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Report No. 2730-CV COPY The Republic of Cape Verde Economic Development in a Small Archipelago

Public Disclosure Authorized Volume 1: Main Report

May 30, 1980 Western Africa Regional Office FOR OFFICIAL USE ONLY Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Document of the World Bank

This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. CURRENCY EQUIVALENTS

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

Cape Verde escudos per US dollar Period 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 A SMALL ARCHIPELAGO

Table of Contents

VOLUME I Page No. PREFACE i

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

I. INTRODUCTION ......

Natural Resources ...... Economic History ...... 2 Emigration and Population ...... 3 Recent Political Developments *...... - 3

II. ECONOMIC BACKGROUND ...... 5

Structure of the Economy ...... 5 Expenditure on Available Resources ...... 6 Public 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 ...... 35 Shipping ...... 38 Air Transport ...... 39 Telecommunications ...... 40 Tourism ...... 41 Water Supply and Electric Power ...... 42 Education ...... 44 Health ...... 0 ...... 46

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

Government Development Policies ...... 47 Assessment of Development Policies ...... 48 Alternatives ...... 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 performance of 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 . . 9 5. 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), and P. Koenig (loan officer) of the Bank, and G. Gerhardsen (fisheries specialist), consultant. This report was reviewed within the Bank on October 9, 1979. The Government authorities agreed to discuss the report in January 1980. The report was subsequently updated and revised by Mr. D. Bovet and Ms. A. Paiva (loan officer/economist).

The purpose of this report is twofold: to acquaint the Bank with the broad characteristics of a new member co atry and its sectoral priorities, and to initiate with the Government of Cape Verde a construc- tive dialogue on economic policy and project issues. The timeframe covered, while emphasizing the years since independence in 1975, includes earlier periods of the islands' history where appropriate. This report draws heavily upon other studies of Cape Verde, including the IMF's Recent Economic Developments dated May 16, 1979, and USAID's Assessment of the Agricultural 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 DENSITYf 4,033.3 km2 300,000 (1978) 77.6 per km' Rate of Growth: 1.9% (1975-80)

POPULATION CHARACTERISTICS HEALTH Crude Birth Rate (per 1,000) 32.8 (1970-75) Population per physician Crude Death Rate (per 1,000) Population per hospital bed Life 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

EDUCATION Adult literacy rate % (1978) 35.0 Primary 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 1978 Gross Domestic investment 33 Gross National Savings 0.33 Current Receipts 11.7 14.5 25 27 Current Account Balance -32 Current Expenditure 16.2 15.9 35 29 Exports of Goods, NFS 5 Current Surplus (+) -4.5 -1.4 9 2.5 Imports of Goods, NFS 61 Capital Expenditures 27.1 30.4 58 56

1/ Mission Estimates. 2/ Estimated. .. not available. Page 2 of 2 pages COUNTRY DATA - CAPE VERDE

MONEY, CREDIT and PRICES 1974 1975 1977 1978 3/

Money and quasi-money 603.3 787.1 1467.1 1549.0 Bank Credit to Public Sector 1.6 -1.3 -108.9 6.1 Bank 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$) Frozen fish and shell fish 0.43 21.0 Exports of Goods, NFS 6.8 2.7 1.2 4.7 Canned fish 0.29 14.0 Imports of Goods, NFS 31.4 39.5 48.0 61.3 Salt 0.18 8.7 Resource Gap (deficit = -) -24.5 -36.8 -46.8 -56.6 Bananas 0.15 7.3 All other commod'ities 1.0 49.0 Interest Payments (net) -0.09 0.24 0.98 0.64 Total 2.05 100.0 Private Transfers (net) 6.9 16.8 23.5 23.7 Balance on Current Account -17.69 -19.76 -22.3 -32.2 EXTERNAL DEBT, DECEMBER 31, 1978 Direct Private Foreign Investment -0.05 0.00 0.07 - (including undisbursed) Official transfer (net) 13.8 14.7 28.1 23.4 US$ Mln. Official borrowing (net) 5.1 11.8 2.3 1.6 Errors and Omissions 3.5 10.3 3.8 4.7 Public Debt, incl. guaranteed 25.4 Increase in Reserves (+) 4.6 17.0 11.2 -2.5 Non-Guaranteed Private Debt Total outstanding & Disbursed Net 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 2.4 Period Cape Verde escudos per US dollar Non-Guaranteed Private Debt Period Average End of Period Total outstanding & Disbursed 1974 25.4 24.6 1975 25.6 27.5 IBRD/IDA LENDING, (Dec. 31, 1979) (Million US$): 1976 30.1 31.5 1977 33.9 33.9 IBRD IDA 1978 35.0 35.0 Outstanding & Disbursed Undisbursed Outstanding 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 - iv -

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-Bissau and 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 Cultural Organization

UNDP United Nations Development Programme

USAID United States Agency for International Development

WFP World Food Programme

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- v -

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 infrastructure due to the dispersion of population over nine islands;

- a weak agricultural base due to low and unreliable rainfall 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 (particularly 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 structure 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 imports) which is fully offset by heavy inflows of remittances from overseas Cape Verdeans and by foreign aid. The trade deficit in recent years has - vi - been equal to the entire value of GDP. Foreign aid, mainly grants, has run as high as US$80-100 per capita per annum. Remittances add about US$70 per islander per year. Thus, total resources available to the economy are twice the level of domestic production, and consumption considerably exceeds GDP. Investment is running at about 60% of GDP, as the Government undertakes an all-out effort to drought-proof the agricultural sector. Public finances have been prudently conducted, with foreign resources financing the entire capital expenditure budget and a small current deficit being recorded in 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 produce rum, and bananas are exported. However, only about 3% of the cropped 'area is irrigated, and this makes the economy and the domestic food supply critically dependent on rainfall which has historically been low and erratic. Watershed management and development of water resources have been accorded the first priority by the Government, and the rural works program is presently building thousands of stone retention structures to prevent erosion and to recharge groundwater supplies. Several large integrated rural development projects are also underway. But greater technical assistance is necessary to help implement these projects, and to help establish an applied research capability. The introduction of improved seeds, inputs and cultivation techniques can undoubtedly raise the productivity of rainfed cropland. Irrigation expansion, particularly for high-value crops, will also raise agricultural output, though surface water needs to be more fully exploited for irrigation purposes. Great improvements can be made in agriculture, but the cost will be high as well, and the long-term potential for meeting the domestic food demand and absorbing additional manpower is limited. vi. Fisheries is a sector with potential, based on Cape Verde's control of 600,000 km2 of ocean resources. Development so far has been at a very low level, with production of about 9,000 tons annually by some 3,000 fishermen mostly using small European-style rowboats. The fish of major interest is the tuna, which constitutes most of the catch, and which is presently canned, salted, or frozen for export. A small quantity of lobster is also caught and shipped (live, by air) to Portugal. Bottomfish resources are limited due to the absence of a continental shelf, and the potential catch of pelagic species needs to be assessed by a resource survey in the near future. Estimations are that a yield of 30,000 tons of fish per year could be reached in the next decade, if certain obstacles can be overcome. These bottlenecks include the low level of fisheries technology employed, the limited range of operations, an obsolescent fleet, and poor marketing and transport facilities. A Government fisheries development policy has gradually evolved with the objectives of upgrading the existing fishing fleet, improving the fish storage and transport system, and better linking the small-scale fishermen 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 of a modern flour mill, a handful of small import-substitution enterprises, and the artisanal production of rum from sugarcane. An industrial development program could be envisaged that would focus upon skill-intensive industries 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 private sector having traditionally focussed upon the import business) suggests that the Government may wish to discuss these industrial possibilities with foreign business firms. Better technical and business management training also needs to be developed. viii. Tourism is an industry which may have considerable potential in Cape Verde, though it is practically non-existent now. The islands' assets include a proximity to Europe (four hours by air), an international jet airport, a year-round sunny and pleasant climate, attractive beaches and rugged volcanoes, and excellent conditions for scuba diving. Disadvantages center upon the lack of any tourist infrastructure at present, the probable high cost of imported inputs and services, and possible social impact. The Government is planning to undertake a study of the tourism potential, which should include investment, marketing, and economic and social analyses. Despite the Government's cautious approach to this sector, tourism represents a possible avenue of growth in foreign exchange revenues and employment, and thereby warrants serious consideration. The recently-created public-private mixed enterprise for hotel management is presently planning to add about 300 rooms on Sal, Santiago, and Fogo islands; more ambitious projects should await the completion of the sector study. At a later stage, the interest of overseas 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 an international airport on Sal Island. But cargo and passengers must then be distributed by ship or air amongst the nine islands. The domestic airline is constantly augmenting its services, and additional aircraft are presently required to meet demand. Two of the islands do not yet have airstrips. Interisland shipping is thus of major significance, and the overaged fleet is in need of replacement with more suitable vessel types. A systems study of interisland transport is needed to determine the optimal vessel and port infrastructure. Managerial assistance is also needed. The future development of the port of Mindelo is a serious question, since recent declines in the traffic volume, largely related to declines in the tonnage of bunkers provided to ships in transit, have contributed to high unemployment in the country's second-largest city. It is recommended that a marketing and strategic analysis be carried out covering the possible options for future development: as a bunkering port, a transshipment terminal, a fisheries center, or a national port. x. The social sectors -- education and health -- have received considerable attention since independence, and the present literacy rate of 35 - viii -

percent is rising. Education is a key sector in Cape Verde, since the islands' human potential is their greatest resource. Two major problems in education 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 technical school at Mindelo. Health conditions, though better than in many West African countries, are still affected by nutritional problems. Studies of nutrition underway should shed light on this question, but it is known that the rural works program, by providing employment, has had a major effect on allowing 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, following independence, were aimed at securing adequate food supplies from foreign donors. This preoccupation has now evolved into a more project-oriented development approach, with major aid agencies allocated specific islands and priority sectors. Most public investment at present is being devoted to water resource development and associated agricultural programs, in an effort to raise domestic food production and cut back on food import needs.

xii. In the future, development will need to be increasingly directed toward industry and services, since agricultural possibilities are limited over the long-term. First, Government's policy of encouraging local private sector investment in productive enterprises must be supported by appropriate technical assistance, training, and credit. Second, foreign industrial know-how, particularly in marketing and production management, should be sought. International institutions, such as the U.N. Industrial Development Organization and the International Finance Corporation, can be used as intermediaries in attracting foreign investment under the right conditions. Third, the foreign aid presently received could be better utilized by increasing 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 underway and planned. Fourth, the importance of collaboration with Guinea-Bissau is recognized; existing ties could be reinforced through successful participation in joint industrial and perhaps fishing ventures. Finally, it is recommended that the valuable resource of overseas Cape Verdeans should be considered when searching for technical, managerial and investment partners in the development process.

Outlook

xiii. The longer-term economic outlook for Cape Verde is particularly difficult to forecast at this juncture. The discontinuity caused by the sharp rise in public investment following independence introduces considerable uncertainty. There are few clear results so far from the Govern- ment's development efforts to indicate whether these projects can effectively counter the pernicious drought cycle and general stagnation which have heretofore plagued the islands. On the other hand, the very low level of production at present and the remarkably high investment level provide some basis for expecting an upturn. This report therefore adopts, first, a rather - ix -

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

xiv. The optimistic scenario is for average real GDP growth of 4-5 percent per annum through 1990 without, however, graduating from the low- income group of developing countries. The structure of the economy, under these assumptions, would shift toward certain productive sectors (such as agriculture and fisheries) and foreign-exchange generating services (such as shipping). The corresponding balance of payments outlook would be characterized, over the next decade, by a smaller current account deficit, in relation to GDP, brought about by higher exports of goods and services. This deficit would be made up by foreign assistance, still on highly concessionary terms, so that the overall balance would permit the maintenance of adequate reserve levels.

xv. Cape Verde's economic outlook also contains important downside risks and limitations. These include (i) the risk that rainfall may not reliably return to long-run average levels, (ii) the possibility that foreign aid may decrease in real terms either due to a perceived decline in the country's food shortfall or due to other exogenous factors, (iii) the possibility of delayed project implementation due to shortages of managers and technicians, and (iv) the chance that production and transport costs in Cape Verde may prove to be so high that expanded exports are not feasible. The pace of economic growth will in any case be limited by the lack of high-value mineral resources, the high cost of expanding agricultural output and the high external transport costs, despite the high level of current and planned investment. It is also considered likely that the economy will encounter continuing difficulty in absorbing a growing labor force, with the result that emigration will remain a key alternative.,

xvi. The role of the World Bank Group in Cape Verde must take into account the uncertainty surrounding the country's economic outlook. A high per capita level of IDA financing appears appropriate in sectors which can absorb the funds in order to rapidly establish certain minimum standards of infrastructure. However, a prudent view of Cape Verde's future would preclude IBRD or commercial-term creditworthiness for some time because of the very low value of exports. IDA-financed projects should be oriented in part toward generating export revenues needed to strengthen creditworthiness. Rural development calls for IDA attention as soon as the Government has gained some experience with the current ambitious program. The most promising area for initial IDA operations in Cape Verde appears to be interisland transport. Fisheries and other sectors have already received substantial external 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 several uninhabited islets, located about 650 km west of Senegal. The Sahelian cLimate makes. the country's name a misnomer. Drought and famines have plagued Cape Verde for centuries, and the country is presently suffering from an eleven-year drought. The Cape Verde islands are of volcanic origin and all except three are mountainous and typified by steep eroded slopes. The islands are widely dispersed, in two groups, and cover a total land area of 4,000 2 km . The largest island is Santiago, where the capital (Praia) and about half the population are located. The 200-mile economic zone for fisheries controls an estimated 600,000 km2 of ocean. The islands obtained their independence from Portugal in 1975. Population is about 300,000 (1978).

