OF GDP, 1978

Percent of GDP

Agriculture, Livestock and Forestry 20.5Fisheries 4.3Mining 0.4Manufacturing 6.3Construction 16.7Commerce and Transport 36.4Public Services 15.4

100.0

Source: Statistical Appendix Table 2.1.

18. Agricultural production can be divided into rainfed subsistencecrops -- maize and beans -- and irrigated crops, notably sugarcane, bananasand sweet potatoes, cassava, and potatoesl/. Of 60,000 ha of cultivatedland, only about 1,800 ha are irrigated. The yields on rainfed land varytremendously depending on rainfall, and are generally very low. The irrigatedcrops, using pumped groundwater, are grown on state farms and large individualplots; most smallholders do not have access to irrigation at present. Invalue terms, bananas and sugarcane predominate; the bananas are exported whensufficient quantities are available, whereas the sugarcane is used in theartisanal distillation of aguardente.

19. Fisheries output represents a fairly low 4% of GDP, despite theconsiderable resources included in Cape Verde's 200-mile economic zone.Total fish production is very roughly estimated at 8-10,000 tons per year,about two-thirds caught by small-scale fishermen with the remainder caught byan "industrial" sector of modest dimensions. The major portion of fish caughtis the tuna, a high-value fish which is exported either frozen or canned.However, small-scale fishermen with their 3-man Portuguese-style rowboats areill-equipped for exploiting this resource. Lobsters are also caught, eitherby diving or with traps, and some of these are shipped frozen or live (byair) to Europe. Bottomfish are not common in Cape Verde as there is virtuallyno continental shelf.

20. Manufacturing consists first of aguardente (rum) production,especially on Santo Antao and Santiago islands; this is the national liquor.Modern manufacturing facilities are very few; the main modern industry isflour milling, in Sao Vicente, which was established in 1975. The capacityof this plant is sufficient to supply all the islands with flour. Otherindustries are very small, including bricks and tiles, garments, fiberglassarticles, noodles, cookies, and shoes. Many of these operations have justrecently started up. The small size of the local market limits the potentialfor import substitution.

21. The tertiary sector is the main contributor to GDP in Cape Verde.The islands have always been trade-oriented, from the early days when CapeVerde played a middleman role between the Guinea Coast, Portugal, and theNew World. Commercial establishments remain to this day oriented towardthe import of goods from Europe or the supply of goods to ships and planes,rather than toward manufacturing. Government service is also an importanttertiary activity. The Central Government employs 3-4,000 persons, inaddition to the 15-20,000 rural workers employed in public constructionprograms. Local governments -- there are fourteen concelhos or municipali-ties -- are not of major importance in financial or employment terms.

Expenditure on Available Resources

22. The striking feature on the expenditure side is, as already noted,that total expenditures are twice GDP (Table 2). Thus, consumption exceeds

1/ More thorough discussions of the major sectors of the economy are pre-sented in Chapter III.

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25. Data on public investment realized in 1978 and 1979 (see Table4) indicate the heavy emphasis on rural development and transport infrastruc-ture, and the differences in sectoral absorptive capacity. On average duringthe two years, 28% of the investments carried out were in rural development,mainly for water resources. About 20% went for transport, 6% for educationand health, 6% for housing and sewerage, 5% for fisheries, and 5% for publicworks. By contrast, Government investment in industry (2%) and publicutilities (1%) was very low. In the productive sectors and the socialsectors, actual investment spending has been considerably below budgetedamounts, indicating the difficulty of implementing these projects. Economicinfrastructure projects, on the other hand, have enjoyed high implementationrates. This is particularly true of public works projects, designed mainlyto generate employment, and of shipping investment, which is easily imple-mented.

Table 4. PUBLIC INVESTNIENT, 1978 and 1979

Actual Investment Actual as %Realized, % of Total of Programmed

1978 1979 1978 1979

Productive Sectors 40.6 28.4 62.6 46.9Rural Development 30.8 24.3 67.7 63.7Fisheries 6.8 3.8 51.6 23.0Industry 3.0 0.3 48.6 4.9

Economic Infrastructure 22.1 38.9 64.6 86.5Transport 11.4 29.5 73.2 101.3Public Utilities 0.5 1.5 16.6 38.8Public Works 6.2 3.4 210.3 174.2Telecommunications 0.7 0.5 10.0 22.3Commerce and Tourism 1.2 2.4 42.2 84.4Administrative Infrastructure 2.1 1.6 72.4 33.1

Social Sectors 10.6 13.0 41.1 51.1Education 1.6 3.1 19.5 35.8Health 3.7 2.9 43.1 39.4Housing, Urban and Sewerage 5.3 7.0 58.7 74.8

Other 26.7 19.7 n.a. n.a.

Total. 100.0 100.0 77.4 71.9

Source: Statistical Appendix Table 5.4.

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26. Government revenues have increased by an average of 18% per yearfrom 1975 to 1978. Tax revenues have been growing in relative importance,

rising to 82% of total revenues in1978 from 70%-in 1975. Taxes on income,import duties, and excise taxes are the major sources of tax revenue, and

their yield has improved through better administration of direct taxes-and an increase in the taxes on consumption of luxury goods. Detailedinformation on nontax revenues is not available to explain their relativedecline. The revenue system remains much as it was inherited from the

colonial regime, and a study of tax reform is to be-undertaken. However, no

major increase in the tax burden is planned.

27. Domestic revenues have generally come close to meeting currentexpenditures, with a modest current deficit equal to 11% of current spendingover 1975-78. Development spending has generally been financed by foreign

aid; over the 1975-78 period, cumulative foreign financing was the equivalent

of 103% of the cumulative develcpment spending. Some 80% cf this aid is on agrant basis, with the remainder on a concessionary loan basis. Figures

available for 1977 indicate that, of total foreign aid received, the equiva-

lent of about 30% was in the form of food aid. Some mismatch between foreign

financing and development outlays occurred during 1976-78 as a large loan was

disbursed into an earmarked account in the Banco de Cabo Verde and graduallydrawn down. In 1978, new foreign financing declined and about 18% of develop-ment expenditures were financed domestically through bank credit and the useof earmarked accounts. Thus, while foreign aid has fully financed developmentoutlays in the past, it is not clear at this point whether the trend, willcontinue. It is notable that the Government sharply trimmed the growth of

development expenditures in 1978 as it became clear that foreign financing

was diminishing.

28. The Government's fiscal policies reflected in the abcve summary

of public finance developments are sound, and appropriately cautious for a

small country with limited resources. Tight control has been exerted overexpenditures to reduce the current deficit in 1978, and this austerity policywill be continued in 1979. Measures include limiting budget authorization to85% of budgeted amounts, and a freeze on hiring except for techinical person-

nel. Positive developments on the revenue side are expected due to the

recent termination-of import tariff preferences on goods from Portugal, and

due to larger profit contributions from public enterprises. Thus, the

current deficit should remain small over the near term.

Money and Credit

29. The present financial system in Cape Verde has been createdfrom the former operations of two banks in the pre-independence period:

a branch of the Banco Nacional Ultramarino (BNU), a Portuguese commercialbank, and a branch of Portugal's National Development Bank (NDB). The formerfunctioned as bank of issue and goivernment depository in addition to itscommercial role. The currency, the Cape Verde escudo, was at that time

pegged to Portugal's escudo at par. Two small financial institutions, the

Caixa de Credito and the Caixa Economica Postal, also operated in the country,but in quantitative terms were unimportant.

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30. The Banco de Cabo Verde (BCV) was established in 1975 and beganoperations in July 1976. The BCV took over the assets and liabilities ofthe local BNU branch, and the activities of the NDB became BCV's InvestmentDepartment. This department has separate accounting which could permit itseventual separation from BCV if the volume of its activities warrants it.The BCV is presently virtually the only bank in Cape Verde; it serves ascentral bank, commercial bank, and development bank. BCV's head office isin Praia; the Investment Department and a regional office are in Sao Vicente;and a branch located on Sal Island deals particularly with foreign exchange.A new branch is under construction in Tarrafal, Santiago. Most islands havea BCV representative. The Caixa de Credito and the Caixa Economica Postalhave continued to operate, but their relevance has been further eclipsed bythe rapid growth of the BCV.

31. Net foreign assets of the banking system rose by some 55% peryear over the 1974-77 period (Table 5). The stock of money and quasi-moneyrose by an average of about 35% per year over this same period. Credit toboth the Government and the private sector increased sharply in 1978,reflecting a more active credit policy in support of productive investments.However, the rate of growth of money and quasi-money slowed to about 14% in1978, mainly because public enterprise deposits levelled off as theseorganizations stepped up their investment activity.

32. The Cape Verde escudo remained pegged to the Portuguese escudountil February 1977, when the Portuguese currency was depreciated by 15%.At that time, the Cape Verdean authorities interrupted the exchange marketand shifted the peg to a basket of 18 currencies. These currencies areweighted according to the preceding year's foreign trade. The trade-weighted exchange rate has thus changed little over the 1977-79 period, butthe CV escudo has lost 27% of its value versus the US dollar from end-1975to end-1978. The currency is not freely convertible.

Table 5. MONETARY SURVEY, 1974-78(in millions of Cape Verde escudos)

End of period: 1974 1975 1976 1977 1978 /a

Net Foreign Assets 380 501 1,017 1,421 1,334

Net Domestic Assets, of which: 362 443 283 468 959

Credit to Central Government, net -15 -17 -165 -123 119Credit to Private Sector /b 283 325 408 402 608

Money and Quasi-Money 603 787 1,047 1,467 1,676

Business and Individuals 558 728 804 1,073 1,276Public Enterprises 46 59 243 394 400

/a Estimated.Lb Includes credit to nonfinancial public enterprises, about 7 million

CV escudos.

Source: Statistical Appendix Table 6.1.

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33. Credit policy in Cape Verde includes a system of sectoral ceilingsand limits on credit to Government. The sectoral ceilings, adjusted upwardsafter independence, are considerably above 'actual credit outstanding.Credit for current operations of' the Government is limited by statutes of theBCV to the equivalent of 15% of the previous year's current revenues.However, the BCV is also authorized to grant additional credit to the Govern-ment for specific development projects, tho'ugh this exemption is rarely used.Credit policies have essentially been very cautious, in line with the vulner-ability of the economy. Lending policies of the BCV have been very selec-tive, and require detailed information on the creditworthiness of borrowersand the proposed use of the loan.

34. Interest rates have remained unchanged since independence. Thebasic interest rate for short-term loans is 6.5%, while for medium- andlong-term loans the interest rates range between 8-9.5%. Interest rateson time deposits are fixed at 6.5%.

The Balance of Payments

35. The salient feature of Cape Verde's balance of payments is itsvery large and growing trade deficit, which'is, however, fully offset byheavy inflows of foreign aid and remittances from abroad. The trade deficitis caused by low and stagnating exports of US$2-3 million annually over thepast decade, owing largely to the drought; and by constantly rising imports(from US$11 million in 1969 to US$60 million in 1978). Exports of goods havecovered only about 4% of imports since independence. This has led to aresource gap (deficit on goods and nonfactor services) which was the equiva-lent of 104% of GDP in 1978. Never'theless, this gap has traditionally beencovered by inflows of foreign aid and remittances from Cape Verdeans livingoverseas. Before independence, these capital flows and private transferswere equivalent to about 80-85% ofTthe resource gap; following independence,these inflows increased to about 107% of the resource gap 1/. Related todomestic production, foreign aid and private remittances have each averagedover 50% of GDP during 1976-78. The outcome has been an overall surplus inall but two years over the past decade. Gross official reserves were estimat-ed to stand at about seven months' imports at end-1978 (Statistical AppendixTable 3.1).

1/ This is partly because remittances were accounted for under travelthrough 1975, and afterwards as private transfers.

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Table 6. SUNDMARY BALANCE OF PAYMENTS, 1970-78(in millions of CV escudos)

1970 1974 1976 1978 /a

Exports f.o.b. 80 76 47 109

Imports c.i.f. 359 806 1,177 2,086

Trade balance -279 -729 -1,130 -12977

Net nonfactor services 2 23 1 -7

Resource balance -277 -706 -1,129 -1,984

Net factor incomes 42 49 30 28

Net private transfers 80 265 506 829

Current account balance -155 -392 -593 -1,127

Public grants and loans 170 349 798 874

Private capital -4 -6 0 0

Errors and omissions 17 164 311 166

Overall balance (+ surplus) 28 115 516 -87

/a Provisional.

Source: Statistical Appendix Table 3.1,

36. Fish, salt and bananas are the major domestic exports of Cape Verde.Fish formerly made up about 80% of domestic exports, but have declined sinceindependence to about 50%; by value, the main products are canned tuna, frozentuna, and lobsters. The volume of fish exports is very modest; in 1977, itconsisted of 300 tons of canned tuna, 200 tons of frozen tuna, and 50 tons oflobsters. About 20,000 tons of salt are exported annually from Sal island, andits value has been increasing rapidly, including a tripling in price in 1977.Bananas are the major agricultural export, and about 700-900 tons, grownunder irrigation, have been shipped annually. Marketing arrangements forbananas appear to have improved dramatically after independence: in 1974-75,Cape Verde was receiving only 8-9 USE/kg, whlle the unit value went up to33-36 USE/kg in 1976-77. The recent prices are extremely high comparedto annual average prices of bananas c.i.f. Hamburg of only 21 USJ/kg in1976-77.

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37. Re-exports of goods and the supplying of bunkers for ships andaircraft greatly exceed domestic exports in value terms. Re-exports, whichare included under exports in the balance of payments (though trade data arenot fully consistent with the balance of payments), have been the equivalentof about 40% of domestic exports in recent years, though it is not clear whatthese re-exports consist of. Bunkering and stores for carriers are notincluded in the balance of payments, and this may account for the consistentlypositive errors and omissions. The value of these services has been increas-ing steadily with rising petroleum prices, exceeding 500 million CV escudosin 1977 or thirteen times the value of exports recorded in the balance ofpayments. However, the volume trend of bunkering re-exports has not beenencouraging; petroleum re-exports have declined from 700,000 tons in 1954 to420,000 tons in 1974 and only 170,000 tons in 1977.

38. Cape Verde's imports have grown at the rapid rate of 23% perannum (in current value terms) over the past decade. Comparing this increasewith the growth of GDP yields an import elasticity of 1.1 over 1973-78. Yetthe structure of imports has changed little. Food represents about 50% ofimports, and a large proportion of the main staples (maize, rice, wheat,beans and sugar and edible oils) was provided by foreign aid grants. Forinstance, in 1977 about half of the maize and bean imports, and most of thewheat and rice imports, were donated. Total consumer goods including foodaccount for about 70% of imports (see Table 7). Intermediate items and fuelmake up nearly 20% of imports; fuel is the only item whose share of theimport bill has changed appreciably, from 5% in 1974 to 9% in 1977 in responseto oil prices. Capital goods make up around 10% of imports, and their sharehas not changed over the 1974-78 period. This reflects the fact that theincreased foreign aid has been devoted to food aid and consumables as well asto heavy equipment.

Table 7. IMPORTS, 1974-77

(four-year average)

Category Percent

Food 51Other Consumer Goods, 17Intermediate Goods 11Fuel 8Capital Goods 11Other 2

100

Source: Statistical Appendix Table 3.3.

39. The terms of trade shifted substantially in Cape Verde' sfavorover the 1974-77 period, reaching 197 versus 100 in 1974 (Statistical AppendixTable 3.7). This is mainly due to price increases for banana and frozen fishexports. It may also be related to the diversification of Cape Verde's

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pattern of trade. The share of Portugal and Angola in Cape Verde's im-ports was reduced from 70% prior to independence to only 35% in early 1978(Statistical Appendix Table 3.6). Exports, two-thirds of which were orientedtoward Portugal in the early seventies, have begun to penetrate Africanmarkets which took 50% of Cape Verde's exports in the first half of 1978.

40. Of the non-trade items in the current account, the only cleartrend emerges in the case of private transfers. These are essentiallyremittances from overseas Cape Verdeans to relatives still living in theislands. It is not known what portion of this money comes from recentemigrants as opposed to emigrants who may be established in new countriesfor several generations, for instance, the estimated 300,000 persons of CapeVerdean descent living in the United States. In any case, this item hasincreased from about US$2 million in 1969 to some US$24 million in 1978.1/Factor incomes display little trend. Combining the resource balance withthe private transfers, a current account deficit of about 50% of GDP resultsin recent years.

41. Official grants to Cape Verde, including food aid, have been at avery high level in relation to GDP since independence. These increased from350 million CV escudos (US$14 million) in 1975 to 950 million escudos (US$28million, equivalent to 60% of GDP) in 1977. Much of this increase was dueto unusually high food aid linked to the drought in 1977, which accountedfor 45% of the value of grants. Data on food aid (Statistical AppendixTable 3.5) indicate declining, but still large, amounts in 1978 and 1979.Foreign loans have been more modest and have all been on highly concessionaryterms. Major loans so far have been obtained from the AfDF (for telecommuni-cations and rural development) and from BADEA. Total public external debtis estimated at US$25 million at end-1978; only US$12 million have been dis-bursed. Service on the debt contracted up to end-1978 is estimated at aboutUS$0.1 million in 1978, rising to US$1.4 million by 1989. This gives aratio of roughly 1.8% of 1978 estimated domestic goods exports. In terms of

Government revenues, the debt service ratio is only 0.8% in 1978. Thus,debt service is low despite the high inflow of foreign aid which amounted(grants and loans) to about US$80 per capita in 1978. It is also clear,however, that Cape Verde's fragile economy cannot be considered creditworthyfor borrowing on conventional (non-concessionary) terms.

Import Marketing System

42. Domestic marketing in Cape Verde is largely a question of thecontrol over and distribution of imported foodstuffs and consumer goods.Imports are controlled by the State Secretariat of Commerce, Tourism andArtisanat, which sets prices, trading margins, and grants import licenses

according to different types of commodities. The state-owned public enter-prise EMPA (Empresa Publica de Abastecimento), created in late 1976, importsessential goods: maize, beans, rice, sugar, vegetable oil, cement, and rein-

forcing rods. If food products are received by the Government as inter-

1/ Though this is misleading in part because of the change in the treatmentof remittances referred to earlier.

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national grant aid, the Ministry of Economic Coordination sells the produce toEMPA at a fixed price and places the proceeds in the National Development Fundto finance the local costs of labor-intensive development projects. EMPAcontrols essential imports in order to assure a planned and orderly supply, toimplement the Government's price policy for these goods, and because privateimporters generally lack the financial capacity to purchase in bulk. EMPAserves as importer and wholesaler only, generally operating on a 10% margin.Its wholesale prices are the same throughout the country; thus a policy ofsubsidizing the more remote islands by absorbing the transport costs isconsciously applied. The prices set by the state are designed to allow EMPAto be self-sustaining, but some products subsidize others; i.e., sugar ispriced high to discourage its use in aguardente manufacture, and the profitssubsidize the prize of maize and beans. EMPA maintains warehouses in thevarious islands, and sells to retailers at official prices. Retailers in turnmust respect fixed retail prices, generally set to allow' them a 10-15% margin.Inspectors enforce these fixed prices for imported essentials on local markets.

43. Non-essential goods are imported and distributed by private firms.For these goods, an import license scheme is applied by the State Secretariatof Commerce in conjunction with the BCV. -The total foreign exchange avail-ability for imports is set, and then split up by importing firms according totheir past volume and capacity. Each firm can then determine their own mix ofimports, although a system of priorities operates. The first four prioritycategories -- covering food, clothing, medicines, construction materials,petroleum, industrial and transport items -- can be imported rather freelywithin the importer's overall limit. However, lower priority items -- bever-ages, cigarettes, tobacco, chocolate and perfume -- must be approved on acase-by-case basis. Certain items are restricted on grounds of protection oflocal industries: these include wooden furniture, certain types of clothing,cookies, and wheat flour, which are all produced in Cape Verde. Automobileimports have also been suspended. Private importers are generally allowedfixed margins of 10-15% at the wholesale level.

Employment and Wages

44. Employment is one of the most serious problems facing Cape Verde.Exacerbated by the past decade of drought, the lack of employment opportu-nities has historically been a problem in the islands and has been a primecause of emigration. The Government estimates that 35% of the economicallyactive population (aged fifteen and over) were without work in 1970; this isthe most recent estimate available., though the situation may well be worsetoday. The structure of employment (in 1970) is about 90% in agriculture andfisheries, 2% in industry, and the remainder in services. Thus, in recentyears when rainfed crops have failed, there is really no way for the rest ofthe economy to absorb the surplus labor force. The response, initiated in1976, has been a series of rural employment programs generating from 15-20,000jobs per year, financed by foreign aid. This effort is not sufficient toprovide work to all those of the 142,000 estimated active population who areunemployed (Statistical Appendix Table 1.3).

45. A survey carried out by the ILO of employment problems in the urbancenters of Praia and Mindelo (in 1978) provides some insight into the economic

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pressures operating. These two cities have populations of about 39,000 and33,000 respectively, swollen to some extent by rural inhabitants seekingrelief from the drought. In Praia, employment is 70% in services, 20% inconstruction, and less than 10% in industry, agriculture and fisheries com-bined (Statistical Appendix Table 1.4). In Mindelo, the proportion ofservices is slightly higher, construction is lower and industry is higher.This reflects Mindelo's traditional commercial and industrial role in theislands; but the higher construction employment in Praia indicates that theadministrative center is growing much faster today than the commercialcenter. Public sector jobs constitute 61% of total employment in Praia, butonly 47% in Mindelo. Due to the high Government employment in Praia, theunemployment rate is lower (24%) than in Mindelo (29%) 1/. Unemploymentamong heads of household is lower, about 10%, with Mindelo again having ahigher rate. The employment situation in Mindelo has suffered heavily fromthe reduction in bunkering activities in the port, nd from the droughtaffecting Sao Vicente and neighboring islands. Emigration from Sao Vicentehas increased, and today 17% of the inactive and unemployed citizens ofMindelo are supported by remittances from family members working overseas.

