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FINANCIAL services: sustainable growth is possible with the right partnerships

Cape Verde's financial sector is in good shape, with eight main banks and two insurance companies currently in operation. The Central Bank of Cabo Verde (Banco de Cabo Verde) is responsible for the supervision of the sector, interest rates and price stability. Recent legislation has given the entity more independence, promoting its financial intermediary role, and the whole sector has been strengthened by improved regulations and monetary policy autonomy.

For Cristina Duarte, minister of Finance, there is still plenty of potential for internal growth. "We have a significant diaspora, so the sector has great potential to grow," she says. "We need to position Cape Verde as a platform for services, and make more bets on technology.

"When a country begins to build infrastructure at the pace we are, it needs to be certain of the quality of the spending. It is a simple equation; the expense must drive the growth and the growth will pay the debt. This equation cannot fail. We have developed a monitoring and evaluation strategy for public investment. From 2013 onwards, projects must pass an assessment based on the criteria of economic, financial and social profitability. This ensure the quality of our spending."

"We have strengthened our supervision arrangements and adopted international standards against money laundering. Cape Verde will only be able to become a financial services if it is fiscally competitive, and credible."

As Duarte notes, one of the major challenges the economy faces is the role of tourism as the principal driver of economic growth. "This is risky," she says. "Our external anchor is in Europe, most of the touristic flow comes from the UK, Germany, France, Spain and Portugal. Foreign direct investment continues to come from Europe, and has decreased because of the crisis. We have an umbilical cord attached to Europe, and obviously, when it is in crisis, we also suffer the consequences."

Despite this, things are much more positive, she says. "We've gone through the tsunami. In the first place, we built the fiscal space to digest the crisis. We also reached significant levels of social cohesion. That, in fact, is one of the greatest achievements of this government. Civil society created social spaces during the crisis which have subsequently been used to cushion the impact. We had to manage budgets very realistically and implement unpopular measures at the time that was necessary."

The government has also contained the growth of expenditure over the past five years. "All the spaces created in terms of deficit and debt were kept for public investment and not for the operation of the state machine."

"Nowadays, domestic debt is kept within sustainable limits consolidating our exchange rate regime. We are not distracted and we mobilized external funding for public sector programs that served to provide the country with infrastructure and as an anti-cyclical measure."

The country is not competing with African centers such as Lagos, Dakar, Abidjan or Accra, Duarte asserts. "We are not in a position to do so because we lack a real economy. But we have many other advantages: Cape Verde has a massively developed information and communications technology (ICT) infrastructure, institutional credibility, political stability and good governance ratings. Investment in human capital will allow us to position Cape Verde as a secure platform for back up systems, booking systems and call centers, not only for the financial institutions, but also for the oil companies that are emerging in the region. It is not a coincidence that we have begun building our first cyber zone in Praia with Chinese funding."

Chinese partnership is a major priority for the rapidly growing Caixa Económica de Cabo Verde (Caixa).

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