Natural Resources

2. The Cape Verdean climate is characterized by very low and erratic rainfall. Not only Is there a high degree of variability from year to year but there is also a strong tendency for periods of drought lasting several years; the present drought is particularlv severe. The rains which do fall are concentrated within the period from August to October, and fall largely in a few torrential storms. It is not uncommon for half a year's rainfall to occur in a single storm. This concentration of rainfall makes the situation in Cape Verde much more difficult than that prevailing in the Canary Islands, for instance, where similar rainfall (about 300 mm) is spread evenly over an eight month period. Annual rainfall varies widely from island to island and within the same island. Average figures are from about 200 us. an the 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, especially the largest and most populated ones. At lower elevations, arid rock plains (or achadas) are found which drop abruptly to rocky shores, lacerated by narrow rock-wall gulches that channel rains from higher slopes. Virtually all the archipelago soils are derived from volcanic rocks, and the most widely used agricultural soils for rainfed cultivation are found in the cooler, moister portions of the islands and cn the achadas. Irrigation is commonly practiced on alluvial and colluvial soils in valley bottoms and along the lower slopes of valleys.

4. Water resources are limited and unreliable. Repeated droughts have periodically practically eliminated all rainfed crops and led to massive starvation. Irrigation has become the sole reliable possibility of developing agriculture and therefore the assessment of water potential (surface and groundwater) is of major importance. At present, most surface water is lost to the sea because of the torrential nature of the rainfall and the steepness of the terrain. Reservoirs to store surface water are difficult to locate and sabject to rapid filling with erosional debris. However, the use of small retention and diversion structures aimed at recharging the groundwater is possible and desirable. Groundwater is presently the major source of - 2 - irrigation and domestic water supply in Cape Verde, but desalting plants are increasingly used in certain islands. Although scarce and unreliable rainfall, relatively high evaporation potentials and the torrential nature of the rainfall resulting in high surface. run-off, losses severely limit accruals to groundwater, it may be possible to, increase the exploitation of groundwater resources. Caution must be exercised in groundwater development, however, to prevent possible seawater infiltration of aquifers.

Economic History

5. The highlights of Cape Verde's economic history are the continuing importance of maritime trading links and human migration, as contrasted with the low level of production and precarious subsistence conditions prevailing over the past five centuries. Development here more than elsewhere seems to have depended on trade between other countries for which the islands provided a convenient stopover point. Before the Portuguese first discovered the archipelago in 1460, the Cape Verde islands were quite uninhabited. They were discovered during the intense period of exploration sponsored by Prince Henry the Navigator, and soon became favored watering and ship supply ports for vessels trading to Brazil and around Africa from Europe. Santiago, the largest island and least unfavorable to,agriculture and habitation, was first settled in 1462. During the sixteenth century Santiago played its part in Atlantic commerce by revictualing ships, essentially with salted goatmeat and fresh water.

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

7. During the nineteenth century, the Cape Verdean economy relied principally upon the supply of stores to ships. Salt has continuously been exported from the flat islands of Maio, Sai and Boa Vista, and in the mid-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 from the salt trade, receiving items of food and. old clothing in exchange for their labor in loading and transferring the salt. Beginning around 1850, the natural harbor at Kindelo on Sao Vicente became an important coaling and watering station for ships on the England-Brazil run and those rounding Africa to the East Indies. Some 1,500 ships per year called at Mindelo in the late - 3 -

1800s, but again the Cape Verdeans earned little from the trade, in part because 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 has reduced Mindelo's role in ship bunkering. The only really new element in Cape Verde's economy in the twentieth century, prior to independence, has been the construction 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 the periodic famines has been, since the early eighteenth century, emigration. It started with Cape Verdeans signing aboard American whaling ships, which eventually deposited them in the New Bedford area of the northeastern United States. These Cape Verdeans worked in the U.S. as sailors, as farm hands in the cranberry bogs, and especially as mill workers in the burgeoning textile 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 the U.S., and cultural, language and family ties remain strong. Around 1915 the U.S. began to restrict immigration, however, and many Cape Verdeans in this century were forced to accept low-wage contracts on the cocoa plantations of Sao Tome and Principe to avoid starvation. In the 1950s a wave of Cape Verdeans 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 replaced Portuguese 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% of the population). Since independence, more favorable quotas have increased the 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 84,000 persons died of starvation, giving an average annual increase of the population of only about 1.3% over the past hundred years. Better health conditions resulted in a high growth rate of the population of 3.2% per year during the 1960s, but this has declined to an estimated 1.9% in the seventies due to the heavy net emigration. Population density overall is about 67.5 inhabitants per square kilometer, but this varies greatly by island. The most populated are Santiago (almost half the total), Santo Antao, Sao Vicente and Fogo; the islands of Maio, Boa Vista, Sal, and Brava each count fewer than 10,000 persons.

Recent Political Developments

10. The long history of Portuguese colonial rule began to come to an end in 1956, when the African Party for the Independence of Guinea- Bissau and Cape Verde (PAIGC) was founded in Bissau. The PAIGC, headed by Amilcar Cabral, sought to improve social, economic and political conditions in the two colonies, but was eventually forced into waging a guerrilla war on the mainland (during which Cabral was assassinated) which lasted until the Portuguese revolution of April 1974. Although the PAIGC had a clandestine organization in Cape Verde during this time, the fighting was confined to Guinea-Bissau.

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

12. The Government of Cape Verde has been headed since independence by Mr. Aristides Pereira, the President, who is appointed by the National Assembly. The Prime Minister is named by the President, with the Assembly's approval, and the Prime Minister proposes the Council of Ministers to the President. This executive branch formulates decrees and laws which must eventually be ratified by the legislative branch. The National Assembly meets only twice a year, and at other times delegates its power to the Council of Ministers. The judicial system is headed by the National Council of Justice, consisting of three judges named by the Government and six assessors elected by the people. There is no definitive constitution yet.

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

14. The political situation in Cape Verde since independence has been marked by stability, pragmatic socialism, and a non-aligned foreign policy. The chief members of the Government and of the PAIGC have not changed in the past four years. National policy remains in the hands of the sole political party, but decision-making does not appear to be dogmatic. The island nation has carefully maintained a moderate and non-aligned foreign policy which allows for friendly relations with major eastern and western powers, and warm relations with Portugal. One of the major goals of the Party is the eventual unification of Guinea-Bissau and Cape Verde, and extremely close contacts are maintained between the sister, republics. Cooperation includes joint commissions and frequent meetings among sector specialists; a joint shipping company; a customs union; constant cultural exchanges; and the single PAIGC structure. The governments of both countries are conscious of the time and care which will be required over the long-term to achieve greater political unification. II. ECONOMIC BACKGROUND

Structure of the Economy

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

16. Cape Verde's GDP is estimated at 1,900 million CV escudos in current 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 1978 by the mission), it is not possible to give official figures, adequate time series, or constant-price data. However, comparison of the 1978 estimate with an 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 the local 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 1973 versus US$170 per capita in 1978. Thus, GDP per capita in constant-price US dollar 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, 1978 was a better year for precipitation than the preceding ten years. It is notable that primary production--mainly agriculture and fisheries--accounts for only about 25% of GDP (Table 1). This is extremely low in the African context, and emphasizes the weak natural resource position. Manufacturing is still of very modest dimensions, at 6% of GDP; this consists mainly of local aguardente (rum) distilling and the production of flour from imported wheat. Construction, mainly on employment-oriented rural works programs and 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 throughout its history, remains a striking aspect.

Table 1. STRUCTURE OF GDP, 1978

Percent of GDP

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

100.0

Source: Statistical Appendix Table 2.1. 18. Agricultural production can be divided into rainfed subsistence crops -- maize and beans -- and irrigated crops, notably sugarcane, bananas and sweet potatoes, cassava, and potatoesl/. Of 60,000 ha of cultivated land, only about 1,800 ha are irrigated. The yields on rainfed land vary tremendously depending on rainfall, and are generally very low. The irrigated crops, using pumped groundwater, are grown on state farms and large individual plots; most smallholders do not have access to irrigation at present. In value terms, bananas and sugarcane predominate; the bananas are exported when sufficient quantities are available, whereas the sugarcane is used in the artisanal distillation of aguardente.

19. Fisheries output represents a fairly low 4% of GDP, despite the considerable 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 by an "industrial" sector of modest dimensions. The major portion of fish caught is the tuna, a high-value fish which is exported either frozen or canned. However, small-scale fishermen with their 3-man Portuguese-style rowboats are ill-equipped for exploiting this resource. Lobsters are also caught, either by diving or with traps, and some of these are shipped frozen or live (by air) to Europe. Bottomfish are not common in Cape Verde as there is virtually no 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 is flour milling, in Sao Vicente, which was established in 1975. The capacity of this plant is sufficient to supply all the islands with flour. Other industries are very small, including bricks and tiles, garments, fiberglass articles, noodles, cookies, and shoes. Many of these operations have just recently started up. The small size of the local market limits the potential for 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 Cape Verde played a middleman role between the Guinea Coast, Portugal, and the New World. Commercial establishments remain to this day oriented toward the import of goods from Europe or the supply of goods to ships and planes, rather than toward manufacturing. Government service is also an important tertiary activity. The Central Government employs 3-4,000 persons, in addition to the 15-20,000 rural workers employed in public construction programs. 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 presented in Chapter III. - 9 -

25. Data on public investment realized in 1978 and 1979 (see Table 4) indicate the heavy emphasis on rural development and transport infrastructure, and the differences in sectoral absorptive capacity. On average during the two years, 28% of the investments carried out were in rural development, mainly for water resources. About 20% went for transport, 6% for education and health, 6% for housing and sewerage, 5% for fisheries, and 5% for public works. By contrast, Government investment in industry (2%) and public utilities (1%) was very low. In the productive sectors and the social sectors, actual investment spending has been considerably below budgeted amounts, indicating the difficulty of implementing these projects. Economic infrastructure projects, on the other hand, have enjoyed high implementation rates. This is particularly true of public works projects, designed mainly to generate employment, and of shipping investment, which is easily implemented.

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 46.9 Rural Development 30.8 24.3 67.7 63.7 Fisheries 6.8 3.8 51.6 23.0 Industry 3.0 0.3 48.6 4.9

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

Social Sectors 10.6 13.0 41.1 51.1 Education 1.6 3.1 19.5 35.8 Health 3.7 2.9 43.1 39.4 Housing, 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. - 10 -

26. Government revenues have increased by an average of 18% per year from 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. Detailed information on nontax revenues is not available to explain their relative decline. 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 current expenditures, with a modest current deficit equal to 11% of current spending over 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 a grant basis, with the remainder on a concessionary loan basis. Figures available for 1977 indicate that, of total foreign aid received, the equivalent 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 gradually drawn down. In 1978, new foreign financing declined and about 18% of development expenditures were financed domestically through bank credit and the use of earmarked accounts. Thus, while foreign aid has fully financed development outlays in the past, it is not clear at this point whether the trend, will continue. 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 over expenditures to reduce the current deficit in 1978, and this austerity policy will be continued in 1979. Measures include limiting budget authorization to 85% of budgeted amounts, and a freeze on hiring except for techinical personnel. 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 created from the former operations of two banks in the pre-independence period: a branch of the Banco Nacional Ultramarino (BNU), a Portuguese commercial bank, and a branch of Portugal's National Development Bank (NDB). The former functioned as bank of issue and goivernment depository in addition to its commercial 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. - 11 -

30. The Banco de Cabo Verde (BCV) was established in 1975 and began operations in July 1976. The BCV took over the assets and liabilities of the local BNU branch, and the activities of the NDB became BCV's Investment Department. This department has separate accounting which could permit its eventual separation from BCV if the volume of its activities warrants it. The BCV is presently virtually the only bank in Cape Verde; it serves as central bank, commercial bank, and development bank. BCV's head office is in 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 have a BCV representative. The Caixa de Credito and the Caixa Economica Postal have continued to operate, but their relevance has been further eclipsed by the rapid growth of the BCV.

31. Net foreign assets of the banking system rose by some 55% per year over the 1974-77 period (Table 5). The stock of money and quasi-money rose by an average of about 35% per year over this same period. Credit to both 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% in 1978, mainly because public enterprise deposits levelled off as these organizations stepped up their investment activity.

32. The Cape Verde escudo remained pegged to the Portuguese escudo until February 1977, when the Portuguese currency was depreciated by 15%. At that time, the Cape Verdean authorities interrupted the exchange market and shifted the peg to a basket of 18 currencies. These currencies are weighted according to the preceding year's foreign trade. The trade- weighted exchange rate has thus changed little over the 1977-79 period, but the CV escudo has lost 27% of its value versus the US dollar from end-1975 to 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 -123 119 Credit 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 1,276 Public 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. - 12 -

33. Credit policy in Cape Verde includes a system of sectoral ceilings and limits on credit to Government. The sectoral ceilings, adjusted upwards after independence, are considerably above 'actual credit outstanding. Credit for current operations of' the Government is limited by statutes of the BCV 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 borrowers and the proposed use of the loan.

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

The Balance of Payments

35. The salient feature of Cape Verde's balance of payments is its very large and growing trade deficit, which'is, however, fully offset by heavy inflows of foreign aid and remittances from abroad. The trade deficit is caused by low and stagnating exports of US$2-3 million annually over the past 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 have covered only about 4% of imports since independence. This has led to a resource gap (deficit on goods and nonfactor services) which was the equivalent of 104% of GDP in 1978. Never'theless, this gap has traditionally been covered by inflows of foreign aid and remittances from Cape Verdeans living overseas. Before independence, these capital flows and private transfers were equivalent to about 80-85% ofTthe resource gap; following independence, these inflows increased to about 107% of the resource gap 1/. Related to domestic production, foreign aid and private remittances have each averaged over 50% of GDP during 1976-78. The outcome has been an overall surplus in all but two years over the past decade. Gross official reserves were estimated to stand at about seven months' imports at end-1978 (Statistical Appendix Table 3.1).