46. Wages in the private sector and public enterprises are not setby the Government, and there is no legal minimum wage. In practice, salaryincreases must be reviewed by the Government, and the public sector exerts astrong influence on wage levels. Rural works programs provide marginalemployment in the rural areas, and the wages paid are a minimum of 40 CVescudos (US$1.14) per day for men, and 30 escudos (US$0.86) for women, withthe average wage being about 50 escudos. 2/ Daily wages surveyed by theDirectorate of Statistics range from about 45 CV escudos for unskilledworkers (though even less for domestics) to 200 escudos (US$5.80) for amechanic (Statistical Appendix Table 1.5). Wlages have risen on average about15% per year over the 1974-77 period. Public sector salaries have remainedconstant, after an initial adjustment shortly after independence to lower thehigher salary ranges. Government salaries currently range from about US$860per year to a maximum of about US$5,000 for the President of the Republic.Low public salaries have caused some difficulty in recruiting technicalspecialists, especially among trained Cape Verdeans working abroad. Specialhigher salaries are paid to certain professionals such as doctors and ships'officers.

Prices

47. Price movements in Cape Verde are generally closely related tointernational fluctuations, owing to the important component of imports inlocal consumption. The major divergence from this trend occurred in 1974 and

1/ These figures can only be considered as indicative, given the diffi-culties inherent in distinguishing between employed, unemployed andinactive persons under the present economic situation.

2/ These minimum wages were raised in September 1979 to 60 escudosfor men, 40 escudos for women; averages were about 60 escudosfor road work and 75 escudos for building construction.

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1975 due to the disruption of the economy during the changeover to indepen-dence, when certain products were in short supply and other prices which hadbeen fixed for many years were adjusted upwards. Apart from these two years,the general price index for Praia has moved very closely with that of Lisbon(Statistical Appendix Table 10.2).

48. General price increases have been moderate in 1976 and 1977 (seeTable 8). The official price index, however, is a unit-value weighted indexof some 80 commodities, in which one kg of maize has the same weighting as adozen eggs or a kilowatt of electricity. Also, the general consumer priceindex does not include rent or clothing items. This index clearly needs to bere-computed by the Directorate-General of Statistics on the basis of householdconsumption patterns; which would first, of course, require at least a limitedhousehold budget survey. In the meantime, the IMF has computed a roughweighting and produced a price series covering 1974-77. The two series arepresented below. It appears that a more accurate weighting of consumer goodsproduces a somewhat higher inflation rate. The 1977 rate of about 10% isbelieved to have continued in 1978.

Table 8. CONSUMER PRICE INDEX

(percent change per annum)

1970 - 73annualaverage 1974 1975 1976 1977

Praia - official 13.1 51.7 27.8 1.2 7.0

Praia - IMF estimate n.a. n.a. 40.9 7.8 10.7

Sources: Statistical Appendix Tables 10.1 and 10.2 and IMF staff estimates.

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III. SECTORAL PERFORMANCE AND ISSUES

49. This chapter describes the current situation in the majorsectors, the principal issues, and the prospects ahead. The sectors aretreated in some detail, especially agriculture and fisheries. A more generaldiscussion of Cape Verde's development strategy and economic outlook followsas Chapter IV. The sectors are presented here in the following order:

A. Agriculture

B. Fisheries

C. Mining and Manufacturing

D. Transport

E. Telecommunications

F. Tourism

G. Water Supply and Electric Power

H. Education

I. Health

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A. Agriculture

Land Use, Yields and Production

50. Of the total area of the country (400,000 ha), about 60,000 haare cultivated but only 1,800 ha are irrigated. Highland forests cover 2,800ha and there are 38,000 ha of classified range land. The remaining area, or300,000 ha, is wasteland caused by the drought, removal of plant cover forfuel, uncontrolled grazing by goats, and the erosive action of wind andwater. Of the rainfed land, the area actually cultivated depends on rainfall,but probably averages no more than 30-40,000 ha.

51. Over 90% of the rainfed land is planted to a maize/bean association,about 5% with sweet potatoes and the rest to other crops (cassava, peanut,purgenut, castor bean). A major part of the area is on steep slopes particu-larly subject to erosion, and for reasons of soil conservation is consideredto be unsuited to annual cropping.

52. Yields on rainfed lands are highly dependent on an erratic and ofteninadequate rainfall and average yields are low. On the steep lands maizeyields vary from total failure in drought years to about 700 kg/ha in years ofgood rainfall. On the flatter lands the yields are higher and can reach 1,200kg/ha in rainy years. The national average for maize is estimated at about400 kg/ha.

53. Under the present cropping pattern and in years of good rainfall thecountry can produce about 15,000 tons of maize or about one-third of theestimated demand of 48,000 tons. In an average year only about one-sixth ofthe demand will be produced domestically, and in severe drought years like1977 there is virtually no grain production. The 1978/79 maize harvest isestimated at 9,000 tons. In a year of good rainfall the demand for beans(8,000 tons) can be covered by local production. This is about 4,000 tons onaverage (1,350 tons in 1978/79). Vegetables and root crops grow mostly onirrigated land and are almost always in short supply.

54. Less than half of the irrigated land has a reliable water supply.Where the water supply is precarious, sugarcane is the dominant crop mainlybecause it is the most tolerant to extended periods without irrigation.Yields are consequently low, of the order of 10-20 t/ha. It is estimated thatsugarcane yields could be greatly increased with the judicious introduction ofimproved varieties. Sugarcane occupies 60% of the irrigated land, and is usedexclusively to supply artisanal distilleries producing rum (aguardente). Onwell-irrigated land, vegetables, including potatoes, are the main crop,followed by cassava interplanted with sweet potatoes. There are also 160 haof pure stands of bananas, mainly on Santiago. The farmers are in generalskilled horticulturalists and obtain relatively high yields for potatoes andvegetables considering that they do not use pesticides or fertilizers.

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55. Most of the farmers have some livestock, goats, pigs or poultry.Due to the extended drought period the livestock population has decreasedduring the last ten years. Ruminant livestock is kept during the crop growingseason (July to December) on range lands outside the villages. On return tothe homesteads, they first graze on the stubble in the harvested fields andlater they are fed on collected herbage and crop residues.

Land Tenure and Marketing

56. The limited data available on property size and distributionindicate the very small amount of agricultural land relative to the popula-tion (six rural inhabitants per regularly-cultivated ha) and a fairly skewedpattern of land ownership. The traditional morgados (land-grant plantations)from the colonial times were abolished in 1963. In Santiago a few of thelarger farms were nationalized; however, many relatively large propertiesstill exist. It is estimated that about 19% of the population owns all theland, with the other 81% working as renters, sharecroppers or wage laborers.Farm sizes vary widely and no characteristic indices can be given. Many farmsare still so small that they cannot provide adequate subsistence to onefamily, even in good years.

57. Due to this pressure on the land, farmers are often compelledto seek either sharecropping or rental arrangements. After independence,measures were introduced attempting to correct the existing agrarian distor-tions and focussing on land tenure, inheritance laws and the resolution ofconflicts between landlords and tenants. Sharecropping was abolished in 1975and special committees set up by the Government attempt to protect therights of the landless against exorbitant rentals demanded by landlords.The present legal minimum area for leased land is 1.0 or 0.5 ha for rainfedor irrigated land, respectively; rents are to be reduced when betterments areintroduced in the property by the renter; and contracts are for a minimumperiod of 3 years without revision. Despite the healthy nature of thesereforms it is recognized that for an adequate level of subsistence a familywould require at least 1.0 ha of irrigated land and 2.0 ha of rainfed land.

58. The Government has expropriated a few large irrigated properties,mostly in Santiago, and miscellaneous rainfed lands.l/ These state farmshave become semi-autonomous enterprises with budgetary autonomy. Theirobjectives are to serve as demonstration farms, to provide employment, tosupport the Government's pricing policies, and to produce efficiently. Landsare leased to individuals who work directly on the farm. The Governmentenvisages setting up a public enterprise which would coordinate all statefarms.

1/ Compensation was not always paid. For instance, a large propertyat Santa Cruz on Santiago was taken over without payment because of thelarge debts owed on the property to Cape Verdean banks by the foreignowner.

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59. Domestic marketing of pFoduce is carried out either by privatetraders who own trucks or by the farmers themselves selling directly in thelocal marketplaces. There are weekly markets in the smaller towns and dailyin the capital. There is little intervention by the Government in the market-ing system. In fact, produce grown on state farms is available for sale toprivate traders.

60. Pricing controls are essentially reserved for imported goods.For imported first quality hard maize the retail price was established atCV escudos 6 per liter (equivalent to 7.20/kg) in December 1977 and remainedin effect in April 1979. However, local maize is preferred for preparing thenational dish cachupa, and in April 1979 this maize was selling for CV escudos8 per liter, and at times goes as high as 15/liter. Thus, at current pricesthere is a substantial incentive to produce.

Institutions Dealing with Agriculture

61. The Ministry of Rural Development is still in the process offinalizing its organizational structure. At present it comprises two majorDirectorates-General, that of Conservation and Use of Natural Resources andthat of Agriculture, Forestry and Livestock. The former embraces the threeDirectorates of Rural Works, Groundwater Exploitation, and Climatology andWater Conservation. The latter comprises the Directorates of Plant Productionand Protection, Animal Production and Health, and State Farms; a new Direct-orate of Extension is being launched. Additionally, the Ministry has anEquipment Maintenance Center, a Center of Agrarian Studies, and CentralizedAdministrative Services. While the professional level of the staff is high,they are too few in number at present to define and implement plans for rapidagricultural development. The two directorates-general have 10 staff ofengineer level and 26 technicians. Foreign aid has supplied about 17 expertsintegrated in the financed projects. There are, however, university graduatesdue to return from training and it is expected that some experienced staffwill return from service overseas. There are no facilities within the countryfor training junior or senior personnel.

62. The former research station at Sao Jorge (Santiago) has become astate farm, but is being re-vitalized as a research station. This stationwill include a veterinarian laboratory, and chemical and physical laboratoriesfor the analysis of soils and water. These laboratories and other agricul-tural activities will become part of a center for agrarian studies at SaoJorge. There are also some on-going bilateral seed production and plantproduction projects located on other Government farms.

63. Agricultural credit (through a Caixa de Credito Agricola) isextremely limited, and there are no farmers' associations or cooperatives. Apublic enterprise (Empresa Publica de Fomento Agro-Pecuaria) has just beenestablished to supply production inputs and technical assistance to farmers.

Government Policy and Objectives

64. Having gained independence in the middle of a severe drought, thefirst priority of the Cape Verdean Government was to feed the population.

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This was obtained through food grants (41,000 tons of grains in 1977) and byorienting foreign aid towards the development of water control essential toassuring the supply of staple crops. Shipments of food aid are sold by theGovernment to create a special Development Fund which is used to finance ruralworks and create employment.

65. Cape Verde does not yet have a development plan, but in agriculturethe main objectives are as follows:

- Priority to the rural population aiming at assuring a minimumfood supply to everyone and at decreasing or eliminating unemployment;

- Development of water resources (ground and surface water)

- Soil conservation and watershed management;

- Improvement of water economy, agricultural techniques, introductionof inputs and development of extension services; and

- Applied agricultural research.

66. This strategy appears sound given the present situation of thecountry. However, huge investments are required for watershed managementwhich is a prerequisite for any agricultural development in Cape Verde.These investments are only recovered over the long-term as the impact of thework is always slow. The envisaged slow pace of the availability of newtechnicians in the sector is also an important constraint to the implementa-tion of new projects.

On-going Prolects and Foreign Aid

67. There are about 35 on-going projects in the field of agriculture,most combined with soil and water conservation and/or irrigation. In additionthere are projects dealing with specific agricultural problems such as plantprotection, seed production, livestock and forestry.

68. Of the total budget for these projects of about US$40 million,approximately one-half is earmarked for soil and water conservation and aboutone third for irrigation. Soil conservation implementation is required forall agricultural land development in the country and therefore the Governmenthas started an emergency program for soil conservation covering the mainwatersheds. This program has a dual purpose, to control soil erosion and toprovide employment. However, it will require follow-up with intensive invest-ment programs which would install supplementary structures, including terraces,torrent control, check-dams and the growing of perennial crops on the steepestslopes. Irrigation is based so far only on groundwater either from wells orunderground galleries.

69. Bilateral aid in agriculture has mainly focussed on projects onislands "allocated" to individual agencies. Dutch aid has financed a numberof rural development schemes on Santo Antao; the French have financed agri-cultural production and groundwater development projects on Sao Nicolau. The

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largest projects now underway are on Santiago Island, which is also the lar-

gest, most-populated island with one of the greatest agricultural potentials.

The African Development Fund and the International Fund for Agricultural

Development financed (in 1978) the US$8.2 million Assomada Integrated Rural

Development Project in the central part of Santiago. This project will develop

150 ha under irrigation and 2,000 ha for rainfed crops, including erosion

control, storage and credit components. USAID is financing two large (total

US$10.4 million) projects on Santiago, both based on construction of small-

scale retention dams. These projects now underway appear to have seriously

strained the implementation capacity of the Government. Assistance in plan-

ning and program development is, however, being provided to the Ministry of

Rural Development by UNDP experts.

Constraints and Potential

70. The further development of agriculture in Cape Verde faces severe

constraints which combine to raise production costs. In fact, while theGovernment treats agriculture as the highest priority sector, it recognizes

that the potential is limited. This is mainly due to physical causes, among

which we have already noted the low, erratic and heavily concentrated rain-

fall. The climate is truly Sahelian, and the long-term average rainfall does

not exceed 300 mm per year except at high elevations. A second constraint is

the difficulty, due to the terrain, of capturing surface water and the

problem of estimating the potential of groundwater resources. The recharge

of aquifers is subject to the same vagaries as the rainfall and there is not

enough experience to obtain good estimates of average assured yields.

71. Cape Verde's remote location also limits agricultural development.

That is, one could argue on the basis of climatic constraints that Cape Verde

should grow high-value export crops under irrigation. However, the dispersion

of agricultural land and population over nine islands, with limited interisland

and overseas transport, makes the distribution of inputs and the marketing of

production very difficult and costly. The problems of banana and tomato

exports were cited to the mission. Refrigerated vessels which are the best-

suited to banana transportation no longer call at Cape Verde due to the small

cargoes available. So vessels with forced ventilation are used instead, but

must then sail directly to Lisbon to land the cargo in reasonable condition.

These vessels call irregularly, and shipments are therefore organized on an

ad hoc basis when it is known that a ship is calling. A trial shipment of

tomatoes was carried out with excellent results, but in present drought

conditions the vegetables produced are mainly consumed locally so that it is

impossible to guarantee a sufficient and steady supply for export.

72. Several organizational problems also affect the agriculturalsector. The well-trained members of the MDR staff are presently too few

in number to implement any more large-scale rural development projects beyond

the several already underway. The mission also suspects, though without an

adequate data base, that problems of land ownership distribution and the.very

small size of most individual holdings comprise a constraint on the future

development of the sector.

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73. Certain favorable aspects of agricultural potential should not beoverlooked. For instance, soils are generally fertile and adequate, givensufficient water. Wind and solar energy are abundant and could be harnessedfor pumping or desalination. Several experiments with wind and solar-poweredpumps are now underway, and a recent USAID mission on non-traditional energysources reported favorably on the potential. The varied topography offers arange of microclimates permitting a diversification of crops. Temperateclimate fruits and vegetables, including grapes and potatoes, can be grown andin fact a local wine has even been produced, though not in quantity. Thedispersion of the territory also facilitates disease and pest control.

74. The mission would particularly stress three aspects of the Govern-ment's approach to agricultural development problems. First, greater techni-cal assistance in agriculture is necessary to provide the applied researchbase and to ease the absorptive capacity constraint. Second, improved cropvarieties and cultural practices could considerably increase the yieldsobtained for both rainfed and irrigated crops. Third, watershed managementand development of water resources must be accorded priority. Watershedmanagement projects should be of the integrated rural development type,including erosion control upstream, development of water resources forirrigation, and improvement of rainfed farming. The Government properlywishes to begin efforts to retain surface water, which has up to now been lostto the ocean, taking into account the extensive work now underway to prospectand exploit groundwater.

75. Assuming a continuation of the present heavy investment levelin agriculture, the following long-term improvements can be foreseen. Rainfedcrop yields can be increased through use of new varieties, improved seeds,fertilizers and better farming techniques, though the optimal use of inputsneeds to be studied in light of the variability of rainfall. Staple cropsmight also be introduced which would contribute to soil and water retention.Irrigation would essentially be aimed at higher-value crops, both to supplythe domestic market and for export; better transport being a key requirement.Development of groundwater resources, construction of suitable surface waterstorage, the use of water-efficient irrigation techniques such as drip irriga-tion, and the introduction of fertilizers and pesticides are among themeasures which could be envisaged.

76. The long-run result of such measures is presently unknown. Theoverall volume of irrigated crop output will be limited by water availabilitywhich is still unknown. Probably the percentage of food imports (generally70% of total food needs) can slowly be reduced, but the lack of results yetfrom the agricultural investment program make it impossible to predict whatdegree of self-sufficiency can be attained.

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B. Fisheries

77. Since the introduction of the 200 mile zone, the Cape VerdeanGovernment has come into the possession of the archipelago's rich marine

resources extending over a total area of 600,000 km2. Because fisheriesoperations previously had been mostly under external management, the plann-

ing, organization and administration of the sector still has to be brought

into a coherent national, policy framework. The sub'stantial resource poten-tial of tuna'and lobster has attracted multinational donors and a number of

projects in the sector are being planned or have already started. In order

for the fisheries industry to become a major source of economic growth,however, the widely fluctuating trend in fish landings (which varied from a

low of 5,000 tons to a high of 10,000 tons, in recent years), and the stagna-

tion in processing and exports must be improved. The export volume of fish-eries products has remained at abbut 1,,800 tons from 1974 to 1978. Even so,fisheries products still account for one-half of domestic exports, and the

sector contributes 4% of GDP and absorbs 2% of total employment.

78. The fisheries sector is characterized by low productivity, limited

local markets and the absence of established export marketing channels aswell as underutilized cold storage and freezing capacity. The main impedi-ments to raising the fishermen's catch seem to be the low level of technology,the limited range of operations, an obsolescent fleet, and the lack ofinterisland transport facilities and adequate road infrastructure on theislands to allow for distribution of the catch of small-scale fishermen. Thesegregation of small-scale fishermen is reinforced by the somewhat artificialdistinction the Government draws between the artisanal sector (boats 4-6 m)and the industrial sector (boats 10 m and longer). In the past, the small-scale fishermen's catch has not always entered the export market, sincecertain islands lacked proper storage, processing, and transport facilities.

Fisheries Production and Marketing

79. Current fishing operations are based on a fleet of about 760

small boats (4-6 m), 30 medium size boats (10-15 m) and three tuna clippers(38 m). These boats mainly go for tuna. The small boats are owned by thefishermen themselves and the rest by Government processing firms. Most of

the 3,000 fishermen operate small 'oats and live in small fishing villageswhere their boats are beached. Some 72% of the total number of fishermen

live and work on the three main islands (Santiago, Sao Vicente, and SantoAntao). Boat building and fishing methods.mostly are rooted in Portuguesetradition. The average small fishing boat of 4-6 m in length, with three menaboard, catches about 3 tons per man per year. While motorization of smallfishing boats is gaining momentum kabout 100 have outboard engines), themedium size boats are fairly old. About half of them are based at Mindeloand operated by the freezing plant, the rest fish for the canning factorieson the islands. Annual production per boat is about 120-130 tons, whileproduction of 180-200 tons could be achieved with proper equipment andmanagement. Fishing is almost exclusively done with hook-and-line andpole-and-line. Even the three tuna clippers, which were originally riggedfor purse seining, now use pole-and-line fishing because the purse seining

- 27 -

techniques were unknown in Cape Verde. This way the clippers operate at anannual loss, bringing in only a third (540 t) of the potential catch with theclippers' original rigging. The shortage of bait fish, a real problem in thefisheries industry, and the low productivity of the existing fleet underscorethe need to bring better technology and fishing practices to the fishermen.

80. The most important fish stocks exploited so far are three speciesof tuna (yellowfin, skipjack and big eye), a relatively high-value fish,mainly caught during April-November. Tuna accounts for about two-thirds ofthe total catch and even more of its value. Other pelagic species are mainlycaught for bait in the tuna fishery. In the off-season for tuna, bottomfishsuch as snapper, groupers and seaperches are caught, though these are limiteddue to the absence of a continental shelf. Lobster fishing accounts forabout 100 t, sold at a high price for export. About 75% of the fish caughtis consumed locally with per capita consumption varying greatly betweenislands. Overall, fish consumption in Cape Verde is about average comparedwith other West African countries but only half that in Senegal.

81. The two main commercial ports of Mindelo (Sao Vicente) and Praia(Santiago) are also the main fishing ports. The Mindelo shore facilitiesinclude a refrigeration plant (freezer storage capacity of 3,000 t), asmaller plant (cold storage room of 300 t), and an old but efficient shiprepair yard for which a new repair shop is being built. Canning plants arelocated in Praia and on the islands of Boa Vista, Sal, Sao Nicolau and Maio,employing a total of 500 people in labor-intensive operations. Total annualproduction and export was about 500 t of canned tuna in the early 1970s andhas since declined to less than 200 t. The plants operate way below capacity,partly because of their advanced age and poor condition when they wereacquired by the Government. An FAO/UNDP fish processing expert is currentlyadvising on improved processing methods as well as fish salting and drying toraise the quality of fish handling. A Japanese bilateral aid project(US$800,000) will renew the cannery at Boa Vista, provide four new 14-metervessels and 300 outboard motors to revitalize this fishery.

