São Tomé and Príncipe

Country Profile 2005

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Q Gulf of Guinea U A T O R I A L G U I N E A PríncipePríncipe SSÃOÃOT TOMÉOMÉ AND PRÍNCIPEPRÍNCIPE SOUTH ATLANTIC OCEAN SSãoãoT Toméomé

GABON

Príncipe San António

Ilha Caroço

Gulf of Guinea

SÃO TOMÉ AND PRÍNCIPE

Main road International boundary Neves International airport SÃO TOMÉ Capital São Tomé Other town Santa Cruz January 2005 Porto Alegre 0km 20 40 Ilha das Rôlas 0 km 100 200 300

Gross domestic product Gross domestic product per head US$ bn US$ Nigeria 65.0 Gabon 6760.7 Côte d'Ivoire Equatorial Guinea 5294.5 Cameroon Cape Verde Gabon Congo (Brazzaville) Ghana Côte d'Ivoire Senegal Cameroon Dem Rep of Congo Senegal Zambia Benin Equatorial Guinea Chad Mali Zambia Burkina Faso São Tomé & Príncipe Chad Nigeria Congo (Brazzaville) Mauritania Benin Ghana Guinea Guinea Niger Togo Togo Mali Central African Republic Burkina Faso Mauritania Central African Republic Cape Verde Niger Sierra Leone Gambia Liberia Liberia Gambia Guinea-Bissau Guinea-Bissau Sierra Leone São Tomé & Príncipe Dem Rep of Congo 0246810121416 0 500 1,000 1,500 2,000 2,500 Sources: Economist Intelligence Unit estimates; national sources. Sources: Economist Intelligence Unit estimates; national sources.

Gross domestic product Consumer prices % change, year on year % change, year on year Chad 38.0 Zambia Equatorial Guinea 21.1 Guinea Liberia Gambia Gambia Nigeria Dem Rep of Congo São Tomé & Príncipe São Tomé & Príncipe Ghana Sierra Leone Sierra Leone Ghana Liberia Cape Verde Dem Rep of Congo Cameroon Mauritania Burkina Faso Equatorial Guinea Zambia Central African Republic Nigeria Guinea-Bissau Congo (Brazzaville) Chad Mali Benin Niger Niger Senegal Mali Mauritania Côte d'Ivoire Benin Congo (Brazzaville) Togo Burkina Faso Guinea-Bissau Gabon Gabon Cape Verde Guinea Cameroon Central African Republic Togo Côte d'Ivoire Senegal -20246810121416 05101520 Sources: Economist Intelligence Unit estimates; national sources. Sources: Economist Intelligence Unit estimates; national sources.

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Contents

São Tomé and Príncipe

3 Basic data

4 Politics 4 Political background 5 Recent political developments 7 Political forces 9 Constitution, institutions and administration 10 International relations and defence

11 Resources and infrastructure 11 Population 12 Education 12 Health 13 Natural resources and the environment 13 Transport, communications and the Internet 14 Energy provision

15 The economy 15 Economic structure 16 Economic policy 20 Economic performance

21 Economic sectors 21 Agriculture, forestry and fishing 22 Mining and semi-processing 24 Manufacturing 24 Construction 24 Financial services 25 Other services

25 The external sector 25 Tra d e i n go od s 26 Invisibles and the current account 27 Capital flows and foreign debt 27 Foreign reserves and the exchange rate

29 Regional overview 29 Membership of organisations

33 Appendices 33 Sources of information 34 Reference tables 34 Population 34 Gross domestic product 34 Gross domestic product by sector 34 Gross domestic product by expenditure 35 Money and credit

35 Inflation and interest rates 35 Agricultural production 36 Foreign trade 36 Main trading partners 36 Balance of payments 37 Net official development assistance 37 External debt 38 Foreign reserves 38 Exchange rate

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São Tomé and Príncipe

Basic data

Land area 1,001 sq km

Population 181,565 (2004; extrapolated from 2001 census)

Main town São Tomé (capital) population 54,300 (includes peri-urban population; 2004)

Climate Tropical

Weather in São Tomé Hottest month, March, 23-31°C; coldest months, July, August, 21-28°C; driest (altitude 5 metres) month, July, 1 mm average rainfall; wettest month, March, 150 mm average rainfall

Languages Portuguese (official), Lunga santomé, Ling’lé, Lunga ngolá, Crioulo

Measures Metric system

Currency Dobra (Db)=100 centimos. Average exchange rate in 2003: Db9,342.6:US$1; exchange rate on December 22nd 2004: Db9,115:US$1

Time GMT

Public holidays January 1st; February 3rd (Day of the Heroes of Liberty); February 28th; April 13th; May 1st; May 24th; June 3rd; July 12th (Independence Day); September 6th (Armed Forces Day); September 30th (Day of Agrarian Reform); November 1st; December 21st (Feast Day of Saint Thomas); December 25th

Politics

The political scene is, for such a small country, remarkably complex and divided. Since presidential and legislative elections in 2001-02, the country has been ruled by a political cohabitation: the presidency is held by a semi- independent candidate, Fradique de Menezes, and there is a hung parliament, divided almost evenly between the Movimento de Libertação de São Tomé e Príncipe-Partido Social Democrata (MLSTP-PSD), formerly the sole ruling party, and a number of other parties. A unity government has been established, although this is highly unstable, and there are frequent cabinet changes and clashes between the president and the prime minister, as well as a coup attempt in 2003. The country is on the verge of reaping enormous wealth from the oil sector, which will transform this small and poverty-ridden country.

Political background

From colony to micro-state The first Portuguese colonists settled in São Tomé and Príncipe in 1493. Using African slaves, by the mid-16th century they had turned the islands into the world’s largest producer of sugar. Indentured labour from Angola and Cape Verde replaced slaves in the 19th century, which saw booms in coffee and cocoa production. After the second world war nationalism developed among the local Creole population, the fo rro s , and in 1972 the Movimento de Libertação de São Tomé e Príncipe (MLSTP) was formed under the leadership of Manuel Pinto da Costa. Following the military coup in Portugal in April 1974, the Portuguese government recognised the MLSTP as the sole representative of the Sãotoméan people, and installed a transitional government dominated by the party. An exodus of the Portuguese settler population, as well as of elite Sãotoméans, followed. Independence was proclaimed on July 12th 1975, with Mr Pinto da Costa as president and Miguel Trovoada as prime minister. Transition to single-party Marxist rule was almost immediate and socialist economic policies were introduced. The MLSTP government was riven by factional stri fe and leading fi gures were fo rce d i nto exi le.

Transition to economic reform, In 1985, faced with economic deterioration and pressure from popular opinion political pluralism and Western donors, political and economic reforms were introduced by the ruling party (now known as the MLSTP-PSD). A democratic constitution was established and the first multi-party legislative election was held in January 1991. A newly formed opposition party, Partido da Convergência Democrática- Grupo de Reflexão (PCD-GR), won the legislative election and in March Mr Trovoada, standing as an independent, but with the support of the PCD-GR, was elected unopposed as president. Since then political life has been dominated by power struggles between the president and successive governments, party infighting and corruption.

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Recent political developments

Political and administrative The period of PCD-GR government was marked by frequent disputes with the deadlock marks the 1990s president, which produced political and administrative deadlock. In 1994 the PCD-GR was nearly obliterated in an election called by Mr Trovoada, in which the MLSTP-PSD won 27 out of 55 seats and went on to form a minority government. A new party allied to the president, the Acção Democrática Independente (ADI), refused to join a proposed national unity government, but agreed to support the new prime minister, Carlos Graça. On August 15th 1995 Mr Graça and Mr Trovoada were deposed in a military coup, but reinstalled one week later following Angolan mediation. The MLSTP- PSD and the ADI subsequently formed a coalition government under the prime minister, Armindo Vaz d’Almeida. In 1996 Mr Trovoada was re-elected president in a narrow victory, and the MLSTP-PSD won a majority in the parliamentary election in 1998. Under a new MLSTP-PSD government led by the reform- minded prime minister, Guilherme Pósser da Costa, political life stabilised, despite fractious relations with the president, particularly over control of foreign policy. Financial support from international donors increased, as Mr Pósser da Costa was credited with improving governance despite corruption scandals. Security risk

Political instability is endemic in São Tomé and Príncipe. Public life in recent years has involved bitter infighting among a small political class in which personal, professional and family ties are easily blurred. There have been several coup attempts since independence. State institutions on which investors and foreign actors depend for routine matters are compromised by administrative weakness and corruption. Such conditions constitute the greatest component of risk in the country. In addition, the enforcement of contracts through the justice system cannot be assured. Most businesses and property seized by the state after independence have been sold or returned to their original owners. The economy is officially open to foreign capital, although larger volumes of foreign investment have been deterred by the islands’ great isolation, weak infrastructure and—until recently—economic instability. Political cohabitation The presidential election on July 29th 2001 was won by Mr de Menezes, the continues candidate initially backed by Mr Trovoada, who had served the two presidential terms allowed by the constitution. The MLSTP-PSD's candidate, Mr Pinto da Costa, was resoundingly defeated. An early legislative election was held in March 2002—it had been planned for November—preceded by a pact in which the political parties and the president agreed that a national unity government would be formed afterwards. No single party won a majority: the MLSTP-PSD and a new pro-presidential party, the Movimento Democrático das Forças da Mudança (MDFM), won an almost equal number of seats, and a third party allied to the ex-president, Mr Trovoada, won the remainder. The unity government has proved to be unwieldy and fractious, characterised by frequent disputes between the prime minister and president. In September 2002 the president dismissed the prime minister, Gabriel Costa, and his government following a dispute over military promotions, and appointed a new government led by Maria das Neves of the MLSTP-PSD. However, the

president again became embroiled in a dispute with parliament over constitutional reforms that proposed to strip him of many of his powers, including the ability to renegotiate a controversial oil agreement with Nigeria. After considerable dispute—including a decision to call a fresh legislative election, later rescinded—a compromise was reached in February 2003. Political tension continued to rise, and rioting broke out in the capital on April 17th, resulting in one death and widespread damage to public property.