1/ This is partly because remittances were accounted for under travel through 1975, and afterwards as private transfers. - 13 -

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 since independence to about 50%; by value, the main products are canned tuna, frozen tuna, and lobsters. The volume of fish exports is very modest; in 1977, it consisted of 300 tons of canned tuna, 200 tons of frozen tuna, and 50 tons of lobsters. About 20,000 tons of salt are exported annually from Sal island, and its value has been increasing rapidly, including a tripling in price in 1977. Bananas are the major agricultural export, and about 700-900 tons, grown under irrigation, have been shipped annually. Marketing arrangements for bananas 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 to 33-36 USE/kg in 1976-77. The recent prices are extremely high compared to annual average prices of bananas c.i.f. Hamburg of only 21 USJ/kg in 1976-77. - 14 -

37. Re-exports of goods and the supplying of bunkers for ships and aircraft greatly exceed domestic exports in value terms. Re-exports, which are included under exports in the balance of payments (though trade data are not fully consistent with the balance of payments), have been the equivalent of about 40% of domestic exports in recent years, though it is not clear what these re-exports consist of. Bunkering and stores for carriers are not included in the balance of payments, and this may account for the consistently positive errors and omissions. The value of these services has been increasing steadily with rising petroleum prices, exceeding 500 million CV escudos in 1977 or thirteen times the value of exports recorded in the balance of payments. However, the volume trend of bunkering re-exports has not been encouraging; petroleum re-exports have declined from 700,000 tons in 1954 to 420,000 tons in 1974 and only 170,000 tons in 1977.

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

Table 7. IMPORTS, 1974-77

(four-year average)

Category Percent

Food 51 Other Consumer Goods, 17 Intermediate Goods 11 Fuel 8 Capital Goods 11 Other 2 100

Source: Statistical Appendix Table 3.3.

39. The terms of trade shifted substantially in Cape Verde' sfavor over the 1974-77 period, reaching 197 versus 100 in 1974 (Statistical Appendix Table 3.7). This is mainly due to price increases for banana and frozen fish exports. It may also be related to the diversification of Cape Verde's - 15 - pattern of trade. The share of Portugal and Angola in Cape Verde's imports was reduced from 70% prior to independence to only 35% in early 1978 (Statistical Appendix Table 3.6). Exports, two-thirds of which were oriented toward Portugal in the early seventies, have begun to penetrate African markets 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 clear trend emerges in the case of private transfers. These are essentially remittances from overseas Cape Verdeans to relatives still living in the islands. It is not known what portion of this money comes from recent emigrants as opposed to emigrants who may be established in new countries for several generations, for instance, the estimated 300,000 persons of Cape Verdean descent living in the United States. In any case, this item has increased from about US$2 million in 1969 to some US$24 million in 1978.1/ Factor incomes display little trend. Combining the resource balance with the private transfers, a current account deficit of about 50% of GDP results in recent years.

41. Official grants to Cape Verde, including food aid, have been at a very high level in relation to GDP since independence. These increased from 350 million CV escudos (US$14 million) in 1975 to 950 million escudos (US$28 million, equivalent to 60% of GDP) in 1977. Much of this increase was due to unusually high food aid linked to the drought in 1977, which accounted for 45% of the value of grants. Data on food aid (Statistical Appendix Table 3.5) indicate declining, but still large, amounts in 1978 and 1979. Foreign loans have been more modest and have all been on highly concessionary terms. Major loans so far have been obtained from the AfDF (for telecommunications and rural development) and from BADEA. Total public external debt is estimated at US$25 million at end-1978; only US$12 million have been disbursed. Service on the debt contracted up to end-1978 is estimated at about US$0.1 million in 1978, rising to US$1.4 million by 1989. This gives a ratio 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 creditworthy for borrowing on conventional (non-concessionary) terms.

Import Marketing System

42. Domestic marketing in Cape Verde is largely a question of the control over and distribution of imported foodstuffs and consumer goods. Imports are controlled by the State Secretariat of Commerce, Tourism and Artisanat, which sets prices, trading margins, and grants import licenses according to different types of commodities. The state-owned public enterprise EMPA (Empresa Publica de Abastecimento), created in late 1976, imports essential 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 treatment of remittances referred to earlier. - 16 - national grant aid, the Ministry of Economic Coordination sells the produce to EMPA at a fixed price and places the proceeds in the National Development Fund to finance the local costs of labor-intensive development projects. EMPA controls essential imports in order to assure a planned and orderly supply, to implement the Government's price policy for these goods, and because private importers generally lack the financial capacity to purchase in bulk. EMPA serves as importer and wholesaler only, generally operating on a 10% margin. Its wholesale prices are the same throughout the country; thus a policy of subsidizing the more remote islands by absorbing the transport costs is consciously applied. The prices set by the state are designed to allow EMPA to be self-sustaining, but some products subsidize others; i.e., sugar is priced high to discourage its use in aguardente manufacture, and the profits subsidize the prize of maize and beans. EMPA maintains warehouses in the various islands, and sells to retailers at official prices. Retailers in turn must 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 Secretariat of Commerce in conjunction with the BCV. -The total foreign exchange availability for imports is set, and then split up by importing firms according to their past volume and capacity. Each firm can then determine their own mix of imports, although a system of priorities operates. The first four priority categories -- covering food, clothing, medicines, construction materials, petroleum, industrial and transport items -- can be imported rather freely within the importer's overall limit. However, lower priority items -- beverages, cigarettes, tobacco, chocolate and perfume -- must be approved on a case-by-case basis. Certain items are restricted on grounds of protection of local industries: these include wooden furniture, certain types of clothing, cookies, and wheat flour, which are all produced in Cape Verde. Automobile imports have also been suspended. Private importers are generally allowed fixed 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 opportunities has historically been a problem in the islands and has been a prime cause of emigration. The Government estimates that 35% of the economically active population (aged fifteen and over) were without work in 1970; this is the most recent estimate available., though the situation may well be worse today. The structure of employment (in 1970) is about 90% in agriculture and fisheries, 2% in industry, and the remainder in services. Thus, in recent years when rainfed crops have failed, there is really no way for the rest of the economy to absorb the surplus labor force. The response, initiated in 1976, has been a series of rural employment programs generating from 15-20,000 jobs per year, financed by foreign aid. This effort is not sufficient to provide work to all those of the 142,000 estimated active population who are unemployed (Statistical Appendix Table 1.3).

45. A survey carried out by the ILO of employment problems in the urban centers of Praia and Mindelo (in 1978) provides some insight into the economic - 17 - pressures operating. These two cities have populations of about 39,000 and 33,000 respectively, swollen to some extent by rural inhabitants seeking relief from the drought. In Praia, employment is 70% in services, 20% in construction, and less than 10% in industry, agriculture and fisheries combined (Statistical Appendix Table 1.4). In Mindelo, the proportion of services is slightly higher, construction is lower and industry is higher. This reflects Mindelo's traditional commercial and industrial role in the islands; but the higher construction employment in Praia indicates that the administrative center is growing much faster today than the commercial center. Public sector jobs constitute 61% of total employment in Praia, but only 47% in Mindelo. Due to the high Government employment in Praia, the unemployment rate is lower (24%) than in Mindelo (29%) 1/. Unemployment among heads of household is lower, about 10%, with Mindelo again having a higher rate. The employment situation in Mindelo has suffered heavily from the reduction in bunkering activities in the port, nd from the drought affecting Sao Vicente and neighboring islands. Emigration from Sao Vicente has increased, and today 17% of the inactive and unemployed citizens of Mindelo are supported by remittances from family members working overseas.

46. Wages in the private sector and public enterprises are not set by the Government, and there is no legal minimum wage. In practice, salary increases must be reviewed by the Government, and the public sector exerts a strong influence on wage levels. Rural works programs provide marginal employment in the rural areas, and the wages paid are a minimum of 40 CV escudos (US$1.14) per day for men, and 30 escudos (US$0.86) for women, with the average wage being about 50 escudos. 2/ Daily wages surveyed by the Directorate of Statistics range from about 45 CV escudos for unskilled workers (though even less for domestics) to 200 escudos (US$5.80) for a mechanic (Statistical Appendix Table 1.5). Wlages have risen on average about 15% per year over the 1974-77 period. Public sector salaries have remained constant, after an initial adjustment shortly after independence to lower the higher salary ranges. Government salaries currently range from about US$860 per year to a maximum of about US$5,000 for the President of the Republic. Low public salaries have caused some difficulty in recruiting technical specialists, especially among trained Cape Verdeans working abroad. Special higher salaries are paid to certain professionals such as doctors and ships' officers.

Prices

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

1/ These figures can only be considered as indicative, given the difficulties inherent in distinguishing between employed, unemployed and inactive persons under the present economic situation.

2/ These minimum wages were raised in September 1979 to 60 escudos for men, 40 escudos for women; averages were about 60 escudos for road work and 75 escudos for building construction. - 18 -

1975 due to the disruption of the economy during the changeover to independence, when certain products were in short supply and other prices which had been 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 (see Table 8). The official price index, however, is a unit-value weighted index of some 80 commodities, in which one kg of maize has the same weighting as a dozen eggs or a kilowatt of electricity. Also, the general consumer price index does not include rent or clothing items. This index clearly needs to be re-computed by the Directorate-General of Statistics on the basis of household consumption patterns; which would first, of course, require at least a limited household budget survey. In the meantime, the IMF has computed a rough weighting and produced a price series covering 1974-77. The two series are presented below. It appears that a more accurate weighting of consumer goods produces a somewhat higher inflation rate. The 1977 rate of about 10% is believed to have continued in 1978.

Table 8. CONSUMER PRICE INDEX

(percent change per annum)

1970 - 73 annual average 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. - 19 -

III. SECTORAL PERFORMANCE AND ISSUES

49. This chapter describes the current situation in the major sectors, the principal issues, and the prospects ahead. The sectors are treated in some detail, especially agriculture and fisheries. A more general discussion of Cape Verde's development strategy and economic outlook follows as 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 - 20 -

A. Agriculture

Land Use, Yields and Production

50. Of the total area of the country (400,000 ha), about 60,000 ha are cultivated but only 1,800 ha are irrigated. Highland forests cover 2,800 ha and there are 38,000 ha of classified range land. The remaining area, or 300,000 ha, is wasteland caused by the drought, removal of plant cover for fuel, uncontrolled grazing by goats, and the erosive action of wind and water. 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 particularly subject to erosion, and for reasons of soil conservation is considered to be unsuited to annual cropping.

52. Yields on rainfed lands are highly dependent on an erratic and often inadequate rainfall and average yields are low. On the steep lands maize yields vary from total failure in drought years to about 700 kg/ha in years of good rainfall. On the flatter lands the yields are higher and can reach 1,200 kg/ha in rainy years. The national average for maize is estimated at about 400 kg/ha.

53. Under the present cropping pattern and in years of good rainfall the country can produce about 15,000 tons of maize or about one-third of the estimated demand of 48,000 tons. In an average year only about one-sixth of the demand will be produced domestically, and in severe drought years like 1977 there is virtually no grain production. The 1978/79 maize harvest is estimated 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 on average (1,350 tons in 1978/79). Vegetables and root crops grow mostly on irrigated 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 mainly because 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 that sugarcane yields could be greatly increased with the judicious introduction of improved varieties. Sugarcane occupies 60% of the irrigated land, and is used exclusively to supply artisanal distilleries producing rum (aguardente). On well-irrigated land, vegetables, including potatoes, are the main crop, followed by cassava interplanted with sweet potatoes. There are also 160 ha of pure stands of bananas, mainly on Santiago. The farmers are in general skilled horticulturalists and obtain relatively high yields for potatoes and vegetables considering that they do not use pesticides or fertilizers. - 21 -

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

Land Tenure and Marketing

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

57. Due to this pressure on the land, farmers are often compelled to 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 of conflicts between landlords and tenants. Sharecropping was abolished in 1975 and special committees set up by the Government attempt to protect the rights 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 rainfed or irrigated land, respectively; rents are to be reduced when betterments are introduced in the property by the renter; and contracts are for a minimum period of 3 years without revision. Despite the healthy nature of these reforms it is recognized that for an adequate level of subsistence a family would 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 farms have become semi-autonomous enterprises with budgetary autonomy. Their objectives are to serve as demonstration farms, to provide employment, to support the Government's pricing policies, and to produce efficiently. Lands are leased to individuals who work directly on the farm. The Government envisages setting up a public enterprise which would coordinate all state farms.

1/ Compensation was not always paid. For instance, a large property at Santa Cruz on Santiago was taken over without payment because of the large debts owed on the property to Cape Verdean banks by the foreign owner. - 22 -

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

60. Pricing controls are essentially reserved for imported goods. For imported first quality hard maize the retail price was established at CV escudos 6 per liter (equivalent to 7.20/kg) in December 1977 and remained in effect in April 1979. However, local maize is preferred for preparing the national dish cachupa, and in April 1979 this maize was selling for CV escudos 8 per liter, and at times goes as high as 15/liter. Thus, at current prices there is a substantial incentive to produce.

Institutions Dealing with Agriculture

61. The Ministry of Rural Development is still in the process of finalizing its organizational structure. At present it comprises two major Directorates-General, that of Conservation and Use of Natural Resources and that of Agriculture, Forestry and Livestock. The former embraces the three Directorates of Rural Works, Groundwater Exploitation, and Climatology and Water Conservation. The latter comprises the Directorates of Plant Production and Protection, Animal Production and Health, and State Farms; a new Direct- orate of Extension is being launched. Additionally, the Ministry has an Equipment Maintenance Center, a Center of Agrarian Studies, and Centralized Administrative Services. While the professional level of the staff is high, they are too few in number at present to define and implement plans for rapid agricultural development. The two directorates-general have 10 staff of engineer level and 26 technicians. Foreign aid has supplied about 17 experts integrated in the financed projects. There are, however, university graduates due to return from training and it is expected that some experienced staff will return from service overseas. There are no facilities within the country for training junior or senior personnel.