82. Several fish processing projects currently being considered oralready under way seem to be excessively large in relation to the catch.For example, with the assistance of various donors, seven salting and dryingstations are planned, particularly for islands (Fogo, Brava, and Santo Antao)and locations which do not have canning or freezing capability. In the caseof Tarrafal, a 2,000 t/year plant was built, though there are no concreteplans to expand the local fishing fleet (annual catch 300 t). The Govern-ment is also proceeding with the construction of a new 6,000 t capacitycold storage plant at Mindelo, to be ready by late 1980, which may beexcessive. With Dutch financing, refrigerated storage is being added onSal (1,500 t in 1980), at Praia (800 t in 1981), and on Brava (500 t in1981).

83. Canned tuna is exported to the US, the Netherlands, Portugaland Italy. Lobster is airfreighted live and there is a small exporttrade in fishmeal and salted and dried fisheries products. The export tradewas disrupted in the mid-1970s at the time of independence, but is nowbeing restored. Refrigerated storage space formerly rented by a Japanese

- 28 -

company (Mitsui), is now used by Joint Trawlers, a Swedish-based Sovietfirm. Recently one of Cape Verde's large tuna clippers has been fishing onhire to the Angolan Government during the off-season at home. Tuna exportshipments declined from 1,200 tons in 1977 to 890 tons in 1978, and areexpected to reach about 1,300 tons in 1979.

84. Fishermen's incomes on average are low but compare favorably withthose of agricultural or unskilled workers in Cape Verde. Small-scalefishermen's annual income varies between about US$500-600 to $2,000 (versusUS$300-400 for rural works laborers). Fish prices remained constant from1976 to 1979, when they were raised about 50%. The producer price for fishis based on a retail price from which the Government subtracts marketing andtransport charges. In the more urbanized islands that have access to freez-ing storage, the price received by fishermen is about three times higher thanelsewhere. There is a parallel market, which indicates that producer pricesdo not always reflect local demand conditions. The price system should berevised with a more flexible pricing system in view. For tuna, prices shouldbe linked to international market prices.

85. Domestic marketing could be greatly improved to the benefit ofsmall-scale fishermen if interisland connections were improved, for exam-ple, by introducing small, fast boats. A few such boats have recently beenintroduced. On-island distribution of fresh fish to urban consumptioncenters is often hampered by lack of vehicles, other times by inadequate roadinfrastructure. The Mindelo refrigeration plant operates below capacity,while on the rest of the islands fish goes to waste because no cold storageis available and the catch cannot be moved. A more decentralized refrigera-tion system with small cold storage plants spread over certain islands wouldassure the small fishermen of a more diversified market, while on some of theless populated islands, salting and drying of fish might still be the onlyviable processing method.

Institutions

86. The two main operating agencies under the Fisheries Directorateare organized to support the artisanal and industrial sectors. SCAPA(Sociedade de Comercializacao e Apoio a Pesca Artesanal), created in 1977,assists the small fishermen by providing them with fishing equipment, improv-ing their access to marketing, operating canning plants and building fishsalting and drying plants. SCAPA requires reinforcement in managementand quality control and should be more agressive in addressing marketingneeds. An ongoing experiment with,FAO/UNDP assistance to transport freshfish from Porto Mosquito for sale on the Praia market needs to be expandedand replicated elsewhere. PRICAP, responsible for reorganizing and strengthen-ing the industrial sector, took over the former CONGEL company's shorefacilities in Mindelo and three tuna clippers. Marketing experts are neededto develop sound arrangements in anticipation of increased production. Anew umbrella organization for the fisheries sector, INTERBASE, was estab-lished in July 1979. Its objective is to coordinate industrial fishingactivities, including fish handling and processing, fishing fleet management,and salt production. Further information on the management and operations ofINTERBASE were not available at the time of the mission.

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87. Overall, the Fisheries Directorate needs strengthening with thehelp of international advisers in the interim and trained Cape Verdeans inthe medium term, in particular regarding planning for the sector. It wouldbe of great importance to establish a linkage between the small-scale andindustrial producers to coordinate the export marketing of the sector'soutput.

Foreign Aid Prolects

88. A number of modest foreign aid-financed projects are underway in theartisanal fisheries sector, totaling about US$2.7 million. These projectsgenerally consist of motorization for small fishing boats, interisland fishcarriers, and small harbor and storage Improvements. Bilateral aid from theNetherlands is active on Santo Antao, from Switzerland on Fogo, Brava and BoaVista, from France on Sao Nicolau, and from West Germany on Maio.

89. In the industrial sector, the main project is the construction of a6,000 ton cold store at Mindelo, costing about US$4 million and mainlyfinanced by Holland. Two tuna canneries, on Santiago and Boa Vista are alsobeing modernized, and in Boa Vista fishing vessels will be financed under theJapanese aid project mentioned earlier.

90. A large project is under preparation by the FAO which would enablea greater number of artisanal fishermen to engage in a more industrializedtype of fishing. This project will be export oriented, fishing for tuna fromJuly to December and for small pelagic species (for export to West Africa)during the rest of the year. A fleet of twelve combination 15-meter steelfishing vessels would be purchased abroad for the project. These boats woulduse pole-and-line fishing for tuna, and seines for the smaller fish. A baitcollection system would be established in support of the tuna operation. Theproject would include substantial technical assistance, and would be based atMindelo. Total costs are estimated at about US$5.5 million, and financinghas been committed by the Abu Dhabi Fund, BADEA, and the Saudi Fund.

91. The Government of Iceland ts providing a 38-meter, 300 ton vesselto be based permanently in Mindelo as a fisheries training and experimentalfishing vessel. It is equipped to carry out bottom trawling, midwatertrawling, and seining.

Prospects

92. With proper encouragement and an adjustment to new and appropriatetechnologies, and improved marketing arrangements, the income of fishermencould be improved and exports of some fisheries products could be greatlyincreased. If all small fishermen were to fish from medium size boats theiraggregate annual catch might be some 25,000 t. The annual catch would beincreased by establishing a resource base for fishing throughout the year byfishing outside the 200 mile zone and/or negotiating fishing rights in watersof other West African countries. To efficiently patrol the 200 msile zone aminimum of four handy-size boats and one aircraft would be needed,

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93. As for the near future, several techniques to increase the catchcould be tried such as use of light attraction, small purse seining andmidwater trawling combined with the introduction of somewhat larger boats.An important goal would be to enhance the productivity of individual fisher-men and eventually replace the small fishing boats with medium size (10-15 m)boats with a crew of 5-10 men. Since these boats could not be beached, andprotected bays are very few, fishermen might tend to migrate to a few suit-able ports. Appropriate supportive measures would have to be taken tofacilitate such a gradual changeover, including the possibility of reservingcertain waters close to shore for the medium-size boats. Larger boats couldcreate additional employment opportunities, but probably only if they coulddisplace foreign fishing boats in international waters, since sufficient tunaare not available year-round in Cape Verde's waters.

Policy Recommendations

94. The foremost aim of fisheries development should be to maximizethe use of available resources. The area accessible by small boats from theislands is estimated to yield a potential annual catch of coastal species of15-30,000 t in addition to 10-15,000 t of tuna within a 50 km distance,compared to the current total annual catch of 5-10,000 t. A more quantita-tive evaluation of fish stocks is needed, using a modern research vessel.Until conclusive results of such a survey are available, fishing in the200-mile zone with traditional gear could probably be doubled to 20,000 tover the next five years using improved distribution and marketing methods,and tripled if new gear and boats were introduced.

95. The effective implementation of a development program will requirequantitative and qualitative strengthening of the administrative structure.Organization and administration of the fisheries sector should be keptsimple. The purpose of Government intervention should be to formulate andcarry out a resource assessment and fisheries management program. Theindustrial sector is in dire need of rehabilitation, since it consists mainlyof unsuccessful private enterprises left over from colonial times. TheGovernment should also-see that the sector is provided the necessary distribu-tion and storage infrastructure and should build up an extension service forfisheries, that would keep fishermen updated on the science and technologydevelopments in the field.

96. Since independence, a number of fisheries teams from bi- andmultilateral organizations have helped in preparing aid projects, someof which are now underway. A national fisheries policy is emerging from thevarious studies completed to date, but it would be useful to summarize thispolicy in a concise document setting out a coordinated approach for thedevelopment of the resource base, fishing activities, shore installations andmarket outlets. The importance of providing access to export markets forpresent artisanal fishermen through better production and marketing systemsshould be stressed in such a document.

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97. The mission has identified certain priority aspects of fisheriesdevelopment in Cape Verde, which are now being addressed by foreign aidfinanced projects. These include the need for an experimental fishingprogram involving purse seining and midwater trawling and the use of medium-size (10-15 m) fishing boats with various gear. To aid small-scale fisheries,it is also important to develop small decentralized refrigerated depots,improvements in fish handling and processing, and viable export marketingchannels. In addition, the possibilities of local small boat constructionshould be explored, and a survey of potential fishing port sites suitablefor medium-size boats undertaken. Technical assistance related to theexperimental fisheries program and to the development of better marketingarrangements is also required.

C. Mining and Manufacturing

98. Mining and manufacturing together provide a very small proportion ofCape Verde's GDP, about 7%. Production consists mainly of the extraction ofsalt and pozzolana, and the manufacture of aguardente (rum), flour milling,soft drink bottling, fish processing (described earlier), and several othersmall industries. The extractive industries are export-oriented, while thesmall factories are directed toward import substitution. These sectors employonly 2% of the work force, and have historically been of only modest signifi-cance in the Cape Verdean economy. There are plans to establish a cementindustry and a ship-repair facility, both of which would be largely export-oriented. Also, assembly-type industries may be feasible. The future successof an expanded industrial sector rests on the degree to which local laborresources can compensate for the competitive disadvantages inherent in CapeVerde's isolated location. This section will survey the major industrialoperations before presenting several issues affecting future prospects.

Major Industrial Operations

99. Salt has been continuously produced by evaporation in salt flatson Sal and Maio islands for hundreds of years. The level of production-- about 30,000 tons per year -- is the same today as it was in the 1850s.Production is concentrated now on Sal, where one French firm and one Portu-guese firm operate salt flats. The salt is mainly exported to Zaire. Themain problem is the lack of a suitable loading facility on Sal; lightering isnecessary and this raises the cost substantially. A consulting firm isstudying the possibility of a port on Maio which could be used to export40,000 tons of salt annually in a first phase; but the cost of this neededinfrastructure, about US$2 million, may make the project uneconomic. Senegaland Angola seem to be the competing producers in the West Africa region, andNigeria and Guinea have been identified as potential markets. The exportprice received by Cape Verde for salt rose sharply in 1977, and the higherprice may improve the economic prospects.

100. Pozzolana, a volcanic rock used as an additive in the manufactureof hydraulic cement, is found on Santo Antao. As much as 18,000 tons wereexported, mainly to Portugal, in the late 1960s. However, exports have now

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ceased. A study was completed recently on the possibility of constructinga 120,000 ton annual capacity cement clinker grinding plant at Praia, basedon imported clinker and pozzolana from the 13 million ton deposit on SantoAntao. Unfortunately, it appears that this project would not be suitablefor Praia due to the high cost of necessary dust-preventing equipment andthe inadequate port facilities. Aknew contract is now being let to studythe broader problem of how to exploit Cape Verde's resources of lime, stone,clay, pozzolana and porous rocks. The constraints include the infrastruc-ture: a clinker grinding plant would require additional power generation, aship for pozzolana transport, and possible port development work on SantoAntao. Marketing would also be a problem for construction materials, whichhave a low value-to-weight ratio and enjoy economies of scale. Also, mostWest African countries have their own clinker grinding plants.

101. Among the modern manufacturing facilities, by far the largestis the MOAVE flour mill in Mindelo. Production at this mill started in 1975,and reached about 9,000 tons in 1978 when a portion of this flour was,exceptionally, exported to Guinea-Bissau and Angola. MOAVE is 51% owned bythe Government, and the rest of the equity is held by some 20 Cape Verdeans.Sales in 1978 were 102 million CV escudos, with a profit before taxes of 10million CV escudos. A good rate of return has been achieved, in partbecause MOAVE has a monopoly on flour sales. Only 34 jobs are created by themill. Expansion plans include the manufacture of noodles and cookies aimedat the domestic market.

102. Preparations are underway for the establishment of a substantialship repair facility at Mindelo. The Portuguese shipyard LISNAVE completedan updated feasibility study for the project in September 1979, based on a1977 study. The yard would be equipped with a marine railway and thecapacity to lift six 7,000 deadweight ton ships out of the water. Theproject would cost about US$25 million, and the financing plan includes theAfDB, the European Investment Bank, a Portuguese shipbuilder, a Dutchshipbuilder, and one other Dutch enterprise, in addition to the Cape VerdeGovernment. To be called CABNAVE, the ship repair yard would generate about550 direct jobs by 1985 and is estimated to have an internal rate of returnof 15%. The market is identified as domestic and foreign fishing vesselsoperating in the area, and freighters passing by the Cape Verde Islands.The success of the repair yard is clearly linked to other developments atMindelo, especially in fisheries. It will also depend on the competitivesituation vis-a-vis other facilities in Dakar or the Canary Islands. Thefeasibility study does not provide a detailed analysis of the proposedyard's competitive position and market niche.

103. The remaining manufacturing facilities are very small. Theyinclude furniture-making, garment-making, fiberglass boatbuilding, soft drinkbottling, cigarette manufacture, and cookie production. UNIDO has preparedplans for three small-scale enterprises to produce shoes and foodstuffs, andfinancing has apparently been obtained. Aguardente (rum) distillation byartisanal means is a major industry but little is known about the structureand economics of this operation.

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Issues

104. Two issues are of particular interest in the industrial sector:the role of public versus private enterprise, and the export competitivenessof Cape Verde. The Government explained to the mission that the public rolein industry is to take the initiative and then bring in private participants.A very low base of private productive capacity, experience, and capital hascaused the Government to experiment with the establishment of new small-scaleindustries as mixed-economy companies, with the Government organizing theoperation but possibly selling out fully into private hands over time.Foreign investment is handled on a case-by-case basis so far, and there isno investment code yet. The approach has been cautious, for the Government'is concentrating its efforts first on coordinating the flow of official aidand strengthening the public enterprises.

105. The lack of entrepreneurial experience in Cape Verde clearlyhampers industrial development, and the Government should adopt a moreforceful policy towards the sector. The Government may well need to play acatalytic role in encouraging industrial development; private initiativeshould also be encouraged wherever possible in order to ensure efficientoperations which look to export markets as well as to the local market. TheGovernment also lacks industrial and marketing experience, and may wish toconsider foreign investment in order to fill this gap. Cape Verdeans whohave gained experience in manufacturing overseas could also form a valuablenucleus for launching industrial ventures. Overseas Cape Verdeans might alsobe able to establish market outlets for possible handicraft exports. Also,small business training might be added as a course at the industrial schoolin Mindelo.

106. The competitiveness of Cape Verdean manufacturing on the exportmarkets is a key factor which deserves further investigation by the Govern-ment. The degree of competitiveness expected would be a key indication ofthe priority to be attached to export-oriented industries. Such a studywould have to include estimates of productivity and the local cost structure,as well as a comparison of wage rates. However, a preliminary check oncomparative wage rates by the mission reveals that Cape Verdean wage ratesprobably have little competitive advantage compared with wage levels incountries which may have similar productivity. The average wage rate inmanufacturing in Cape Verde (1977) is about US$2.50-3.00 per day; comparedwith figures of US$2.10 for Sierra Leone and Sri Lanka, countries withsimilar per capita GDP figures (Statistical Appendix Table 9.2). Portugal(US$8.50 per day) and the Far East (US$5.00 to 6.00 per day) have higher wagecosts but clearly higher produc'tivity as well due to substantial investmentsin infrastructure, equipment, and human resources. Cape Verdean wage ratesare somewhat lower than those in Senegal and the Ivory Coast (US$3.50 to 3.75per day for the minimum industrial wage), but local infrastructure is probablybetter in these countries.

107. Cape Verde's remote location and unique development pattern also'impose certain costs which are relevant to an export-oriented industrialsector. Remoteness means that communications are limited, and transportcosts high between the islands and overseas. Factory locations should

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ideally be in Mindelo or Praia for sea shipment, and on Sal if airfreight iseconomical, though domestic-oriented industry could be more decentralized.

Inputs are likely to be costly, with most items imported and water cost

varying by island. Wage levels are also higher, indirectly, because of the

volume of remittances and aid received from overseas and the possibility of

emigration.

Prospects

108. Major prospects for increased industrial activity in Cape Verde

are concentrated in the construction materials, ship repair, salt extraction

and other export industries. The Government plans to build industry on a

mechanical engineering technological base, linked to local resources such as

fisheries and ships' services, and largely employing skilled labor. These

possibilities would all involve considerable investment including needed

infrastructure and training of the labor force. The outlook for the

world economy today is such that caution must be exercised in determining the

capacities to be installed, and generally the domestic demand for the product

should account for a considerable share of the output. Marketing arrange-

ments should be very carefully analyzed. The mission's estimation is that

several of these projects will go ahead during the next three or four years,

but possibly not on as large a scale as originally anticipated. The ship

repair project is the only advanced undertaking which offers much potential

new employment. For other export projects the markets need to be closely

assessed and probably foreign technical and marketing partners brought in.

Stimulation of local entrepreneurship through better business training and

the attraction of overseas Cape Verdeans, along with a judicious use of

foreign technical and marketing skills, are the main elements needed at

present for industrial development.

D. Roads

109. The road network in Cape Verde is relatively extensive and of

good quality. There are some 750 km of roads, of which about 300 km are of

cobblestone, and the remainder are earth roads or tracks. Roads are particu-

larly important on the rugged islands, and the largest systems are found on

Santiago and Santo Antao (Statistical Appendix Table 9.3). There are no

roads on Boa Vista or Maio, but these islands are flat and little populated.There are some 7,000 motor vehicles, mainly found on Santiago. Private cars

and pick-ups predominate, with some small trucks and light buses. Pack

animals (horses and mules) are used, but most of the rural population walks

to market.

110. Road construction and maintenance is highly labor-intensive. In

the 1977-78 Emergency Program, designed to combat the effects of the drought

through employment creation, some 6,000 out of 17,000 totai new jobs were

created,in road-building and maintenance. These road works projects typi-

cally combine labor and material inputs in a ratio of two to one. Roadactivity is particularly concentrated on the islands of Santiago and Santo

Antao. The 1977-78 Emergency Program employed 16% of the active population

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on Santo Antao in road building. Some heavy mechanical equipment -- abulldozer and blasting equipment -- is used to cut roads along very precipi-tous areas. But in most places, the road formation is prepared using picks,shovels, and headpans to level the ground, and on cobbled roads, to spreadand compact a base course of sandy soils. Basaltic rock is then cleaved byhand into roughly cubical pieces, and the cobbles are hammered into place ardwedged with small chippings. At a typical site, some 50 workers (men andwomen) will build ahout 40 meters of new road, 6 meters wide, each day.

111. The cobblestone roads of Cape Verde are well-shaped with a highstandard of drainage and retataiig walls. Durable construction combined withlow rainfall and comparatively light traffic gives the roads a low maintenancecost, and no potholes can be seen. However, the ride is quite rough and inustca,iss wear on vehicle suspension systems; in fact, tt Ls too rough for bi-cycles. In towns, major streets are of cobblestone with a thin bituminoussurfacing which improves the riding quality considerably.

112. Additional roads are needed in some areas -- particularly onSantiago, Santo Antao, and Fogo islands -- to better link points of agricul-tural and fisheries potential with urban markets. The road-building carriedout under the Emergency Program and other rural work schemes are thus accom-plishing worthwile goals, in addition to the employment-generating aspects.UNDP is seeking to provide technical assistance for the design of labor-intensive road operations, but in general, techniques appear to be verywell adapted to local conditions.

Ports

Background

113. Port infrastructure in Cape Verde consists of a major deepwaterport at Mindelo, a port at Praia being upgraded to handle oceangoing ships,and a series of very modest piers on most of the other islands. The port ofMindelo rose to prominence, as noted earlier, in the 1850s as a coalingstation, and has served a similar role in fuel oil bunkering for ships in thiscentury. However, due to changes in world trade patterns and vessel tech-nology, and as a result of keen competition from other West African ports,Mindelo's ship supply function has been declining. In 1978, some 90,000 tonsof bunkers were sold to ships in Mindelo (down from 700,000 tons in 1954). Inthe same year, about 80,000 tons of imports were discharged at Mindelo and70,000 tons at Praia. Some 8,000 tons of general cargo exports were shipped,mostly through Mindelo, and about 30,000 tons of salt loaded directly at Salisland for export. A lively interisland trade is also served by the nation'sports, linking Mindelo and Praia with the other islands.

114. The Mindelo port is fairly modern, constructed in 1959, but wasdesigned as a bunkering facility and therefore does not offer the access orhandling equipment associated with most modern ports. The natural settingprovides the best anchorage in the islands, with a protected semicircular bayoffering good water depths. Three berths are provided from a long finger

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pier, one with 11 meters depth and the other two offering 9 meters of water.There is also a quayface along the shore to accommodate fishing vessels, with6 meters of water. Three transit,sheds are located back of the quayface.Equipment includes three mobile cranes (up to 12 tons capacity), five trac-tors, 20 trailers, and six forklifts. The"port employs a staff of 150 per-manently, and up to 600 stevedores on demand.

115. The harbor at Praia has a more difficult entrance channel, but isfairly well protected. A new pier has been built with 500 meters of berthvarying from 7.5 to 9 meters water depth. Unfortunately, this pier suffersfrom structural problems and it is estimated that repairs costing as much asUS$8 million may be required. A road is still under construction linking thepier to the city, so unloading is'presently accomplished partly by lighters.Proper equipment -- warehouses and cranes -- is being provided under Nether-lands aid. The oceangoing traffic calling directly at Praia rather thantransshipping cargo at Mindelo should increase as the facilities are completedand the pier rehabilitated.

