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Wednesday, April 27, 2011

Why US small business is the ideal target for investments in Cape Verde

There are two types of corporations in the US, for-profit and non-profits or charities. We can put the charities aside for now with the caveat that there are several charities who direct funds toward African countries, but such investments for charitable purposes are not the type on investment opportunities of which we are speaking.

We thus focus strictly on for-profit corporations when we use the term, "corporation." And again, in the US, corporations are generally divided into two types - large corporations and small businesses.

Examples of large US corporations are Citibank, GM, MetLife, Mobil Oil and Apple. The use of the word "large" when describing these corporations is actually quite deceptive. Large corporations in the US are not simply large, they are enormous. They have extremely deep pockets and huge investment war-chests to use. But, with all due respect, Cape Verde is just too small to attract any attention from these types of corporations. When these companies invest, they do so to the tune of billions of dollar. This would be an overwhelming event for Cape Verde except if it were some type of strategic investment - for example if oil were discovered off the cost of Cape Verde.

So this leaves us with the US small business. Let's look at what this term actually means. Here too, the word "small" is also extremely misleading. Most people who hear the expression "small business" would probably assume that the business in question employs a handful of people. However, small businesses in the US are actually the primary engine of growth and employment in the US economy. These businesses may employ hundreds or even thousands of workers, and may command tens or even hundreds of millions of dollars of revenue.

Many are publicly traded but you might not find them on the listings of the Dow Jones exchanges. Rather, you'll find them on NASDAQ or you may not find them listed at all even when they are publicly owned. And of course, the vast majority of them are privately owned.

US small businesses are not necessarily a homogeneous group. But the point here is that this is where the resources and investments are available, the appetite for risk taking and the patience needed to deploy capital investments in illiquid projects are matched to the opportunities presented by Cape Verde. That's what small businesses in the US do. So Cape Verde needs to focus on attracting the US small business!

But there are a number of severe obstacles to the US small business investor when it comes to exploring investment opportunities in Cape Verde. Until these obstacles are removed, it will be extremely difficult for Cape Verde to attract investments from the US. We will explore those obstacles and their potential solutions in another post.

Feel free to leave your comments and express your own opinions.

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