The government is ousted in a The political instability of the country was further underlined when a military military coup, but restored coup occurred on July 16th 2003. Mr de Menezes—who was abroad in Nigeria at the time—was deposed and the prime minister, cabinet and other senior officials were arrested. Political opportunism by the armed forces was one of the motivating factors behind the coup, as it occurred just as the country was on the verge of reaping oil wealth. International condemnation of the coup, coupled with foreign mediation, resulted in its reversal, a week later. The coup plotters were granted an amnesty and Mr de Menezes and most of the cabinet were restored to power. The ending of the coup, however, included an agreement to form a new government and set up an international committee to monitor progress on this and other issues. One consequence of the coup was that it helped to precipitate the partial breakdown of the national unity government and a fracturing of the party political landscape. The MLSTP-PSD heads the current government that was sworn in on September 2004, with the ADI as a junior partner. The Uê Kédadji party, the PCD and the MDFM are now in opposition. Conflict between the executive, the legislature and the government is likely to continue.

The oil era has begun São Tomé and Príncipe officially entered the oil era in October 2003 when bidding for nine offshore exploration blocks in the Joint Development Zone was concluded. Although in the end only Block 1 was awarded, a second licensing round launched in November 2004 promised to raise signature bonuses worth in excess of US$150m, of which São Tomé’s share will be at least US$60m—with the remainder going to Nigeria—in addition to its share of the signature bonus for the awarded block. This massive infusion of funds, well in excess of total GDP, is destined permanently to transform the country, long one of the poorest in the world. However, concerns have been expressed about the effect that oil wealth could have on the country’s corruption-prone elite. Important recent events

July 2001 Fradique de Menezes is elected president, defeating the MLSTP-PSD's old-guard candidate, Manuel Pinto da Costa. March 2002 An election in March produced a hung parliament, with seats evenly split between the MLSTP-PSD and the party allied to Mr de Menezes, the MDFM. Mr de Menezes announces that highly unfavourable oil deals with Nigeria will be renegotiated.

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September 2002 Mr de Menezes dismisses Gabriel Costa as prime minister and appoints a new government. January 2003 Mr de Menezes dissolves parliament and calls a legislative election for April 13th 2003, following a constitutional dispute with parliament. A resolution of the dispute by the end of the month calls off the dissolution of parliament. July 2003 A military coup overthrows the president and government. A week later the coup is reversed and Mr de Menezes is reinstated following outside mediation. October 2003 First oil licensing round in the Joint Development Zone (held jointly with Nigeria. Only one block out of the nine is awarded, to a consortium consisting of ChevronTexaco and ExxonMobil and a Norwegian-based firm, Energy Equity Resources (EER). March 2004 Four MDFM ministers resign from the government after clashing with the prime minister, Maria das Neves. The MDFM withdraws from the coalition and joins the opposition benches. September 2004 Mr de Menezes dismisses the government of Ms das Neves after she is implicated in a corruption scandal. A new coalition government is formed under the MLSTP/PSD and ADI, with Damião Vaz de Almeida as prime minister. Political forces

The MLSTP-PSD is still the The MLSTP-PSD is the main political grouping. The party ruled during the era dominant party of the one-party state from 1974 until 1991, when it was defeated in the first multiparty elections. In 1994 it failed to win an absolute majority in the Assembléia Nacional (parliament) by a narrow margin, and returned to power as part of a coalition. In 1998 it won an absolute majority, but again failed to gain the presidency. In the last election in 2002 the MLSTP-PSD won the most seats, 24 out of a total of 55. Despite its record of cronyism and abuses during the one- party era, it is still the natural ruling party and is closely associated in the popular mind with the nation-building of the post-independence era. The MLSTP-PSD is divided between an old guard and younger members who want to modernise the party. Mr Pinto da Costa’s failure in the 2001 presidential election has started a succession battle in which pressure has been put on the party leader to resign.

Legislative election results, 2002 Party Seats Movimento de Libertação de São Tomé e Príncipe-Partido Social Democrata (MLSTP-PSD) 24 Movimento Democrático das Forças da Mudança-Partido da Convergência Democrática (MDFM-PCD) 23 Uê Kédadji 8 Total 55

Source: Economist Intelligence Unit.

Main political figures

Fradique de Menezes A businessman, raised in Portugal, Mr de Menezes held numerous government positions after independence before joining the opposition. He has run an activist presidency, but has clashed frequently with the legislature and the government, dismissing five prime ministers since he took office in 2001. His strained relationship with the MLSTP-PSD and his close association with the MDFM, of which he claims to be the "virtual chairman", continues to cause political tensions. Damião Vaz de Almeida Originally from the island of Príncipe, Mr Vaz de Almeida, formerly the minister of labour under Maria das Neves’s government, is the vice-president of the MLSTP-PSD. He was appointed prime minister in September 2004 by Mr Menezes following the dismissal of Ms Neves’s government. Guilherme Pósser da Costa Prime minister from 1999-2001, and previously minister of foreign affairs in 1987- 88 and 1994-96. A lawyer by training, he was responsible for the economic turnaround after 1999, and also attempted to curb official corruption. He faces opposition from the old guard of the MLSTP-PSD, who defeated his hopes of being the party’s presidential candidate in the 2001 election, but he is backed by modernisers in the party. His involvement in the misuse of foreign aid corruption scandal in 2004 has damaged his reputation. Manuel Pinto da Costa Former president from 1975 to 1991 and leader of the MLSTP-PSD until 1990, and failed presidential candidate in 1996 and 2001, he was re-elected leader of the ruling MLSTP-PSD in May 1998. He faces strong pressure to resign from younger members who blame him for the party's defeats, but still wields wide influence as the head of the party’s old guard. Patrice Trovoada A wealthy and politically ambitious businessman, he is acting in concert with his father, the former president, who was constitutionally barred from standing for a third term in office. He was briefly minister of foreign affairs in the government that held office between the election of Mr de Menezes in July 2001 and the March 2002 legislative election, and is currently the president’s unpaid adviser on the oil industry. In May 2004 he was elected leader of the ADI.

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No other parties have made a There are numerous opposition parties, but none has made a lasting electoral lasting impact impact. For example, the PCD (formerly the PCD-GR; it dropped the words "Grupo de Reflexão" from its name in 2001) governed from 1991-94, but has collapsed as a serious contender for power, winning only eight seats in parliament in 1998. The run-up to the 2002 legislative election produced considerable political upset, with several coalitions of the smaller opposition parties repeatedly forming and fragmenting again. Out of these emerged one main group, the MDFM, which joined with the PCD to form a coalition, the MDFM-PCD, which won 23 seats. The MDFM is nominally allied to Mr de Menezes, who helped to create it as a pro-presidential vehicle for the 2002 election, and he has publicly expressed his intention to lead the party, of which he claims to be "virtual chairman", after he steps down as president in 2006. The Uê Kédadji coalition—formed by the Acção Democrática Independente (ADI), the União Nacional para a Democrácia e Progresso (UNDP), Codó, the Partido da Renovação Democrática (PRD), and the Partido Popular do Progresso (PPP)—secured the remaining eight seats in 2002. The ADI has since left the Uê Kédadji coalition and is voting with the government. The former president, Mr Trovoada, and his son, Patrice Trovoada, are a dominant force behind Uê Kédadji, but have fallen out with Mr de Menezes, whom they had backed in the presidential election and believed would be a front for their interests. However, Mr de Menezes had different ideas, particularly the renegotiation of controversial oil agreements with Nigeria that the Trovoada family reached in dubious circumstances. Differences between the parties tend to centre on personality, family and the competing interests of different groups. As a result, political disputes and other developments tend to have little to do with policy or ideology.

Constitution, institutions and administration

A democratic constitution A multiparty constitution was adopted in September 1990 by referendum, replacing the autocratic Marxist constitution that had been in force since independence in 1975. It defines São Tomé and Príncipe as a sovereign, unitary and democratic state, and grants many democratic rights and freedoms. Legislative power is vested in the parliament, the Assembléia Nacional, which has 55 members who serve a four-year term. There are six district assemblies on São Tomé. Since being granted political and administrative autonomy in 1994, the island of Príncipe has had a seven-member regional assembly, although the poor performance of this body has been criticised. The legitimacy of both islands’ local governments has been undermined, however, by their failure to hold fresh municipal and regional elections following the expiry of their mandate in 1999. Executive power is vested in the government, and the president is nominally in charge of foreign affairs and defence. The highest judicial power is the Supreme Court, which is accountable to, and appointed by, the Assembléia Nacional.

Ill-defined presidential powers A major flaw in the constitution lies in the vague separation of powers between the president and the government, which has resulted in continuous political conflict. The previous president, Mr Trovoada, was accused of turning

foreign and defence affairs into "reserved domains", and of summarily dismissing the prime minister and dissolving parliament. His decision to establish diplomatic relations with Taiwan in May 1997, without consulting the cabinet or parliament, led to six months of political stalemate. The 1996-98 coalition government proposed a revision of the constitution to clarify—and curb—the president’s powers, but no amendments were submitted to parliament. Shortly after coming into office the current president, Mr de Menezes, signalled that he intended to use his executive authority fully. However, by late 2002 he had become embroiled in conflict with parliament, which proposed constitutional changes to curb the powers of the president and increase its own powers. Nevertheless, continuing political infighting and government crises have enabled Mr Menezes to strengthen his power base and re-establish the presidency as the dominant force in São Tomé’s political system.

International relations and defence

From East to West After independence São Tomé and Príncipe developed close links with several socialist countries, particularly Angola, China, Cuba and East Germany; it still maintains strong ties with Angola. Relations with Western countries started to improve in 1985 when the government began to introduce liberal economic reforms. The former colonial power, Portugal, regained its pre-eminent influence, while France and Brazil have also become important partners. The recognition of Taiwan in 1997 has resulted in significant aid inflows.