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

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

Government Policy and Objectives

64. Having gained independence in the middle of a severe drought, the first priority of the Cape Verdean Government was to feed the population. - 23 -

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

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

- Priority to the rural population aiming at assuring a minimum food 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, introduction of inputs and development of extension services; and

- Applied agricultural research.

66. This strategy appears sound given the present situation of the country. However, huge investments are required for watershed management which is a prerequisite for any agricultural development in Cape Verde. These investments are only recovered over the long-term as the impact of the work is always slow. The envisaged slow pace of the availability of new technicians in the sector is also an important constraint to the implementation 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 addition there are projects dealing with specific agricultural problems such as plant protection, 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 about one third for irrigation. Soil conservation implementation is required for all agricultural land development in the country and therefore the Government has started an emergency program for soil conservation covering the main watersheds. This program has a dual purpose, to control soil erosion and to provide employment. However, it will require follow-up with intensive investment programs which would install supplementary structures, including terraces, torrent control, check-dams and the growing of perennial crops on the steepest slopes. Irrigation is based so far only on groundwater either from wells or underground galleries.

69. Bilateral aid in agriculture has mainly focussed on projects on islands "allocated" to individual agencies. Dutch aid has financed a number of rural development schemes on Santo Antao; the French have financed agricultural production and groundwater development projects on Sao Nicolau. The - 24 - largest projects now underway are on Santiago Island, which is also the largest, 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 planning 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 the Government 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 rainfall. 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 agricultural sector. 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. - 25 -

73. Certain favorable aspects of agricultural potential should not be overlooked. For instance, soils are generally fertile and adequate, given sufficient water. Wind and solar energy are abundant and could be harnessed for pumping or desalination. Several experiments with wind and solar-powered pumps are now underway, and a recent USAID mission on non-traditional energy sources reported favorably on the potential. The varied topography offers a range of microclimates permitting a diversification of crops. Temperate climate fruits and vegetables, including grapes and potatoes, can be grown and in fact a local wine has even been produced, though not in quantity. The dispersion 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 technical assistance in agriculture is necessary to provide the applied research base and to ease the absorptive capacity constraint. Second, improved crop varieties and cultural practices could considerably increase the yields obtained for both rainfed and irrigated crops. Third, watershed management and development of water resources must be accorded priority. Watershed management projects should be of the integrated rural development type, including erosion control upstream, development of water resources for irrigation, and improvement of rainfed farming. The Government properly wishes to begin efforts to retain surface water, which has up to now been lost to the ocean, taking into account the extensive work now underway to prospect and exploit groundwater.

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

76. The long-run result of such measures is presently unknown. The overall volume of irrigated crop output will be limited by water availability which is still unknown. Probably the percentage of food imports (generally 70% of total food needs) can slowly be reduced, but the lack of results yet from the agricultural investment program make it impossible to predict what degree of self-sufficiency can be attained. - 26 -

B. Fisheries

77. Since the introduction of the 200 mile zone, the Cape Verdean Government has come into the possession of the archipelago's rich marine resources extending over a total area of 600,000 km2. Because fisheries operations previously had been mostly under external management, the planning, organization and administration of the sector still has to be brought into a coherent national, policy framework. The sub'stantial resource potential 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 stagnation in processing and exports must be improved. The export volume of fisheries 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 as well 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 of interisland transport facilities and adequate road infrastructure on the islands to allow for distribution of the catch of small-scale fishermen. The segregation of small-scale fishermen is reinforced by the somewhat artificial distinction 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, since certain 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 the fishermen themselves and the rest by Government processing firms. Most of the 3,000 fishermen operate small 'oats and live in small fishing villages where their boats are beached. Some 72% of the total number of fishermen live and work on the three main islands (Santiago, Sao Vicente, and Santo Antao). Boat building and fishing methods.mostly are rooted in Portuguese tradition. The average small fishing boat of 4-6 m in length, with three men aboard, catches about 3 tons per man per year. While motorization of small fishing boats is gaining momentum kabout 100 have outboard engines), the medium size boats are fairly old. About half of them are based at Mindelo and operated by the freezing plant, the rest fish for the canning factories on the islands. Annual production per boat is about 120-130 tons, while production of 180-200 tons could be achieved with proper equipment and management. Fishing is almost exclusively done with hook-and-line and pole-and-line. Even the three tuna clippers, which were originally rigged for 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 an annual loss, bringing in only a third (540 t) of the potential catch with the clippers' original rigging. The shortage of bait fish, a real problem in the fisheries industry, and the low productivity of the existing fleet underscore the need to bring better technology and fishing practices to the fishermen.

80. The most important fish stocks exploited so far are three species of tuna (yellowfin, skipjack and big eye), a relatively high-value fish, mainly caught during April-November. Tuna accounts for about two-thirds of the total catch and even more of its value. Other pelagic species are mainly caught for bait in the tuna fishery. In the off-season for tuna, bottomfish such as snapper, groupers and seaperches are caught, though these are limited due to the absence of a continental shelf. Lobster fishing accounts for about 100 t, sold at a high price for export. About 75% of the fish caught is consumed locally with per capita consumption varying greatly between islands. Overall, fish consumption in Cape Verde is about average compared with 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 facilities include a refrigeration plant (freezer storage capacity of 3,000 t), a smaller plant (cold storage room of 300 t), and an old but efficient ship repair yard for which a new repair shop is being built. Canning plants are located 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 annual production and export was about 500 t of canned tuna in the early 1970s and has since declined to less than 200 t. The plants operate way below capacity, partly because of their advanced age and poor condition when they were acquired by the Government. An FAO/UNDP fish processing expert is currently advising on improved processing methods as well as fish salting and drying to raise the quality of fish handling. A Japanese bilateral aid project (US$800,000) will renew the cannery at Boa Vista, provide four new 14-meter vessels and 300 outboard motors to revitalize this fishery.

82. Several fish processing projects currently being considered or already under way seem to be excessively large in relation to the catch. For example, with the assistance of various donors, seven salting and drying stations are planned, particularly for islands (Fogo, Brava, and Santo Antao) and locations which do not have canning or freezing capability. In the case of Tarrafal, a 2,000 t/year plant was built, though there are no concrete plans 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 capacity cold storage plant at Mindelo, to be ready by late 1980, which may be excessive. With Dutch financing, refrigerated storage is being added on Sal (1,500 t in 1980), at Praia (800 t in 1981), and on Brava (500 t in 1981).

83. Canned tuna is exported to the US, the Netherlands, Portugal and Italy. Lobster is airfreighted live and there is a small export trade in fishmeal and salted and dried fisheries products. The export trade was disrupted in the mid-1970s at the time of independence, but is now being restored. Refrigerated storage space formerly rented by a Japanese - 28 -

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

84. Fishermen's incomes on average are low but compare favorably with those of agricultural or unskilled workers in Cape Verde. Small-scale fishermen's annual income varies between about US$500-600 to $2,000 (versus US$300-400 for rural works laborers). Fish prices remained constant from 1976 to 1979, when they were raised about 50%. The producer price for fish is based on a retail price from which the Government subtracts marketing and transport charges. In the more urbanized islands that have access to freezing storage, the price received by fishermen is about three times higher than elsewhere. There is a parallel market, which indicates that producer prices do not always reflect local demand conditions. The price system should be revised with a more flexible pricing system in view. For tuna, prices should be linked to international market prices.

85. Domestic marketing could be greatly improved to the benefit of small-scale fishermen if interisland connections were improved, for example, by introducing small, fast boats. A few such boats have recently been introduced. On-island distribution of fresh fish to urban consumption centers is often hampered by lack of vehicles, other times by inadequate road infrastructure. The Mindelo refrigeration plant operates below capacity, while on the rest of the islands fish goes to waste because no cold storage is available and the catch cannot be moved. A more decentralized refrigeration system with small cold storage plants spread over certain islands would assure the small fishermen of a more diversified market, while on some of the less populated islands, salting and drying of fish might still be the only viable processing method.

Institutions

86. The two main operating agencies under the Fisheries Directorate are 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, improving their access to marketing, operating canning plants and building fish salting and drying plants. SCAPA requires reinforcement in management and quality control and should be more agressive in addressing marketing needs. An ongoing experiment with,FAO/UNDP assistance to transport fresh fish from Porto Mosquito for sale on the Praia market needs to be expanded and replicated elsewhere. PRICAP, responsible for reorganizing and strengthening the industrial sector, took over the former CONGEL company's shore facilities in Mindelo and three tuna clippers. Marketing experts are needed to develop sound arrangements in anticipation of increased production. A new umbrella organization for the fisheries sector, INTERBASE, was established in July 1979. Its objective is to coordinate industrial fishing activities, including fish handling and processing, fishing fleet management, and salt production. Further information on the management and operations of INTERBASE were not available at the time of the mission. - 29 -

87. Overall, the Fisheries Directorate needs strengthening with the help of international advisers in the interim and trained Cape Verdeans in the medium term, in particular regarding planning for the sector. It would be of great importance to establish a linkage between the small-scale and industrial producers to coordinate the export marketing of the sector's output.

Foreign Aid Prolects

88. A number of modest foreign aid-financed projects are underway in the artisanal fisheries sector, totaling about US$2.7 million. These projects generally consist of motorization for small fishing boats, interisland fish carriers, and small harbor and storage Improvements. Bilateral aid from the Netherlands is active on Santo Antao, from Switzerland on Fogo, Brava and Boa Vista, from France on Sao Nicolau, and from West Germany on Maio.

89. In the industrial sector, the main project is the construction of a 6,000 ton cold store at Mindelo, costing about US$4 million and mainly financed by Holland. Two tuna canneries, on Santiago and Boa Vista are also being modernized, and in Boa Vista fishing vessels will be financed under the Japanese aid project mentioned earlier.

90. A large project is under preparation by the FAO which would enable a greater number of artisanal fishermen to engage in a more industrialized type of fishing. This project will be export oriented, fishing for tuna from July 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 steel fishing vessels would be purchased abroad for the project. These boats would use pole-and-line fishing for tuna, and seines for the smaller fish. A bait collection system would be established in support of the tuna operation. The project would include substantial technical assistance, and would be based at Mindelo. Total costs are estimated at about US$5.5 million, and financing has been committed by the Abu Dhabi Fund, BADEA, and the Saudi Fund.

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

Prospects

92. With proper encouragement and an adjustment to new and appropriate technologies, and improved marketing arrangements, the income of fishermen could be improved and exports of some fisheries products could be greatly increased. If all small fishermen were to fish from medium size boats their aggregate annual catch might be some 25,000 t. The annual catch would be increased by establishing a resource base for fishing throughout the year by fishing outside the 200 mile zone and/or negotiating fishing rights in waters of other West African countries. To efficiently patrol the 200 msile zone a minimum of four handy-size boats and one aircraft would be needed, - 30 -

93. As for the near future, several techniques to increase the catch could be tried such as use of light attraction, small purse seining and midwater trawling combined with the introduction of somewhat larger boats. An important goal would be to enhance the productivity of individual fishermen 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, and protected bays are very few, fishermen might tend to migrate to a few suitable ports. Appropriate supportive measures would have to be taken to facilitate such a gradual changeover, including the possibility of reserving certain waters close to shore for the medium-size boats. Larger boats could create additional employment opportunities, but probably only if they could displace foreign fishing boats in international waters, since sufficient tuna are not available year-round in Cape Verde's waters.

Policy Recommendations

94. The foremost aim of fisheries development should be to maximize the use of available resources. The area accessible by small boats from the islands is estimated to yield a potential annual catch of coastal species of 15-30,000 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 quantitative evaluation of fish stocks is needed, using a modern research vessel. Until conclusive results of such a survey are available, fishing in the 200-mile zone with traditional gear could probably be doubled to 20,000 t over 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 require quantitative and qualitative strengthening of the administrative structure. Organization and administration of the fisheries sector should be kept simple. The purpose of Government intervention should be to formulate and carry out a resource assessment and fisheries management program. The industrial sector is in dire need of rehabilitation, since it consists mainly of unsuccessful private enterprises left over from colonial times. The Government should also-see that the sector is provided the necessary distribution and storage infrastructure and should build up an extension service for fisheries, that would keep fishermen updated on the science and technology developments in the field.

96. Since independence, a number of fisheries teams from bi- and multilateral organizations have helped in preparing aid projects, some of which are now underway. A national fisheries policy is emerging from the various studies completed to date, but it would be useful to summarize this policy in a concise document setting out a coordinated approach for the development of the resource base, fishing activities, shore installations and market outlets. The importance of providing access to export markets for present artisanal fishermen through better production and marketing systems should be stressed in such a document. - 31 -

97. The mission has identified certain priority aspects of fisheries development in Cape Verde, which are now being addressed by foreign aid financed projects. These include the need for an experimental fishing program 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 marketing channels. In addition, the possibilities of local small boat construction should be explored, and a survey of potential fishing port sites suitable for medium-size boats undertaken. Technical assistance related to the experimental fisheries program and to the development of better marketing arrangements is also required.

C. Mining and Manufacturing

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

Major Industrial Operations

99. Salt has been continuously produced by evaporation in salt flats on 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. The main problem is the lack of a suitable loading facility on Sal; lightering is necessary and this raises the cost substantially. A consulting firm is studying the possibility of a port on Maio which could be used to export 40,000 tons of salt annually in a first phase; but the cost of this needed infrastructure, about US$2 million, may make the project uneconomic. Senegal and Angola seem to be the competing producers in the West Africa region, and Nigeria and Guinea have been identified as potential markets. The export price received by Cape Verde for salt rose sharply in 1977, and the higher price may improve the economic prospects.

