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CAPE VERDE: More developed- and more vulnerable

Photo: Phuong Tran/IRIN
Despite a new label, the archipelago still has its old problems- and some new ones
PRAIA, 5 February 2009 (IRIN) - One year after shedding its UN rank as a least developed country, Cape Verde now faces the challenge of emerging onto the global market as a middle-income country - during a worldwide recession, according to the World Bank.

Cape Verde became the second country, after Botswana, to leave the grouping of the world’s poorest countries in December 2007, leaving 49 least developed countries (LDC).

UN criteria for moving past LDC status are a per capita income of at least US$900; strong human resources as measured by literacy, nutrition and health education; and a stable economy.

Cape Verdeans have one of the highest average life expectancies in Africa, 69 years, as well as one of the highest adult literacy rates. Its per capita income is several times higher than that of its neighbours, according to the UN’s most recent ranking of living conditions around the world.

Missing link


But Cape Verde is still far from meeting the third criterion of economic stability, which is measured in part by exports and agricultural production, according to the UN.

Less than 10 percent of the volcanic island cluster is cultivable and the country imports about 80 percent of its food, according to the Ministry of Agriculture.

Periodic droughts starting in the 1970s have forced thousands of job-seeking Cape Verdeans overseas, followed by more job seekers and adventurers, said the UN’s top official in Cape Verde, Petra Lantz.

This has resulted in a diaspora twice as large as the half-million population scattered across nine islets, according to the World Bank.

Even though Cape Verde is surrounded by 630,000sqkm of ocean, about 25 percent of its population does not have regular access to safe drinking water, according to a May 2008 government report.

“Can you imagine if Cape Verde had natural resources?” said Lantz, pointing out her office window toward the Atlantic coastline. “There isn’t anything here, but determination, ambition and tuna fish.”

More on how Cape Verde is meeting water gap here.


Photo: Phuong Tran/IRIN
Illegal housing settlements like this one are spreading in the capital Praia, straining scarce water resources (file photo)
Even though fish is a large part of the country’s exports, traditional fishing methods keep the industry generating less than one percent of the country’s wealth, according to African Development Bank (ADB).

Even so, Lantz told IRIN, Cape Verde has come a long way since when it was “written off” as a non-viable island cluster that suffered from droughts and poor natural resources.

“Through good governance and the export of its culture, it has managed to survive,” said Lantz. “But because Cape Verde’s economy is so dependent on overseas funding, it is vulnerable to international shocks from the financial crisis.”

Cape Verde has one of the highest levels of overseas development assistance per person in Africa, according to a 2008 report from ADB and Organisation for Economic Cooperation and Development (OECD).

Aid and remittances from overseas make up about 25 percent of the national budget, according to the US Millennium Challenge Compact, which awarded Cape Verde $110 million from 2005 to 2010.

MIC

With an estimated income of almost $3000 per resident in 2007, the World Bank classified Cape Verde as a lower middle-income country (MIC) in January 2008. Even so, Cape Verde still qualifies for low-interest loans available to the least wealthy countries, based on the bank’s lending records.

The country is receiving almost $60 million in low-interest loans for HIV/AIDS activities, economic growth, road reforms and poverty reduction.

At a World Bank meeting in October 2008 for eight sub-Saharan MICs, the bank noted MIC vulnerability to the international lending meltdown, which may make it harder for these countries to access credit. Also, because MICs are more closely tied to international markets than LDCs, the “risk of contagion” to the financial crisis is higher, according to World Bank.

''...Let’s have this island be remembered as an example of how donors and the partner government got it right...''

Cape Verde with its half-million population attracted $3.6 billion in foreign investment in 2008, almost all in tourism, according to the government. But with the international economic downturn, the Ministry of Finance has projected a 0.5% rate of economic growth in 2009, compared to the islands’ 10-percent jump from 2006 to 2007, and seven-percent increase in 2008.

The UN’s Lantz said Cape Verde is at a crossroads. “We have to be very careful that its successes are not reversed. This is not the time to throw up our hands and say our job is done.

“Let’s have this island be remembered as an example of how donors and the partner government got it right.”

pt/np

Theme(s): Economy, Governance, Aid Policy,

[This report does not necessarily reflect the views of the United Nations]