Oil raises strategic interest The discovery of oil in commercially exploitable quantities has greatly increased Western strategic interest in São Tomé—particularly from the US. In 2004 the US Senate Committee on Foreign Relations held hearings on the strategic importance of the Gulf of Guinea to meeting the US’s future energy needs. The US military is believed to be considering setting up a military base on São Tomé, and the US government is funding feasibility studies on the construction of a deepwater port in São Tomé and the extension of the international airport’s only runway. Nigerian and Angolan interest in the country has also increased, and both countries are competing for influence over the development of São Tomé’s oil resources. Nigeria already exerts strong influence in the country, and actively intervenes in Sãotoméan politics in order to secure its interests; for example, it brokered the political pact that brought the July 2003 coup to an end and restored the president, Fradique de Menezes, to power. Nigerian influence has tended to be at the expense of Angola, which has traditionally been the main regional power, and this has led to a cooling off in relations between Mr Menezes and the Angolan president, José Eduardo dos Santos. São Tomé and Príncipe joined the Organisation of African Unity (OAU) after independence, signed the Lomé Convention in 1977 and was a founding member of the Communauté économique des États de l’Afrique centrale (CEEAC) in 1983. In 1996 the country participated in the foundation of the seven-member lusophone community, Comunidade dos Países de Língua Portuguesa (CPLP). In 1997 it joined the 52-member community of francophone countries, Organisation Internationale de la Francophonie (OIF). Given the size of the country, international representation on the islands is limited. Diplomatic

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representation is maintained by Portugal, France, Nigeria, Angola, Cape Verde and Gabon. Of the UN agencies, only the UN Development Programme (UNDP) and World Health Organisation (WHO) have full representation. The main offices for other UN agencies, the IMF and the World Bank responsible for São Tomé are located in Gabon or Angola.

Armed forces The armed forces, Forças Armadas de São Tomé e Príncipe, have been reduced, despite opposition from demobilised soldiers, to 300, about one-half of whom are recruits serving 30 months of compulsory service. Portugal provides military training and equipment under a bilateral agreement. There is no air force. The Presidential Guard numbers 160 and is better equipped than the regular armed forces. The armed forces are a generally weak institution, although they have been the source of two coup attempts in the past decade. There is much friction relating to their poor terms of service, and in 2004 one of the leaders of the failed coup in July 2003, Alércio Costa, demanded better working conditions, warning of unrest in the army.

Resources and infrastructure

Population

Population, 2004 Population (’000) 181,565 Population growth rate (% change, year on year) 2.4

Sources: Government of São Tomé; Economist Intelligence Unit, extrapolated from 2001 census.

A Creole country The population stood at 181,565 in 2004, based on an extrapolation from the 2001 census, compared with 117,500 in 1991. The rate of population growth has averaged 2.4% per year in the period 1975-2002. According to the UN Development Programme (UNDP), the population will grow at an average of 2.3% per year in 2002-15, only marginally above the rate for Africa. Although nearly two-thirds of Sãotoméans still live in rural areas, a growing proportion is concentrated in and around the capital, São Tomé, in Água Grande district, which had an estimated population of 54,300 in 2004. Príncipe has only one small town, Santo António, with a population of about 1,000 people. The majority of Sãotoméans are Roman Catholic, mixed descendants of European colonists and African labourers, reflected in the divisions between forros (local Creoles), angolares (former indentured workers from Angola) and Cape Verdean settlers. Independence from Portugal led to the departure of most Europeans and the return of many contract workers to Angola. There are sizeable Sãotoméan emigrant communities in Lisbon, Luanda and Libreville. Uncertainties surrounding the measurement of human development

São Tomé and Príncipe was ranked as a "medium human development" country in the UN Development Programme’s Human Development Index (HDI) for 2004, and was ranked 123rd out of 177 countries, based on data for 2002—the sixth-highest ranking in Sub-Saharan Africa. The HDI measures quality of life

using real GDP per head (expressed in purchasing power parity terms), the adult literacy rate and life expectancy. This result would suggest that indicators of social development have performed relatively well, despite a period of economic decline during the first half of the 1990s: poverty rose from 36% of the population in 1991 to 53.8% in 2001 according to government figures. Since the late 1990s economic performance has improved, with real GDP growth exceeding population growth from 1998. However, there is some reason to doubt the accuracy of the 2002 score, because of problems of data scarcity and volatility in the HDI score. In 2001 São Tomé was one of 12 countries dropped from the HDI as a result of data problems. Education

Social indicators, 2002 Education Adult illiteracy rate (%) 17 Primary school net enrolment ratio (%)a 98 Health Life expectancy at birth (years) 70 Infant mortalityb 75 Population per doctorc 2,133 a 1999/2000. b Per 1,000 live births; 2001. c 1990-2003 Sources: World Bank, African Development Indicators, World Development Indicators; UN Development Programme, Human Development Report.

The adult literacy rate in 2002 was 83%, 20 percentage points above the Sub- Saharan African average. There are ongoing problems with the poor quality of education, including high drop-out and repetition rates. The sector experienced years of under-investment, but received a substantial increase in resources under the government’s Priority Action Plan (PAP) for 2000-02. There is a lack of secondary and tertiary education, although in 1993 a private institute, Instituto Universitário de Contabilidade, Administração e Informática (IUCAI), was established. A state-run Instituto Superior Politécnico (ISP) has been functioning since 1997. In February 2004 Portugal offered €500,000 (US$669,000) for the decentralisation and expansion of vocational training, which is currently centralised in the capital, to other areas of the country, including Príncipe.

Health

Life expectancy was estimated at 69.7 years in 2002 (66.9 for men, 72.7 for women), which is high by African standards. The UNDP estimates that life expectancy will rise slightly in the period 2000-05, to 69.9 years. The main causes of sickness are malaria—there are about 40,000 recorded infections each year, causing 40% of recorded hospital deaths—and acute respiratory and diarrhoeal diseases. The health system has been undermined by poor management and inadequate attention to primary healthcare. In 1990-2003 there was an average of 47 doctors per 100,000 population, and in 2002 the infant mortality rate was 75 per 1,000 live births, up from 59 in 1999. Real spending on health fell from the 1980s onwards because of political and

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economic instability and declining foreign aid. Since 2000 this has been reversed and, backed by foreign assistance, the government is prioritising health expenditure, which has been increasing substantially in real terms. HIV/AIDS, malaria and basic primary healthcare are the main priorities in the sector. In 2001 public health expenditure amounted to only 1.5% of GDP, equivalent to US$22 per head. HIV/AIDS in São Tomé and Príncipe

Data scarcity—São Tomé is not included in the statistical indices of most development institutions, including UNAIDS—makes an accurate assessment of the extent of HIV/AIDS in São Tomé difficult. In 1998 only 32 HIV/AIDS cases were registered, a figure that almost certainly understates the situation. The UN office lists HIV/AIDS as a growing health problem, and anecdotal evidence suggests that prevalence is probably similar to that of neighbouring countries; nearby Gabon has a rate of adult infection of 4.2% and Angola has a rate of 2.8%. The government’s strategy for HIV/AIDS is based on making available condoms through the public health system. As a least-developed country, São Tomé has won exemption rights for the use of generic anti-HIV drugs through the Doha declaration of the World Trade Organisation on trade in intellectual property rights. In August 2004 Brazil’s president, Luiz Inácio Lula da Silva, announced that by 2005 Brazil would provide anti-retroviral drugs to all people living with HIV/AIDS in Cape Verde, Guinea-Bissau, São Tomé and East Timor. Natural resources and the environment

São Tomé and Príncipe has an equatorial climate with heavy rainfall, high temperatures and high humidity. The south of the main island, São Tomé, being mountainous, is wetter than the north. The eastern slopes and coastal flatlands are covered by cocoa plantations carved out of a dense jungle, which is intersected by numerous streams. Príncipe, occupying about 15% of the total area of the archipelago, is extremely jagged and indented by numerous bays. The main dry season is from early June to late September. There is another dry season, the "Pequena Gravana", from the end of December to the beginning of February. Oil has been discovered offshore in commercially exploitable quantities and production is likely to begin in 2010.

Transport, communications and the Internet

There are about 380 km of roads, of which about 250 km are paved. Maritime links with Libreville, Luanda, Lisbon, Antwerp and Amsterdam are served principally by Portuguese and Dutch shipping lines, but they remain irregular. The country’s ports are managed by the state-owned Empresa Nacional de Administração dos Portos (Enaport) and have seen some investment. Traffic has been hindered by the lack of a deepwater port, and in 2004 the government invited tenders for feasibility studies on the construction of a deepwater port and the expansion and modernisation of São Tomé’s international airport.

Air transport Both São Tomé airport and the smaller Santo António airport on Príncipe are managed by the parastatal Empresa Nacional de Aeroportos e Segurança Aérea (ENASA). TAP-Air Portugal provides a weekly flight to Lisbon and has a 40% share in Air São Tomé e Príncipe (ASTP). Another airline, Air Luxor (Portugal), also began twice-weekly flights to Lisbon in December 2002, introducing price competition on the route and easing the country’s international isolation. Air Gabon, Transportadora Aérea Angolana (TAAG) and Transportes Aereos de Cabo Verde (TACV) also provide regional services to Libreville, Luanda and Sal, respectively. ASTP operates one aeroplane that provides a service to Príncipe and Libreville, but is in poor financial health. In November 2004 the government announced that a twice-weekly service between São Tomé and Equatorial Guinea would begin in 2005.

Telecommunications The local telephone network is of reasonable quality and almost all lines are connected to digital exchanges. International links are being upgraded with the help of foreign aid and the privatisation of the Companhia Santomense de Telecomunicações (CST), which is now a joint venture between a Portuguese company, Rádio Marconi, with 51% of share capital, and the state, which holds the remainder. In 2003 there were 7,000 telephone lines in São Tomé and Príncipe, increasing the number of lines from 19 per 1,000 people in 1990 to 41 per 1,000 in 2002, compared with an average of 21.5 per 1,000 for the rest of Africa in 2003. CST and a private company also provide Internet access. In 2002 there were an estimated 15,000 Internet users. A mobile-phone service was introduced in the capital and its immediate vicinity in 2002, and is eventually to be extended to Príncipe and the rest of São Tomé island. In 2003 there were 4,800 mobile-phone users in São Tomé.

Media Three newspapers, with an average circulation of 500 copies each, are produced—irregularly—in the capital. The state-owned Televisão Santomense (TVS) and Rádiotelevisão Portuguesa Internacional (RTPi) provide local television. In October 1999 the government approved the establishment of a retransmission station by a private company, Africa Pay Television (APTV). Radio listeners are served by the local Rádio Nacional, and by Radio France Internationale (RFI) and Rádio Difusão Portuguesa (RDP). In 1996 a Voice of America radio relay station began broadcasting.