100. Pozzolana, a volcanic rock used as an additive in the manufacture of hydraulic cement, is found on Santo Antao. As much as 18,000 tons were exported, mainly to Portugal, in the late 1960s. However, exports have now - 32 - ceased. A study was completed recently on the possibility of constructing a 120,000 ton annual capacity cement clinker grinding plant at Praia, based on imported clinker and pozzolana from the 13 million ton deposit on Santo Antao. Unfortunately, it appears that this project would not be suitable for Praia due to the high cost of necessary dust-preventing equipment and the inadequate port facilities. Aknew contract is now being let to study the broader problem of how to exploit Cape Verde's resources of lime, stone, clay, pozzolana and porous rocks. The constraints include the infrastructure: a clinker grinding plant would require additional power generation, a ship for pozzolana transport, and possible port development work on Santo Antao. Marketing would also be a problem for construction materials, which have a low value-to-weight ratio and enjoy economies of scale. Also, most West African countries have their own clinker grinding plants.

101. Among the modern manufacturing facilities, by far the largest is 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 by the 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 10 million CV escudos. A good rate of return has been achieved, in part because MOAVE has a monopoly on flour sales. Only 34 jobs are created by the mill. Expansion plans include the manufacture of noodles and cookies aimed at the domestic market.

102. Preparations are underway for the establishment of a substantial ship repair facility at Mindelo. The Portuguese shipyard LISNAVE completed an updated feasibility study for the project in September 1979, based on a 1977 study. The yard would be equipped with a marine railway and the capacity to lift six 7,000 deadweight ton ships out of the water. The project would cost about US$25 million, and the financing plan includes the AfDB, the European Investment Bank, a Portuguese shipbuilder, a Dutch shipbuilder, and one other Dutch enterprise, in addition to the Cape Verde Government. To be called CABNAVE, the ship repair yard would generate about 550 direct jobs by 1985 and is estimated to have an internal rate of return of 15%. The market is identified as domestic and foreign fishing vessels operating in the area, and freighters passing by the Cape Verde Islands. The success of the repair yard is clearly linked to other developments at Mindelo, especially in fisheries. It will also depend on the competitive situation vis-a-vis other facilities in Dakar or the Canary Islands. The feasibility study does not provide a detailed analysis of the proposed yard's competitive position and market niche.

103. The remaining manufacturing facilities are very small. They include furniture-making, garment-making, fiberglass boatbuilding, soft drink bottling, cigarette manufacture, and cookie production. UNIDO has prepared plans for three small-scale enterprises to produce shoes and foodstuffs, and financing has apparently been obtained. Aguardente (rum) distillation by artisanal means is a major industry but little is known about the structure and economics of this operation. - 33 -

Issues

104. Two issues are of particular interest in the industrial sector: the role of public versus private enterprise, and the export competitiveness of Cape Verde. The Government explained to the mission that the public role in industry is to take the initiative and then bring in private participants. A very low base of private productive capacity, experience, and capital has caused the Government to experiment with the establishment of new small-scale industries as mixed-economy companies, with the Government organizing the operation but possibly selling out fully into private hands over time. Foreign investment is handled on a case-by-case basis so far, and there is no investment code yet. The approach has been cautious, for the Government' is concentrating its efforts first on coordinating the flow of official aid and strengthening the public enterprises.

105. The lack of entrepreneurial experience in Cape Verde clearly hampers industrial development, and the Government should adopt a more forceful policy towards the sector. The Government may well need to play a catalytic role in encouraging industrial development; private initiative should also be encouraged wherever possible in order to ensure efficient operations which look to export markets as well as to the local market. The Government also lacks industrial and marketing experience, and may wish to consider foreign investment in order to fill this gap. Cape Verdeans who have gained experience in manufacturing overseas could also form a valuable nucleus for launching industrial ventures. Overseas Cape Verdeans might also be able to establish market outlets for possible handicraft exports. Also, small business training might be added as a course at the industrial school in Mindelo.

106. The competitiveness of Cape Verdean manufacturing on the export markets is a key factor which deserves further investigation by the Govern- ment. The degree of competitiveness expected would be a key indication of the priority to be attached to export-oriented industries. Such a study would have to include estimates of productivity and the local cost structure, as well as a comparison of wage rates. However, a preliminary check on comparative wage rates by the mission reveals that Cape Verdean wage rates probably have little competitive advantage compared with wage levels in countries which may have similar productivity. The average wage rate in manufacturing in Cape Verde (1977) is about US$2.50-3.00 per day; compared with figures of US$2.10 for Sierra Leone and Sri Lanka, countries with similar 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 wage costs but clearly higher produc'tivity as well due to substantial investments in infrastructure, equipment, and human resources. Cape Verdean wage rates are somewhat lower than those in Senegal and the Ivory Coast (US$3.50 to 3.75 per day for the minimum industrial wage), but local infrastructure is probably better in these countries.

107. Cape Verde's remote location and unique development pattern also' impose certain costs which are relevant to an export-oriented industrial sector. Remoteness means that communications are limited, and transport costs high between the islands and overseas. Factory locations should - 34 - ideally be in Mindelo or Praia for sea shipment, and on Sal if airfreight is economical, 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 arrangements 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 particularly 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. Road activity is particularly concentrated on the islands of Santiago and Santo Antao. The 1977-78 Emergency Program employed 16% of the active population - 35 - on Santo Antao in road building. Some heavy mechanical equipment -- a bulldozer 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 spread and compact a base course of sandy soils. Basaltic rock is then cleaved by hand into roughly cubical pieces, and the cobbles are hammered into place ard wedged with small chippings. At a typical site, some 50 workers (men and women) 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 high standard of drainage and retataiig walls. Durable construction combined with low rainfall and comparatively light traffic gives the roads a low maintenance cost, and no potholes can be seen. However, the ride is quite rough and inust ca,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 bituminous surfacing which improves the riding quality considerably.

112. Additional roads are needed in some areas -- particularly on Santiago, Santo Antao, and Fogo islands -- to better link points of agricultural and fisheries potential with urban markets. The road-building carried out 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 very well adapted to local conditions.

Ports

Background

113. Port infrastructure in Cape Verde consists of a major deepwater port 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 of Mindelo rose to prominence, as noted earlier, in the 1850s as a coaling station, and has served a similar role in fuel oil bunkering for ships in this century. However, due to changes in world trade patterns and vessel technology, 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 tons of bunkers were sold to ships in Mindelo (down from 700,000 tons in 1954). In the same year, about 80,000 tons of imports were discharged at Mindelo and 70,000 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 Sal island for export. A lively interisland trade is also served by the nation's ports, linking Mindelo and Praia with the other islands.

114. The Mindelo port is fairly modern, constructed in 1959, but was designed as a bunkering facility and therefore does not offer the access or handling equipment associated with most modern ports. The natural setting provides the best anchorage in the islands, with a protected semicircular bay offering good water depths. Three berths are provided from a long finger - 36 -

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, with 6 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 permanently, and up to 600 stevedores on demand.

115. The harbor at Praia has a more difficult entrance channel, but is fairly well protected. A new pier has been built with 500 meters of berth varying from 7.5 to 9 meters water depth. Unfortunately, this pier suffers from structural problems and it is estimated that repairs costing as much as US$8 million may be required. A road is still under construction linking the pier 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 than transshipping cargo at Mindelo should increase as the facilities are completed and the pier rehabilitated.

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

117. The ports are organized as a public enterprise, the Junta Antonomo dos 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 constrained by its statutes in its efforts to establish adequate tariffs; lacking any port engineers; and hampered by coordination problems with numerous ministries. However, the Government has not accepted these findings. The JAP earned revenues 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 at the BCV (early 1979).

Issues

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

119. The Government attaches the highest priority to the development of Mindelo, not just as a national port, but as a bunkering/repair/supply port and as a transshipment facility. The economy of Sao Vicente island largely revolves around the port activities, and the decline in numbers of ships and bunkers supplied over the-past twenty years has worsened unemployment and created a serious social problem. The Government proposes that a port master plan should be developed to coordinate land use for the related activities of ship repair, fisheries, and cargo handling. This plan would also map out a suitable role for the port based on marketing studies. The authorities believe that traffic has declined in part because of inadequate piers, equipment, aprons, ships' supplies and complementary facilities. In short, a major investment project is sought to revitalize Mindelo port. - 37 -

120. The mission, while recognizing the seriousness of the problem, feels that the determining factor in the port's decline may well be the changing requirements of international shipping more than any technical shortcomings of the port facilities. The mission supports the findings of the UNCTAD ports expert, who states that the essential features for successful ship bunkering today are a substantial commercial port and an oil refinery, in addition to adequate supplies, tourist facilities, and an international airport. 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 air access, 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 possibility should 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, when several have very small populations (under 10,000) and no sheltered locations for ports. The Government has expressed a policy of seeking financing for these 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 assistance 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 business opportunities for the port of Mindelo. The port of Praia may divert some traffic, but Mindelo will remain the hub for supplying the smaller islands whose port facilities will probably remain limited for some time. It also appears likely that the role of Mindelo as a national port will expand if the economy grows and export-oriented industry and fisheries develop. These domestic developments should place Cape Verde's ports on a more stable growth path. - 38 -

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 (Brava and Santo Antao) do not currently have airstrips and can only be reached by sea. Shipping, both interisland and foreign, thus acquires primary importance in the case of Cape Verde.

125. Interisland shipping is in the hands of the state interisland shipping company ARCAVERDE, under the responsibility of the Ministry of Transport. ARCAVERDE operates three passenger/freight vessels and one freighter between the islands, plus three foreign-going freighters. The passenger vessels are all small and over twenty years old, and are not fitted for carrying vehicles. One operates on a ten-day schedule from Mindelo to all the islands but Santo Antao; a second operates daily from Mindelo to Santo Antao; and a third runs from Praia to Fogo and Brava twice a week, weather permitting. The interisland freighter (300 tons capacity) distributes imports to the smaller islands, but not on a fixed schedule. Traffic between the islands has been rising sharply, and in 1978 73,000 tons of cargo were loaded in Mindelo for distribution to the other ports (up 33% from 1977). A much smaller volume of interisland freight was discharged at Mindelo, about 9,000 tons, but this was also up sharply (22%) from 1977. Passenger traffic growth 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 Portugal and Cape Verde is divided in theory according to the UNCTAD Liner Shipping Code -- 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 schedule between Lisbon-Cape Verde-Bissau. A third vessel (5,500 t) was purchased second hand in September 1979 by the Cape Verde Government. It is operated by ARCAVERDE carrying cement and maize from Europe. ARCAVERDE also manages a fleet of three 600 ton vessels; two carry general cargo from Europe and one imports and distributes petroleum products. The private Cape Verdean firm, Estrela Negar, operates one 1,000 ton vessel between Europe, Cape Verde and Guinea-Bissau. The freight available for Cape Verde-flag vessels appears to be sufficient for their carrying capacity.

Constraints

127. The major constraints are inadequate management strength, lack of appropriate vessels, the harbor problems mentioned earlier, and the low passenger and freight volumes to some islands, which make it difficult to offer a frequent but economical service. ARCAVERDE and NAGUICAVE are both presently managed by the same personnel, who require reinforcements. The. service problem has two aspects. Larger vessels are needed to distribute imports from Mindelo and Praia throughout the islands economically. On the other hand, small, fast vessels would be more appropriate for passenger - 39 - transport and for transporting fish and fruit destined for urban markets or for 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 Santo Antao;

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

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

Recommendations

128. Interisland shipping in Cape Verde plays the social and economic role normally associated with highways in other countries. It is a crucial element of economic infrastructure which will be necessary to stimulate the development of market economies on the outlying islands. Therefore, the mission recommends prompt action to upgrade the interisland shipping links. The mission supports the recommendation made by an UNCTAD shipping adviser that management assistance should be provided to ARCAVERDE (and possibly NAGUICAVE). Appropriate vessels should also be purchased, either new or secondhand. In order to be sure that an optimal transport system will be established, an interisland transport systems study should be conducted before placing orders for additional vessels. This study would analyze the prospective cargo flows and service requirements and determine the most economic system solution, taking into consideration air transport, different vessel types and sizes, and port requirements.

Air Transport

129. Seven of the Cape Verde islands are served by plane, and this mode of transport is essential for passenger movement. Internally, air communications are handled by the Transportes Aereos de Cabo Verde (TACV), which is a wholly Government-owned firm operating a small fleet of aircraft: two Hawker- Siddeley HS-748s (48 seats each), one Twin Otter (20 seats), and three Islanders (8 seats each). The main domestic airports are at Praia and on Sao Vicente, with lesser airstrips on the other islands except for Brava and Santo Antao. The major issues regarding internal air transport are the proper expansion of the fleet to respond to strong demand and the upgrading of certain airports. TACV has increased its freight carried at an annual rate of - 40 -

30% over the 1974-77 period, and passenger traffic by 9% annually. The Government ordered a second Twin Otter aircraft in 1979, and hopes eventually to expand the TACV network as far as Lisbon which would require the purchase of a US$12-13 million jet aircraft; the only foreign route so far is to Dakar. The domestic service is good, with at least one flright daily between Praia 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 fleet by 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 a flat island, and was built in 1969 in part as a stopover point for planes flying from Europe and the US to South Africa. The airport presently serves about 50 flights per week, including jumbo jets.

131. The traffic has not increased much lately, as Cape Verde has lost certain flights to Dakar (for, instance, Europe to Brazil) and other airports. The Sal airport takes in about 20 million CV escudos per year from landing rights, and to this must be added taxes and margins on the sale of 40-50,000 tons of aviation fuel per year. Still, the airport is not fully utilized and could contribute more, in a fiscal sense. A UNDP project is providing assistance in training personnel for airport management. Invest- ments required include strengthening of the runway and improvements of the passenger terminal. However, a major need is to stimulate the demand for Sal airport's services, and this could most clearly be linked to the development of tourism on Sal island and elsewhere in Cape Verde. Without a positive Government tourism program, it seems unlikely that Sal airport traffic will grow more than moderately, in response to the traffic volumes of companies already using 'the airport as a refueling stop.