116. Small ports exist on Fogo, Sao Nicolau, Brava, Sal, and SantoAntao islands, but these are mostly in disrepair and unloading at many portshas to be carried out by lighters. The heavy swell 'makes cargo operationsdifficult, and periodically damage's protective breakwaters.

117. The ports are organized as a public enterprise, the Junta Antonomodos Portos de Cabo Verde (JAP), under the g'uidance of the Ministry of Trans-port. An UNCTAD mission by a port expert in 1978 found the JAP constrainedby its statutes in its efforts to establish adequate tariffs; lacking anyport engineers; and hampered by coordination problems with numerous ministries.However, the Government has not accepted these findings. The JAP earnedrevenues of 55 million CV escudos in 1978 and a profit of 4.5 million escudos(without considering depreciation); it has 31 million escudos on deposit atthe BCV (early 1979).

Issues

118. The main issue in the ports subsector concerns the future roleand development of the port of Mindelo. Another issue is the rehabilitationof the pier at Praia and the upgrading of the small ports.

119. The Government attaches the highest priority to the developmentof Mindelo, not just as a national port, but as a bunkering/repair/supplyport and as a transshipment facility. The economy of Sao Vicente islandlargely revolves around the port activities, and the decline in numbers ofships and bunkers supplied over the-past twenty years has worsened unemploy-ment and created a serious social problem. The Government proposes that aport master plan should be developed to coordinate land use for the relatedactivities of ship repair, fisheries, and cargo handling. This plan wouldalso map out a suitable role for the port based on marketing studies. Theauthorities believe that traffic has declined in part because of inadequatepiers, equipment, aprons, ships' supplies and complementary facilities. Inshort, a major investment project is sought to revitalize Mindelo port.

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120. The mission, while recognizing the seriousness of the problem,feels that the determining factor in the port's decline may well be thechanging requirements of international shipping more than any technicalshortcomings of the port facilities. The mission supports the findings of the

UNCTAD ports expert, who states that the essential features for successfulship bunkering today are a substantial commercial port and an oil refinery, in

addition to adequate supplies, tourist facilities, and an internationalairport. Mindelo's lack of these characteristics is unlikely to be offset by

its favorable geographical location, as other ports (Dakar, Las Palmas) offer

similar locations combined with busier ports, oil refineries, better airaccess, etc. The role of Mindelo as a transit port would depend upon the

economics of discharging large vessels in Cape Verde and transshipping (very

cheaply) to small vessels continuing to West African ports. This possibilityshould be investigated, but successful transit activities would require costly

revision of the port facilities.

121. Turning briefly to the other ports, the mission attaches a high

priority to the necessary pier repairs at Praia. For the smaller ports, the

question is how extensive these facilities should be, based on an economic and

social analysis of the whole interisland transport system. The optimal port

solution will depend upon the type of vessels to be used and vice versa. It

is clearly a major problem to provide adequate ports for each island, whenseveral have very small populations (under 10,000) and no sheltered locations

for ports. The Government has expressed a policy of seeking financing forthese ports from bilateral donors already involved with specific islands.

Recommendations

122. The mission recommpends that a marketing study be undertaken to

ascertain the prospects for different avenues of development of Mindelo port.

This study should assess the requirements, suitability, and competition for

the port as a bunkering point, a transit terminal, and as a national port.Shipping companies and competing ports should be visited. In the meantime,the Government should make what improvements it can in the present level of

services, such as improving the water supply and obtaining technical assis-

tance in port management. Foreign aid should be sought for the Praia works.

The small ports should form part of an overall interisland transport study to

determine the appropriate level and type of facilities. Once this study is

complete, financing could be aplit up among different aid agencies.

Outlook

123. Cape Verde's maritime orientation will doubtless continue, but the

exact nature of the services provided may change. The ship bunkering function

is not likely to expand in the near-term, while transit activities may be a

possibility. Ship repair and fisheries activities may generate new businessopportunities for the port of Mindelo. The port of Praia may divert some

traffic, but Mindelo will remain the hub for supplying the smaller islandswhose port facilities will probably remain limited for some time. It alsoappears likely that the role of Mindelo as a national port will expand if the

economy grows and export-oriented industry and fisheries develop. Thesedomestic developments should place Cape Verde's ports on a more stable growth

path.

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Shipping

Description of Services

124. The nine inhabited islands of Cape Verde are quite widely dispersed,and the principal means of access is by ship. The two urban centers --Mindelo and Praia -- are some 160 nautical miles apart. Two islands (Bravaand Santo Antao) do not currently have airstrips and can only be reached bysea. Shipping, both interisland and foreign, thus acquires primary importancein the case of Cape Verde.

125. Interisland shipping is in the hands of the state interislandshipping company ARCAVERDE, under the responsibility of the Ministry ofTransport. ARCAVERDE operates three passenger/freight vessels and onefreighter between the islands, plus three foreign-going freighters. Thepassenger vessels are all small and over twenty years old, and are not fittedfor carrying vehicles. One operates on a ten-day schedule from Mindelo toall the islands but Santo Antao; a second operates daily from Mindelo toSanto Antao; and a third runs from Praia to Fogo and Brava twice a week,weather permitting. The interisland freighter (300 tons capacity) distributesimports to the smaller islands, but not on a fixed schedule. Traffic betweenthe islands has been rising sharply, and in 1978 73,000 tons of cargo wereloaded in Mindelo for distribution to the other ports (up 33% from 1977). Amuch smaller volume of interisland freight was discharged at Mindelo, about9,000 tons, but this was also up sharply (22%) from 1977. Passenger trafficgrowth was about 3% in 1978, reaching 67,000 persons.

126. Cape Verde's shipping links overseas are primarily via Lisbon,and regular service is assured twice a month. The trade between Portugaland Cape Verde is divided in theory according to the UNCTAD Liner ShippingCode -- 40 % for Portuguese ships, 40% for Cape Verdeans, and 20% for third-flag vessels. Cape Verdean flag ocean shipping is operated by three firms.NAGUICAVE presently operates two 3,000 ton vessels on a twice monthly schedulebetween Lisbon-Cape Verde-Bissau. A third vessel (5,500 t) was purchasedsecond hand in September 1979 by the Cape Verde Government. It is operatedby ARCAVERDE carrying cement and maize from Europe. ARCAVERDE also manages afleet of three 600 ton vessels; two carry general cargo from Europe and oneimports and distributes petroleum products. The private Cape Verdean firm,Estrela Negar, operates one 1,000 ton vessel between Europe, Cape Verde andGuinea-Bissau. The freight available for Cape Verde-flag vessels appears tobe sufficient for their carrying capacity.

Constraints

127. The major constraints are inadequate management strength, lackof appropriate vessels, the harbor problems mentioned earlier, and the lowpassenger and freight volumes to some islands, which make it difficult tooffer a frequent but economical service. ARCAVERDE and NAGUICAVE are bothpresently managed by the same personnel, who require reinforcements. The.service problem has two aspects. Larger vessels are needed to distributeimports from Mindelo and Praia throughout the islands economically. On theother hand, small, fast vessels would be more appropriate for passenger

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transport and for transporting fish and fruit destined for urban markets orfor export. Vessel requirements outlined by ARCAVERDE include:

- a new car ferry for Mindelo-Santo Antao, capacity 200 passengers,6-10 cars and 200 tons cargo, being financed by West Germany;

- a small ferry for Fogo and Brava, to carry 30-60 passengers,also being provided by a grant from the West German Government;

- a water tanker to supply Mindelo with fresh water from SantoAntao;

- a products tanker to supply the islands with fuel oil; and

- a ferry to replace the two old vessels currently linking allthe islands.

Recommendations

128. Interisland shipping in Cape Verde plays the social and economicrole normally associated with highways in other countries. It is a crucialelement of economic infrastructure which will be necessary to stimulate thedevelopment of market economies on the outlying islands. Therefore, themission recommends prompt action to upgrade the interisland shipping links.The mission supports the recommendation made by an UNCTAD shipping adviserthat management assistance should be provided to ARCAVERDE (and possiblyNAGUICAVE). Appropriate vessels should also be purchased, either new orsecondhand. In order to be sure that an optimal transport system will beestablished, an interisland transport systems study should be conductedbefore placing orders for additional vessels. This study would analyze theprospective cargo flows and service requirements and determine the mosteconomic system solution, taking into consideration air transport, differentvessel types and sizes, and port requirements.

Air Transport

129. Seven of the Cape Verde islands are served by plane, and this modeof transport is essential for passenger movement. Internally, air communica-tions are handled by the Transportes Aereos de Cabo Verde (TACV), which is awholly Government-owned firm operating a small fleet of aircraft: two Hawker-Siddeley HS-748s (48 seats each), one Twin Otter (20 seats), and threeIslanders (8 seats each). The main domestic airports are at Praia and on SaoVicente, with lesser airstrips on the other islands except for Brava andSanto Antao. The major issues regarding internal air transport are the properexpansion of the fleet to respond to strong demand and the upgrading ofcertain airports. TACV has increased its freight carried at an annual rate of

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30% over the 1974-77 period, and passenger traffic by 9% annually. TheGovernment ordered a second Twin Otter aircraft in 1979, and hopes eventuallyto expand the TACV network as far as Lisbon which would require the purchaseof a US$12-13 million jet aircraft; the only foreign route so far is toDakar. The domestic service is good, with at least one flright daily betweenPraia and Sao Vicente and'several flights a week to other islands. However,due to heavy demand the planes are often full. The installation of an air-field lighting system at Praia would extend the capacity of the present fleetby permitting landings after sunset.

130. Cape Verde's external air link is via the Amilcar Cabral Inter-national Airport on Sal Island. This jet runway is ideally situated on aflat island, and was built in 1969 in part as a stopover point for planesflying from Europe and the US to South Africa. The airport presently servesabout 50 flights per week, including jumbo jets.

131. The traffic has not increased much lately, as Cape Verde haslost certain flights to Dakar (for, instance, Europe to Brazil) and otherairports. The Sal airport takes in about 20 million CV escudos per year fromlanding rights, and to this must be added taxes and margins on the sale of40-50,000 tons of aviation fuel per year. Still, the airport is not fullyutilized and could contribute more, in a fiscal sense. A UNDP project isproviding assistance in training personnel for airport management. Invest-ments required include strengthening of the runway and improvements of thepassenger terminal. However, a major need is to stimulate the demand for Salairport's services, and this could most clearly be linked to the developmentof tourism on Sal island and elsewhere in Cape Verde. Without a positiveGovernment tourism program, it seems unlikely that Sal airport traffic willgrow more than moderately, in response to the traffic volumes of companiesalready using 'the airport as a refueling stop.

E. Telecommunications

Existing Telecommunications Facilities

132. Telecommunications, like transport, provide a vital link fora remote island nation. Unfortunately, the present facilities are inadequate.The national telecommunications network consists of three automatic telephoneexchanges located in r'indelo, Praia and on Sal, with 900, 600 and 100 linesrespectively, as well as a few small manual exchanges on the other islands. Atelex exchange with a capacity of 40 subscribers is also available in Praia.The transmission system is based on two troposcatters (Santiago - Sao Vicente,Santiago - Sal) with a total capacity of 300 channels. Due to lack of trans-mission equipment, there are only 6 telephone and 6 telegraphic channelsoperating between Praia and Sao Vicente and another 6 telephone and 5 tele-graphic channels between Praia and Sal. The connections among the otherislpnds consist of a VHF link of 6 channels between Santo Antao and SaoVicente and UHF links between Sal - Boa Vista and Santiago - Fogo, which havea potential of 36 channels but are presently underutilized because of a

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shortage of spare parts. Single-channel VHF links are also operating beweenSao Vicente - Sao Niccolau, Maio - Santiago and Brava - Fogo. The interna-tional telecommunications service consists of one submarine cable to Lisbon(with a capacity of only three conversations simultaneously) and an HF radiolink to Dakar and Bissau.

Development Oblectives

133. The main sector objectives are to expand and improve the facilitiesin the principal trrban areas, to extend services to rural communities, and toimprove the quality of transmission and speed of communication in longdistance services. Accomplishment of these objectives is expected to provideimportant social, administrative, and productive benefits. AfDB has recentlyfinanced a project to provide two new automatic telephone exchanges inMindelo (5,000 lines) and Praia (6,000 lines). This project also includesinstallation of a telex center in Sao Vicente, along with a training programfor personnel in equipment maintenance. Furthermore, the Government isfinancing an extension of the transmission network between Santiago - SaoVicente and Santiago - Sal. With respect to international service, an earthstation and transit center for satellite communications is planned, for whichthe Government is seeking financial support. The rural telephone network isanother priority for which financing has not yet been secured.

F. Tourism

134. Tourism is virtually undeveloped in Cape Verde and is not atpresent a priority sector in Government planning. Hotel facilities areextremely limited, with one principal (but small) mixed-ownership hotel inPraia, one public and one private hotel on Sal, and two privately-operatedhotels (one leased from the municipality) in Mindelo. The Praia hotel isfully occupied with official visitors, and the hotels on Sal are generallyfilled with air crews and passengers in transit. The mixed public/privateenterprise Hotelmar, which owns the Praia hotel, is adding 67 rooms in Praiain 1980, and plans to add 200 rooms on Sal and 26 rooms on Fogo. Thisenterprise is training its personnel overseas, and will have some technicalassistance, but has not obtained any foreign financing. Further developmentand planning for the sector is to be carried out by this quasi-public entity.

135. The Government distinguishes between different categories oftourists, and orients its policies accordingly. For official visitors toPraia and transit visitors on Sal, the Government is making every effort toexpand the accommodations available. Internal tourism is also being encourag-ed; this consists of facilities like the small beach hotel in Tarrafal on thenorthern coast of Santiago, which is popular with Cape Verdeans and foreigntechnical assistants based in Praia. The Government is also interested inwelcoming overseas Cape Verdeans; this is the thinking behind, for instance,the construction of a hotel on Fogo, from whence many Cape Verdeans haveemigrated to the United States. The policy towards large-scale "vacation"-type tourism has, however, not yet been defined.

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136. Certain conditions for today's recreation-oriented internationaltourism appear to be fulfilled in Cape Verde: pleasant beaches, low rainfall,mild year-round temperatures, interesting volcanoes and scuba-diving on someislands, and an international airport only four hours from Europe. Thedisadvantages include the lack of hotel and water infrastructure, the need toimport most supplies and services, the high cost of local food, and the lackof any experience with the tourism industry.- The Government is thereforeconsidering the possibility of launching a study to determine its developmentpolicy in the sector. Such a study should pay particular attention tothe marketing, economic and social aspects of tourism. Development wouldlikely be carried out by the mixed public-private enterprise Hotelmar.Overseas Cape Verdeans may be interested in tourism development. The loca-tion of any tourist facility is a qnsarinn gal island is presently the mostconvenient by air, but other islands may nave greater tourist appeal. Thesocial impact in Cape Verde might be somewhat mitigated by the long historyof contact through migration that Cape Verdeans have had with the UnitedStates and Europe.

G. Water Supply and Electric Power

137. Water supply poses a problem due to the low rainfall and conse-quently limited availability of groundwater. Most islands are presentlyutilizing groundwater resources, but several (Sao Vicente and Sal) havealready turned to the use of desalting plants. The modest supply ofelectric power, closely linked with water in the case of desalting plantswhich produce power and water, is obtained from small thermal generatingplants.

Water

138. The most acute water supply problem in the islands today is thatfacing Mindelo. This city of over 30,000 persons is located on an islandwhich has always had very low rainfall. Present consumption of 1,200 m3/day (including 100 m3/day sold to ships in the harbor) is supplied by localbrackish wells (25%), shipments of water from Santo Antao (25%), and a de-salting plant (50%). The desalting plant, built in 1971, has an originalcapacity of 2 x 1,100 m3/day but at present only one line of evaporatorsis operating and about 600 mi/day is produced. There is a water distribu-tion system in Mindelo (dating from 1971) with 2,500 connections and it isestimated that 40% of the population is served. A progressive tariff policycharges from 30 to 70 CV escudos per m3 depending upon the consumptionrate, but actual production and distribution costs are now estimated at about120 escudos/m3 due to the reduced output of the desalting plant. TheGovernment does not favor increasing the water rates in Mindelo, consideringthat a relatively high proportion of income is already spent on water andthat water costs should fall somewhat as the desalting plant is improved.

139. A plan for water and power development at Mindelo has been produced,calling for three phases to be implemented over the next decade. The firstphase would replace the old desalting plant with a new one of 2,500 m3 /day,

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and the Netherlands will finance this. The second phase is planned for 1982,

to add another 2,500 m3/day; this has not been financed yet. The third

phase would add another unit of the same size in 1988.

140. At Praia, the water situation is better due to the heavier rainfall

in the interior, and groundwater is used to supply the city with about 2,400

m3/day. The municipality charges 4.50 CV escudos per m3, the lowest water

rate in the country. Underground supplies are not fully adequate, however,

and water is shut off during part of the day to residences in Praia. A

groundwater survey is underway, and it is likely that a desalting plant will

eventually be necessary to add to the water supply.

141. On Sal island, which requires water for the international airport

as well as for the local inhabitants, USAID has recently financed the foreign

exchange costs of a US$8.8 million water/power project which will produce 750

m3/day of water by desalination. The desalting plant will permit an 80%

decrease in the price of water (now the second highest in the archipelago at

80 CV escudos/m3), due to the improved technology being used. However,

bids recently received on the equipment indicate that project costs may be as

much as US$5 million higher than anticipated. Groundwater is generally

available in limited quantities on the other islands.

142. Water source availability and economics vary by island. On Fogo,

for instance, groundwater can be supplemented by large cisterns that retain

the rainfall which is heavy during brief storms and would otherwise run off

into the ocean. These cisterns might be more widely used, for instance on

Santiago, since the magnitude of groundwater resources is not known and there

is some risk that overuse could cause saltwater infiltration. At Mindelo, a

recent study concluded that an oil-fired desalting plant represents the

least-cost solution. However, in order to minimize risks, it is suggested

that appropriate means be provided to supply water from Santo Antao, whether

by water tankers, water barges, or a pipeline.

Electric Power

143. Electric power generation in Cape Verde is produced exclusively by

small diesel generating plants with a total capacity of about 7,800 kw. This

output is utilized primarily for the port of Mindelo (51%) and the airport on

Sal (26%), leaving 14% for Praia and 9% for the other islands. Two islands

(Maio and Boa Vista) have no electricity, and only ten towns in the archi-

pelago are electrified. Electric power consumption is approximately 8.5

million kwh (in 1977). One-third of consumption is for residential use,

around 20% each is for industrial and Government use, and street lighting

uses about 3%. Electricity generation and distribution is carried out by

autonomous public enterprises, and the prices charged (about 6 to 8 escudos

per kwh for residential use) are sufficient for full cost recovery.

144. Energy supply in Cape Verde faces the problem of serving very small

communities widely dispersed over nine islands. There is presently no inter-

connection between towns, even on Santiago where four towns are electrified.

Most generation is by very small, decentralized diesel plants. However, in

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three locations, much larger units are installed in support of ports, air-ports, etc. An approach needs to be worked out for each island to determinewhether large generating units with an interconnection grid, or small units,represent the least-cost solution. Such a general study should be carriedout soon in order to forestall the creation of a suboptimal system on apiecemeal basis.

145. New generating capacity is planned for Mindelo and Sal to complementdesalting plants. In Mindelo, 2,400 kw of additional generation is plannedfor each stage in the water supply plan. On Sal, about 2,500 kw will beprovided. Praia will require about 3,200 kw of new electric power, mainly tosupply the planned clinker grinding plant but also for the airport, the port,and other municipal uses. This generating installation would cost about US$2million, and financing has not yet been obtained.

H. Education

146. Cape Verde's school system has expanded tremendously in thepast dozen years, and the supply of trained teachers and classrooms has notkept pace. From an average of about 12,000 pupils in primary school in themid-sixties, enrollment jumped to 23,500 in 1967/68 and reached 56,000 inthe first year after independence. Overcrowding has inevitably resulted,with about 78 students per classroom in 1978/79 often split into two orthree shifts, and 39 pupils per teacher. Although projections of the schoolage population for the coming years are not available, the past trend on therate of growth of school enrollment should not be considered typical becauseit largely reflects the drastic change in people's attitude towards educationwhich occurred after independence. In addition, population control programsmay also have a stabilization effect on the rate of growth of enrollment.Only about 13% of primary school teachers have received training consideredby the Government to be appropriate. Half of the 700 classrooms in use arerented, and are often inadequately lighted. Secondary school and technicaltraining is quite limited in Cape Verde. Still, adult literacy, estimatedvery roughly at 35%, and the primary school enrollment ratio of 88%, areabove the comparative figures for low-income developing countries.

147. The educational system consists of a very limited kindergartenprogram, four compulsory years of primary school, two years of preparatoryschool, and five years of secondary school (lyceums located in Mindelo andPraia). All teaching is in Portuguese, with French and English taught assecond languages beginning in preparatory school. Cape Verdean Crioulo isnot used as a language of instruction. There are two technical schools, bothlocated in Mindelo: an industrial and commercial school, and a navigationschool. At present there is no agricultural training school, and there areno plans for a university. About 550 Cape Verdeans are studying abroad,and some 100 are expected to be returning each year to work as mid-leveladministrators or as skilled technicians.

148. Teacher training has so far concentrated on preparing primaryschool teachers. There are three levels of teachers, based on their prepara-tion. The classification involving the most extensive training is called

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"curso do Magisterio Primario". Training for this level is roughly equiva-lent to the US high school diploma and includes two years of specializedteacher preparation after completion of secondary school. A second classifica-tion is called "Posto Escolar" and provides for two or three years of teachertraining following six years of primary and preparatory school. The thirdand least qualified classification is known as "Monitor", requiring only fouryears of primary education plus forty days of teacher training. Monitors aremore frequently found in rural schools. The proportion of teachers with thetwo higher qualifications has increased since independence, while the propor-tion of Monitors has fallen from 34% to 16% of the total. A concerted efforthas also been made to increase the level of Monitors through one-year upgrad-ing courses. A large (650-place) teacher training school is currentlyunder construction at Assomada (Santiago) with Netherlands aid; this schoolwill produce teachers at the Magisterio Primario level to teach in theprimary and preparatory schools.