Energy provision

Energy supply More than 25,000 tonnes of petroleum products are imported annually; most of it is used for electricity generation. In 2004 60% of households had access to electricity. Transmission problems and irregular power supply are being addressed by a foreign assistance programme, which will also extend the network. The supply of electricity and water is under the control of the Empresa de Água e Electricidade, which has been recommended for privatisation by the World Bank. In July 2004 the government awarded a 45-year concession to an Anglo-Portuguese company, Synergies Investment, to construct a hydroelectric dam and power-generating station on the Yô Grande,

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São Tomé's largest river. Work on the US$50m project is due to start in 2005, with an expected completion date in 2007.

The economy

Economic structure

Main economic indicators, 2003 Real GDP growth (%) 4.5 GDP at market prices (Db bn) 557a Consumer price inflation (av; %) 9.8 Current-account balance (US$ m) -12.1a Foreign debt (US$ m) 302.5a Exchange rate (av; Db:US$) 9,348 a Estimates. Source: IMF, Banco de Portugal

A low-income country São Tomé is classified by the World Bank as a low-income economy; the World Bank classifies countries as low-income if their 2003 gross national income (GNI) is US$765 or lower. Historically the country’s economy has been highly dependent on its cocoa exports and has lacked natural resources. Economic development has been constrained by the small size of the economy, extremely low population (estimated at 182,000) and isolation. However, the discovery of oil reserves in the country’s territorial waters in 1998 means that the structure of the economy will be radically altered in the future. Although oil production is expected to start in 2010, the economy will be transformed earlier, thanks to large investments in the oil sector.

Comparative economic indicators, 2004a Guinea- São Tomé Cape Verde Bissau Angola Portugal GDP (US$ m) 87 983 289 17,304 165,000 GDP growth (%) 6.0 5.2 2.6 11.7 0.9 GDP per head (US$) 478 2,070 189 1248 15,890 Consumer price inflation (av; %) 14.0 1.1 3.0 43.5 2.4 Current-account balance (US$ m) -19 -108 -34 472 -8,700 Merchandise exports fob (US$ m) 7 59 95 15,170 38,600 Merchandise imports fob (US$ m) 40 417 103 5,630 54,000 a Estimates. Sources: Economist Intelligence Unit.

Agriculture dominates Cocoa production is the main economic activity, accounting for 86% of total the economy exports, and production has been increasing over 2000-03, although not to the levels of 1998, as international cocoa prices have risen. According to the World Bank, agriculture represented 19% of GDP in 2003 and industry 18% of GDP, but the manufacturing sector is small and most value added was in construction. Services—predominantly public administration and commerce—contributed the remaining 63%. The islands’ tourism potential is beginning to show some development, with tourists from Portugal, Gabon, and Angola. On the expenditure side, private consumption accounted for about 70% of GDP in 2003,

and investment accounted for around 30%, reflecting investment in oil exploration. Public-sector investment is largely dependent on the availability of foreign funding.

Origins of gross domestic product (% of total) 1993 2003 Agriculture 28.9 19.0 Industry 19.7 18.0 Manufacturing 6.5 3.9 Services 51.4 63.0 GDP at factor cost 100.0 100.0

Source: World Bank.

Economic policy

Reform has accelerated After independence in 1975 the state assumed a dominant role in the economy, since 1999 and all businesses were nationalised. Economic liberalisation began in 1985, and in 1987 São Tomé and Príncipe began a structural adjustment programme with the IMF, followed by a second programme in 1991. Poor policy implementation led to the Fund suspending the programme in 1997, however, and it was not until March 1999 that a shadow programme was established as a condition for the eventual resumption of assistance. Success in meeting the programme’s targets led to the approval of a three-year poverty reduction and growth facility (PRGF) in April 2000, under which the government committed itself to pursuing a tight monetary and fiscal policy, reducing inflation, broadening the tax base, increasing budgetary allocations to the social sectors (particularly health and education), and carrying out structural reforms to promote growth and private-sector development. Politically difficult measures involving the restructuring of public enterprises and civil service reform, including a reduction in the workforce, were implemented, and a liberal investment code was adopted. The improvement of budgetary efficiency remains a major objective; it is to include increasing transparency in the operations of Banco Central de São Tomé e Príncipe (BCSTP—the central bank), budget execution and the oil sector, for which oil revenue management legislation is being introduced. Poverty reduction is the focus of government policy

The government drew an interim poverty reduction strategy paper (PRSP) in 2001, the main objectives of which are to raise the rate of GDP growth and improve access to basic social services and productive assets for the poor. The PRSP is expected to be finalised by 2005. The government has finalised its Priority Action Plan (PAP), which establishes a policy framework for social sector investment, macroeconomic stabilisation and higher economic growth. The government also has in place a medium-term development strategy, covering the period 2000-05. The main elements of the strategy are: • to promote the private-sector and diversify productive activities; • to place smallholder agriculture at the centre of growth strategy; and • to reform and strengthen public institutions and capacity.

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PRGF suspended since 2001 From 1999 onwards the government either met or exceeded its IMF targets. Improved performance renewed confidence in the government, which resulted in a substantial rise in foreign assistance, including debt relief under the IMF- World Bank heavily indebted poor countries (HIPC) initiative. However, towards the end of 2001, as the presidential election approached, the government failed to meet a number of the fiscal and monetary targets to which it had agreed. As a result, inflation exceeded programmed levels, as well as problems in budget execution and stalled structural reforms. In November 2001 the IMF suspended disbursements. In January 2002 the IMF put in place a six-month staff monitored programme (SMP). Further slippages against agreed benchmarks during the first half of 2002—largely in the form of excessive spending related to the legislative election—resulted in the agreement being extended to December 2002. Macroeconomic performance has been uneven, and in June 2004 the IMF urged the government to be more rigorous in its implementation of macroeconomic policy, prompting corrective measures that included tightening public spending and monetary policy in the 2005 budget. In November 2004 discussions continued on a new PRGF programme covering the period 2005-07, with a view to an agreement being concluded in 2005. A new PRGF would enable São Tomé to renegotiate its bilateral debt with the Paris Club, as well as foreign debt under HIPC, leading to a reduction of the country’s estimated US$300m of foreign debt. Much will depend on whether the government can keep a tight rein on macroeconomic policy in the face of public demands for substantial increases in investment, public-sector salaries and the minimum wage.

Recent arrangements with the IMF Approval Expiry Approved (SDR m) Drawn (SDR m) PRGFa Apr 2000 Apr 2003 6.66 1.90 SAFb Jun 1989 Jun 1992 2.8 0.80 a Poverty reduction and growth facility. b Structural adjustment facility Source: IMF.

Privatisation

Despite resistance during the early 1990s, the privatisation of state companies has proceeded. There are 12 enterprises still in state hands, of which four— mostly utilities and public infrastructure companies—have been defined as strategic enterprises, although some form of private participation or management is to be explored. Most of the larger enterprises, including the telecommunications company, the state airline and the national fuel company, Empresa Nacional de Combustível e Óleos (ENCO), now include private capital. A 40% stake in ENCO was sold to the Angolan state oil company, Sonangol, resulting in greater reliability in fuel supplies. The World Bank believes that although the government has successfully reduced its direct role in the economy, it has not yet succeeded in creating the financial, administrative, institutional and infrastructural conditions necessary to support the desired growth in private-sector production.

Oil revenue law come into The discovery of oil reserves in 1998 and the decision to create a Joint fo rce i n 2 005 Development Zone (JDZ) with Nigeria for the exploitation of a significant part of São Tomé's exclusive economic zone (EEZ) has turned the issue of oil revenue management into a key policy priority. In 2005 the Oil Revenue Management Law (ORML) will come into force, establishing an institutional framework for the transparency and accountability of future oil revenue. The ultimate aim of the law is to defuse tensions in the political struggle for control of a new and lucrative source of revenue and thus ensure that oil revenue is used for sustainable economic development. The ORML establishes a national oil account, set up in a custodian bank located outside São Tomé, into which all earnings from oil will be deposited directly. There will be strict limits on the draw-down of funds, with any spending to be directed towards priority sectors. The new law also addresses the future, when São Tomé's oil resources will be exhausted. Once oil production begins, a special sub-account of the national oil account, the permanent reserve, will be set up, with the aim of converting oil revenue into permanent wealth. Earnings from investing the permanent reserve's funds will be made available for public spending projects, but the funds themselves will remain untouched so that in the future, when oil resources are exhausted, the country will receive earnings from interest on the reserve account. The law focuses on creating mechanisms to promote transparency in the management of oil revenue. There will be two audits each year, one by the auditor-general and a second by a reputable international audit firm to be selected by public tender. In a further move to promote transparency, the public will be given access to all information relating to oil-sector activity, including revenue, tenders and contracts. The law proposes to limit the confidentiality of oil contracts and to introduce an obligatory register of all documentation related to the oil sector, which will be open to the public. An independent oil management commission will act as watchdog, with powers to investigate and supervise. In June 2004 the president of Nigeria, Olusegun Obasanjo, and the Sãotoméan president, Fradique de Menezes, signed the Abuja Joint Declaration, committing their governments to disclosing all transactions resulting from oil activity in the JDZ, and to adhering to the principles of transparency. However, it remains to be seen whether the past history of secrecy and corruption in Nigeria will give way to a genuine commitment to enforce the terms of the Abuja Joint Declaration and the ORML. Corruption

Corruption is a prominent feature of public life in São Tomé. In the mid- to late 1990s there were several large-scale corruption scandals involving senior state officials. Prominent among these scandals was the fraudulent issue of Treasury bills by the ex-governor of the Banco Central de São Tomé and Príncipe (the central bank). Those involved have so far evaded prosecution and are believed to enjoy the protection of senior politicians. The unfolding corruption scandal at the government’s food aid agency, the Gabinete de Gestão da Ajuda, in which nearly 400 people (including members of the government and parliament) are suspected of receiving illegal payments, has confirmed that corruption remains pervasive. The international anti-corruption organisation, Transparency

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International, does not provide a ranking for São Tomé and Príncipe in its annual corruption perceptions index, but it does note the anecdotal evidence of a serious corruption problem there. The adoption of the Oil Revenue Management Law (ORML) in 2005 will be a major step towards ensuring the transparent management of São Tomé’s future oil revenue and preventing the misappropriation of funds. Fiscal policy Fiscal consolidation is a major demand of the IMF for the resumption of its PRGF programme. In order to reach its fiscal targets, the government is aiming to increase domestic revenue by eliminating ad hoc tax and customs duty exemptions, widening the tax base and strengthening tax administration. The customs tariff structure has been streamlined, with the total number of tariffs reduced from over 100 to four, and the maximum rate set at 20%. Following fiscal slippages in 1999 and the suspension of the PRGF, the government implemented corrective measures. However, programmed increases in public spending in 2004, in particular large increases in public-sector salaries, have increased the fiscal deficit substantially, and it is projected to more than double in 2004 to Db162.4bn (US$16.4m), equal to 24.3% of GDP. Delays in the payment of signature bonuses for the JDZ have put significant strain on the public finances, and forced the government to contract new loans to finance its priority development projects. Fiscal policy is expected to be tight in 2005 as the government seeks to contain demands for substantial increases in public spending in the anticipation of oil revenue.

Summary of government finances (Db bn; commitments basis, excl foreign financing) 2003 2004 Budget Outturn Budget Revenue 316.6 255.9 312.2 Taxes 101.1 114.2 138.4 Grants 192.9 115.5 111.7 Expenditure 383.4 279.8 474.6 Recurrent 143.0 155.3 212.2 Capital 208.4 96.2 215.0 Balance (incl grants) -66.8 -23.9 -162.4

Source: Banco de Portugal, Evolução das Economias dos PALOP.

Monetary policy Monetary policy instruments are not well developed in São Tomé and Príncipe and include minimum reserve requirements and the BCSTP's reference interest rate. However, there are no central bank or government bills. To respond to increased inflows arising from oil-related activities, the BCSTP will need to adjust the reference rate to prevent inflation from increasing too rapidly. São Tomé maintains a floating exchange-rate regime, although there have been rumours that the government is considering joining the CFA franc zone. Since late 2002 São Tomé's currency, the dobra, has depreciated sharply against the euro, from an average of Db8,586:€1 in 2002 to Db12,190:€ in December 2004, but has remained stable against the US dollar, from an average of Db9,088:US$1 in 2002 to 9,076:US$1 in December 2004.

Economic performance

Gross domestic product (% real change; market prices) Annual average 2004a 2000-04 GDP 6.0 4.3 a Estimate. Sources: IMF; Economist Intelligence Unit.

Economic stagnation has Economic expansion has long been hindered by macroeconomic instability, finally come to an end state interference, corruption, weak institutional performance, and dependence on a single export crop, cocoa. Real GDP growth averaged just 1% in the ten years between 1985 and 1995, which caused income per head to decline and poverty to rise steadily. Growth slowly began to recover in the late 1990s: it reached 2.5% in 1998 and rose to 4-5% between 2001 and 2003, backed by improved policy performance and a large inflow of foreign assistance. This improved performance—although still far from robust—has raised the prospect that São Tomé and Príncipe may be moving towards a sustained period of economic growth and poverty reduction, provided that the government meets its policy commitments to the IMF and the World Bank and that a new PRGF agreement is signed. Higher growth is expected in the years ahead, as oil signature bonuses lead to higher public expenditure and foreign investors increase oil-related investments. The IMF projects that annual real GDP growth will average 6.5% over 2004-08.

Non-traditional sources Economic performance has been hampered by the steep decline in the cocoa of growth sector, the traditional mainstay of the economy, although this has been reversed in recent years. Current policies and programmes are focused on diversifying agriculture towards other crops and promoting non-traditional sectors of the economy. The services sector, including the nascent tourism industry, is now making the strongest contribution to growth, and fishing has also seen some expansion. Exploitation of offshore oil resources will have an enormous impact on the islands’ economy. Production is expected to begin by 2010, although from 2005 there will be a significant inflow of funds from the licensing of oil exploration blocks. The development of petroleum resources is viewed with some anxiety because of the strong correlation between this and negative patterns of political and economic governance elsewhere in Africa. Inevitably, the inflow of enormous oil funds into such a small country will transform economic performance, although the quality of that growth is likely to be uneven, involving economic distortions, with a shift toward capital-intensive rather than labour-intensive, activities.

Inflation increasing again All price controls have been abolished other than that on fuel, which is adjusted periodically when new shipments are received. In the past, irregular import shipments to the islands have tended to cause price fluctuations. Average consumer price inflation remained high during much of the 1990s and reached 42% between 1995 and 1998, largely because of an expansion of the money supply in order to finance the budget deficit. Following improved budget management,

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inflation was reduced to an annual average of 9.2% in 2002—although, because of fiscal laxity, this increased to 9.8% in 2003 and an estimated 14% in 2004. The government faces significant pressure to increase civil service pay and it has increased public expenditure in anticipation of funds from the licensing of oil blocks. From 1989 onwards interest rates were progressively raised to take account of inflation, and real interest rates are now positive.

Inflation (% change, year on year) Annual average 2004a 2000–04 Consumer prices 14.0 10.7 a Estimate. Source: IMF.

Labour unrest is endemic High inflation eroded the real value of wages from the late 1980s, and years of deteriorating living standards have led to militancy among civil servants. Since 1999 the government has withstood several strikes in which unions demanded wage rises of up to 700%, stating that there was no room for such pay increases under fiscal targets agreed with the IMF. However, the availability of oil money means that the government will be under pressure to make more substantial increases, a development that is likely to have significant inflationary effects. The impact of the oil era has already started to be felt with a 33% increase in civil service salaries awarded in May 2004. In December 2004 the public-sector union, Sindicato de Trabalhadores do Estado (STE), threatened strike action unless the government met its demand of a 300% increase in the minimum monthly salary, from Db250,000 (US$110) to Db1,500,000. Whether the government delivers this salary increase to the estimated 6,000 public-sector employees or not, it is clear that it will face considerable pressure in 2005 to raise salaries.

Economic sectors

Agriculture, forestry and fishing

Agriculture is dominant In 2003 agriculture (including fishing) accounted for 19% of GDP and about 86% of exports; agricultural exports are composed almost entirely of cocoa, which has been the dominant crop since the 1890s. As a result of falling prices, ageing trees and other local supply-side constraints, cocoa production fell from 4,500 tonnes in 1994 to an annual 3,462 tonnes since 2002. Coffee still remains a secondary crop, production in 2003 amounting to only 6 tonnes. Agricultural diversification is a top government priority and is being addressed with foreign assistance. Reduction of the food import bill is also a priority for the government, since most food needs, excepting cereals, could be supplied locally. Despite land reform and the allocation of substantial aid to agriculture, foodstuffs account for 25% of imports. The food crops that have been developed most successfully are plantains, maize and tomatoes.

Land reform A major land reform programme has been under way since 1993 with assistance from the World Bank. Its objective is to distribute land from former state plantations to small-scale farmers in an attempt to increase and diversify agricultural production and to promote equity. As part of this programme, about 8,735 families had received a total of 43,522 ha of land by 2003. However, smallholder farmers have been constrained by a lack of training and credit, and by poor access to markets as a result of inadequate road transport.

Forestry São Tomé’s forest resources have been indiscriminately developed. The country produced 8,500 cu metres of logs and 3,150 cu metres of processed timber in 1995, and there were eight sawmills. Primary rainforest cover has dropped to 28% of the land area, and 30% is wooded with secondary forest. New environmental legislation to protect the forests and prohibit unauthorised tree felling was introduced in the 1990s. However, the government has yet to implement a plan to protect one-third of the total land area by creating national parks, as recommended by the EU. This may change with the current prep- aration of a National Environment Plan for Sustainable Development, which identifies deforestation as one of the island’s main environmental problems.

Fishing The fishing sector has been identified as a priority for economic diversification. Around 2,300 artisanal fishermen produce about 86% of the total local catch, estimated by the Food and Agriculture Organisation (FAO) at 3,500 tonnes annually. However, the 160,000-sq-km exclusive economic zone (EEZ) contains important offshore fishing resources, with potential yields of 12,000 tonnes per year. Fishing licences have become the country’s third-largest source of foreign exchange after cocoa. A new three-year fishing agreement was signed with the EU in January 2002, bringing about €2.2m (US$2.4m) per year to the government in exchange for allowing EU vessels to catch tuna in the country’s territorial waters. About 40% of the EU compensation is to be used to support local fisheries, surveillance and research. In May 2004 the Assembléia Nacional (the parliament) voted against a bilateral fishing agreement with Angola on the grounds that it was detrimental to São Tomé’s interests.

Mining and semi-processing

Oil production is expected to São Tomé and Príncipe’s territorial waters in the middle of the Gulf of Guinea, begin in 2010 now one of the world’s most important oil frontiers, have attracted the interest of foreign oil companies. In 1998 ExxonMobil signed an agreement for the exploration of 22 deepwater concession blocks, and the results of seismic exploration indicated that the country had substantial recoverable oil reserves. Oil production is expected to begin in 2010. In September 1999 the government established a state petroleum company, Petrogás, which is to participate in the energy sector. Development of São Tomé’s offshore energy resources was complicated, however, by a dispute with Nigeria over the maritime border. In March 1998 parliament passed a law on São Tomé’s exclusive economic zone (EEZ), although this was not recognised by Nigeria, which itself claimed large parts of the EEZ. In February 2001 an agreement was reached under which the two countries will jointly develop petroleum

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resources in the disputed zone, the Joint Development Zone (JDZ). A Joint Development Authority (JDA) was also set up to administer the zone and to license offshore blocks for exploration and production. Under the terms of the JDZ, São Tomé will receive 40% of oil revenue. São Tomé and Príncipe: oil and gas concession areas

NIGERIA

CAMEROON

Gulf of Guinea

01 02 E Q 03 04 05 U 06 A 09 07 08 T O R IA Nigeria-São Tomé L Joint development zone GU PrPríncipeíncipe INEA SÃOTOMÉAND São Tomé PRÍNCIPE Exclusive Economic Zone SãoTomé São Tomé

GABON

Blocks on offer in 2004 Note.Block 01 licence awarded to ChevronTexaco/ 0 km 50 100 150 200 ExxonMobil/Energy Equity Resources. Source: Economist Intelligence Unit. 0 miles 50 100

One barrier to the development of the JDZ has been a legal dispute with a ExxonMobil & EHRC secure Nigerian-owned company, Chrome Energy—also known as Environmental pre-emptive rights in JDZ Remediation Holding Company (ERHC) of the US—with which the government signed a 25-year joint-venture agreement in 1997 to help it develop the energy sector. The World Bank described the agreement with ERHC as detrimental to the country's interests and recommended that it be scrapped or renegotiated. In October 1999 the government tried to rescind the agreement, and after ERHC was acquired by Chrome Energy in 2001 a highly controversial out-of-court settlement was reached under the direction of the then president, Miguel Trovoada, and his son Patrice, involving even worse terms than the original contract. The Chrome agreement was described by neutral observers as one of the most unequal ever signed by any government, granting the Nigerian company extensive rights and privileges over São Tomé’s oil resources. The IMF advised the government to review the agreement and to seek terms that would protect the country’s national interest. The current president, Fradique de Menezes, vowed in May 2002 to renegotiate the agreement, but after considerable pressure from Nigeria he was forced to accept that it would have to remain intact, although negotiations have removed some of its more contentious provisions. As a result, ERHC and ExxonMobil both have pre-

emptive rights on up to eight blocks in the JDZ, although jointly they are barred from owning more than 40% of any one block.