E. Telecommunications

Existing Telecommunications Facilities

132. Telecommunications, like transport, provide a vital link for a remote island nation. Unfortunately, the present facilities are inadequate. The national telecommunications network consists of three automatic telephone exchanges located in r'indelo, Praia and on Sal, with 900, 600 and 100 lines respectively, as well as a few small manual exchanges on the other islands. A telex 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 transmission equipment, there are only 6 telephone and 6 telegraphic channels operating between Praia and Sao Vicente and another 6 telephone and 5 telegraphic channels between Praia and Sal. The connections among the other islpnds consist of a VHF link of 6 channels between Santo Antao and Sao Vicente and UHF links between Sal - Boa Vista and Santiago - Fogo, which have a potential of 36 channels but are presently underutilized because of a - 41 - shortage of spare parts. Single-channel VHF links are also operating beween Sao Vicente - Sao Niccolau, Maio - Santiago and Brava - Fogo. The international telecommunications service consists of one submarine cable to Lisbon (with a capacity of only three conversations simultaneously) and an HF radio link to Dakar and Bissau.

Development Oblectives

133. The main sector objectives are to expand and improve the facilities in the principal trrban areas, to extend services to rural communities, and to improve the quality of transmission and speed of communication in long distance services. Accomplishment of these objectives is expected to provide important social, administrative, and productive benefits. AfDB has recently financed a project to provide two new automatic telephone exchanges in Mindelo (5,000 lines) and Praia (6,000 lines). This project also includes installation of a telex center in Sao Vicente, along with a training program for personnel in equipment maintenance. Furthermore, the Government is financing an extension of the transmission network between Santiago - Sao Vicente and Santiago - Sal. With respect to international service, an earth station and transit center for satellite communications is planned, for which the Government is seeking financial support. The rural telephone network is another priority for which financing has not yet been secured.

F. Tourism

134. Tourism is virtually undeveloped in Cape Verde and is not at present a priority sector in Government planning. Hotel facilities are extremely limited, with one principal (but small) mixed-ownership hotel in Praia, one public and one private hotel on Sal, and two privately-operated hotels (one leased from the municipality) in Mindelo. The Praia hotel is fully occupied with official visitors, and the hotels on Sal are generally filled with air crews and passengers in transit. The mixed public/private enterprise Hotelmar, which owns the Praia hotel, is adding 67 rooms in Praia in 1980, and plans to add 200 rooms on Sal and 26 rooms on Fogo. This enterprise is training its personnel overseas, and will have some technical assistance, but has not obtained any foreign financing. Further development and planning for the sector is to be carried out by this quasi-public entity.

135. The Government distinguishes between different categories of tourists, and orients its policies accordingly. For official visitors to Praia and transit visitors on Sal, the Government is making every effort to expand the accommodations available. Internal tourism is also being encouraged; this consists of facilities like the small beach hotel in Tarrafal on the northern coast of Santiago, which is popular with Cape Verdeans and foreign technical assistants based in Praia. The Government is also interested in welcoming overseas Cape Verdeans; this is the thinking behind, for instance, the construction of a hotel on Fogo, from whence many Cape Verdeans have emigrated to the United States. The policy towards large-scale "vacation"- type tourism has, however, not yet been defined. - 42 -

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

G. Water Supply and Electric Power

137. Water supply poses a problem due to the low rainfall and consequently limited availability of groundwater. Most islands are presently utilizing groundwater resources, but several (Sao Vicente and Sal) have already turned to the use of desalting plants. The modest supply of electric power, closely linked with water in the case of desalting plants which produce power and water, is obtained from small thermal generating plants.

Water

138. The most acute water supply problem in the islands today is that facing Mindelo. This city of over 30,000 persons is located on an island which 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 local brackish wells (25%), shipments of water from Santo Antao (25%), and a desalting plant (50%). The desalting plant, built in 1971, has an original capacity of 2 x 1,100 m3 /day but at present only one line of evaporators is operating and about 600 mi/day is produced. There is a water distribution system in Mindelo (dating from 1971) with 2,500 connections and it is estimated that 40% of the population is served. A progressive tariff policy charges from 30 to 70 CV escudos per m 3 depending upon the consumption rate, but actual production and distribution costs are now estimated at about 120 escudos/m 3 due to the reduced output of the desalting plant. The Government does not favor increasing the water rates in Mindelo, considering that a relatively high proportion of income is already spent on water and that 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 first phase would replace the old desalting plant with a new one of 2,500 m3 /day, - 43 - 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 3 m3/day. The municipality charges 4.50 CV escudos per m , 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 archipelago 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 interconnection between towns, even on Santiago where four towns are electrified. Most generation is by very small, decentralized diesel plants. However, in - 44 - three locations, much larger units are installed in support of ports, airports, etc. An approach needs to be worked out for each island to determine whether large generating units with an interconnection grid, or small units, represent the least-cost solution. Such a general study should be carried out soon in order to forestall the creation of a suboptimal system on a piecemeal basis.

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

H. Education

146. Cape Verde's school system has expanded tremendously in the past dozen years, and the supply of trained teachers and classrooms has not kept pace. From an average of about 12,000 pupils in primary school in the mid-sixties, enrollment jumped to 23,500 in 1967/68 and reached 56,000 in the first year after independence. Overcrowding has inevitably resulted, with about 78 students per classroom in 1978/79 often split into two or three shifts, and 39 pupils per teacher. Although projections of the school age population for the coming years are not available, the past trend on the rate of growth of school enrollment should not be considered typical because it largely reflects the drastic change in people's attitude towards education which occurred after independence. In addition, population control programs may also have a stabilization effect on the rate of growth of enrollment. Only about 13% of primary school teachers have received training considered by the Government to be appropriate. Half of the 700 classrooms in use are rented, and are often inadequately lighted. Secondary school and technical training is quite limited in Cape Verde. Still, adult literacy, estimated very roughly at 35%, and the primary school enrollment ratio of 88%, are above the comparative figures for low-income developing countries.

147. The educational system consists of a very limited kindergarten program, four compulsory years of primary school, two years of preparatory school, and five years of secondary school (lyceums located in Mindelo and Praia). All teaching is in Portuguese, with French and English taught as second languages beginning in preparatory school. Cape Verdean Crioulo is not used as a language of instruction. There are two technical schools, both located in Mindelo: an industrial and commercial school, and a navigation school. At present there is no agricultural training school, and there are no 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-level administrators or as skilled technicians.

148. Teacher training has so far concentrated on preparing primary school teachers. There are three levels of teachers, based on their preparation. The classification involving the most extensive training is called - 45 -

"curso do Magisterio Primario". Training for this level is roughly equivalent to the US high school diploma and includes two years of specialized teacher preparation after completion of secondary school. A second classification is called "Posto Escolar" and provides for two or three years of teacher training following six years of primary and preparatory school. The third and least qualified classification is known as "Monitor", requiring only four years of primary education plus forty days of teacher training. Monitors are more frequently found in rural schools. The proportion of teachers with the two higher qualifications has increased since independence, while the proportion of Monitors has fallen from 34% to 16% of the total. A concerted effort has also been made to increase the level of Monitors through one-year upgrading courses. A large (650-place) teacher training school is currently under construction at Assomada (Santiago) with Netherlands aid; this school will produce teachers at the Magisterio Primario level to teach in the primary and preparatory schools.

149. The mainstay of technical education is the Escola Industriale Comercial de Mindelo, established in 1956, which counts 500 day students, and 200 evening students. They are trained for three years, following preparatory school, to become clerks (70%), electricians (8%), mechanics (10%), construction workers (7%), or home economists (7%). The students are mostly from Mindelo or Santo Antao, with very few from Santiago, and there are no boarding facilities. This is the only technical school in Cape Verde (aside from a very small navigation school), and impressed the mission as fulfilling an important role in the educational system. The graduates are in great demand, and a 16 year-old mechanic can command a starting salary of 8-9,000 CV escudos per month whereas a graduate engineer would only receive about 12,000/month. Curriculum changes and expansion plans are being studied by the ILO, including the addition of two more years for specialization and the possibility of secretarial training. Other problems raised by the Director are the lack of entrepreneurial training in business, the shortage of workshops, and the lack of qualified engineers on the teaching staff. The mission felt that an advisory board of public and private sector employers might be useful. Also, the establishment of a similar school on Santiago should 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 8,000 per year (US$25-200) for primary and technical school students respectively. Teachers' salaries range from US$100 per month for monitors to US$260 per month for secondary school teachers. Primary school is free, and materials are provided to needy students; the FAO is also furnishing food to students in certain islands. Secondary and technical schools cost parents 500 escudos per quarter, though some 20% of these students receive Government scholarships.

151. Multilateral and bilateral agencies have been actively supporting the education sector. The Netherlands is supporting schools on Santo Antao in addition to teacher training. UNESCO has provided assistance for the upgrading of existing teachers and is currently studying the possibility of training locally some 30 secondary school teachers per year. USAID has recently provided grant aid (US$3.0 million) for an education project that will construct 100 primary classrooms, two industrial arts workshops, 15 - 46 - teacher housing units in outlying areas, and upgrading of teachers and school administrators. Portugal provides a number of trained teachers to the islands.

152. Cape Verde's economic growth may well be linked to better education and training aimed at the priority sectors. Two of the major constraints to a better educational system -- shortage of purpose-built classrooms and of well trained teachers for primary education -- are being overcome at present through strong Government efforts. Several longer-term problems will remain, particularly the heavy recurrent costs of improving basic education and the challenge of developing adequate job training. The Ministry of Education hopes to make six years of education a reality as soon as possible, and eventually to establish universal kindergarten. These worthwhile goals will be costly. Agricultural training is a serious need in Cape Verde which should be accorded a high priority. Training of fishermen needs to be greatly enlarged, and the navigation school at Mindelo could be expanded for this purpose. In general, the authorities feel that the inherited classical European system of education remains too theoretical and not practical enough. 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 is needed for people already in the labor force to improve the productivity of mechanics, masons, and eventually specialized personnel in such fields as shipping and hotels. Training of teachers for all levels above preparatory school 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 basis by primary school teachers and a pilot literacy project among Praia construction workers, requires greater attention.

I. Health

153. Health conditions in Cape Verde are generally better than in continental 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 population per doctor (6,700) and population per nursing person (1,600), which are more similar to upper income developing countries. Nutrition problems continue to occur, however, related especially to the drought, and the birth rate is high.

154. The Government's objective in the sector is to improve basic health conditions, with an emphasis on preventive medicine. The health delivery system has been considerably expanded recently, and this has in turn created additional demand for health services. The system consists of two major hospitals (Praia and Mindelo), three regional hospitals, and an array of sanitary posts or dispensaries in numerous villages. Only one island (Boa Vista) does not have a doctor in permanent residence. A major new rural health program is underway, with partial financing by WHO and UNICEF, to expand 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. - 47 -

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

155. Nutrition problems persist, especially shortages of proteins and vitamins. The Government conducts emergency programs to supplement diets in areas where deficiencies are uncovered. The nutrition situation reflects the drought conditions, and in areas where the rural works program provides employment, the situation is better. Several nutrition studies are currently underway but results are not yet available.

156. The need for family planning is accepted by the Government, along with the need for maternal and infant protection. A five-year program has been initiated, with Swedish support, which will eventually institutionalize family planning and mother/child protection. The program consists of general public health work, as well as distribution of birth control pills and IUDs together with counseling for women. This innovative project is working well and reported on schedule.

IV. DEVELOPMENT STRATEGY AND PROSPECTS

Government Development Policies

157. Development planning in Cape Verde is evolving from a preoccupation with the immediate problems caused by the drought toward an analysis of longer-term employment and sectoral prospects. In the first several years since independence, the emergency needs for food and jobs were the overriding concern of planners. This led to the establishment of several Emergency Programmes, starting in 1976/77, that effectively channelled food grant aid into productive employment. Rural workers in areas hard-hit by the drought were organized into labor-intensive brigades building small water retention structures and roads largely out of local materials.

158. The successful organization of the Emergency Programmes and the 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-priority sectors: agriculture, fisheries, transport, and the social sectors. Agricul- ture, including the development of water resources, has been declared the number one priority. The Government's rural development approach stresses the 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 can eventually be extended to some 8-10, 000 ha. Though a limit to agricultural potential is clearly recognized, the Government wants to do everything - 48 - possible to reach this limit. Fisheries is the other priority productive sector, and several projects in support of artisanal fishermen on various islands have been launched, in addition to rehabilitation of the cold storage plant at Mindelo. Much remains to be done before the country's 200 mile zone is effectively exploited. Transport investments have focussed on building up the foreign-going and interisland shipping fleet, port facilities, and the road 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 analysis of longer-term possibilities in the light of necessary structural shifts. The present rural population already exerts extreme pressure on the land, and it is felt that future increases in the work force will have to be absorbed in urban industries or services. The strategic location of the islands for international transport, the possibility of tourism, the development of a construction materials industry based on local resources, and the possible establishment of mechanical engineering industries such as ship repair, are major factors in long-term development planning. The Government believes that skill-intensive industries will suit the country's human resources level better than assembly-type export industries, particularly since unskilled wages are not particularly low. So far, little investment has been undertaken in these areas. The Government is presently writing an interim four-year development plan, for implementation in 1982, and this document will attempt to formalize the development strategy which is already emerging.

Assessment of Development Policies

160. The mission considers that the Government's development policies are sound and are being successfully implemented. The strategy pursued so far has been a highly pragmatic one. It started with the problem of feeding people under drought conditions, and has moved on to the implementation of large projects in rural development, fisheries, infrastructure, and social sectors. The employment problem has been tackled in a creative and positive way by converting food aid, through the National Development Fund, into productive investment and jobs for rural workers. The evident quality of the small retention dams being built throughout the countryside will clearly contribute to raising agricultural productivity in the future. Moreover, the macroeconomic climate generally has supported development. Conservative fiscal and monetary policies have provided the confidence in the Government's economic management needed to assure a heavy flow of foreign aid in support of investment, which has reached the extremely high level of 60% of GDP. Yet the Government remains conscious of the inherent limitations in both agriculture and industry, and continues to seek new avenues for development. A realistic understanding of the limited absorptive capacity also obtains.

