The Marketing of Cape Verde to Investors

For me, one of the most curious issues regarding investing in Cape Verde is the lack of information that is available about specific investment opportunities in the country or about how and why foreign investors should go about the process of investing in Cape Verde.

There is a specific government agency responsible for promoting Cape Verde to foreign investors. It is called Cabo Verde Investimentos (CVI). The folks at CVI do an excellent job in welcoming investors and providing information if you were to visit their offices in Achada Santo Antonio on the island of Praia. There are also two satellite offices, one in São Vicente and the other in Sal.

For many years, there was little if any online information available regarding investing in Cape Verde. In fact, CVI itself never had its own website until very recently. You can find it here: http://www.cvtradeinvest.cv/. CVI is even on Facebook now, under the name Cape Verde Investments. CVI is certainly to be commended for keeping up with the times.

The real question is how well is CVI marketing to foreign investors via their online presence? In this article, I provide a review of what is working and what is not.

Mission of CVI

This is the mission of CVI as taken directly from its website:

CI – Cape Verde Investments is the government investment promotion agency and export, and whose purpose is the promotion of conditions conducive to the realization of projects of national and foreign investment, the promotion of the Cape Verde Islands as a tourist destination and the promotion of exports of goods and services of Cape Verdean origin.

First of all, that's quite a mouthful and barely understandable. There is perhaps a bit of a language issue here as it is written in English, but not well. Granted that Portuguese is the official language of Cape Verde, and it is excellent that CVI has made an attempt to present the case for investing in Cape Verde in English. After all, English is more widely spoken than Portuguese across the globe and certainly among big potential investors. But if you are going to present the information in English, make sure it is proper English and that it is understandable. Hire a translator. Or don't include such a statement since the purpose of the site it is quite obvious to anyone visiting the site. It sounds more like an exercise in self-importance.

The Richest Countries in the World

According to the publication, Global Finance Magazine, the richest country in the world in 2012 is Qatar with a per-capita income of US$106,283 as measured on the basis of purchasing power parity (PPP), using data from the World Bank.

Cape Verde is listed among the Emerging and Developing Countries. Interestingly, this category also includes many island nations around the world. I have long suggested that rather than attempt to compare itself to Portugal (arguably the world's original pre-modern superpower which now is considered one of the weakest members of the European Union) and other European countries which is completely unrealistic, or African countries which are the least developed and among the poorest nations on Earth, Cape Verde should instead compare its performance on the world stage to island nations around the world, and in particular, pattern itself after successful, independent Caribbean nations.

My reasoning is very simple and is summarized in the following points:

• The history of the Caribbean islands is almost identical to that of Cape Verde, discovered and colonized by Europeans, with ancestry rooted in Africa through slavery.
• Cape Verde shares a remarkably similar culture (food, music, art) with the islands of the Caribbean, no doubt based on the African roots.
• Island nations typically have limited or no natural resources because of the limited land mass and so their economies are challenged in similar ways...reliance on tourism and foreign investment as well as on the business savvy of the local residents.
• Islands usually have relatively small populations with a history of poverty, so the labor pools are limited and thus a robust educational system is often a high social priority since it provides a pathway out of poverty (and often a pathway off the impoverished island for perceived greener pastures in first-world countries).
• Many island nations have a modern history of immigration to foreign countries where the locals are educated and often return to contribute directly to their homeland, or otherwise provide support via remittances acquired through earnings in foreign lands.
• Most of the nations of the Caribbean have been independent for about the same length of historical time as Cape Verde (although it would be fair to say that Cape Verde is about one decade younger in its independence than the Caribbean).

To demonstrate this point about Caribbean nations being the most appropriate model for the purpose of the development of Cape Verde, I have extracted the results from the list of the richest countries in the world to show how Cape Verde ranks against the Caribbean nations. I have also included the Seychelles and Mauritius which are two independent island nations in Africa, and I have shown where Portugal falls in comparison (is not at the top of the list as many might imagine). The list is ranked in terms of PPP (purchasing power parity) for 2012, the measure of per-capita wealth preferred by economists.

Massachusetts MetroSouth Chamber of Commerce visits Cape Verde

Even though Africa is among the newly emerging economic zones around the world, it is not the top destination for American business people or US investors. Instead, the US is late to the party while the likes of China, Europe, Russia and India have already invested hundreds of billions. American sentiments, however, may be changing. Rather than seeing Africa as a single and unique entity in need of donations for starving children, local business groups in the US are starting to understand, through the connections of immigrants from various parts of Africa, that Africa is a multicolored fabric full of economic opportunities.

One example of how this works is highlighted by the visit (April 18-24, 2011)  of a trade mission lead by the Metrosouth Chamber of Commerce, to Cape Verde, West Africa which is considered one of the most stable democracies in sub-Saharan Africa. The business group included bankers, health care professionals, university administrators, and construction companies among others. It is interesting to note that the Chamber primarily represents businesses in the Greater Brockton area where about 25-30% of the population is of Cape Verdean descent.