The first licensing round is a In April 2003 the JDA opened the first licensing round for the JDZ, putting nine disappointment offshore blocks up for tender. Bidding companies were given six months to submit their proposals, and by the time bidding ended on October 27th a total of 20 companies had submitted 33 bids, which were collectively worth US$1.7bn. There was strong international criticism of the licensing round, in particular the JDA’s failure to attract many heavyweights from the international oil industry. Total, Shell and BP, which are already involved in Nigeria, Angola and elsewhere in the region, declined to participate, and the majority of bidders were small Nigerian or junior international firms. As a result the licensing round was formally concluded in November 2004 with only one block being awarded.

Block 1 is awarded and a new Block 1—which is widely considered the most promising block as it borders licensing round is launched Total’s prolific OPL 246 acreage on the Nigerian side of the JDZ boundary—was awarded to a consortium of two US firms, ChevronTexaco and ExxonMobil, and a Norwegian-based firm, Energy Equity Resources (EER). A signature bonus of US$123m was offered for the block, which will be payable in 2005 following the conclusion of a joint operating agreement (JOA) and production sharing contract (PSC), both of which were signed in December 2004. In November 2004 the JDA launched a second licensing round, putting five blocks up for tender (2, 3, 4, 5 and 6). Winning bidders were expected to be announced before the end of January 2005, with JOAs and PSCs for the awarded blocks to be completed during the second quarter of 2005.

Manufacturing

A small manufacturing sector Industry contributed 18% of GDP in 2003, of which manufacturing accounted for 3.9%. Manufacturing is limited to several small factories, mainly involved in the agro-industrial sector (beer, bread, fish and palm oil), timber processing and other light industrial activities (including brick making and printing).

Construction

There is a small local construction industry involved in commercial and residential building, contributing 10.1% of GDP in 2003. The larger public-works contracts require the involvement of foreign companies and generous funding from international donors.

Financial services

The central bank is the Banco Central de São Tomé e Príncipe (BCSTP), and commercial operations are handled by two private commercial institutions: Banco Internacional de São Tomé e Príncipe (BISTP) and Afriland First Bank de São Tomé e Príncipe, which is affiliated to Afriland First Bank of Cameroon. In 2004 a Cameroon-owned bank, Banco Comercial, announced that it was

starting operations in São Tomé with a focus on industry and real estate. Previously BISTP was the only commercial bank in the country after Banco Comercial do Equador (BCE) collapsed in 2001. Plans to resurrect BCE initially faltered, despite a late appeal by its majority shareholder, who blamed the collapse on looting by the bank’s board, which had made large loans to cronies associated with the former ruling party. In March 2004, however, the authorities reached a judicial agreement granting BCE an operating licence and allowing it to emerge from bankruptcy proceedings. The Caixa Nacional de Poupança e Crédito (CNPC), a credit and savings institution, was liquidated in 1997 after fraudulent activities led to bankruptcy.

Other services

Some potential for tourism The tourism potential of the islands lies in their great natural beauty, empty development beaches, endemic bird species and fine old plantation houses. However, tourists are deterred by the islands’ extreme isolation, high air fares and poor infrastructure—although air access, telecommunications and hotel accommo- dation all improved during the 1990s. The government is trying to promote São Tomé and Príncipe as an exotic holiday destination and some investment has been taking place; resorts are now in operation, marketing themselves abroad and attracting some foreign tourists, even though the domestic and business market still accounts for much of the hotel trade. Foreign-exchange earnings from tourism have increased from US$4.1m in 1998 to an estimated US$15.8m in 2004, according to data from the Banco de Portugal. Total hotel capacity is estimated at about 500 beds, a vast improvement on the early 1980s, when there was only one hotel. The main markets are currently Portugal, Angola and Gabon (visitors from Gabon are mostly Western expatriates based in Libreville).

Tourism, 2004a Tourism revenue (US$ m) 15.8 Contribution to GDP (%) 18.2 a Estimates. Source: Banco de Portugal, Evoluçao das Economias dos PALOP.

The external sector

Trade in goods

Foreign trade, 2004a (US$ m) Merchandise exports fob 6.8 Merchandise imports fob -38.4 Trade balance -31.6 a Estimates. Source: Banco de Portugal, Evoluçao das Economias dos PALOP.

A perpetual trade deficit São Tomé and Príncipe’s export performance is almost exclusively reliant on cocoa, which represents over 86% of earnings. After years of decline, resulting from lagging production and low international prices, merchandise exports

rebounded in 2002, thanks to higher international cocoa prices, and in 2004 reached an estimated US$6.8m according to the Banco de Portugal's annual report on lusophone African countries. Nonetheless, the high level of imports— an estimated US$38.4m in 2004—leaves the country’s trade balance in perpetual deficit, equivalent to over one-half of GDP. The composition of imports—capital goods, oil products and food—has changed little since the 1980s, as most goods lack local substitutes. Portugal has retained its position as São Tomé’s leading trade partner, accounting for two-thirds of imports and one-third of exports in 2003. Angola is the main source of fuel imports, which are supplied by its national petroleum company, Sonangol.

Main trading partners, 2003 (% of total) Exports to: Imports from: Netherlands 40.7 Portugal 62.3 Portugal 33.5 Belgium 11.9 Belgium 15.1 Angola 10.3

Source: Banco de Portugal, Evoluçao das Economias dos PALOP, 2004.

Invisibles and the current account

A chronic deficit on the Since the collapse of cocoa prices in 1979 the current account has run a large current account deficit, financed mainly by loans and grants. The high cost of shipping goods to São Tomé is reflected in the large deficit on the services account, which amounted to US$10.1m in 2003. Earnings from tourism have increased, reaching an estimated US$15.8m in 2004, but migrants’ remittances remain small. Substantial official transfers—in some years equivalent to the country’s GDP—help to offset the deficit on the trade and invisibles balance.

Current account, 2003a (US$ m) Merchandise exports fob 6.6 Merchandise imports fob -32.7 Trade balance -26.1 Net services -10.1 Net current transfers 26.1 Current-account balance -15.6 a Estimates. Source: Banco de Portugal, Evolução das Economias dos PALOP.

Aid São Tomé receives one of the largest amounts of aid per head in the world— equivalent to US$166 per inhabitant in 2002—and the economy is heavily dependent on such assistance. The poor quality of governance on the islands— including rampant corruption, economic instability and institutional weakness—led to a decline in assistance in the mid-1990s. According to the OECD, net official development assistance (ODA) to São Tomé reached a peak of US$84m—almost twice the country’s GDP—in 1995, but fell to US$26m in 2002. A roundtable conference of foreign donors in October 2000 led to pledges of assistance of US$49m, of which US$35m was disbursed. Portugal is the main bilateral donor, providing about US$11m in net aid in 2000. The EU,

the World Bank and the African Development Fund (ADF) are the major multilateral donors.

Capital flows and foreign debt

Debt stock, 2003a (US$ m unless otherwise indicated) Medium and long-term debt 292.5 Multilateral 198.2 Bilateral 94.3 Commercial 0.0 Short-term debt 10 Arrears 15.4 Total external debt 302.5 Debt/GDP (%) 508.8 a Estimates; excluding short-term debt. Source: Banco de Portugal, Evolução das Economias dos PALOP, September 2004.

Debt burden to be eased Traditionally, the balance-of-payments deficit has been covered by an accumu- by donors lation of arrears, debt-relief grants and a reduction in reserves. According to the Banco de Portugal’s annual report on lusophone African economies, Evolução das Economias dos PALOP, São Tomé’s total external debt reached US$302.5m in 2003, of which US$292.5m was long-term public and publicly guaranteed debt. All sovereign debt is owed to official creditors; of this, about 66% is owed to multilateral agencies and 31% to bilateral donor agencies. São Tomé’s debt had long been unsustainable, with total external debt in 2003 equivalent to 1,348% of exports of goods and services and 508.8% of GNP. By these criteria São Tomé qualifies easily as debt-distressed under the IMF and World Bank’s heavily indebted poor countries (HIPC) debt-relief initiative. Following a favourable review of the government's performance under the poverty reduction and growth facility (PRGF) in December 2000, São Tomé was admitted to the enhanced HIPC programme, entitling it, on reaching the completion point, to debt relief of US$200m in nominal terms, or an 83% reduction in its total outstanding debt in net present value terms. The ratio of debt service to exports has remained steady since 2001, reaching 49.5% in 2003, but following the start of oil production in the Joint Development Zone (JDZ) it is expected to drop to 7% in 2000-09. The reduction in debt-service payments is expected to free resources for expenditure on basic social services and infrastructure. The suspension of the PRGF by the IMF in late 2001 does not mean that São Tomé’s access to HIPC has been jeopardised. Progress towards completion point will resume when a new PRGF is in place and in the meantime, the country will still benefit from the "flow terms" of HIPC, which means that it still receives relief on debt service.

Foreign reserves and the exchange rate

A floating currency The national currency is the dobra (divided into 100 centimos), which replaced the Portuguese escudo in September 1977. All foreign-exchange transactions are made under the supervision of the Banco Central de São Tomé e Príncipe

(BCSTP, the central bank), but exchange controls are applied flexibly. Since 1994 the official exchange rate has been determined by the weighted average of the exchange rates in commercial banks, foreign-exchange bureaux and the parallel market. The gap between the official and parallel-market exchange rates has since narrowed to a small margin. The exchange rate is stable, and since 1998 the dobra has depreciated broadly in line with the inflation differential between São Tomé and its main trading partners. Foreign reserves are robust, amounting to US$17.4m in 2002, US$25.5m in 2003, and US$24m in March 2004. The continuing weakness of the dobra prompted the government to start negotiations with the Banque des Etats de l’Afrique Centrale (BEAC) in September 2004 with a view to joining the CFA franc zone and adopting the CFA franc as its currency. Although a lusophone country, São Tomé’s accession would not be unprecedented, as Equatorial Guinea joined in 1984 and Guinea- Bissau acceded in 1997, and the French government is known to be keen on incorporating São Tomé’s nascent oil economy into the franc zone.