Alternatives

161. Before proceeding with specific recommendations on Cape Verde's longer-term development strategy, it is perhaps useful to discuss broad alternative development policies. These alternatives -- regional integration, emigration, and permanent external support -- are not necessarily mutually exclusive, and a pragmatic strategy may incorporate some elements of each. The options are presented as partial answers to the underlying problems facing Cape Verde: - 49 -

- a remote location entailing serious external transport difficulties;

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

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

- a very limited wealth and range of other natural and mineral resources; and

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

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

163. Cape Verde has been quick to associate itself with a number of regional groupings. These include ECOWAS, which besides operating a development fund has as its major goal the elimination of tariffs between member West African states. While Cape Verde may benefit from such a grouping, it is in a way too large (including almost all the French, Portuguese, and English-speaking countries of West Africa) to provide special opportunities. Cape Verde is also a member of the ACP countries tied to the European Economic Community. This provides access to the European Development Fund, the Euro- pean Investment Bank, and STABEX facilities, and is particularly useful now that Portugal is a member of the EEC. The ACP membership gives Cape Verde a fair chance at the European market. The Government also maintains close relations with the other Portuguese-speaking African nations, and helped found a common market among these five countries in April 1980. In the case of Angola there is cooperation in fisheries and shipping. Close cooperation also exists with Senegal, which has provided scholarships for Cape Verdeans studying in Dakar, and medical personnel,

164. The major integration move has been with Guinea-Bissau. There are long historical links between the two former Portuguese colonies, and political ties have been very close since the founding of the PAIGC movement for independence. Many Cape Verdeans participated in the long armed struggle against Portugal which took place in Guinea-Bissau. Thus, the origin of the link between Cape Verde and Guinea-Bissau is essentially historical and political in nature, and not economic. The two countries are associated, however (aside from their common political party), in a common market; in a joint shipping line; and through close collaboration on economic policies in all sectors. Of particular interest are the possibilities for resoure-based industries utilizing the two markets. Guinea-Bissau plans to build a 10,000 - 50 -

ton sugar refinery to serve the needs of both nations, based on local sugarcane. Cape Verde's possible development of its construction materials industry might involve supplying cement to Guinea-Bissau. Such cooperation can be extremely useful in obtaining economies of scale, and foreign aid should support such endeavors.

165. Emigration of people from slowly-growing to fast-growing or higher income countries is a normal feature of uneven economic development. In Cape Verde, emigration has been substantial since at least a hundred years ago, as discussed earlier. The present situation is influenced by the family ties with Cape Verdeans living in the US and Portugal, which makes the likelihood of obtaining work overseas higher and increases the pressure to emigrate in search of better employment. If these emigrants return to the islands after a period abroad, the net effect may well be positive, and certainly remittances add to the income levels at home. But disadvantages exist, including the possibility of creating a stagnant "remittance economy" at home which discourages local entrepreneurship and creates expectations of a higher standard 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 in Lisbon where many workers are without their families.

166. Clearly, then, emigration has its pluses and minuses. But it is a fact today in Cape Verde, and Government policies toward emigration have profound implications for economic development. The Government does not consider 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 country governments to ease any social problems in immigrant communities. Due to-the lack of recent statistics, it is difficult to say much about the present emigration situation. It is simply pointed out that emigration represents a valuable safety valve when work is not available in the islands, and the Government may generally wish to ensure that restrictions on immigration to European countries and the US are minimized wherever possible. A complementary policy needed is to encourage the reverse flow of experienced Cape Verdeans back to their country. This however, will only be possible if the economy is perceived as expanding.' As an alternative and long-term approach to the population problem, the Government is starting to implement family planning programs.

167. Another alternative concept of development in Cape Verde's case is a more-or-less permanent reliance on foreign aid (plus workers' remittances) to fill the resource gap. The financial role previously played by Portugal is thus assumed and increased by the international community. The existence of large volumes of foreign aid since independence (US$90 per capita per annum) could be seen as part of this strategy, particularly since it has financed consumption as well as investment., And in some sense the permanent availability of foreign aid may be necessary and desirable to allow the provision of basic services to people living on small, desolate islands who may not, in the foreseeable future, be able to finance these services on their own. - 51 -

168. The Government recognizes that foreign aid cannot be considered a permanent feature of the economy, depending as it does on political circum- stances and the competing demands of other developing countries. About 25-30% of Cape Verde's high level of aid is food aid directly related to the drought, and this support may decrease when (and if) the drought ends. The strategy adopted has therefore been to finance with foreign aid now available a very large public investment program, oriented primarily towards infrastructure closely linked to production possibilities. These investments are necessary if Cape Verde is to enjoy some economic independence in the future.

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

Recommendations

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

171. Investment is already at a high level, but will need in the future to be increasingly directed toward industry and services since it is unlikely that agriculture can absorb much more labor. The problem is that neither the Government nor local private businessmen have much experience in developing and running profitable productive enterprises. Most business experience is concentrated in the import field, which does not demand the same set of skills. Several steps can be taken. First, the local private sector should be encouraged to invest in productive enterprises. The Government can provide assistance in identifying opportunities, in lining up financing, and in providing water, power, and other needs. The technical school at Mindelo could add a curriculum on small business management, and a second technical school could be built at Praia. Better provision of finance to local enter- preneurs and cooperatives is important. While a separate development bank may not be needed at present, the activities of the Investment Department of the BCV should be stepped up. Training in project analysis and in the identification and promotion of viable enterprises may be required for BCV personnel. Second, foreign private investment should be actively sought for appropriate high-priority projects. These organizations can provide the marketing knowledge and access necessary for export industries, and can transfer managerial skills to Cape Verdeans, if the terms of the agreement are right. The intervention of a neutral intermediary, such as the Interna- tional Finance Corporation of the World Bank Group, could help provide the mutual confidence required for mixed-capital enterprises to succeed. Once the Government has acquired some experience in dealing with foreign investors, an investment code should be developed. Third, the foreign assistance presently received could be better utilized by increasing the proportion of - 52 - technical assistance and by more explicit coordination. Since the lack of trained 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 project conception and analysis capability, as well as to help with the execution of projects in technological fields (e.g., fisheries and industry). The flow of information on development projects, though assisted by the UNDP Resident Representative and managed by the Secretary of State for Cooperation and Planning, is not as free as it could be. The Government could periodically compile and disseminate more comprehensive information on the various projects underway. This also implies that foreign aid donors should provide the Government with complete data on their assistance, including disbursements as well as commitments.

172. Among the alternatives discussed, two points stand out. First, Cape Verde can benefit from close collaboration with Guinea-Bissau when planning industrial, agricultural processing, fisheries and transport investments. The resources of the two countries are complementary to some extent, and joint projects could take advantage of a larger market. Second, emigration policies should both seek to maintain access for Cape Verdeans to foreign labor markets and seek to attract experienced workers back to the islands. The resource of overseas Cape Verdeans could be tapped to provide management and technicians for projects in fisheries, shipping, and manufacturing; to provide investment capital; and possibly to establish overseas market outlets for Cape Verdean products.

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

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

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

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

- In transport, the interisland network needs to be strengthened through better shipping and air services; the pier at Praia and the smaller ports need to be improved; and the commercial potential for an expanded Mindelo port needs to be studied.

- In tourism, a study of potential tourist development in Cape Verde should be undertaken to determine the costs and benefits of expansion in this field. - 53 -

Prospects

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

175. Under these favorable assumptions, average growth in real GDP of 4-5% per annum would be possible over the 1978-90 period. Agricultural output has the potential to rise sharply with implementation of current and proposed projects, successful exploitation of groundwater and surface water resources to increase the irrigated crop area, more normal rainfall, and a slight increase in cultivated area related to population growth. As discussed above, the production of fish could reach 25,000-30,000 tons with substantial improvements in distribution and marketing, fishing vessels, and fishing techniques. In mining and manufacturing, the assumption is made that several identified proposals will go forward: an expansion of the salt evaporation capacity, the construction of a clinker grinding plant, and the establishment of a modest ship repair capability. Construction could grow at 3-4% per year as a consequence of continued high investment. Public and private services are assumed to grow at 3% per annum; this assumption is purposely conservative since the basis for prediction is particularly weak, and the Government's policies in certain service sectors such as tourism have yet to be developed.

176. The results of these assumptions are shown below in Table 9. The GDP per capita would rise to US$235 (in constant 1978 prices) in 1990, up from US$170 in 1978. The effect of favorable developments in the productive sectors, especially in agriculture, is plainly visible, while the relative contribution of construction and services declines. This structural shift is consistent with the view that the production level could generally be considerably increased through appropriate investment (and with better weather), without necessarily entailing a corresponding rise in services. The high incremental capital-output ratio assumed here seems appropriate in Cape Verde, where major improvements in agriculture, for instance, are known to be extremely costly in terms of required infrastructure. - 54 -

Table 9. GDP PROJECTION (at 1978 prices)

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

Agriculture 9.0 20.5 32.6 Fisheries 7.9 4.3 6.0 Mining and Manufacturing 5.7 6.7 7.4 Construction 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 program may well persist over the next decade, and a moderate rate of emigration is also likely to provide a partial solution to the employment problem. Increases in the modern sector will probably not be enough to absorb the surplus manpower from the agricultural sector. However, irrigation and other rural development efforts combined with better rainfall in the long-term should do much to improve conditions in the rural areas. Manpower planning should 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 would rise sharply (see Table 10). Imports may increase more slowly than in the past, perhaps with an elasticity of about 1.0, as food requirements are more fully met from domestic production. This would lead to a deficit on trade balance of 91% of GDP in 1990 versus 104% in 1978, indicating continued dependence 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 the resulting 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. These capital flows are considered possible, but would have to be higher if imports could not be held down to the assumed level. - 55 -

Table 10. PROJECTED BALANCE OF PAYMENTS

(at constant 1978 prices)

US$ millions % of GDP 1978 1990 1978 1990

Exports 3.1 11.4 5.7 11.9 Imports -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 53.0 Errors 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), indicates 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 substantial 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 total investment program the Government is proposing for 1980 indicates that the resource gap could be filled only with the support of faster growing foreign resources. - 56 -

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

US$ Millions Average annual 1978 1990 growth rate, %

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

Capital expenditures a/ 30.4 53.0 4.7 Foreign financing a/ 25.0 50.5 6.0 Overall surplus (deficit) -6.8 0.0 - a/ While capital expenditures are not fully offset by foreign financing in 1978, they were 100% offset, on average, over 1975-78.

Source: Mission estimates.

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

181. While these risks have been partially taken into account in the earlier macroeconomic scenario, it is clear that the projected growth rates are subject to great uncertainty. There are a few large development projects now getting underway or planned, whose potential impact is substantial compared to the present low production level in the country. The Government makes the point that the very high investment level, if it can be combined with training and better employment opportunities, could lead to a growth rate twice as high as that projected here. Indeed, our GDP estimate looks conservative when related to the total investment program for 1980, which is almost double that of 1979. Until further experience with these large projects is acquired in Cape Verde, it is difficult to clearly estimate the outcome. - 57 -

182. The World Bank Group's role in Cape Verde, under present circum- stances, must be tailored to the country's priorities and must complement rather than supplant existing aid efforts. Government accords priority to production--mainly rural development, followed by fisheries--and also to infrastructure required to support productive investments. The limited absorptive capacity in rural development indicates that this sector should only be emphasized by the World Bank Group once the initial batch of large projects in the sector is well underway. Interisland transport, closely tied to the distribution and marketing needs of fisheries, offers sound possibilities for a first Bank Group project in Cape Verde. Any project in the near term should include significant technical assistance both for training and for actual project execution in the initial phase. There are problems associated with providing advisers, however, due to the critical lack of suitable housing available and the Portuguese 'Language requirement.

183. Intervention by the Bank Group would be on IDA terms for the foreseeable future. Cape Verde's external debt exposure is considered reasonable, but the very low level of exports and GDP, combined with the fragility of the economy and its dependence upon foreign aid, would not make the country creditworthy for IBRD (or indeed other hard-term) lending. The volume of concessionary lending and grant aid available needs to be allocated to projects that will generate internal growth, employment, and new exports. Cape Verde's particularly difficult economic situation will undoubtedly require many years of high investment, with substantial foreign support, before significant strengthening of the economy can be expected. This also implies a recurrent cost burden which should be shared by foreign donors in the medium-term. - 58 -

ANNOTATED BIBLIOGRAPHY

A. Government Publications

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

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

Secretariat d'Etat a la Cooperation et Planification. Programme d'Emergence 1977/78. 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 early 1970s.

International Monetary Fund. Cape Verde: Recent Economic Developments. Washington: IMF, May 1979. Basic source for public finance, monetary and 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 at the University of Sussex, Discussion Paper 123, January 1978. Analysis of the economic problems of small island nations.

United Nations General Assembly. Assistance to Cape Verde: Report of the Secretary-General of the Economic and Social Council. New York: UN, July 18, 1978. Report of a mission sent to identify sectoral constraints and priority projects. - 59 -

C. Other - Specific

Almeida, Raymond A., and Patricia Nyhan. Cape Verde and its People: A Short 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. Revised version. Rome: FAO, February 1977. Brief assessment of the situation.

Carreira, Antonio. Migracoes nas Ilhas de Cabo Verde. Lisbon: Universidade Nova de Lisboa, 1977. Detailed study of population movements to and from Cape Verde.