149. The mainstay of technical education is the Escola IndustrialeComercial de Mindelo, established in 1956, which counts 500 day students, and200 evening students. They are trained for three years, following prepara-tory school, to become clerks (70%), electricians (8%), mechanics (10%), con-struction workers (7%), or home economists (7%). The students are mostlyfrom Mindelo or Santo Antao, with very few from Santiago, and there are noboarding facilities. This is the only technical school in Cape Verde (asidefrom a very small navigation school), and impressed the mission as fulfillingan important role in the educational system. The graduates are in greatdemand, and a 16 year-old mechanic can command a starting salary of 8-9,000CV escudos per month whereas a graduate engineer would only receive about12,000/month. Curriculum changes and expansion plans are being studied bythe ILO, including the addition of two more years for specialization and thepossibility of secretarial training. Other problems raised by the Directorare the lack of entrepreneurial training in business, the shortage of work-shops, and the lack of qualified engineers on the teaching staff. Themission felt that an advisory board of public and private sector employersmight be useful. Also, the establishment of a similar school on Santiagoshould be given priority.

150. Recurrent expenses for education make up about 19% of the budget,and costs per student range (1975/76 data) from about CV escudos 900 to 8,000per year (US$25-200) for primary and technical school students respectively.Teachers' salaries range from US$100 per month for monitors to US$260 permonth for secondary school teachers. Primary school is free, and materialsare provided to needy students; the FAO is also furnishing food to students incertain islands. Secondary and technical schools cost parents 500 escudos perquarter, though some 20% of these students receive Government scholarships.

151. Multilateral and bilateral agencies have been actively supporting theeducation sector. The Netherlands is supporting schools on Santo Antao inaddition to teacher training. UNESCO has provided assistance for the up-grading of existing teachers and is currently studying the possibility oftraining locally some 30 secondary school teachers per year. USAID hasrecently provided grant aid (US$3.0 million) for an education project thatwill construct 100 primary classrooms, two industrial arts workshops, 15

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teacher housing units in outlying areas, and upgrading of teachers and schooladministrators. Portugal provides a number of trained teachers to the islands.

152. Cape Verde's economic growth may well be linked to better educationand training aimed at the priority sectors. Two of the major constraints to abetter educational system -- shortage of purpose-built classrooms and of well

trained teachers for primary education -- are being overcome at presentthrough strong Government efforts. Several longer-term problems will remain,particularly the heavy recurrent costs of improving basic education and thechallenge of developing adequate job training. The Ministry of Educationhopes to make six years of education a reality as soon as possible, andeventually to establish universal kindergarten. These worthwhile goals willbe costly. Agricultural training is a serious need in Cape Verde whichshould be accorded a high priority. Training of fishermen needs to be

greatly enlarged, and the navigation school at Mindelo could be expanded forthis purpose. In general, the authorities feel that the inherited classicalEuropean system of education remains too theoretical and not practicalenough. The technical school is endeavoring to revise its curriculum to

emphasize practical mechanical courses, but the workshops inspected by the

mission require re-equipping and expansion. Skills upgrading training isneeded for people already in the labor force to improve the productivity of

mechanics, masons, and eventually specialized personnel in such fields asshipping and hotels. Training of teachers for all levels above preparatoryschool is presently virtually nonexistent in Cape Verde, and this will be a

constraint for the development of higher and more specialized education.Adult education, which consists of a few classes taught on a voluntary basisby primary school teachers and a pilot literacy project among Praia construc-

tion workers, requires greater attention.

I. Health

153. Health conditions in Cape Verde are generally better than incontinental West Africa. Tropical diseases are found, but malaria and

filariasis have now been all but eliminated. The life expectancy (50 years)does not yet reflect the improvement in health indicators such as populationper doctor (6,700) and population per nursing person (1,600), which are moresimilar to upper income developing countries. Nutrition problems continue to

occur, however, related especially to the drought, and the birth rate ishigh.

154. The Government's objective in the sector is to improve basic healthconditions, with an emphasis on preventive medicine. The health deliverysystem has been considerably expanded recently, and this has in turn createdadditional demand for health services. The system consists of two majorhospitals (Praia and Mindelo), three regional hospitals, and an array ofsanitary posts or dispensaries in numerous villages. Only one island (Boa

Vista) does not have a doctor in permanent residence. A major new ruralhealth program is underway, with partial financing by WHO and UNICEF, toexpand the number of basic sanitary units in rural areas. Some 22 are now

being built (at a cost of about US$10,000 each) and another 10 are planned.

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These units provide simple medical treatment, social work and public healthservices. The "basic sanitary agents" manning these units are in partvolunteers, due to lack of budgetary support, and medicines are in shortsupply. Construction of a large new hospital on Sao Vicente is also beingcompleted, and further work is ongoing at Praia and Santa Catarina (Santiago)and on Fogo. The country counts about 47 doctors, of whom 22 are CapeVerdeans. Nursing schools were established in 1977, with 30 places inMindelo and 50 at Praia. Some 60 nurses graduated in 1979, after two yearsof instruction, bringing the total to about 200 nurses.

155. Nutrition problems persist, especially shortages of proteins andvitamins. The Government conducts emergency programs to supplement dietsin areas where deficiencies are uncovered. The nutrition situation reflectsthe drought conditions, and in areas where the rural works program providesemployment, the situation is better. Several nutrition studies are currentlyunderway but results are not yet available.

156. The need for family planning is accepted by the Government, alongwith the need for maternal and infant protection. A five-year program hasbeen initiated, with Swedish support, which will eventually institutionalizefamily planning and mother/child protection. The program consists of generalpublic health work, as well as distribution of birth control pills and IUDstogether with counseling for women. This innovative project is working welland reported on schedule.

IV. DEVELOPMENT STRATEGY AND PROSPECTS

Government Development Policies

157. Development planning in Cape Verde is evolving from a preoccupationwith the immediate problems caused by the drought toward an analysis oflonger-term employment and sectoral prospects. In the first several yearssince independence, the emergency needs for food and jobs were the overridingconcern of planners. This led to the establishment of several EmergencyProgrammes, starting in 1976/77, that effectively channelled food grant aidinto productive employment. Rural workers in areas hard-hit by the droughtwere organized into labor-intensive brigades building small water retentionstructures and roads largely out of local materials.

158. The successful organization of the Emergency Programmes andthe mobilizing of the necessary finance has led in the past two years or so,to a second stage of planning concentrated on projects in the high-prioritysectors: agriculture, fisheries, transport, and the social sectors. Agricul-ture, including the development of water resources, has been declared thenumber one priority. The Government's rural development approach stressesthe introduction of irrigation, based so far mostly on groundwater resources,and the improvement of rainfed cultivation, both aimed at small farmers.Government planners believe that the current 1,800 ha of irrigated land caneventually be extended to some 8-10, 000 ha. Though a limit to agriculturalpotential is clearly recognized, the Government wants to do everything

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possible to reach this limit. Fisheries is the other priority productivesector, and several projects in support of artisanal fishermen on variousislands have been launched, in addition to rehabilitation of the cold storageplant at Mindelo. Much remains to be done before the country's 200 mile zoneis effectively exploited. Transport investments have focussed on building upthe foreign-going and interisland shipping fleet, port facilities, and theroad network. The social sectors--education, health, and family planning--have also received attention.

159. A third stage of planning is now starting; this involves an analy-sis of longer-term possibilities in the light of necessary structural shifts.The present rural population already exerts extreme pressure on the land, andit is felt that future increases in the work force will have to be absorbedin urban industries or services. The strategic location of the islands forinternational transport, the possibility of tourism, the development of aconstruction materials industry based on local resources, and the possibleestablishment of mechanical engineering industries such as ship repair, aremajor factors in long-term development planning. The Government believesthat skill-intensive industries will suit the country's human resources levelbetter than assembly-type export industries, particularly since unskilledwages are not particularly low. So far, little investment has been undertakenin these areas. The Government is presently writing an interim four-yeardevelopment plan, for implementation in 1982, and this document will attemptto formalize the development strategy which is already emerging.

Assessment of Development Policies

160. The mission considers that the Government's development policiesare sound and are being successfully implemented. The strategy pursued sofar has been a highly pragmatic one. It started with the problem of feedingpeople under drought conditions, and has moved on to the implementation oflarge projects in rural development, fisheries, infrastructure, and socialsectors. The employment problem has been tackled in a creative and positiveway by converting food aid, through the National Development Fund, intoproductive investment and jobs for rural workers. The evident quality of thesmall retention dams being built throughout the countryside will clearlycontribute to raising agricultural productivity in the future. Moreover, themacroeconomic climate generally has supported development. Conservativefiscal and monetary policies have provided the confidence in the Government'seconomic management needed to assure a heavy flow of foreign aid in supportof investment, which has reached the extremely high level of 60% of GDP. Yetthe Government remains conscious of the inherent limitations in both agricul-ture and industry, and continues to seek new avenues for development. Arealistic understanding of the limited absorptive capacity also obtains.

Alternatives

161. Before proceeding with specific recommendations on Cape Verde'slonger-term development strategy, it is perhaps useful to discuss broadalternative development policies. These alternatives -- regional integra-tion, emigration, and permanent external support -- are not necessarilymutually exclusive, and a pragmatic strategy may incorporate some elements ofeach. The options are presented as partial answers to the underlying problemsfacing Cape Verde:

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- a remote location entailing serious external transportdifficulties;

- diseconomies of scale in the provision of domestic infra-structure to a population dispersed over nine islands;

- a poor and unreliable agricultural sector due to rainfalland topography limitations;

- a very limited wealth and range of other natural and mineralresources; and

- a small population and low income level, hence small localmarket.

162. Regional integration can be proposed as a solution for a smalland remote country like Cape Verde, with certain possible advantages. First,the creation of regional groupings makes possible the exploitation of econo-mies of scale through the enlargement of markets, permitting a wider range oflocal industries. Second, bargaining power vis-a-vis outside investors,shipping conferences and other organizations can be enhanced. Third, certainservice functions can be carried out jointly: for instance, shipping and airservices, financial institutions, and economic planning.

163. Cape Verde has been quick to associate itself with a number ofregional groupings. These include ECOWAS, which besides operating a develop-ment fund has as its major goal the elimination of tariffs between memberWest African states. While Cape Verde may benefit from such a grouping, itis in a way too large (including almost all the French, Portuguese, andEnglish-speaking countries of West Africa) to provide special opportunities.Cape Verde is also a member of the ACP countries tied to the European EconomicCommunity. This provides access to the European Development Fund, the Euro-pean Investment Bank, and STABEX facilities, and is particularly useful nowthat Portugal is a member of the EEC. The ACP membership gives Cape Verde afair chance at the European market. The Government also maintains closerelations with the other Portuguese-speaking African nations, and helpedfound a common market among these five countries in April 1980. In the caseof Angola there is cooperation in fisheries and shipping. Close cooperationalso exists with Senegal, which has provided scholarships for Cape Verdeansstudying in Dakar, and medical personnel,

164. The major integration move has been with Guinea-Bissau. There arelong historical links between the two former Portuguese colonies, and politicalties have been very close since the founding of the PAIGC movement forindependence. Many Cape Verdeans participated in the long armed struggleagainst Portugal which took place in Guinea-Bissau. Thus, the origin of thelink between Cape Verde and Guinea-Bissau is essentially historical andpolitical in nature, and not economic. The two countries are associated,however (aside from their common political party), in a common market; in ajoint shipping line; and through close collaboration on economic policies inall sectors. Of particular interest are the possibilities for resoure-basedindustries utilizing the two markets. Guinea-Bissau plans to build a 10,000

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ton sugar refinery to serve the needs of both nations, based on local sugar-cane. Cape Verde's possible development of its construction materialsindustry might involve supplying cement to Guinea-Bissau. Such cooperationcan be extremely useful in obtaining economies of scale, and foreign aidshould support such endeavors.

165. Emigration of people from slowly-growing to fast-growing or higherincome countries is a normal feature of uneven economic development. In CapeVerde, emigration has been substantial since at least a hundred years ago, asdiscussed earlier. The present situation is influenced by the family tieswith Cape Verdeans living in the US and Portugal, which makes the likelihoodof obtaining work overseas higher and increases the pressure to emigrate insearch of better employment. If these emigrants return to the islands aftera period abroad, the net effect may well be positive, and certainly remit-tances add to the income levels at home. But disadvantages exist, includingthe possibility of creating a stagnant "remittance economy" at home whichdiscourages local entrepreneurship and creates expectations of a higherstandard of living than can be sustained on the basis of domestic production.Also Cape Verde may lose its best-educated and most energetic inhabitants.Social problems may also arise in the country of immigration, such as inLisbon where many workers are without their families.

166. Clearly, then, emigration has its pluses and minuses. But it is afact today in Cape Verde, and Government policies toward emigration haveprofound implications for economic development. The Government does notconsider emigration to be a viable solution to the islands' economic problems.It is public policy, however, to ensure that Cape Verdean emigrants under-stand their rights and responsibilities, and to work with host countrygovernments to ease any social problems in immigrant communities. Due to-thelack of recent statistics, it is difficult to say much about the presentemigration situation. It is simply pointed out that emigration represents avaluable safety valve when work is not available in the islands, and theGovernment may generally wish to ensure that restrictions on immigration toEuropean countries and the US are minimized wherever possible. A complemen-tary policy needed is to encourage the reverse flow of experienced CapeVerdeans back to their country. This however, will only be possible if theeconomy is perceived as expanding.' As an alternative and long-term approachto the population problem, the Government is starting to implement familyplanning programs.

167. Another alternative concept of development in Cape Verde's caseis a more-or-less permanent reliance on foreign aid (plus workers' remittances)to fill the resource gap. The financial role previously played by Portugal isthus assumed and increased by the international community. The existence oflarge volumes of foreign aid since independence (US$90 per capita per annum)could be seen as part of this strategy, particularly since it has financedconsumption as well as investment., And in some sense the permanent availabi-lity of foreign aid may be necessary and desirable to allow the provision ofbasic services to people living on small, desolate islands who may not, inthe foreseeable future, be able to finance these services on their own.

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168. The Government recognizes that foreign aid cannot be considered apermanent feature of the economy, depending as it does on political circum-stances and the competing demands of other developing countries. About25-30% of Cape Verde's high level of aid is food aid directly related to thedrought, and this support may decrease when (and if) the drought ends. Thestrategy adopted has therefore been to finance with foreign aid now availablea very large public investment program, oriented primarily towards infrastruc-ture closely linked to production possibilities. These investments arenecessary if Cape Verde is to enjoy some economic independence in the future.

169. In the medium-term, however, the need for foreign aid will remainstrong in order to continue the investments underway or planned, and tohelp finance recurrent costs. Efforts to upgrade social services, especiallyin education and health, may create recurrent cost requirements before theproductive investments are able to supply the needed funds. This emphasizesthe continued importance of foreign aid to finance both capital and recurrentexpenditures in Cape Verde in the coming years.

Recommendations

170. While the development strategy pursued to date is sound, themission proposes certain policy recommendations based upon its assessment ofthe economic situation and the alternatives available. These suggestions areaimed at increasing Cape Verde's very low level of production, both to bettersatisfy domestic needs and to raise exports.

171. Investment is already at a high level, but will need in the futureto be increasingly directed toward industry and services since it is unlikelythat agriculture can absorb much more labor. The problem is that neither theGovernment nor local private businessmen have much experience in developingand running profitable productive enterprises. Most business experience isconcentrated in the import field, which does not demand the same set ofskills. Several steps can be taken. First, the local private sector shouldbe encouraged to invest in productive enterprises. The Government canprovide assistance in identifying opportunities, in lining up financing, andin providing water, power, and other needs. The technical school at Mindelocould add a curriculum on small business management, and a second technicalschool could be built at Praia. Better provision of finance to local enter-preneurs and cooperatives is important. While a separate development bankmay not be needed at present, the activities of the Investment Department ofthe BCV should be stepped up. Training in project analysis and in theidentification and promotion of viable enterprises may be required for BCVpersonnel. Second, foreign private investment should be actively sought forappropriate high-priority projects. These organizations can provide themarketing knowledge and access necessary for export industries, and cantransfer managerial skills to Cape Verdeans, if the terms of the agreementare right. The intervention of a neutral intermediary, such as the Interna-tional Finance Corporation of the World Bank Group, could help provide themutual confidence required for mixed-capital enterprises to succeed. Oncethe Government has acquired some experience in dealing with foreign investors,an investment code should be developed. Third, the foreign assistancepresently received could be better utilized by increasing the proportion of

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technical assistance and by more explicit coordination. Since the lack oftrained project managers is a serious constraint in certain key sectors,foreign technical personnel could be used 'to raise the absorptive capacity.Technical assistance could be used to increase the Government's projectconception and analysis capability, as well as to help with the execution ofprojects in technological fields (e.g., fisheries and industry). The flow ofinformation on development projects, though assisted by the UNDP ResidentRepresentative and managed by the Secretary of State for Cooperation andPlanning, is not as free as it could be. The Government could periodicallycompile and disseminate more comprehensive information on the various projectsunderway. This also implies that foreign aid donors should provide theGovernment with complete data on their assistance, including disbursements aswell as commitments.

172. Among the alternatives discussed, two points stand out. First,Cape Verde can benefit from close collaboration with Guinea-Bissau whenplanning industrial, agricultural processing, fisheries and transport invest-ments. The resources of the two countries are complementary to some extent,and joint projects could take advantage of a larger market. Second, emigra-tion policies should both seek to maintain access for Cape Verdeans toforeign labor markets and seek to attract experienced workers back to theislands. The resource of overseas Cape Verdeans could be tapped to providemanagement and technicians for projects in fisheries, shipping, and manufactur-ing; to provide investment capital; and possibly to establish overseas marketoutlets for Cape Verdean products.

173. Recommendations by sector have been presented in the precedingchapter. However, a brief summary of the sectoral conclusions in addition tothe points mentioned above, is as follows:

- In agriculture, the results from an integrated rural developmentproject now being executed on Santiago should be closely followed; appliedresearch needs to be undertaken; land reform efforts may be necessary;agricultural extension must be established; and surface water needs to bebetter retained and exploited.

- In fisheries, experimental fishing should be carried out; a classof medium-size boats (10-15 m) shopld be developed; small-scale fishermenshould obtain better access to export markets through changes in marketingand distribution networks; and a national fisheries policy should be articulated.

- In industry, resource-based enterprises such as constructionmaterials should be established; small-scale enterprises should be encouraged;and foreign private investment should be sought in partnership to developexport industries, especially on Sal and Sao Vicente islands.

- In transport, the interisland network needs to be strengthenedthrough better shipping and air services; the pier at Praia and the smallerports need to be improved; and the commercial potential for an expandedMindelo port needs to be studied.

- In tourism, a study of potential tourist development in CapeVerde should be undertaken to determine the costs and benefits of expansion inthis field.

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Prospects

174. The uncertainty about weather conditions, the future level offoreign aid, and the impact of current projects in Cape Verde, combined withthe very rough nature of past macro-economic data, make it particularlydifficult to evaluate the long-term development prospects for the islands.Hence, it is neither desirable nor practicable to prepare detailed projec-tions. However, various scenarios can be constructed, and a rough estimateof the situation in 1990 is presented below as an illustration. This scenariois an optimistic one: it assumes that pre-drought weather conditions reappear,that a high level of investment can be maintained with continued foreign aidand remittances, and that the high current investment rate succeeds inraising production.

175. Under these favorable assumptions, average growth in real GDP of4-5% per annum would be possible over the 1978-90 period. Agriculturaloutput has the potential to rise sharply with implementation of current andproposed projects, successful exploitation of groundwater and surface waterresources to increase the irrigated crop area, more normal rainfall, and aslight increase in cultivated area related to population growth. As discussedabove, the production of fish could reach 25,000-30,000 tons with substantialimprovements in distribution and marketing, fishing vessels, and fishingtechniques. In mining and manufacturing, the assumption is made that severalidentified proposals will go forward: an expansion of the salt evaporationcapacity, the construction of a clinker grinding plant, and the establishmentof a modest ship repair capability. Construction could grow at 3-4% per yearas a consequence of continued high investment. Public and private servicesare assumed to grow at 3% per annum; this assumption is purposely conservativesince the basis for prediction is particularly weak, and the Government'spolicies in certain service sectors such as tourism have yet to be developed.

176. The results of these assumptions are shown below in Table 9. TheGDP per capita would rise to US$235 (in constant 1978 prices) in 1990, upfrom US$170 in 1978. The effect of favorable developments in the productivesectors, especially in agriculture, is plainly visible, while the relativecontribution of construction and services declines. This structural shift isconsistent with the view that the production level could generally be con-siderably increased through appropriate investment (and with better weather),without necessarily entailing a corresponding rise in services. The highincremental capital-output ratio assumed here seems appropriate in CapeVerde, where major improvements in agriculture, for instance, are known to beextremely costly in terms of required infrastructure.

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Table 9. GDP PROJECTION(at 1978 prices)

Average growth rate, Structure of outputSector % p.a., 1978-90 1978 1990

Agriculture 9.0 20.5 32.6Fisheries 7.9 4.3 6.0Mining and Manufacturing 5.7 6.7 7.4Construction 3.0 16.7 13.6

Commerce, Transport,other Services 2.5 36.4 28.0

Public Sector 2.9 15.4 12.4

Total 4.8 100.0 100.0

Source: Mission estimates.