Regional overview

Membership of organisations

African Union (AU) The African Union (AU) is the successor to the Organisation of African Unity (OAU) and is based in the Ethiopian capital, Addis Ababa. The AU was formally launched in July 2002 at a meeting of African heads of state in the South African city of Durban. This came two years after the AU’s formation was first agreed in Togo in July 2000 and followed a one-year transitional period that began after the ratification of the constitutive act of the AU by two-thirds of the member states in May 2001. The AU is modelled on the EU and has ambitious plans for a parliament, a central bank, a single currency, a court of justice and an investment bank. The most advanced of these is for a Pan-African Parliament, which held its first session in South Africa in October, although it will not play a legislative role for five years. The president is currently Gertrude Mongella from Tanzania. The AU also aims to have common defence, foreign and communications policies, based loosely on those of the EU. Even if these goals are not fulfilled, the organisation fills the need for a forum for discussing the continent’s problems and the idea of pan-African unity exerts a strong hold over member countries. In practical terms, the most high-profile AU event is the annual conference of heads of state, which is hosted by the member state that is due to hold the chairmanship of the organisation for the following year. The day-to-day affairs of the AU are managed by the AU commission, which is modelled on the EU commission and was endorsed by the AU heads of state summit in July 2003. The commission is headed by the former Malian president, Alpha Konaré, aided by a deputy, Patrick Mazimhaka of Rwanda, both of whom were elected at the summit. There are also seven appointed AU commissioners. One of the main problems facing the AU is that many of the proposed new institutions and policy co-ordination mechanisms are costly and cannot be funded within the AU’s current resource allocations. To help to counter this, at the July 2004 Annual Summit Mr Konaré presented a 2004-07 Strategic Framework aimed at launching Africa into the 21st century. Under this, member states are supposed to pledge 0.5% of GDP to fund the AU, which will allow it to double the staff at its headquarters and to push ahead with the implementation of the New Partnership for Africa’s Development (Nepad). This is a potential bone of contention with the South African government, which is keen for Nepad to remain in its South African headquarters. However, to date, many members still fail to pay their membership dues so further commitments, other than from external donors, are unlikely. In December 2003 donors and external lenders expressed their full support for the AU’s initiatives and the creation of new institutions. The main criticism levelled at the OAU in the last decade was that little real action resulted from its policy announcements. There are concerns that the AU, like its predecessor, will be undermined by a lack of real commitment to its initiatives amongst the 53 member states, many of which suffer from weak governance. This problem is further compounded by the fact that many

member states are unlikely to give up the sovereignty required to make several of the proposed initiatives—such as a single currency or a court of justice— operate effectively. The AU will also battle to overcome opposition to the principle of non- interference, which has been a major hindrance to the resolution of conflicts on the continent and is a contentious issue among member governments. Although non-interference was enshrined in the old OAU, this is not the case with the AU, which has set up a Peace and Security Council (PSC; to replace the OAU’s Mechanism for Conflict Prevention, Management and Resolution) modelled on the UN Security Council. It is envisaged that the PSC will sanction military intervention in member states in cases of genocide, unconstitutional changes of government and gross human rights abuse. The proposed military intervention by the AU is to be through a standing armed force, which is projected to comprise five battalions by 2010 and has already received some funding from both the EU and the US. Even without the establishment of the PSC, since May 2003 the AU has had an observer mission in Burundi, led by South Africa and including troops from Mozambique and Ethiopia, to help enforce a peace agreement in Burundi's civil war. An AU observer mission was also sent to the Darfur region of Sudan in July 2004, and a protection force is being deployed. If this is increased, to become a real peacekeeping force, it could prove to be the first real test of the AU’s commitment to intervening in member countries’ domestic affairs.

Cotonou Convention A new, 20-year, convention was signed in June 2000 in Cotonou, Benin, offering a group of 77 African, Caribbean and Pacific (ACP) countries preferential trade and aid links with the EU. The Cotonou Convention replaced Lomé IV, a convention that was signed in 1989 and replaced previous agreements signed in 1975, 1979 and 1984. Although similar to the Lomé conventions, the new convention has a stronger political dimension. Respect for human rights, democratic principles and the rule of law were essential components of Lomé IV. Under the Cotonou agreement, the ACP countries have also agreed to promote good governance, combat corruption and try to prevent illegal immigration into the EU. A revision of the Cotonou Convention is made possible every five years by a special clause. Negotiations between the ACP countries and the EU for the review and adaptation of the accord should start in autumn 2004 and be completed in February 2005. Under previous conventions, ACP products, whether agricultural or industrial, entered the EU duty-free, although four agricultural products—beef, sugar, bananas and rum—were subject to a more restrictive system of tariff quotas. Because the type of trade agreement established by the Cotonou Convention does not comply with the rules of the World Trade Organisation (WTO), the new agreement offers a negotiating framework for tailor-made regional free- trade agreements known as Economic Partnership Agreements (EPAs), under which ACP countries, preferably within existing economic groupings, will gradually open their domestic markets to European products. Given the adjustment costs involved, a preparatory period of eight years (2000-08) has been agreed, during which the old system of preferences will continue to apply. However, under existing global trading rules, the 33 African countries classified

as least developed countries will still have the option of entering the EU's generalised system of preferences (GSP). Unlike the Lomé Convention, the GSP, which benefits all developing countries, complies with the rules of the WTO because it is based on the twin principles of non-reciprocity and non- discrimination. In September 2003 the ACP countries and the WTO signed an agreement at the Cancún trade round, whereby the WTO will provide training and technical assistance to ACP countries as a form of mutual co-operation. The European Development Fund (EDF) will remain the main source of multilateral European aid to the ACP countries. Under the new convention, EDF instruments have been regrouped and rationalised into two programmes: one to provide grants for long-term development schemes being carried out either at the national or the regional level, with additional support available in the event of a fall in export earnings, and the other to finance risk capital and loans to the private sector. The ninth EDF will total €13.5bn (US$12.9bn). In addition, about €10bn left undisbursed from previous programmes will remain available until 2007, and the European Investment Bank will provide €1.7bn. The financial protocols are concluded for a period of five years, with the ninth EDF running from 2000 to 2005. The Cotonou Convention finally entered into force in April 2003 with all 15 EU members and 76 ACP nations (not Somalia) ratifying the treaty. A month later the ACP representatives signed the Brussels Declaration, which calls for the timely and effective implementation of EDF funds. This represents a commitment towards the efficient disbursement of EDF resources for the benefit of ACP countries. In June 2004, at the 4th Summit of ACP Heads of State, the ACP Council of Ministers was mandated to ensure the effective co-ordination and coherence of EPA negotiations within the ACP and between various ACP regions, as well as with the WTO negotiations, so as to ensure unity.

Comunidade dos Países de The community of Portuguese-speaking countries (Comunidade dos Países de Língua Portuguesa (CPLP) Língua Portuguesa; CPLP) is the equivalent of the English-speaking Commonwealth and the French-speaking Organisation internationale de la Francophonie. It includes Portugal and its five former African colonies: Angola, Cape Verde, Guinea-Bissau, Mozambique, and São Tomé and Príncipe, as well as Brazil and East Timor. The CPLP was established comparatively late, in July 1996. Portugal’s long-standing desire to create a lusophone bloc had been frustrated by the independent African states’ suspicion of the former colonial power, as well as the rivalry or indifference of Brazil, which is a competing pole of influence in the Portuguese-speaking world. Mozambique’s decision to join the Commonwealth in 1995 galvanised efforts to create the CPLP. The CPLP has a permanent secretariat, located in Lisbon and headed by an executive secretary, currently João Augusto de Medicis, a Brazilian elected in July 2002. The organisation holds annual conferences of heads of state as well as of the foreign ministers of the member states, the Council of Ministers. A permanent co-ordination council, generally made up of the ambassadors of member states resident in Lisbon but responsible to their foreign ministers, meets once a month and is responsible for implementing the decisions and recommendations of the conference of heads of state and of the Council of Ministers. Its objectives are the promotion of the Portuguese language and of

co-operation between its members in international diplomacy, economic affairs, culture, justice and science. Among its objectives it also lists the reform of the UN and the World Bank—to increase the influence of its members and other developing countries in both institutions—and the promotion of links between Europe and Africa and between the EU and Mercosur, the South American trade bloc of which Brazil is a member. All its decisions are reached by consensus.

Appendices

Sources of information

National statistical sources Banco Central de São Tomé e Príncipe (the central bank) Departamento da Agricultura e Desenvolvimento Rural Direcção de Estatística Instituto de Desenvolvimento Econômico e Social Ministério das Finanças

International statistical sources Banco de Portugal, Evolução das Economias dos PALOP, Lisbon IMF, Direction of Trade Statistics, yearbook IMF, International Financial Statistics IMF, São Tomé and Príncipe: Statistical Appendix, April 2004 IMF, São Tomé and Príncipe—Article IV Consultation and Staff Monitored Program, September 2002 OECD, Development Assistance Committee, Geographical Distribution of Financial Flows to Aid Recipients World Bank, Global Development Finance

Select bibliography and Tony Hodges, Malyn Newitt, São Tomé and Príncipe: From Plantation Colony to websites Microstate, Westview Press, London 1988 Malyn Newitt, Portugal in Africa: the last 100 Years, Hurst & Co, London 1981 Caroline Shaw, São Tomé and Príncipe, Clio Press, Oxford 1994 War ne, S oph ie, Gabon, São Tomé and Príncipe, Bradt Travel Guides, 2003 Banco Central de São Tomé e Príncipe (central bank), www.bcstp.st Bank of Portugal, Annual report on PALOP economies, www.bportugal.pt/ publish/palop/todo-2004.pdf Columbia University São Tomé e Príncipe Advisory Project (information on Oil Revenue Management Law), www.earthinstitute.columbia.edu/cgsd/STP IMF country page for São Tomé, www.imf.org/external/country/STP/index.htm Links on São Tomé, www.politicalresources.net/saotome.htm Nigeria-São Tomé e Príncipe Joint Development Zone (information on oil sector and licensing rounds), www.nigeriasaotomejda.com Tela Non (daily newspaper), www.cstome.net/diario World Bank country page for SãoTomé, www.worldbank.org/afr/st

Reference tables

Population (m) 1999 2000 2001 2002 2003 Total 0.15 0.15 0.15 0.16 0.16

Sources: IMF, International Financial Statistics.