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

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

Freeman, Green, Hickok, et al. Cape Verde: Assessment of the Agricultural Sector. 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 du Cap 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 of Africa, and its Islands. New York: Derby and Jackson, 1860. Brief descriptions of conditions on Cape Verde Islands in mid-nineteenth century.

Also selected project documents obtained from Government and bilateral sources. - 60 -

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 as of December 31, 1978

4.2 Service Payments, Commitments, Disbursements and Outstanding Amounts of External Public Debt - 61 -

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

Population Absolute 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 km2 Island Area in km2 1960 1970 1977 a/

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

Source: Direqao Geral de Estatistica, Boletim Trimestral de Estatistica, First Quarter 1978, page 1. - 64 -

Table 1.2 AGE DISTRIBUTION OF POPULATION, 1970

Total Age Groups Number Percentage

0 - 4 42,055 15.4 5 9 45,939 16.8 10 - 14 39,902 14.6 15 - 19 30,557 11.2 20 - 24 15,968 5.9 25 - 29 11,811 4.3 30 - 34 14,073 5.2 35 - 39 13,869 5.1 40 - 44 11,909 4.4 45 _ 49 8,282 3.0 50 - 54 7,697 2.8

55 - 59 8,212 3.0 60 - 64 8,653 3.2 65 - 69 4,926 1.8 70 - 74 3,406 1.3 75 and older 4,625 1.7 Unknown 687 0.3

TOTAL 272,571 100.0

Note: Based on provisional data from 1970 census.

Source: Direccao Geral de Estatistica, Boletim Trimestral de Estatistica, First Quarter 1978, page 4. - 65 -

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, Progrsmme d'Emergence 1977L78, Praia, 1977. - 66 -

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 Sobre emprego e desemprego, Geneva, 1978. - 67 -

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

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

Cook 25.00 15.40 21.67 19.72 Digger 40.00 44.00 60.00 60.00 Foreman 66.00 67.00 92.66 108.75 Forgeman 71.00 99.00 103.33 101.00 Journeyman 29.00 41.00 50.55 48.33 Kneader 41.00 45.00 56.66 55.83 Locksmith 114.00 151.00 125.87 122.50 Master carpenter 132.00 134.00 150.00 155.00 Master mason 114.00 110.00 134.16 140.90 Mechanic 138.80 162.87 176.67 196.11 Painter 70.00 83.00 102.85 103.18 Paver 50.00 52.00 63.33 77.00 Porter 45.00 68.00 56.66 60.00 Rural worker 38.00 47.00 47.22 52.77 Seamstress 67.00 91.00 80.00 115.00 Servant 11.17 13.73 16.73 32.92 Shoemaker 69.00 100.00 150.00 141.66 Street-sweeper 33.00 30.00 40.00 30.00 Truck driver 104.03 127.30 132.53 136.94 Washerwoman 30.00 44.00 50.00 48.33 Whitewasher 49.00 54.00 63.33 62.72 Worker 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 GDP 1973 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 GDP in 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 29.3 Private 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 56.1 Private 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 1,900 100.0 100.0 100.0 Resource 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 -1,126.5 873.6 Capital movements 112.5 166.2 289.2 315.7 587.9 343.2 483.5 798.1 1,031.6

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 55.3 165.5 Errors and omissions 3/ 32.9 17.0 49.1 -39.4 -171.8 164.6 88.8 311.0 127.0 -87.4 Overall balance 0.8 27.9 69.3 22.2 -32.3 115.2 120.4 516.2 404.2

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

Source: Data provided by the Banco de Cabo Verde. 1/ Provisional. to 2/ Remittances from overseas Cape Verdeans were partially included under travel through 1975; they were then moved entirely 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. - 71 -

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 supplied 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 ...... 2.5 Oils 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 and beverages 140.0 115.9 185.5 212.3 214.0 293.4 560.7 308.9 631.2 Petroleum products 12.4 14.9 17.9 21.7 27.8 34.8 70.6 79.5 97.4 Textiles and shoes 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 stores for ships and air craft .. 258.8 260.2 360.2 531.2

Source: Data supplied by the Cape Verdean authorities; and Servico Nacional de Estatistica, Boletim Trimestral de Estatistica, 1975-77 issues. a/ Mainly re-exports. - 72 -

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. 737 -

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 15,000 Beans 423 1,060 - - Wheat 4,000 17,022 7,500 6,500 Wheat flout 2,342 - - 917 Rice 3,600 7,870 4,738 5,317 Powdered milk 847 2,101 1,297 60 Edible oils 903 1,522 820' 1,100 Sugar 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 67.5 Beans 5.9 14.8 - - Wheat 15.3 65.2 28.7 29.9 Wheat flour 23.3 - - 11.0 Rice 36.0 78.7 47.4 55.2 Powdered milk 12.7 31.5 19.5 0.9 Edible oils 31.6 53.3 28.7 38.5 Sugar 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 1978 Jan. - 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 43.1 Angola -- - 14.4 9.3 38.1 Zaire 3.6 1.7 2.0 2.6 2.5 1.9 0.5 5.4 12.5 8.1 Guinea-Bissau 4.7 3.6 5.0 3.7 1.5 0.6 1.1 3.3 7.5 1.7 United Kingdom 0.4 1.0 1.3 0.9 1.5 1.7 3.8 4.6 6.2 0.6 United States 11.9 12.8 15.4 22.2 25.3 19.4 0.8 ------Sao Tome & Principe ------0.2 -- 3.8 6.2 1.1 Others , 3.1 2.7 2.1 2.2 2.7 0.9 5.1 3.5 13.6 6.7 Ship 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 35.1 Angola 21.9 16.6 21.2 20.2 10.9 18.7 10.8 2.4 0.4 0.1 Netherlands 3.1 2.8 4.0 2.9 2.4 3.1 3.7 5.1 3.7 12.3 United Kingdom 3.8 3.2 4.1 5.0 12.7 3.4 2.8 3.0 2.4 3.2 United States 3.0 3.3 3.6 3.0 3.8 1.6 2.0 1.8 1.9 9.0 Mozambique 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 exports Value 100.0 58.4 107.9 169.5 Price 100.0 127.8 220.4 343.8 Quantity 100.0 45.7 49.0 49.3

Imports Value 100.0 116.3 104.8 147.8 Price 100.0 126.0 152.5 174.4 Quantity 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 staff calculations. a/ Value and price indices in terms of domestic currency. Customs figures were used for the calculation of these indices. Table 4.1 - CAPE VERDE IS.

EXTERNAL PUBLIC DEBT OUTSTANDING INCLUDING UNDISBURSED AS OF DEC. 31, 1978 DEBT 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 S TYPE OF CREDITOR ------:------CREDITOR COUNTRY DISBURSED :UNDISBURSED: TOTAL PRINCIPAL INTEREST

MULTILATERAL LOANS AFRICAN 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, 1978 DEBT 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 CHANGES BEGINNING 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 - 170 1978 12,050 16,423 8,511 - - 113 113 - 507 1979 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 - I 1985 23,164 24,888 - - 958 237 246 483 - I 1986 23,886 24.652 - 670 882 251 1,133 - 1987 23,675 23,771 - 96 882 248 1.130 - 2 1988 22,891 22,891 - - 946 238 1,184 - - 1989 21,945 21.945 - - 1.151 225 1,376 - 3 1990 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 - 2 1993 17.361 17,361 - - 1,120 173 1,293 - 2 1994 16,243 16,243 - - 1.120 160 1.280 - - 1995 15,123 15,123 - - 1.120 146 1,266 - 2 1996 14,005 14,005 - - 1.120 133 1.253 - -1 1997 12.884 12,884 - - 1,120 118 1.238 - 1 1998 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 ONE YEAR TO THE NEXT. THE MOST COMMON CAUSES OF IMBALANCES ARE CHANGES IN EXCHANGE RATES AND TRANSFER OF DEBTS FROM 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 budget Revenues 309.2 375.4 396.6 505.2 Expenditures -314.8 -390.9 -549.0 -556.2 Deficit -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 1,029.3 873.6 Grants 224.6 443.8 951.6 818.3 Loans 130.2 313.1 77.7 55.3

Domestic financing -2.3 --147.6 42.1 241.4 Bank of Cape Verde -2.3 --147.6 42.1 241.4 Operational accounts -2.3 90.7 -55.6 100.8 Credit 10.3 25.4 3.9 Deposits -12.6 65.3 -59.5 Earmarked accounts -- *-238.3 97.7 140.6

Sources: Data provided by the Cape Verdean authorities; and IMF staff estimates. 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 83.6 Export 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 19.0 Stamp tax 5.0 5.7 7.2 Other 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 ORDINARY BUDGET EXPENDITURES, 1977-78

(As a percentage of total ordinary expenditures)

Average 1977 1978 1977-78

Total ordinary expenditures 100.0 100.0 100.0

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

Of which: State Secretariat of the Interior, Public Administration, and Labor 2.6 3.0 2.8 State Secretariat for External Cooperation and Planning 1.6 1.6 1.6

Ministry of Foreign Affairs 6.i3 8.0 7.4 Ministry 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 for Commerce, 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 and Communications 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 10.2 Ministry of Public Works 3.6 3.8 3.7 Ministry 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 PROCRIAMFOR 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

46 6 Productive Sectors 641.2 50.2 401.2 40.6 62.5 797.9 43.4 374.1 28.3 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 59.1 Agriculture, Reforestation, Livestock 163.8 12.8 73.6 7.4 44.9 99.2 5.4 5B.7 4.4

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

.5 Econsmic Infrastructure 337.3 29.2 217.9 22.0 64.6 c54-.271A 3 4 A 38.9 86

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 3.1 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 1978 March 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 1,406.0 Foreign 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 -7.2 Operational accounts (net) -14.8 -17.1 73.6 62.7 -28.6 -38.2 18.0 47.5 59.3 42.6 Earmarked 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 6.6 Credit to nonfinancial public enterprises 8.0 8.0 7.2 7.2 7.2 7.2 6.6 7.1 7.0 6.7 Loans 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 274.5 316.8 400.5 404.1 403.5 423.8 394.9 443.2 424.3 534.4 Other 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 public enterprises 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 Area Area of Irrigated Rainfed Island Island,ha ha % ha %

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

403,330 1,825 58,199

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

Total 403,330 100.0

Source: Ministry of Rural Development, Producao Agricola Nacional 1977-78, quoted in FAO Investment Centre, Assomada Agricultural Development Project, Preparation Report, 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 1978 1963

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 - - -

OftenMJ 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: ADSlnvotamnt Cantre, Asea Crtultural Dc _leeeea5 t Prateet Pranereaton lazart far data 1961-1976; issln atlmata ftor 1977 nd 1978. - 86 -

Table 7.3. ESTIMATED LIVESTOCK POPULATION AND MEAT 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 the Ministry 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 fles du Cap Vert, Deuxiame et troisieme missions, 1977, p.15. - 88 -

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

9000r

8000

7000 / I /

6000 F- I

LO 5000- / C - ! "I ,

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 mission report (UNIDO) and the Direcao nacional das pescas questionnaire (publ ished in 'Boletrm trimestrial des estatistica,' 19771. - 89 -

FIGURE 2

Exports of Fisheries Products

QUANTITY VALUE

20 25

20 0 815 u) z < .1 1 1 | I l l l ' 'l ' l ' ' ' ' ' ' ' l ' 15 U w~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~L I- 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 ...... 3 Roofing 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. - 91 -

Table 9.2. COMPARATIVE WAGE RATES IN MANUFACTURING

Average Daily 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 6.11 Korea 670 5.50 a! Singapore 2,700 5.28 at Colombia 630 5.13 a/ Honduras 390 4.05 Sierra Leone 200 2.19 a/ Mauritius 680 2.14 Sri Lanka 200 2.08 Bangladesh 110 1.01/0.68 b/

Average Daily Salaries GNP per capita by Occupation (US$, 1978) (US$ per day, 1977)

Cape Verde 262 c/

Mechanic 5.79 Shoemaker 4.18 Truck Driver 4.04 Foreman 3.21 Fainter 3.04 Forgeman 2.98 Journeyman 1.43 Worker 1.40

a/ Contains possible inaccuracies due to converting hourly, weekly or monthly wage rates to a daily basis. b1 Skilled/unskilled workers. cf Mission Estimates.

Sources: Comparator wage rates in manufacturing from ILO, 1978 Year Book of Labour Statistics, Geneva, 1978. Cape Verde data from Statistical Appendix Table 1.5. - 92 -

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 Verde Islands, Louis Berger, July 1977. - 93 -

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 available a/ 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 da Educacgo: 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 1,390 700 Classrooms ...... 611 650 655 695

Ratio of:

Students per teacher 38 40 43 43 40 45 45 42 39 78 Students per classroom ...... 80 94 86 80

Female % of students ...... 4.19..

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 available a! 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. - 95 -

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 437 306 260 250 Escolar plus 40 days' training (34.4) (24.1) (18.8) (16.4)

Posto 6 years of school 720 862 995 1,083 Escolar plus 2 or 3 years of teacher training (56.6) (67.9) (71.8) (70.9)

Magisterio Secondary school 115 102 131 195 Primario plus 2 years advance teacher training (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 Quadros da Educagao: Conclusoes e Documentos Diversos, 1977. - 96 -

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. - 98 -

Table 9.9. ELECTRIC POWER GENERATION

Island/City Generating CapAcity

Santiago Praia 1,400 kva presently, adding 730 kva in 1979. 4,000 kva additional needed for proposed clinker plant, port, and airport.

Assomada 60 kva. Netherlands aid is upgrading.

Tarrafal 2 x 35 kva.

Sao Domingos 50 kva

Pedra Badejo no electricity Note: Island has no interconnection between towns.

Sao Vicente Ztndelo 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. Electrification project 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 and Mindelo; 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 basket index a/ 100 141 152 168

a/ Calculated by the IMF staff on the basis of consumption weights worked out with the Cape Verdean authorities, using retail price time series on 23 products. The indices published by the Government represent unitary-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.