177. This optimistic economic growth scenario would still be unlikely to

resolve the current high underemployment. The need for a public works pro-gram may well persist over the next decade, and a moderate rate of emigrationis also likely to provide a partial solution to the employment problem.Increases in the modern sector will probably not be enough to absorb thesurplus manpower from the agricultural sector. However, irrigation and otherrural development efforts combined with better rainfall in the long-termshould do much to improve conditions in the rural areas. Manpower planningshould be a major factor in the Government's development planning efforts.

178. The balance of payments trend indicated by this scenario includes

rising exports which would allow a better coverage of the import bill.Exports of agricultural produce, fish, salt, and industrial goods wouldrise sharply (see Table 10). Imports may increase more slowly than in thepast, perhaps with an elasticity of about 1.0, as food requirements are morefully met from domestic production. This would lead to a deficit on trade

balance of 91% of GDP in 1990 versus 104% in 1978, indicating continueddependence on transfers and capital inflows. Services inflows should increase

as tourism and shipping are developed. Private transfers are projected to

grow at 2-3% in response to moderate continued emigration. Meeting theresulting current account deficit would require net capital inflows rising at

a rate of 4.5% per year to reach an equilibrium in the overall balance. Thesecapital flows are considered possible, but would have to be higher if importscould not be held down to the assumed level.

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Table 10. PROJECTED BALANCE OF PAYMENTS

(at constant 1978 prices)

US$ millions % of GDP1978 1990 1978 1990

Exports 3.1 11.4 5.7 11.9Imports -59.6 -97.7 -109.8 -102.5

Trade Balance -56.5 -86.3 -104.1 -90.6

Services 0.6 4.0 1.1 4.2

Private Transfers 23.7 31.8 43.7 33.4

Current Balance -32.2 -50.5 -59.3 -53.0

Capital Movements 25.0 50.5 46.0 53.0Errors and Omissions 4.7 - 8.7 -

Overall Balance -2.5 0.0 -4.6 0.0

Source: Mission estimates.

179. A public finance scenario (Table 11), based on an assumed 5% annual

real growth in current expenditures and 5% Government contribution to public

investment by 1990 (compared with 100% foreign financing in 1975-78), indi-

cates the need for a healthy growth of public revenues. The required revenue

growth rate (6.6% per year) implies a revenue elasticity with respect to

GDP of about 1.4, as opposed to the 1975-78 actual elasticity of about 1.2.

Thus, the achievement of current expenditure growth in line with the economy's

output, and a modest local contribution to investment, will require substan-

tial contributions from public enterprises, taxation, and import duties. Any

demand for a higher growth rate of current expenditures, which might arise

from additional social sector investment, would have to be met from either a

faster-growing GDP or from foreign aid sources. In fact, a comparison of our

capital expenditures projections with preliminary information on the totalinvestment program the Government is proposing for 1980 indicates that the

resource gap could be filled only with the support of faster growing foreign

resources.

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Table 11. PUBLIC FINANCE PROJECTIONS(at constant 1978 prices)

US$ Millions Average annual1978 1990 growth rate, %

Revenues 14.5 31.1 6.6Current expenditures 15.9 28.6 5.0Current surplus (deficit) -1.4 2.5 _

Capital expenditures a/ 30.4 53.0 4.7Foreign financing a/ 25.0 50.5 6.0Overall surplus (deficit) -6.8 0.0 -

a/ While capital expenditures are not fully offset by foreign financingin 1978, they were 100% offset, on average, over 1975-78.

Source: Mission estimates.

180. A pragmatic assessment of Cape Verde's economic outlook requiressome discussion of the considerable risks posed to the attainment of theforegoing "optimistic" scenario. First, rainfall may not return to thelong-run average level during the next decade. On certain islands, the trendof declining rainfall already dates from 20-30 years ago, and it is not clearwhether this will be reversed. The variability of rainfall from year to yearis likely to continue to frustrate predictions of agricultural output.Second, half of available resources are provided by foreign aid and remit-tances, both of which are subject to change. If rainfall improves, thejustification for food aid, which supports rural investment, may diminish.Third, since most large development projects in Cape Verde are just nowgetting started, there is little experience to indicate how rapidly they canbe implemented. Integrated rural development projects, in particular, mayencounter delays owing to the complex issues involved and the limited staffavailable for project management. Fourth, as industrial and agriculturalinvestment possibilities are further analyzed, it may be found that certainprojects cannot be justified due to high costs. For several large projectsnow in the planning stage--including ship repair and clinker grinding--thefeasibility studies have not yet been completed.

181. While these risks have been partially taken into account in theearlier macroeconomic scenario, it is clear that the projected growth ratesare subject to great uncertainty. There are a few large development projectsnow getting underway or planned, whose potential impact is substantialcompared to the present low production level in the country. The Governmentmakes the point that the very high investment level, if it can be combinedwith training and better employment opportunities, could lead to a growthrate twice as high as that projected here. Indeed, our GDP estimate looksconservative when related to the total investment program for 1980, which isalmost double that of 1979. Until further experience with these largeprojects is acquired in Cape Verde, it is difficult to clearly estimate theoutcome.

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182. The World Bank Group's role in Cape Verde, under present circum-stances, must be tailored to the country's priorities and must complementrather than supplant existing aid efforts. Government accords priority toproduction--mainly rural development, followed by fisheries--and also toinfrastructure required to support productive investments. The limitedabsorptive capacity in rural development indicates that this sector shouldonly be emphasized by the World Bank Group once the initial batch of largeprojects in the sector is well underway. Interisland transport, closely tiedto the distribution and marketing needs of fisheries, offers sound possibili-ties for a first Bank Group project in Cape Verde. Any project in the nearterm should include significant technical assistance both for training andfor actual project execution in the initial phase. There are problemsassociated with providing advisers, however, due to the critical lack ofsuitable housing available and the Portuguese 'Language requirement.

183. Intervention by the Bank Group would be on IDA terms for theforeseeable future. Cape Verde's external debt exposure is consideredreasonable, but the very low level of exports and GDP, combined with thefragility of the economy and its dependence upon foreign aid, would not makethe country creditworthy for IBRD (or indeed other hard-term) lending. Thevolume of concessionary lending and grant aid available needs to be allocatedto projects that will generate internal growth, employment, and new exports.Cape Verde's particularly difficult economic situation will undoubtedlyrequire many years of high investment, with substantial foreign support,before significant strengthening of the economy can be expected. This alsoimplies a recurrent cost burden which should be shared by foreign donors inthe medium-term.

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ANNOTATED BIBLIOGRAPHY

A. Government Publications

Ministerio da Coordenacao Economica. Orcamento Geral do Estado para o anoeconomico de 1979. Praia: Direccao-Geral de Financas, January 1979.Includes development outlays for the first time as well as recurrentitems.

Secretaria de Estado da Cooperacao e Planeamento. Boletim Trimestral deEstatistica. Praia: Direccao Geral de Estatistica. Quarterlyeconomic statistics.

Secretariat d'Etat a la Cooperation et Planification. Programme d'Emergence1977/78. Praia: October 1977. Presents the Government's labor-intensive public works program.

B. Other - General

Eurodelta, S.A. Etude Economigue. Brussels: Eurodelta, S.A., 1974.Contains one chapter on economic situation in Cape Verde in early1970s.

International Monetary Fund. Cape Verde: Recent Economic Developments.Washington: IMF, May 1979. Basic source for public finance, monetaryand balance of payments data.

Ministere de la Cooperation. Cap Vert: Dossier d'Information Economigue.Paris: Service des Etudes et Questions Internationales, August 1978.General background on the economy.

Selwyn, Percy. Small, Poor and Remote: Islands at a Geographical Dis-advantage. Brighton, England: Institute of Development Studies atthe University of Sussex, Discussion Paper 123, January 1978. Analysisof the economic problems of small island nations.

United Nations General Assembly. Assistance to Cape Verde: Report of theSecretary-General of the Economic and Social Council. New York: UN,July 18, 1978. Report of a mission sent to identify sectoral con-straints and priority projects.

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C. Other - Specific

Almeida, Raymond A., and Patricia Nyhan. Cape Verde and its People: AShort History. Boston: Tchuba (The American Committee for Cape Verde),1976. Useful political, economic, and social history.

Aubray, Roger. The Fishery of Cape Verde: A Comprehensive Review. Revisedversion. Rome: FAO, February 1977. Brief assessment of the situation.

Carreira, Antonio. Migracoes nas Ilhas de Cabo Verde. Lisbon: UniversidadeNova de Lisboa, 1977. Detailed study of population movements to andfrom Cape Verde.

Duncan, T. Bentley. Atlantic Islands: Madeira, the Azores and theCape Verdes in Seventeenth-Century Commerce and Navigation. Chicago:The University of Chicago Press, 1972. Detailed discussion ofCape Verde's maritime role.

FAO/Bankers Programme. Cape Verde: Fisheries Development Project PreparationReport. Rome: Report No. 44/79 DDC, CVE.4, dated November 30, 1979.Preparation report for a US$5.5 million fisheries project in CapeVerde.

Freeman, Green, Hickok, et al. Cape Verde: Assessment of the AgriculturalSector. Washington: Agency for International Development (USAID),August 1978. Detailed analysis of the agricultural sector's situation,problems, and prospects.

Moal, R.A. Assistance au Developpement des Peches Maritimes aux Iles duCap Vert. Paris: Ministere de la Cooperatton, September 1977.Detailed description of the fisheries in Cape Verde.

Thomas, Charles W. Adventures and Observations on the West Coast ofAfrica, and its Islands. New York: Derby and Jackson, 1860. Briefdescriptions of conditions on Cape Verde Islands in mid-nineteenthcentury.

Also selected project documents obtained from Government and bilateral sources.

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Cape Verde Economic Report

STATISTICAL APPENDIX

I. Population, Migration and Employment

1.1 Population by Island, 1960, 1970 and 1977

1.2 Age Distribution of Population, 1970

1.3 Employment Trends and Structure

1.4 Urban Employment Situation, 1978

1.5 Average Daily Salaries by Occupation, 1974-77

II. National Accounts

2.I GDP by Economic Activity

2.2 Expenditure on Available Resources

III. Balance of Payments

3.1 Balance of Payments, 1969-78

3.2 Exports and Imports of Principal Products, 1969-77

3.3 Volume, Value of Imports, 1974-1978

3.4 Volume of Exports, 1974-78

3.5 Food Aid Received, 1976-79

3.6 Direction of Trade, 1969-78

3.7 Trade Indices, 1974-77

IV. External Debt

4.1 External Public Debt Outstanding including Undisbursed asof December 31, 1978

4.2 Service Payments, Commitments, Disbursements and OutstandingAmounts of External Public Debt

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V. Public Finance

5.1 Summary Operations of Central Government, 1975-78

5.2 Central Government Revenues, 1975-78

5.3 Central Government Ordinary Budget Expenditures, 1977-78

5.4 Public Investment Program for 1L978 and 1979

VI. Monetary Statistics

6.1 Monetary Survey, 1974-78

VII. Agriculture

7.1 National Land Use, 1977-78

7.2 Agricultural Areas, Production and Yields, 1961-1978

7.3 Estimated Livestock Population and Meat Production, 1975

VIII. Fisheries

8.1 Fish Production, 1976

Figure 1 Fish Landing Estimates by Industrial and Artisanal Sector,1964-1978

Figure 2 Exports of Fisheries Products

IX. Other Sectors

9.1 Output of Major Industrial Operations, 1970-77

9.2 Comparative Wage Rates in Manufacturing

9.3 Road Network in 1977

9.4 Student Enrollment by Level, 1973/74 to 1976/77

9.5 Primary Education, 1970/71 to 1978/79

9.6 Teacher Qualifications, 1974/75 to 1977/78

9.7 Health Statistics

9.8 Health Delivery System

9.9 Electric Power Generation

- 62 -

X. Prices

10.1 Co.Dsumer Price.7 Indices,. 1974/77

10.2 Comparative Consumer Price Indices!, 1970-77

- 63 -

Table 1.1. POPULATION BY ISLAND, 1960, 1970 and 1977

PopulationAbsolute number Percentage

Island 1960 1970 1977 a/ 1960 1970 1977

Boa Vista 3,218 3,463 4,098 1.6 1.3 1.3

Brava 8,539 7,858 9,060 4.3 2.9 2.8

Fogo 25,571 29,692 33,887 12.8 10.9 10.8

Maio 2,632 3,451 3,970 1.3 1.3 1.2

Sal 2,584 5,642 7,045 1.3 2.0 2.2

Santiago 88,344 129,508 148,803 44.3 47.5 47.5

Santo Antao 33,753 45,051 49,150 16.9 16.5 15.6

S. Nicolau 13,772 16,320 18,468 6.9 6.0 5.8

S. Vicente 20,883 31,586 38,728 10.5 11.6 12.3

Total 199,296 272,571 313,209 100.0 100.0 100.0

POPULATION DENSITY

Density, inhabitants per km2Island Area in km2 1960 1970 1977 a/

Boa Vista 620.0 5.2 5.6 6.6Brava 67.4 126.7 116.5 134.4Fogo 476.0 53.7 62.4 71.2Maio 269.0 9.8 12.8 14.7Sal 216.0 12.0 26.1 32.6Santiago 990.9 89.2 130.7 150.2Santo Antao 779.0 43.3 57.8 63.1S. Nicolau 338.0 35.4 42.1 54.6S. Vicente 227.0 92.0 139.1 170.6

Total 4,033.3 49.4 67.6 77.6

a/ Estimates based on the provisional data from the 1970 census, not includingmigratory movements.

Source: Direqao Geral de Estatistica, Boletim Trimestral de Estatistica,First Quarter 1978, page 1.

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Table 1.2 AGE DISTRIBUTION OF POPULATION, 1970

TotalAge Groups Number Percentage

0 - 4 42,055 15.45 9 45,939 16.810 - 14 39,902 14.615 - 19 30,557 11.220 - 24 15,968 5.925 - 29 11,811 4.330 - 34 14,073 5.235 - 39 13,869 5.140 - 44 11,909 4.445 _ 49 8,282 3.050 - 54 7,697 2.855 - 59 8,212 3.060 - 64 8,653 3.265 - 69 4,926 1.870 - 74 3,406 1.375 and older 4,625 1.7Unknown 687 0.3

TOTAL 272,571 100.0

Note: Based on provisional data from 1970 census.

Source: Direccao Geral de Estatistica, Boletim Trimestral deEstatistica, First Quarter 1978, page 4.

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Table 1.3 EMPLOYMENT TRENDS AND STRUCTURE

(in thousands of persons)

A. Time Series Data.

1960 1970 1977a/

Population 199.3 272.6 313.2

Economically Active Population 103.5 131.0 142.0

Employment 63.6 84.9 n.a.

Without Work 40.9 46.2 n.a.

Percent of Active Population 39.5 35.3 n.a.

B. Structure of Employment in 1970.

Sector Number Percentage

Primary 77.4 91.2

Secondary 1.6 1.9

Tertiary 5.9 6.9

Total 84.9 100.0

a/ Estimate.

Sources: Secretariat dtEtat a la Coop$ration et Planification, Progrsmmed'Emergence 1977L78, Praia, 1977.

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Table 1.4 URBAN EMPLOYMENT SITUATION, 1978

Praia Mindelo

Population 39,400 33,200

Active Population (15 + years) 21,300 18,308

Labor Force a/ 11,230 8,024

Participation rate, % 52.7 43.8

EmpLoyment 8,543 5,670

Private, % 39.1 53.4

Public, % 60.9 46.6

Agriculture and fisheries, % 5.2 2.8

Industry, % 4.0 9.6

Construction, % 20.0 13.4

Services, % 70.8 74.2

Unemployment 2,687 2,354

% of Labor Force 23.9 29.3

Inactive and Unemployed Supported

by Emigrants, % 5.2 17.0

a/ Computed by adding employment and unemployment figures.

Source: J.A. Sonsa Fialho (ILO consultant), Inqu6rito as Familias Sobreemprego e desemprego, Geneva, 1978.

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Table 1.5 AVERAGE DAILY SALARIES BY OCCUPATION, 1974-77

(In Cape Verde escudos)

Occupation 1974 1975 1976 1977

Baker 44.53 65.57 71.11 76.40Bricklayer 60.00 70.00 79.28 97.46Calker 53.00 58.00 70.00 80.00Car driver 95.00 105.00 122.22 132.22Carpenter 87.00 98.00 118.57 122.69Carpenter assistant 38.00 47.00 66.87 58.75Clerk 85.00 116.93 140.67 139.44

CommerceApprentice 31.67 44.63 58.89 60.24Cashier 97.23 191.67 200.00 187.50Sales clerk 66.30 75.00 72.38 92.86Store assistant 48.33 81.10 94.44 120.67Store head 86.53 125.53 132.00 164.58

Cook 25.00 15.40 21.67 19.72Digger 40.00 44.00 60.00 60.00Foreman 66.00 67.00 92.66 108.75Forgeman 71.00 99.00 103.33 101.00Journeyman 29.00 41.00 50.55 48.33Kneader 41.00 45.00 56.66 55.83Locksmith 114.00 151.00 125.87 122.50Master carpenter 132.00 134.00 150.00 155.00Master mason 114.00 110.00 134.16 140.90Mechanic 138.80 162.87 176.67 196.11Painter 70.00 83.00 102.85 103.18Paver 50.00 52.00 63.33 77.00Porter 45.00 68.00 56.66 60.00Rural worker 38.00 47.00 47.22 52.77Seamstress 67.00 91.00 80.00 115.00Servant 11.17 13.73 16.73 32.92Shoemaker 69.00 100.00 150.00 141.66Street-sweeper 33.00 30.00 40.00 30.00Truck driver 104.03 127.30 132.53 136.94Washerwoman 30.00 44.00 50.00 48.33Whitewasher 49.00 54.00 63.33 62.72Worker 33.00 37.00 42.30 47.30

Source: Servigo Nacional de Estatistica, Boletim Trimestral de Estatistica,various issues.

Table 2.1. GDP BY ECONOMIC ACTIVITY

(in million Cape Verde escudos, at current market prices)

million Cape Verde escudos Percent of GDP1973 1977 1978 1973 1977 1978

Agriculture, livestock and forestry ) 260 390 ) 16.4 20.5) 171 ) 15.9

Fisheries ) 82 82 ) 5.2 4.3

Mining 8 7 7 0.7 0.4 0.4

Manufacturing 62 103 119 5.8 6.5 '6.3

Construction 218 261 317 20.3 16.5 16.7

Commerce and transport a/ 422 580 692 39.3 36.7 36.4

Public services 194 290 293 18.0 18.3 15.4

Total GDP 1,075 1,583 1,900 100.0 100.0 100.0

a/ Includes indirect taxes.

Sources: 1973: UNDP-estimates; 1977 and 1978, mission estimates.

Table 2.2. EXPENDITURE ON AVAILABLE RESOURCES

Million Cape Verde escudos Percentage of GDPin current prices

1973 a/ 1977 b/ 1978 b/ 1973 1977 1978

Consumption 1,436 2,157 2,740 133.6 136.2 144.2

Public 124 c/ 549 556 11.5 34.7 29.3Private 1,312 1,608 2,184 122.1 101.5 114.9

Gross Domestic Investment 335 995 1,144 31.1 62.9 60.2

Public Investment ) 27 919 1,065 25.9 58.1 56.1Private Residential Investment 60 60) 3.8 3.1 a'Change in Stocks 56 16 19 5.2 1.0 1.0

Total Expenditures 1,771 3,152 3,884 164.7 199.1 204.4

= Available Resources 1,771 3,152 3,884 164.7 199.1 204.4

Provided by:

GDP 1,075 1,583 1,900 100.0 100.0 100.0Resource Gap 696 1,569 1,984 64.7 99.1 104.4

a/ UNDP estimates, believed to be roughly comparable with Bank staff estimates.b/ Estimates prepared by the mission.c/ May not fully reflect Government current expenditures.

Sources: UNDP and mission estimates.

Table 3.1. BALANCE OF PAYMENTS, 1969-78

(in millions of Cape Verde escudos)

1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1/

Trade balance -254.1 -278.7 -417.4 -508.0 -664.4 -729.4 -739.1 -1,129.9 -1.492.5 -1,976.5

Exports f.o.b. 70.5 80.0 107.3 106.6 69.2 76.6 64.3 47.5 42.3 109.1

Imports c.i.f. -324.6 -358.7 -524.7 -614.6 -733.6 -806.0 803.4 1,177.4 1,534.8 2,085.6

Services (net) 47.4 44.0 26.8 95.8 21.6 71.5 110.5 30.5 -60.4 20.9

Freight and insurance 2.3 0.6 1.0 0.2 0.3 1.1 0.3 0.6 -3.4 -27.8

Other transportation -3.4 -1.6 -4.4 -5.0 -36.2 -17.8 -0.9 -10.7 -23.0 52.0

Travel 2/ 2.4 2.8 5.8 37.4 12.2 39.5 98.1 10.9 -50.0 -31.2

Investment income -3.8 -- -3.1 -5.0 -8.3 -9.0 -2.3 7.3 33.7 22.6

Other services 49.9 42.2 27.5 68.2 53.6 57.7 15.3 22.4 -17.3 5.3

Private transfers 62.1 79.4 121.6 158.1 194.4 265.3 176.7 506.5 797.8 829.1

Current balance -144.6 -155.3 -269.0 -254.1 -448.4 -392.6 -451.9 -592.9 -755.1 -1,126.5

Capital movements 112.5 166.2 289.2 315.7 587.9 343.2 483.5 798.1 1,031.6 873.6

Official transfers 2.3 72.2 191.3 182.6 477.8 312.3 354.6 443.8 951.6 818.3

Private capital 2/ -8.2 -4.0 -1.8 -0.5 3.7 -5.9 -1.3 0.1 2.3 0.0

Official capital 118.4 98.0 99.7 133.6 106.4 36.8 130.2 354.2 143.6 55.3

Errors and omissions 3/ 32.9 17.0 49.1 -39.4 -171.8 164.6 88.8 311.0 127.0 165.5

Overall balance 0.8 27.9 69.3 22.2 -32.3 115.2 120.4 516.2 404.2 -87.4

Reserves and related items(-increase) -0.8 -27.9 -69.3 -22.2 32.3 -115.2 -120.4 -516.2 -404.2 87.4

Source: Data provided by the Banco de Cabo Verde.