This is certainly a step in the right direction and fully supported by the author of this blog. The news was covered by the local Cape Verdean media, although the focus was understandably on the Cape Verdean immigrants in the group. There was some interesting commentary by local Cape Verdeans which I make a point of highlighting in this article because some of the comments raised some very relevant issues that are important for US investors to be aware of:

The Economic Consequences of Biting the Hand That Feeds You

The island of Brava, which had been isolated from the modern world for decades, was finally connected to the rest of Cape Verde in January 2011 by the Cabo Verde Fast Ferry company. According to public records, the company issued €13.6 million of bonds to acquire two sleek ferries, one of which - the Kriola - began operations in January 2011, connecting Santiago, Fogo and Brava with almost daily, scheduled, fast service; it is a quality of service the likes of which have never been seen before in the islands of the archipelago.

It is the type of transportation operation that has been used for centuries in other countries to stimulate their economies by facilitating the flow of people, goods and labor between locations where these resources exist and where they are needed. That is the essence of a free market economy. But this is a little bit of a conceptual point.

Let's break it down in terms that resonate with the average person. When investors pour millions of euros into a project that allows people to easily and reliably travel to places where they can find work (sell their labor), or sell their products and services, or allows people such as foreign and domestic tourists to visit their location and spend money, this creates business opportunities, jobs and in short - improves lives! It lays the basic foundation for a booming economy in the isolated location. And Brava is no exception.

Yet, all investors who are interested in the Cape Verde market, should be take good note of recent developments when the Cabo Verde Fast Ferry, which operated with stable prices for one year, announced a minor price adjustment in the face of a 20% increase in the price of fuel. The media screamed bloody murder and appeared to have fabricated the extent of the price change. The residents of Brava followed suit and accused the company, which had provided high-quality, modern service, of gouging.

From the information that is publicly available, the island of Brava is about 10 nautical miles from Fogo. A modern fast-ferry consumes about 20 liters of diesel fuel for each mile it travels. And fuel costs about €1 per liter. So it presumably costs around €200 per trip and that is not even counting the company's costs for the crew (jobs for people in Brava) and whatever other costs are involved in operating their company. Assume that this is simply equal to the cost of fuel, so that means the total cost of a trip is around €400.

According to the company's website, the Kriola is said to have about 160 seats. But it's hard to imagine that this boat runs full on each trip between Brava, which has a population of about 6,000 people, and its closest neighboring island, Fogo. If the boat were completely full on every trip, it would carry the entire population of Brava in about 40 days! So let's say the boat is typically one-quarter full on each trip so that there are about 40 residents of Brava on each trip; you would therefore expect the tickets to cost around €10 per person (€400 divided by 40). And in fact, that is about what the tickets appear to cost. Now, since we assumed fuel makes up half the cost of a ticket, with a 20% increase in the cost of fuel, the new price of a ticket should cost about €11, for an increase of around 10%.

CVFF gives toys to the children of Brava

In the news reports, that is exactly what the company claims it did. But you would have thought that the tickets were instead €100 each, given the outcry and the exaggerated media reports (or what most people would call outright lies). So I would simply ask this ... when investors provide millions of euros to create a company which provides services that can alter the economic landscape of a country, but are criticized for rational, economic actions that are normal in a free market economy, as if they were criminals, why should capital flow to that economy?

The people of Brava are perhaps a microcosm for what may ail Cape Verde in general when it comes to attracting investments and modernizing its economy. It appears that neither the media nor the people who benefit most from the use of that capital, understand or appreciate what is in fact being done for them. They appear unable to place a value on those services. They act as if they are entitled to this capital! But in the real world, it is not that easy. When companies who are doing the right thing are viciously attacked by the media and by the very public which is being fed by that capital, it sends a strong message to those who hold capital for investment and economic growth that they are much better off taking their businesses elsewhere in the world.

Foreign investors are advised to do their homework not just about the needs in Cape Verde's markets, but more importantly, these investors must study the attitudes of Cape Verde's consumers who seem to be eager to bite the very hands that feed them. This is definitely not a good recipe for economic progress.

Report from the "Hello Cabo Verde Expo 2011" in New Bedford, MA

The Hello Cabo Verde Expo 2011 was held in the city of New Bedford, MA over the weekend of May 28-29, 2011. The event was organized by local Cape Verdean businessman, Tony Neves, with the support of the City of New Bedford and the city's Economic Development Council.

I attended the Expo. While the Expo highlighted a number of cultural aspects of Cape Verde, I decided to sit in on workshops designed to showcase the opportunities in Cape Verde available to US investors. A number of Cape Verde diplomats and government officials were on hand to discuss the opportunities in detail and to describe the various efforts that the government had been undertaking in support of increased FDI (foreign direct investments) in the country.

Here are some highlights of a workshop covered by Mr. Rui Cardoso Santos, President of Cabo Verde Investimentos, the arm of the government that coordinates all FDI projects:

Cape Verde - a rising economic star in Africa - a video summary

Here is a video summary narrated by the US journalist and television reporter, Lyn Vaughn. It provides an excellent overview of the case for US investment in Cape Verde.

10 reasons US businesses should invest in Cape Verde

There are very good arguments that can be made to US small businesses as to the potential benefits of investing in Cape Verde. Here are some of them: