Cape Verde - Diagnostic Trade Inttegration study Update - 2013

This Report is an update of the Cape Verde Diagnostic Trade Integration Study, titled Cape Verde’s Insertion into the Global Economy, produced and validated by the Government of Cape Verde in December 2008. Like the previous 2008 study, this Cape Verde Diagnostic Trade Integration Study Update provides a critical examination of the major institutional and production constraints that hinder Cape Verde’s ability to capitalize fully on the growth and welfare gains from its integration into the world economy. As a policy report, this study offers a set of priority policies and measures that can be implemented by both the public and private sectors to mitigate and surmount these supply side and institutional constraints. These recommendations are summarized in an Action Matrix. The Report is fruit of the generous support of the multi-donor program the Enhanced Integrated Framework (EIF). In every crisis there is an opportunity. Four years after the validation of the country’s first Diagnostic Trade Integration Study in 2008, Cape Verde finds itself in a drastically altered external environment. Cape Verde faces a worsened external environment than four years ago, when it was also traversing years of crisis as global food and energy prices escalated. Just as the country was validating its first trade study in late 2008, and celebrating its graduation from the list of Least Developed Countries, the onset of the deepest global recession in recent memory triggered an even worse external situation as the country’s principal source of markets, investments, remittances and aid, the Eurozone, unraveled economically and politically. As the Eurozone crisis spread, it was Cape Verde’s misfortune that the crisis contaminated precisely its biggest Eurozone partners and donors, such as Portugal, Spain and Italy. For such a highly dependent and exposed economy like that of Cape Verde, the deteriorating external sector has had a substantial negative impact on its macroeconomic performance. At the time of the validation workshop and graduation in 2008, no one could have foreseen or predicted the severity of the global crisis that followed. Despite traversing these years of adversity and external shocks, and suffering palpable setbacks, Cape Verde’s economy had proven surprisingly resilient, especially its principal sector, tourism. To its great credit, the country’s economic fundamentals are solid, and have been carefully and prudently managed over the years. For this reason alone, the country has thus far weathered the global and Eurozone crisis. Yet the near and medium term future remains uncertain. The country’s margin for maneuver has narrowed, its options far more limited, and hard choices lie ahead. Thus, there is no better time than now to analyze Cape Verde’s position in the global economy, and to examine the many challenges and opportunities it faces. The first diagnostic trade study outlined an ambitious agenda and set of policy strategies to enhance Cape Verde’s participation in the global economy. Written prior to the global crisis, the study did not, and could not, anticipate the scope and depth of the subsequent global and Eurozone crises. A few short months before the validation of the first DTIS Cape Verde joined the World Trade Organization (WTO). It has spent these four years adjusting to this status and implementing its commitments. At the same time, the country seeks greater economic integration with the European Union. Since 2008 the government has been investing heavily in the country’s economic infrastructure, focusing especially on fostering transformation in key sectors like agriculture, fisheries, tourism and creative industries. For these and many other reasons, it is both timely and urgent to review the road traveled since 2008. It is an opportune moment to reassess the country’s options, to rethink strategies, and to chart a new way forward that it is practical, implementable, and that builds on the country’s competitive advantages and current successes.

Draft environmental report on Cape Verde

Faced with recurrent drought and famine during five centuries of human occupation, the small and densely populated Cape Verde Islands have a history of severe environmental problems. The arid climate and steep, rocky terrain provide scant resources for traditional subsistance farming under the best conditions, and in years of low rainfall the failure of rainfed crops causes massive food shortages. Agricultural use of steep slopes where rainfall is highest has led to soil erosion, as has removal of the island's vegetation for fuel and livestock. Pressure on the vegetation is particularly severe in dry years. International aid can provide relief from famine, and the introduction of modern agricultural and conservation techniques can improve the land and increase yield, but it is unlikely that Cape Verde can ever be entirely self -sufficient in food. Ultimately, the solution of Cape Verde's economic and environmental problems will probably require the development of productive urban jobs so the population can shift away from the intensive and destructive use of land for subsistance farming. In the meantime, the people of Cape Verde can best be served by instituting fundamental measures to conserve and restore the land so that it can be used to its fullest potential. The primary environmental problems in Cape Verde today are: 1. Soil degradation. Encouraged by brief but heavy rains and steep slopes, soil erosion is made worse by lack of vegetation. Soils are also low in organic matter due to the practice of completely removing crop plants and natural vegetation for food, fuel or livestock feed. 2. Water shortage. Brief and erratic rainfall in combination with rapid runoff makes surface water scarce and difficult to use. Groundwater supplies can be better developed but capabilities are poorly known and the complex nature of the geological substrate makes estimation difficult. Water is the critical limiting factor to the agricultural capability of the islands. 3. Fuel shortage. Demand for fuel is intense and has resulted in the virtual elimination of native vegetation. Fuelwood supplies are becoming more and more scarce and costly. Development of managed fuelwood plantations and alternate energy sources is required. 4. Inappropriate land use. Much of the land now used for raising crops or livestock is too steep or too arid for these purposes, causing erosion and destruction of vegetation. Improving yield in more appropriate areas and encouraging less damaging uses of the remaining marginal lands can help to alleviate this problem.