1/ Provisional.2/ Remittances from overseas Cape Verdeans were partially included under travel through 1975; they were then moved entirely to

private transfers.3/ The large errors and omissions in 1973 and 1974 and the change in direction is due to exchange operations carried out in 1973

for which accounting of foreign exchange holdings by the Banco Nacional Ultramarino in Cape Verde was made only in 1974.

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Table 3.2 EXPORTS AND IMPORTS OF PRINCIPAL PRODUCTS,1969-77

(in millions of Cape Verde escudos)

1969 1970 1971 1972 1973 1974 1975 1976 1977

Exports 44.6 47.7 45.6 46.3 47.8 52.7 61.3 48.0 74.5

Frozen fish 6.6 6.6 6.2 5.1

Shellfish J7.8 1 8.4 )8.6 8.8 316.0 7.1 4.3 7.6 5.3

Canned fish 7.8 11.3 8.6 11.3 9.6 11.0 3.5 4.9 15.3

Fresh water sup-plied to ships 3.1 3.1 3.2 1.3 2.1 2.8 1.9 1.0 1.1

Salt 2.4 1.7 3.6 3.3 3.7 1.9 1.6 4.4 14.5

Bananas 10.3 10.0 8.1 7.7 3.1 1.3 0.0 9.0 8.7

Hides and skins 1.4 0.6 1.2 0.9 1.0 0.3 0.2 0.0 0.3

Pozzolana 2.6 1.7 .. 1.0 0.4 0.6

Coffee 0.4 .. .. 0.4 .. .. .. .. 2.5Oils 0.4 0.6 0.2 0.2 .. ..

Others a/ 8.4 10.3 12.1 11.4 11.9 21.1 43.2 14.9 21.7

Imports 418.8 466.4 574.0 644.1 833.1 869.3 1.010.9 911.4 1.284.8

Food andbeverages 140.0 115.9 185.5 212.3 214.0 293.4 560.7 308.9 631.2

Petroleumproducts 12.4 14.9 17.9 21.7 27.8 34.8 70.6 79.5 97.4

Textiles andshoes 19.1 23.4 33.7 31.2 37.7 29.6 95.8 34.7 43.3

Vehicles 15.1 12.0 18.4 20.8 27.6 22.6 22.5 19.5 39.9

Cement 10.4 15.1 18.1 22.1 23.1 20.7 20.5 24.1 41.8

Wood 6.4 6.0 7.1 7.7 9.6 10.4 15.8 16.4 15.3

Others 215.4 279.1 293.3 328.3 493.3 457.8 224.9 428.3 415.9

Memo item

Bunkering and storesfor ships andair craft .. 258.8 260.2 360.2 531.2

Source: Data supplied by the Cape Verdean authorities; and Servico Nacional deEstatistica, Boletim Trimestral de Estatistica, 1975-77 issues.

a/ Mainly re-exports.

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Table 3.3. VOLUME, VALUE OP mpORTS. 1974-78

(vloume in retric tons; v-lue in =illions of Cape Verde escudos)

1974 1975 1976 1977 1978 al

Animals and animal products:

Volume 637 1.636 1,172 1,632 4.759

Value 22,743 53,445 30,232 44,121 131,418

Vepetal products

Volume 53,068 46,093 33.374 56,896 88,443

Value 227,874 253,381 181,902 334,873 545,742

Edible oil and fats

Volume 2,100 2,581 2,684 2,674 2,565

Value 51,036 68,439 71,123 49,915 66,028

Food asd beverage products

Volume 14,997 10,517 9,200 13,734 14,742

Value 147.903 185,541 161.978 202,481 237,505

Mineral products

Volwoe 39,573 36,477 43,132 48,684 40,192

Value 65,621 100,182 114,623 153,142 143,823

Chemical.

Volume 1,508 1,673 1,759 2,121 2,016

Value 39,468 45,825 54,370 71,548 886408

Plastics sod rubber products

Vol ume 253 454 196 255 409

Value 13.735 19,008 L3,794 21,786 37,383

Hides, skins, and products

Volume 30 31 9 18 13

Value 2,838 3,133 1,460 2,346 2,243

Wood products

VoLume 4,081 4,650 5,559 S,0io 4,303

Value 16,493 21,643 23,220 22.399 29.266

Paper and paper products

Volume 474 367 463 498 748

Value 9,707 9,409 16,113 15,249 27,849

Textiles

Volume 486 518 331 717 595

Value 57,637 75,402 62,055 86,475 87,006

bobes

Volume 112 143 97 as 77

Valu. 15,922 20,462 14,901 186,839 17,000

Stone and ylass products

Volume 6,672 4,036 5,357 2,880 3,199

Value 26,075 20,103 29,069 18,951 42,470

Metal and metal products

Volme, 2,291 1,198 1.169 2,527 2,451

Value 40,671 28,635 27,973 58,261 104,403

Machinte and Electrical equipment

Volume 764 425 231 317 633

Value 69,716 45,608 36,b28 57,195 137,871

Transportation material

Volu. e 629 737 2,187 495 1.486

Value 40,827 43,751 53,162 93,871 166,822

Others

Volume 326 140 143 225 117

Value 21,001 16,686 16,601 33,331 22,965

Total

Volume 128.003 111,676 107,063 138,966 166.768

Value 869,267 1.010.853. 911,404 1,284.785 1,908,222

Sourcest Servico Nacional de Estatiatice, Boletla Tri=estral do Estatistica, 1975-77 iasues;

and data provided by the Cape Veede"o authorities.

37 The breakdown of categories is not yet available for 1978.

7 73 -

Table 3.4 VOLUME OF EXPORTS, 1974-78

(in metric tons)

1974 1975 1976 1977 1978 al

Animals and animal products 1,310 729 1,085 288 330

of which: frozen fish 1,204 679 981 216 -shellfish 89 49 77 52 -

Vegetal products 689 35 2,614 2,776 3,427

of which: babanas 658 27 910 705 -coffee ... ... ... 14 -

Edible oils and fats ... ... ... ...

Food and beverage products 38,290 23,870 13,205 14,454 9,323

of which: canned fish 422 197 180 338 -fresh water supplied 37,799 23,536 12,617 13,811 -

to ships

Mineral pronucts 21,505 12,054 21,851 20,653 16,301

of which: salt 19,307 12,042 21,850 20,650 -pozzolana 2,000 ... ... ...

Chemicals 2,075 5 ... ...

Plastics and rubber products 3 ... 1

Bides, skins, and products 26 12 3 12 78

Wood products ... ... ... ...

Paper and paper products 12 20 ... 4

Textiles 102 52 3 ...

Shoes ... ....

Stone and glass products 1 2 ... ... ...

Metal and metal products 502 245 105 116 307

Machines and electrical equipment 86 119 1 1 180

Transportation material 22 307 1 2 1

Others 107 74 ... ... ...

Total 64,730 37,524 38,869 38,306 29,947

Sources: Servico Nacional de Estatistica, Boletim Trimestral de Estatistica, 1974-78

a/ The breakdown of categories Is not yet available for 1978.

- 74 -

Table 3.5 FOOD AID RECEIVED, 1976-79

(Principal commodities)

Quantity in Tons 1976 1977 1978 1979

Corn 10,650 244144 33,300 15,000Beans 423 1,060 - -Wheat 4,000 17,022 7,500 6,500Wheat flout 2,342 - - 917Rice 3,600 7,870 4,738 5,317Powdered milk 847 2,101 1,297 60Edible oils 903 1,522 820' 1,100Sugar 1,739 664 - -

Total 24,504 54,383 47,655 29,174

Value in millions of CV escudos 1976' 1977 1978 1979

Corn 47.9 108.6 149.9 67.5Beans 5.9 14.8 - -Wheat 15.3 65.2 28.7 29.9Wheat flour 23.3 - - 11.0Rice 36.0 78.7 47.4 55.2Powdered milk 12.7 31.5 19.5 0.9Edible oils 31.6 53.3 28.7 38.5Sugar 19.1, 7.3 - -

Total aI 192.0- 359.5 274.1 203.0

at Estimates.

Source: Data provided by-the State-Secretariat-for Cooperation and Planning,January 1980.

Table 3.6. DIRECTION OF TRADE, 1969-78

(in percent, by value)

1969 1970 1971 1972 1973 1974 1975 1976 1977 1978Jan. - June

Exports 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0

Portugal 65.5 69.2 62.1 63.9 61.1 69.6 88.7 62.7 43.1 43.1Angola -- - 14.4 9.3 38.1Zaire 3.6 1.7 2.0 2.6 2.5 1.9 0.5 5.4 12.5 8.1Guinea-Bissau 4.7 3.6 5.0 3.7 1.5 0.6 1.1 3.3 7.5 1.7United Kingdom 0.4 1.0 1.3 0.9 1.5 1.7 3.8 4.6 6.2 0.6United States 11.9 12.8 15.4 22.2 25.3 19.4 0.8 -- -- --Sao Tome & Principe -- -- -- -- -- 0.2 -- 3.8 6.2 1.1Others , 3.1 2.7 2.1 2.2 2.7 0.9 5.1 3.5 13.6 6.7Ship Chandlering 10.8 9.0 12.1 4.5 5.4 5.7 3.4 2.3 1.6 0.6

Imports 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0

Portugal 49.5 57.9 52.0 56.1 52.6 57.5 62.7 5R85 45.2 35.1Angola 21.9 16.6 21.2 20.2 10.9 18.7 10.8 2.4 0.4 0.1Netherlands 3.1 2.8 4.0 2.9 2.4 3.1 3.7 5.1 3.7 12.3United Kingdom 3.8 3.2 4.1 5.0 12.7 3.4 2.8 3.0 2.4 3.2United States 3.0 3.3 3.6 3.0 3.8 1.6 2.0 1.8 1.9 9.0Mozambique 3.9 1.1 0.5 2.0 3.9 2.2 1.1 -- Others 14.8 15.1 14.6 10.8 13.7 13.5 16.9 29.2 46.4 40.3

Source: Data supplied by the Cape Verdean authorities; and Boletim Trimestral de Estatistica, various issues.

- 76 -

Table 3.7. TRADE INDICES, 1974-77 a/

(1974 = lO0)

1974 1975 1976 1977

Domestic exportsValue 100.0 58.4 107.9 169.5Price 100.0 127.8 220.4 343.8Quantity 100.0 45.7 49.0 49.3

ImportsValue 100.0 116.3 104.8 147.8Price 100.0 126.0 152.5 174.4Quantity 100.0 92.3 68.7 84.7

Terms of trade 100.0 101.4 144.5 197.1

Sources: Data provided by the Cape Verdean authorities; and IMF staffcalculations.

a/ Value and price indices in terms of domestic currency. Customs figureswere used for the calculation of these indices.

Table 4.1 - CAPE VERDE IS.

EXTERNAL PUBLIC DEBT OUTSTANDING INCLUDING UNDISBURSED AS OF DEC. 31, 1978DEBT REPAYABLE IN FOREIGN CURRENCY AND GOODS

(IN THOUSANDS OF U.S. DOLLARS)

D E B T O U T S T A N D I N G : I N A R R E A R STYPE OF CREDITOR -----------------------------------:-----------------------CREDITOR COUNTRY DISBURSED :UNDISBURSED: TOTAL PRINCIPAL INTEREST

MULTILATERAL LOANSAFRICAN DEV. BANK - 2.084 2,084 - -

AFRICAN DEV. FUND - 7.492 7.492 - -

BADEA/ABEDA tO.000 - 10.000 - -

INTL FUND ARG(IFAD) - 3.815 3.815 - _LEAGUE OF ARABSTATES 500 - 500 - -OPEC SPECIAL FUND 1,550 - 1.550 - -

TOTAL MULTILATERAL LOANS 12,0S0 13.391 25.441 - -

TOTAL EXTERNAL PUBLIC DEBT 12.050 13.391 25.441 - _

NOTES: (1) ONLY DEBTS WITH AN ORIGINAL OR EXTENDED MATURITY OF OVER ONE YEAR ARE INCLUDED IN THIS TABLE.(2) DEBT OUTSTANDING INCtUDES PRINCIPAL IN ARREARS BUT EXCLUDES INTEREST IN ARREARS.

Table 4.2 - CAPE VERDE IS.

SERVICE PAYMENTS, COMMITMENTS. DISBURSEMENTS AND OUTSTANDING AMOUNTS OF EXTERNAL PUBLIC DEBT

PROJECTIONS BASED ON DEBT OUTSTANDING INCLUDING UNDISBURSED AS OF DEC. 31, 1978DEBT REPAYABLE IN FOREIGN CURRENCY AND GOODS

(IN THOUSANDS OF U.S. DOLLARS)TOTAL

YEAR DEBT OUTSTANDING AT T R A N S A C T I O N S D U R I N G P E R I O D OTHER CHANGESBEGINNING OF PERIOD

:,DISBURSED : INCLUDING COMMIT- DISBURSE- S E R V I C E P A Y M E N T S CANCEL- ADJUST-ONLY :UNDISBURSED: MENTS MENTS ----------- -----------:----------- LATIONS MENT *

PRINCIPAL INTEREST TOTAL(1) (2) (3) (4) (5) (6) (7) (8) (9)

1974 - - - - - _ _1975 - - - - - -1976 - - 10,000 10,000 - - -1977 10.000 10.000 6,253 2.050 - 100 100 - 1701978 12,050 16,423 8,511 - - 113 113 - 5071979 12,050 25.441

* * * * * * THE FOLLOWING FIGURES ARE PROJECTED * * * * * *

1979 12.050 25,441 - 497 - 114 114 - -1980 12.547 25,441 - 2,502 - 124 124 - -1981 15,050 25,441 - 2,619 - 150 150 - -1982 17,670 25,441 - 2,678 82 183 265 - -1983 20.266 25,359 - 2.124 237 214 451 - 2 1984 22,154 25,124 - 1,245 237 234 471 - I1985 23,164 24,888 - - 958 237 246 483 - I1986 23,886 24.652 - 670 882 251 1,133 -1987 23,675 23,771 - 96 882 248 1.130 - 21988 22,891 22,891 - - 946 238 1,184 - -1989 21,945 21.945 - - 1.151 225 1,376 - 31990 20.797 20,797 - - 1,151 213 1.364 - -

1991 19,646 19,646 - - 1,151 199 1,350 - -1992 18.495 18.495 - - 1.136 186 1.322 - 21993 17.361 17,361 - - 1,120 173 1,293 - 21994 16,243 16,243 - - 1.120 160 1.280 - -1995 15,123 15,123 - - 1.120 146 1,266 - 21996 14,005 14,005 - - 1.120 133 1.253 - -11997 12.884 12,884 - - 1,120 118 1.238 - 11998 11.765 11,765 - - 1.120 l0E 1,226 - 3

* THIS COLUMN SHOWS THE AMOUNT OF ARITHMETIC IMBALANCE IN THE AMOUNT OUTSTANDING INCLUDING UNDISBURSED FROM ONEYEAR TO THE NEXT. THE MOST COMMON CAUSES OF IMBALANCES ARE CHANGES IN EXCHANGE RATES AND TRANSFER OF DEBTSFROM ONE CATEGORY TO ANOTHER IN THE TABLE.

- 79 -

Table 5.1. SUMMARY OPERATIONS OF CENTRAU, GOVERNMENT, 1975-78

(In millions of Cape Verde escudos)

1975 1976 1977 1978 a/

Ordinary budgetRevenues 309.2 375.4 396.6 505.2Expenditures -314.8 -390.9 -549.0 -556.2Deficit -5.6 -15.5 -152.4 -51.0

Capital revenues 2.9 2.1 -- 1.4

Extraordinary expenditures b/ -349.8 -595.9 -919.0 -1,065.4

Overall deficit -352.5 -609.3 -1,071.4 -1,115.0

Foreign financing 354.8 756.9 1,029.3 873.6Grants 224.6 443.8 951.6 818.3Loans 130.2 313.1 77.7 55.3

Domestic financing -2.3 --147.6 42.1 241.4Bank of Cape Verde -2.3 --147.6 42.1 241.4Operational accounts -2.3 90.7 -55.6 100.8

Credit 10.3 25.4 3.9Deposits -12.6 65.3 -59.5

Earmarked accounts -- *-238.3 97.7 140.6

Sources: Data provided by the Cape Verdean authorities; and IMF staffestimates.

a/ Preliminary.b/ Includes outlays on the Emergency Programs.

- 80 -

Table 5.2. CENTRAL GOVERNMENT REVENUES, 1975-78

1975 1976 1977 1978 a/

(In millions of Cape Verde escudos)

Total revenues 312.1 377.5 396.6 506.6

Current revenues 309.2 375.4 396.6 505.2

Tax revenues 219.0 272.6 308.0 415.8

Direct taxes 55.4 72.8 79.0 116.9

Indirect taxes 163.6 199.8 229.0 298.9

Import duties 52.5 56.4 83.6Export duties 0.3 0.6 0.6 ...Excise taxes 54.3 73.7 75.4 ...Stamp tax 15.5 21.6 28.5 ...Other bl 41.1 47.5 41.0

Nontax revenues 90.2 102.8 88.6 89.4

Capital revenues 2.9 2.1 -- 1.4

(As a percentage of total revenues)

Current revenues 99.1 99.4 100.0 99.7

Tax revenues 70.2 72.2 77.7 82.1

Direct taxes 17.8 19.3 19.9 23.1

Indirect taxes 52.4 52.9 57.8 59.0

Import duties 16.8 14.9 21.1 ...Export duties 0.1 0.2 0.2 ...Excise taxes 17.4 19.5 19.0Stamp tax 5.0 5.7 7.2Other b/ 13.1 12.6 10.3 ...

Nontax revenues 28.9 27.2 22.3 17.7

Capital revenues 0.9 0.6 -- 0.3

Sources: Data provided by the Cape Verdean authorities and IMF staff estimates.at Preliminary.b/ Includes mainly customs related charges, which have been separately estimated.

- 81 -

Table 5.3. CENTRAL GOVERNMENT ORD INARY BUDGET EXPENDITURES, 1977-78

(As a percentage of total ordinary expenditures)

Average1977 1978 1977-78

Total ordinary expenditures 100.0 100.0 100.0

National Assembly 0.6 0.6 0.6Office of the President 4.9 4.8 4.8Office of the Prime Minister 7.8 8.1 8.0

Of which: State Secretariat of theInterior, Public Administration,and Labor 2.6 3.0 2.8

State Secretariat for ExternalCooperation and Planning 1.6 1.6 1.6

Ministry of Foreign Affairs 6.i3 8.0 7.4Ministry of Defense and National

Security 14.8 15.2 15.0

Ministry of Economic Coordination 16.0 16.9 16.5

Of which: State Secretariat forCommerce, Tourism, and Handicrafts 1.2 1.1 1.2

State Secretariat for Finance 14.L 11.4 12.8

Ministry of Education and Culture 18.4 19.1 18.8

Ministry of Transport andCommunications 3.9 3.1 3.5

Ministry of Rural Development 10.4 7.4 8.9

Ministry of Health and Welfare 10.0 10.3 10.2Ministry of Public Works 3.6 3.8 3.7Ministry of Justice 2.8 2.8 2.8

Source: Data provided by the Cape Verdean authorities; as reported by the

IMF.

Table 5.4. PUSLIC INVESf9ET PROCRIAM FOR 1978 AND 1979

(in millions of Cape Verde escudos)

1978 1979

PRRGRAI84ED ACTUAL PROGRAMM8P AC=T1AE

RATE OF RTE oF

AMVIJI4T PERCENT ANOINT PERCRT IIPmEATION AMOUNT FERCBENT AM3aNT PERCB 7T IMPIOYNTATION

TOTAL 1,274.9 100.0 987.; 1oo.o 77.4 1,834.5 100.0 1 100.0 71.9

Productive Sectors 641.2 50.2 401.2 40.6 62.5 797.9 43.4 374.1 28.3 46 6

Rural Development 449'7 32 3 2 30.8 67.5 503.1 2 24.2 6

Water Resources 255.9 22.4 230.6 23.3 80.6 403.9 22.0 261.6 19.8 64.7

Agriculture, Reforestation, Livestock 163.8 12.8 73.6 7.4 44.9 99.2 5.4 5B.7 4.4 59.1

Fisheries 130.0 10.1 67.1 6.8 51.6 219.4 11.9 .504 3.8 22.9

Industry 61.5 4.8 29.9 3.0 48.6 75-4 4.1 3.7 0.2 4.9

Econsmic Infrastructure 337.3 29.2 217.9 22.0 64.6 c54-.2 3 4 71A A 38.9 86 .5

Transportation 153.8 12.0. 12.6 11.4 73.2 3S3.5 20.9 36886 29-4 10.3

Roads 2.0 -- 96.5 5.2 85.3 6.4 88.3

Ports and Shipping 144.3 11.3 110.4 11.1 76.5 256.9 14.0 271.3 20.5 105.6

Airports 7.5 0-5 2.2 0.2 29.3 30.0 1.5 32.0 2.4 106.6

Public Utilities 27.8 2.1 4.6 0.4 16) 51.8 2.8 20.1 1.S 38.8

Power and Water 27.8 2.1 4.6 0.4 16.5 51.8 2.B 20.1 1.5 38.8

Public Works 29.0 2.2 61.0 6.1 210.3 26.0 1.4 45.3 3.4 1741.2

Telecomreunications 70.0 5-4 7.0 0.7 10.-0 1 5 6.7 °.5 22.3

Commerce and Tourism 27.7 2.1 11.7 1.1 42.2 37.9 2.0 32.0 2.4 84.4

Admsinistrative Infrastructure 29.0 2.2 21.0 2.1 72.4 65.5 3.5 21.7 1.5 33.1

Social Sectors 254.7 19.9 104.8 10.6 41.1 335.5 18.2 171.7 13.0 51.1

Education 80.2 6.2 15.6 1.5 9.14 114.1 6.2 40.8 3.0 35-7

School Construction 73.4 5.7 8.3 0.8 11.3 90.0 4.9 34.0 2.5 37.7

Miscellaneous 6.8 0.5 7.3- 0.7 107.3 24.1 1.3 6.8 0.5 28.2

Health 8 6 . 3.1 3 38.7 2.9

Hospital Construction 47.9 3.7 16.8 1.7 35.0 37.4 2.0 15.6 1.1 41.7

Equipment 25.5 2.0 3.3 0.3 12.9 45.4 2.4 18.2 1.3 40.0

Miscellaneous 11.9 0.9 16.7 1.5 140.3 15.4 0.8 4.9 0.3 31.8

Housing, Urban DeveloPment and Sewerage 89.2 6.9 52.4 5.57 123.2 6.7 92.2 6.9 74.8

Preinvestment Studies and Miscellaneous 41.7 3.2 62.9 6.3 150 . 106.4 5.7 59.3 4.4 55.7

Omissions Al __ __ 200.0 20.2 -- -- -- 200.0 15.1 --

Source Ministerio da Coordena,ao Economica, Ortamento Geral do Estado Para o ano econanico de 1978.