Gross domestic product 1999 2000 2001 2002 2003 GDP at current market prices (Db bn) 334 370 422 487 557 Real change (%) 2.5 3.0 4.0 4.1 4.5

Source: IMF, São Tomé and Príncipe: Statistical Appendix, April 2004; World Economic Outlook, September 2004.

Gross domestic product by sector (Db bn; at current prices) 1998 1999 2000 2001 2002 Agriculture 51.3 56.2 60.4 66.0 71.4 Fisheries 8.6 12.2 13.7 14.9 16.0 Manufacturing & energy 15.6 18.5 20.3 21.9 23.3 Construction 31.3 38.3 43.8 48.3 52.3 Commerce & transport 71.0 84.9 93.5 109.3 129.0 Public administration 68.8 82.7 92.1 108.0 131.0 Financial institutions 27.3 32.9 36.3 42.6 50.7 Other services 7.0 8.5 9.4 11.0 13.1 GDP 280.9 334.2 369.5 422.0 486.8

Source: IMF, São Tomé and Príncipe: Statistical Appendix, ,April 2004.

Gross domestic product by expenditure (Db bn; current prices) 1998 1999 2000 2001 2002 Private consumption 228.4 266.4 296.2 318.7 366.4 Public consumption 71.8 99.4 116.8 200.5 181.1 Private capital formation 45.0 46.8 39.2 59.9 87.6 Public capital formation 55.3 86.8 93.2 91.0 72.1 Gross domestic expenditure 400.5 499.4 545.4 670.1 707.1 Exports of goods & services 82.8 117.4 123.5 137.5 177.8 Imports of goods & services -202.8 -282.7 -299.4 -385.6 -398.2 GDP 280.9 334.2 369.5 422.0 486.8

Source: IMF, São Tomé and Príncipe: Statistical Appendix, April 2004.

Money and credit (Db m unless otherwise indicated; end-period) 1999 2000 2001 2002 2003 Currency in circulation 20,945 25,048 35,763 39,424 55,854 Demand deposits 27,178 36,756 57,388 69,112 105,276 Money (M1) 50,123 61,885 95,483 108,597 161,230 % change, year on year 5.3 23.5 54.3 13.7 48.5 Quasi-money 39,793 50,401 61,815 88,046 138,483 Money supply (M2) 89,916 112,286 157,298 196,643 299,713 % change, year on year 7.7 24.9 40.1 25.0 52.4 Domestic credit 16,574 9,159 41,196 47,387 129,059 Net claims on central government –8,432 –17,446 11,850 2,232 32,591 Claims on private sector 25,007 26,605 29,346 45,155 91,897 Net foreign assets 156,406 169,482 200,798 241,013 323,090

Source: IMF, International Financial Statistics.

Inflation and interest rates (%; end-period unless otherwise indicated) 1999 2000 2001 2002 2003 Consumer prices (annual av) 12.7 11.0 9.3 9.2 9.8 GDP deflator 16.0 7.4 9.8 10.8 9.5a Commercial lending rate (90-180 days) 40.3 39.7 37.0 37.1 33.8 Discount rateb (end-period) 17.0 17.0 15.5 15.5 14.5 a Estimate. b Rate charged by the central bank on loans to commercial banks. Sources: IMF, São Tomé and Príncipe-Statistical Appendix, April 2004; International Financial Statistics; World Economic Outlook, September 2004.

Agricultural production ( tonnes) 1998 1999 2000 2001 2002 Cocoa 3,928 3,161 2,883 3,652 3,462 Coffee 36 18 12 13 5 Copra 162 190 882 363 n/a Pepper n/a n/a n/a 2 3 Maize 1,352 1,487 1,587 n/a n/a Breadfruit 2,500 3,025 3,200 14,900 18,400 Bananas 34,569 39,785 39,800 27,020 28,620 Taro 20,964 24,905 24,900 26,000 24,650

Source: IMF, São Tomé and Príncipe: Statistical Appendix, April 2004.

Foreign trade (US$ m) 1998 1999 2000 2001 2002 Merchandise exports fob 4.75 3.92 3.19 3.68 5.06 Cocoa 4.58 2.93 2.93 3.26 4.62 Copra 0.03 0.00 0.04 0.00 0.00 Coffee 0.06 0.04 0.03 0.00 0.01 Other 0.07 0.94 0.19 0.40 0.43 Merchandise imports fob 16.8 21.9 22.9 24.4 24.6 Foodstuffs 4.3 4.8 4.5 7.7 6.0 Petroleum products 1.9 3.7 5.0 4.1 3.8 Investment goods 8.2 10.8 12.3 11.3 12.8 Other 2.5 2.6 1.0 1.2 2.0 Trade balance -12.1 -18.0 -19.7 -20.7 -20.5

Source: IMF, São Tomé and Príncipe: Statistical Appendix, April 2004.

Main trading partners (% of total) 1999 2000 2001 2002 2003 Exports to: Netherlands 19.1 12.1 26.4 34.3 43.0 Canada 1.3 4.7 7.2 10.8 15.5 Germany 3.4 0.9 0.4 8.8 10.6 Philippines 0.8 3.1 5.9 4.5 6.4 Belgium 2.3 1.3 2.9 6.9 4.4 Imports from: Portugal 41.3 49.1 39.1 51.2 51.0 Germany 5.8 7.6 1.1 10.4 11.5 Italy 0.8 0.4 0.4 0.8 5.8 Belgium 3.0 5.2 4.8 6.2 4.9 Netherlands 0.5 1.3 2.4 3.8 4.2

Source: IMF, Direction of Trade Statistics.

Balance of payments (US$ m) 1998 1999 2000 2001 2002 Merchandise exports fob 4.7 3.9 3.2 3.7 5.1 Merchandise imports fob -16.8 -21.9 -22.9 -24.4 -25.5 Trade balance -12.1 -18.0 -19.7 -20.7 -20.5 Net services & income -10.3 -6.5 -5.3 -11.1 -7.6 Net private unrequited transfers 0.5 0.5 0.5 0.6 0.8 Net official unrequited transfers 13.4 11.6 13.9 18.0 14.4 Current-account balance -8.5 -12.3 -10.6 -13.1 -12.9 Excl official transfers -21.8 -23.9 -24.5 -31.2 -27.3 Medium- & long-term capital 5.5 9.6 7.1 7.1 1.0 Foreign direct investment 4.2 3.0 3.8 3.3 5.2 Net short-term capitala -3.2 0.0 1.0 5.6 8.2 Overall balance -6.2 -2.7 -2.5 -0.5 -3.7 a Includes short-term loans from Nigeria. Source: IMF, São Tomé and Príncipe: Statistical Appendix, April 2004.

Net official development assistancea (US$ m) 1998 1999 2000 2001 2002 Bilateral 18.1 19.1 17.7 21.9 19.2 Portugal 10.8 13.2 10.6 14.0 13.0 France 4.8 4.5 3.6 3.6 3.8 Japan 1.4 0.1 1.2 1.1 1.3 Spain 0.4 0.7 1.9 2.6 1.0 Multilateral 9.9 8.5 17.3 16.3 6.8 World Bank (IDA) 1.7 0.7 1.3 5.6 1.2 European Commission 1.6 1.8 6.0 5.0 2.4 African Development Fund 3.7 3.2 1.8 1.7 0.5 Total 28.1 27.5 35.0 38.3 26.0 Grants 23.3 24.4 25.2 26.1 24.8 a Disbursements minus repayments. Official development assistance is defined as grants and loans with at least a 25% grant element, provided by OECD and OPEC member countries and multilateral agencies, and administered with the aim of promoting welfare and development in the recipient country. IMF loans, other than trust fund facilities, are excluded, as is aid from the former Eastern bloc. Source: OECD Development Assistance Committee, Geographical Distribution of Financial Flows to Aid Recipients.

External debt (US$ m unless otherwise indicated) 1998 1999 2000 2001 2002 Total external debt 256.9 319.6 315.1 312.8 333.4 Long-term debt 242.8 290.2 293.6 293.4 307.9 Short-term debt 14.0 29.3 19.0 16.9 22.9 Interest arrears on long-term debt 9.0 17.3 7.0 6.9 7.9 Official creditors 9.0 17.3 7.0 6.9 7.9 Private creditors 0.0 0.0 0.0 0.0 0.0 Public & publicly guaranteed long-term debt 242.8 290.2 293.6 293.4 307.9 Private non-guaranteed debt 0.0 0.0 0.0 0.0 0.0 Total debt service 3.8 4.4 4.2 3.9 6.1 Principal repayments 2.2 2.7 2.2 1.7 3.4 Interest payments 1.6 1.7 2.0 2.2 2.7 Ratios (%) Total external debt/GNI 717.5 756.4 724.2 722.3 717.9 Debt-service ratioa 32.1 25.8 25.2.7 23.7 31.8 Concessional debt/total external debt 91.9 88.8 88.3 88.4 88.6 Note. Long-term debt is defined as having a maturity of over one year. a Debt service as a percentage of earnings from exports of goods and services. Source: World Bank, Global Development Finance.

Foreign reserves (US$ m; end-period) 1999 2000 2001 2002 2003 Foreign-exchange reserves 10.88 11.64 15.48 17.34 25.44 SDRs 0.00 0.00 0.00 0.01 0.02 Total reserves excl gold 10.88 11.64 15.48 17.35 25.46

Source: IMF, International Financial Statistics.

Exchange rate (period averages) 1999 2000 2001 2002 2003 Db:US$ 7,119.0 7,978.2 8,842.1 9,088.3 9,347.6

Source: IMF, International Financial Statistics.

Editors: Carolina Monsalve (editor); Roger Boulanger (consulting editor) Editorial closing date: December 22nd 2004 All queries: Tel: (44.20) 7830 1007 E-mail: [email protected]