Orgamento Geral do Estado pamr o ano economico de 1979.

!/ Not specified foreign aid.

- 83 -

Table 6.1. MONETARY SURVEY, 1974-78

(In millions of Cape Verde escudos)

1974 1975 1976 3.977 1978March June Sept. Dec. March June Sept.

Foreign assets (net) 380.0 500.0 1,016.7 936.2 1,164.1 1,173.0 1.420.9 1,442.6 1.470.6 1.387.0

Foreign assets 382.4 500.8 1,031.6 964.7 1,198.0 1,186.7 1,424.7 1,445.1 1,486.3 1,406.0Foreign liabilities -2.4 -0.3 -14.9 -28.5 -33.9 -13.7 -3.8 -2.5 -15.7 -19.0

Domestic assets (net) 362.0 442.6 283.0 554.2 305.1 422.6 468.4 415.2 586.5 749.5

Credit to Central Government(net) -14.8 -17.1 -164.7 -146.7 -229.5 -183.3 -122.6 -66.1 -43.6 -7.2Operational accounts (net) -14.8 -17.1 73.6 62.7 -28.6 -38.2 18.0 47.5 59.3 42.6Earmarked deposits -- -- -238.3 -209.4 -200.9 -145.1 -140.6 -113.6 -102.9 -49.8

Credit to local governments 8.4 7.8 7.4 7.4 7.4 7.1 7.1 6.6 6.6 6.6Credit to nonfinancial public

enterprises 8.0 8.0 7.2 7.2 7.2 7.2 6.6 7.1 7.0 6.7Loans and advances 8.0 8.0 7.2 7.2 7.2 7.2 6.6 7.1 7.0 6.7

Credit to private sector 274.5 316.8 400.5 404.1 403.5 423.8 394.9 443.2 424.3 534.4Other items (net) 85.9 127.1 32.6 282.2 116.5 167.8 182.4 24.4 192.2 209.0

Monetary liabilities 543.2 732.4 968.9 1,159.1 1,058.3 1,160.7 1,312.5 1,312.7 1.379.8 1.430.8

Nonfinancial publicenterprises 45.8 59.0 243.3 276.0 255.1 260.4 394.1 357.3 333.8 374.1

Business and individuals 497.4 673.4 725.6 883.1 803.2 900.3 978.4 955.4 1,046.0 1,056.7

Quasi-monetary liabilities 60.1 54.7 78.2 80.7 80.1 87.2 94.6 102.2 108.5 118.1

Business and individuals 60.1 54.7 78.2 80.7 80.1 87.2 94.6 102.2 108.5 118.1

Government lending funds 58.7 66.0 66.0 65.1 65.1 65.1 65.1 66.1 66.1 66.1

Capital accounts 80.0 a/ 90.0 a/ 186.6 185.5 265.7 282.6 357.1 376.8 502.7 521.7

Sources: Banco de Cabo Verde.

a/ IMF Staff estimates.

- 84 -

Table 7.1. NATIONAL LAND USE, 1977-78

Net Cultivable AreaArea of Irrigated Rainfed

Island Island,ha ha % ha %

Santiago 99,090 950 1.0 31,030 31.3S. Antao 77,900 800 1.0 9,357 12.0Fogo 47,600 6 0.0 14,231 29.9S. Nicolau 38,800 29 0.1 1,605 4.1Maio 26,900 17 0.1 806 3.0Brava 6,740 30 0.4 540 8.0Boa Vista 62,000 2 0.0 480 0.8S. Vicente 22,700 18 0.1 150 0.7Sal 21,600 n.a n.a n.a n.a

403,330 1,825 58,199

ha %Under Cultivation 60,024 14.9Forests 2,200 0.5Rangeland 37,766 9.4Other 303,340 75.2

Total 403,330 100.0

Source: Ministry of Rural Development, Producao Agricola Nacional 1977-78, quotedin FAO Investment Centre, Assomada Agricultural Development Project, PreparationReport, 1978, Table 6; and Mission calculations.

Table 7.2. 4C1ICULrA ARM,S P1WUCIOP AIM YOUng 1961-1979

1961- 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 19781963

Crop Areas: ha

Raolned

Malze 16,901 22,250 1,O039 22,424 22,117 22;552 21,972 14,513 22,487 Apportioned area 5,000

Apricot beans 14,384 16,458 14,237 16,179 15.088 15,233 15,182 9.219 13,892 of total raisl1ed ) ha-ascad

Coffee 528 513 435 435 434 414 399 369 397 - -

rtKiated/lntttfad j/

lenane 212 282 292 336 322 297 317 245 187 - - 162

lager Cans 1,959 76 772 787 704 467 S46 376 612 - - - 1,065

PbrCIa 83 - -- 51 17 12 - 247

Sweat Patatc 1,702 1,083 1,508 1,206 1,152 1,674 1,312 144 730 - - - 1,000 -

Casave 1,638 748 757 810 872 1,357 1,191 143 338 - - - 225 -

Croundants 232 630 524 349 271 211 1 2 -

P19ductt : tons

Hate. 11,966 12,008 11,057 678 3,338 924 910 - 714 2,200 15,000 3,000 1,500 9,000

Rariest Beens 7,186 7,290 5,073 392 979 341 271 - 14 440 3,000 2,000 240 1,350

8 sasa 6,231 5,737 6,470 6.889 9,286 1,371 5,409 5,187 4,690 3,500 3,000 4,500 6,800 9,000

Saa:r Cane 13,350 8,912 9,919 11 .23 14,377 8,082 9,070 5,719 9,742 10,500 10,000 12,000 13,000 14,000

Porect 82 - - - 45 72 47 I,0OO 1,200 1,500 1,900 2,000

Set PFtata 6,991 1,990 6,937 3.172 3,B98 2,844 1,495 211 1,053 1,200 1,500 3,000 2,000 2,000

Gee"va 7,023 2,741 3,448 2,984 3,018 2,119 1,067 235 526 1,900 2,500 3,500 5,625 6,000

Goffee 162 106 121 82 94 114 185 76 8 71 103 168 53 100

Ground-oa 141 561 604 72 164 33 - - - 5 5 25 - -

Averagelijlk: kflha

IUder Sded trappIng

gala. 702 540 526 30 151 41 41 - 32 - - - 300 -

Rircat BScans 500 445 356 24 65 22 19 10 - - - 48

ganan 29,392 20,344 22,158 20,503 27,970 28,158 17,063 21,171 25,080 - - - 42,000

Sags cane 12,606 11,946 12,848 14,266 20,422 17,306 16,612 15.220 15,918 - - - 12,200

Patera 988 - - * - - 4,091 4,235 3,917 - - - 7,7W-

Swet Potat 4,108 3,565 3,937 2,630 3,384 1,400 1,120 1,445 1,445 - , - 2,000

Ca5scea 4,288 3,731 4,548 3,622 3,44 1,562 896 1,643 1,556 25,000

Coff.. 307 207 278 189 217 275 464 206 23 - - -

Greoadou. 608 890 1,153 206 005 156 - - -

MJ Often tw or three craps er grova toagther. The aras ehewn are therefore nt addltive. The total irrgaeted are i. thd to be 1,800 ha (1975).

sources: ADS lnvotamnt Cantre, Asea Crtultural Dc _leeeea5t Prateet Pranereaton lazart far data 1961-1976; issln atlmata ftor 1977 nd 1978.

- 86 -

Table 7.3. ESTIMATED LIVESTOCK POPULATION ANDMEAT PRODUCTION, 1975

a!Stock Slaughtered

(Head) (Head)

Cattle 15,000 1,500

Goats 60,000 30,000

Sheep 2,000 1,000

Pigs 20,000 25,000

Poultry 80,000 80,000

Horses 500 30

Mules 1,800 120

Donkeys 6,000 400

Sources: FAO; and data provided by the Livestock Department of theMinistry of Rural Development.

a/ Only a small proportion is controlled.

- 87 -

Table 8.1. FISH PRODUCTION, 1976

By Species: tons:

Tuna and other ocean pelagic species 6,300

Coastal pelagic species 1,000

Benthic species 1,600

Lobsters 100

9,000

By Market:

Domestic

Local Sales 4,200

Home consumption 2,000

Bait 600

6,800

Export:

Fish and Lobsters 2,050

Bait for tuna and lobsters 150

2,200

TOTAL 9,000

Source: Moal, Assistance au Developpement des Pe^ches Maritimes aux flesdu Cap Vert, Deuxiame et troisieme missions, 1977, p.15.

- 88 -

FIGURE 1: FISH LANDING ESTIMATES BY INDUSTRIAL ANDARTISANAL SECTOR, 1964-1978

9000r

8000

7000 I / /

6000 F- I

C - ! "I ,LO 5000- /

4000}/

3000 J

2000 r--

i 00o Industrial Sector

- - - - Artisanal Sector

1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 197E

YEAR

World Bank - 21348

NOTE- Fish landing figures lartisanal sector) for 1976 and 1977 are based on Mr VVatanabe's missionreport (UNIDO) and the Direcao nacional das pescas questionnaire (publ ished in 'Boletrmtrimestrial des estatistica,' 19771.

- 89 -

FIGURE 2

Exports of Fisheries Products

QUANTITY VALUE

20 25

20 08 15

u)

z <.1 1 1 | I l l l ' 'l ' l ' ' ' ' ' ' ' l ' 15

U w~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~LI- 10

Ud~~~~~~~~~~~~~~~~~~~~~

10 Z

5

5

1963 65 67 69 71 73 75 77 1964 66 li& 70 72 74 76

YEAR YEAR

World Bank-20615

- 90 -

Table 9.1. OUTPUT 0P MUJOR ItMUSTRIAL OPERATIONS, 1970-77

1970 1971 1972 1973 1974 1975 1976 1977

Volume (in metric tons)

Minerals

Salt 16,816 32,937 36,443 38,870 34,580 20,941 13,701 31,317

Pozzolana 16,959 9,511 7.910 L1,900 4,100 1,164 789 940

Food Products

Flour 4 4 4 4 1 38 4,004 10,271

Bread and bakery products 2.028 1,950 2,246 2,477 1,207 1,325 799 1,206

Beverages

Aguardente (rum) (in liters) 31U,616 l9S.736 204,534 160,683 43,954 141,879 48,524 150,308

Sugarcene syrup (in liters) 14,516 6,745 2,628 1,820 30 1,242 1,997 2,158

Soft drinks (in liters) 115,158 138.976 106,547 83,179 56,781 53,898 106,368 B6,580

Mineral water (in liters) 930 180 .. .. .. .. .. 170

Others

Cigarettes and shredded tobacco 28 32 29 24 12 3 8 8

Lime 28 2 13 .. .. .. 3Roofing clay tiles 20 58 115 58 72 38

Value (in thousands of CV eascudos)

Mitnerals

Salt 1,064 530 3,007 3,114 !,751 1,727 906 7,845

Pozzolane 1,832 2,348 775 951 651 554 316 376

Food Products

Flour 24 23 20 20 5 549 33,554 81,387

Bread and bakery products 17,085 16,079 19,563 21,583 12,667 16,775 11,961 7,911

Beverages

Aguardente (rum) (in liters) 4,120 3,100 4,825 4,228 6,090 10,689 4,389 14,401

Sugarcane syrup (in liters) 158 71 45 34 2 63 160 236

Soft drinks (ir liters) 789 934 664 487 415 563 1,096 1,322

Mineral water(in liters) 6 1 .. .. .. .. .. 3

Others

Cigarettes and shredded tobacco 1,894 2,128 1,797 1,433 738 17,570 994 1,230

Lime 14 3 6 .. .. .. 18

Roofing clay tiles 34 46 104 56 144 88

Source: Direccao Geral de Estatistica, Boletim Trimestral de Estatiatica, various issues.

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Table 9.2. COMPARATIVE WAGE RATES IN MANUFACTURING

AverageDaily Wage Rate

Country GNP per capita in Manufacturing(US$, 1976) (US$ per day, 1977)

Comparators

Portugal 1,690 8.48 a/Hong Kong 2,110 6.11Korea 670 5.50 a!Singapore 2,700 5.28 atColombia 630 5.13 a/Honduras 390 4.05Sierra Leone 200 2.19 a/Mauritius 680 2.14Sri Lanka 200 2.08Bangladesh 110 1.01/0.68 b/

Average Daily SalariesGNP per capita by Occupation(US$, 1978) (US$ per day, 1977)

Cape Verde 262 c/

Mechanic 5.79Shoemaker 4.18Truck Driver 4.04Foreman 3.21Fainter 3.04Forgeman 2.98Journeyman 1.43Worker 1.40

a/ Contains possible inaccuracies due to converting hourly, weekly ormonthly wage rates to a daily basis.

b1 Skilled/unskilled workers.cf Mission Estimates.

Sources: Comparator wage rates in manufacturing from ILO, 1978 Year Bookof Labour Statistics, Geneva, 1978. Cape Verde data fromStatistical Appendix Table 1.5.

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Table 9.3 ROAD NETWORK in 1977

(kilometers)

Island Cobblestone roads Improved earth roads Unimproved tracks Total

6m 3.5m 6m 3.5m

Santiago 157 16 42 8 25 248

Sao Nicolau - 18 - 11 38 67

Fogo 3 36 23 - 57 119

Sao Vicente 9 6 - 38 - 53

Santo Antao 54 14 - 22 163 253

Sal - - 18 - - 18

T O T A L 223 90 83 79 283 758

Source: Diagnostic Study of Road Maintenance in the Sahel, Volume 2, Cape VerdeIslands, Louis Berger, July 1977.

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Table 9.4. STUDENT ENROLLMENT BY LEVEL, 1973/74 TO 1976/77

1973/74 1974/75 1975/76 1976/77

Pre-Primary 14,996 16,574 490 a/

Primary (grades 1-4) 47,184 49,009 61,000 56,041

Preparatory (grades 5-6) 3,265 4,263 5,360 4,917

Secondary (lycee) 1,467 1,839 2,400 1,647

Technical 336 498 680 .. b/

Teacher Training cl .. .. ..

not availablea/ Kindergarten; pre-primary was discontinued after independence.b/ In April 1979, this school (Escola Industrial e Comercial do Mindelo)

had about 700 students enrolled; 500 day students and 200 at night.c/ Education statistics are not clear on the number of teachers trained

at various levels.

Source: MinistErio da Educa.co & Cultura, Encontro Nacional de Quadros daEducacgo: Conclusoes e Documentos Diversos, 1977.

Table 9.5. PRIMARY EDUCATION, 1970171 TO 1978/79

1970/71 1971/72 1972/73 1973/74 1974/75 1975/76 1976/77 1977/78 1978/79

Number of Primary School:

Students a/ 27,992 34,420 41,959 47,184 49,009 61,000 56,041 55,406 54,492

Teachers 730 857 973 1,094 1,236 1,350 1,252 1,314 1,390

Classrooms .. .. .. 611 650 655 695 700

Ratio of:

Students per teacher 38 40 43 43 40 45 45 42 39

Students per classroom .. .. .. .. 80 94 86 80 78

Female % of students 9.. .. .. .. 4.1

Primary School Teacher

Qualifications

% Magisterio Primario .. 13 8 7 7 4 6

% Posto Escolar .- 41 44 47 60 69 75

% Monitor .. 46 48 46 33 27 19

not availablea! In grades 1-4 only; excludes an additional 17,000 pre-primary students from 1970/71 through 1974/75. Pre-primary was

discontinued after independence until proper resources available.

Sources: Departmento do Ensino Primario, Dados Estatisticos, 1979; Ministerio da Educa9ao e Cultura, Encontro Nacional de Quadros

da Educacao; ConclusSes e Documentos Diversos, 1977.

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Table 9.6. TEACHER QUALIFICATIONS, 1974/75 TO 1977/78

Number of teachers (%) 1974/75 1975/76 1976/77 1977/78 a/

Category Qualifications

Monitor 4 years primary 437 306 260 250Escolar plus 40 days'

training (34.4) (24.1) (18.8) (16.4)

Posto 6 years of school 720 862 995 1,083Escolar plus 2 or 3 years

of teachertraining (56.6) (67.9) (71.8) (70.9)

Magisterio Secondary school 115 102 131 195Primario plus 2 years

advance teachertraining (9.0) (8.0) (9.4) (12.7)

Total 1,272 1,270 1,386 1,528(100.0) (100.0) (100.0) (100.0)

a/ Forecast.

Source: Ministerio da Educa,ao e Cultura, Encontro Nacional de Quadrosda Educagao: Conclusoes e Documentos Diversos, 1977.

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Table 9.7. HEALTH STATISTICS

Years

1970 1971 1972 1973 1974 1975 1976 1977

Mortality rates

General mortality rate,0/00 10.6 14.9 9.8 12.2 8.7 9.3 8.0 8.2

Infant mortality rate,0/00 95.0 130.9 90.9 110.6 78.9 103.9 100.3 97.5

Births

Live births 8,210 8,664 9,733

Still births 391 387 413

Deaths 2,796 2,460 2,570

Natural Increase 5,417 6,204 7,163

Source: Data supplied to the Mission by the Ministerio da Saude e Assuntos Sociais,April 1979.

Table 9.8. HEALTH DELIVERY SYSTEM

Number of Facilities by Island

Facility Santiago S.Vicente YfZ Brava S.Antao Sal Maio B.Vista S.Nicolau Total

Central hospitals 1 1 2

Regional hospitals 1 1 2

Regional infirmaries 1 1 2 1 1 1 7

Sanitary posts 11 3 2 6 1 2 1 2 28

Basic sanitary units 2 1 3

Treatment posts 3 3

Material-infant centers 1 1

Source: Data supplied to the Mission by the Ministerio da Saude e Assuntos Sociais, April 1979.

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Table 9.9. ELECTRIC POWER GENERATION

Island/City Generating CapAcity

SantiagoPraia 1,400 kva presently, adding 730 kva in

1979. 4,000 kva additional needed forproposed clinker plant, port, and airport.

Assomada 60 kva. Netherlands aid is upgrading.

Tarrafal 2 x 35 kva.

Sao Domingos 50 kva

Pedra Badejo no electricityNote: Island has no interconnection between towns.

Sao VicenteZtndelo 4,000 kw. Phase I of water/power project

plans to add 2,400 kw.

Sal 2,000 kw largely for airport. New water/power,project will add 2,500 kw.

Santo Antao Less than 250 kva. Electrificationproject underway at Porto Novo.

Fogo 200 kva at Sao Filipe.

Brava 200 kva.

Sao Nicolau 50 kva.

Maio No electricity

Boa Vista No electricity

Sources: Mission interviews with Government otticials in Praia andMindelo; USAID Project-Paper on Desalination and Power at Sal, 1977.

- 99 -

Table 10.1. CONSUMER PRICE INDICES, 1974-77

Quarterly averages, 1960 = 100

1974 1975 1976 1977

Praia: overall index 320 409 414 443

Mindelo: overall index 258 340 390 418

Quarterly averages, 1974 = 100

1974 1975 1976 1977

Praia: overall index 100 128 129 138

Mindelo: overall index 100 132 151 162

Praia: DMF overall basketindex a/ 100 141 152 168

a/ Calculated by the IMF staff on the basis of consumption weights workedout with the Cape Verdean authorities, using retail price time serieson 23 products. The indices published by the Government representunitary-weighted combinations of products.

Sources: Servico Nacional de Estatistica, Boletim Trimestral de Estatistica,1975-77 issues; and IMF staff estimates and calculations.

- 100 -

Table 10.-2. COMPARATIVE CONSUMER PRICE INDICES, 1970-77

(1970 = 100)

1970 1971 1972 1973 1974 1975 1976 1977

Cape Verde (Praia) a/ 100.0 115.1 126.7 144.5 219.2 280.1 283.6 303.4

Comparators:

Portugal (Lisbon) 100.0 112.0 124.0 140.0 175.1 201.8 244.2 302.5

Senegal (Dakar) 100.0 103.5 109.9 123.3 144.3 188.0 193.0 211.5

Mauritius 100.0 100.3 105.7 120.0 154.9 177.7 201.6 220.2

Gambia (Banjul) 100.0 103.1 112.0 119.8 130.9 164.8 192.9 216.9

St. Lucia 100.0 108.4 116.9 132.7 178.0 209.6 229.9 250.3

Cook Islands (Rarotonga) 100.0 110.6 123.2 135.1 152.6 176.5 217.1 261.6

Tahiti (Papeete) 100.0 103.5 108.8 117.6 138.8 161.5 171.5 187.1

A/ Excludes clothing and rent; unweighted basket of goods.

Source: ILO, 1978 Year Book of Labour Statistics, Geneva, 1978.