CHINESE private investment is proving crucial in Cape Verde's development.

Cape Verde, a beautiful archipelago on the cusp of West Africa and Southern Europe, has become the latest country to benefit from Chinese investment. Having achieved macroeconomic stability, the government, headed by Prime Minister José Maria Pereira Neves since February 2001 and President Jorge Carlos Fonseca, appointed chief of state last September, is continuing with its mission to strengthen competitiveness and promote the growth of SMEs through financial reforms, facilitating international trade, a revision of the tax system and improving the business environment.

Despite the global financial crisis, the republic is showing significant growth prospects and developing solidly, especially in terms of the energy, transport and water sectors.

"Success is something that has to build gradually," Minister of Finance and Planning, Cristina Duarte explains. "Between 2001 and 2003, we rescued a delicate macroeconomic situation. Between 2004 and 2005, we entered into our second chapter by pursuing the path we needed to achieve good governance and to transform institutions.

"We then took the step to mobilize resources in both hard and soft capital areas. It was important not only to invest in building infrastructure but also in institutions, in human capital. Cape Verde is now recognized for its intangible assets: its good governance, credibility, objectivity and the transparency of the judicial system and institutions.

"We never took a bigger step than we could, but not because we are not ambitious; we had to aggressively build infrastructure and find a way to sustain our public debt. The recipe was ambition, strategic vision, a realistic mindset and of course, lots of fondness for this land."

Having mobilized these resources, the government is now ready to pass the baton to the private sector by attracting FDI.

"Chinese private investment is going to be crucial," Duarte says. "I went to Asia in March not to ask for money, but to talk about the business opportunities that we offer. The next five years will be about putting new projects on the table. We need a paradigm shift and will provide opening to attract partners."

Favorable links with China

Joaquim de Sousa, chairman of the board of Banco Comercial do Atlantico (BCA), which has a roughly 50 percent share of the financial market in Cape Verde, is supportive of the government's interest in China.

"In addition to the very favorable context of the relations between the two republics and the development of diplomatic efforts, we believe that the geo-strategic location of Cape Verde, the political and social stability, the state organization, the legal and fiscal infrastructure and those under construction, the availability of skilled labor, and the natural skills for potential service sectors such as tourism are strong factors that will attract foreign investment and that the Chinese will consider.

"Furthermore, the structural transformation projects within the Cape Verdean economy currently at the implementation stage are also a source of significant opportunities, fostering joint efforts between the state and private enterprise and generating a very important flow of investment with very interesting returns."

The new reality, de Sousa maintains, will offer clear benefits for the economy as a whole and, with particular regard to the improvements of the well-being of the population, will establish Cape Verde as a middle-income country.

"The BCA obviously has a strong interest in participating in the implementation of these projects, as a donor and as an agent capable of undertaking the studies necessary to ascertain which funding model best fits the local situation and the interests of the investor," he says.

Like its parent company, the Portuguese group Caixa Geral de Depósitos (CGD), which has a presence in China, BCA also boasts a portfolio of Chinese companies. "The cultural knowledge we have means we have enough experience to position BCA as an active and determining element in significantly strengthening the very presence of Chinese capital in Cape Verde," de Sousa states.

He is also keen to point out just how robust the financial sector is in this dynamic African country. "The impact of the first wave of the global financial crisis did not have a significant effect on our financial system," he says. "The principal activities of the main banks are associated with the traditional business of transforming deposits into the financing of businesses, families and the state, without resorting significantly and systematically to other sources of funding and without using more sophisticated and structured products with the potential risk incorporated."

He adds: "The ambitious government program that aims to boost growth and development to higher levels while consolidating and enhancing the wealth produced in the country and its generated income, is very exciting as well as a great challenge for all of Cape Verde's society, without exception."

For de Sousa, the challenges faced by Cape Verde as a whole, namely modernization, technology and training, are the same as those faced in BCA, and a fundamental component to BCA maintaining its leadership position.

"With regards to our main shareholder, CGD, the bank has established connecting bridges that aim to modernize our processes and method, by accessing the technology most suited to our needs, and upgrading and retraining our employees. These are the key factors for obtaining competitive advantages and strengthening loyalty with our customers."

BCA closed 2011 with slightly less profit compared to 2010 - one of its best years ever - the chairman explains: "The bank's performance overall was very positive, with operating costs evolving in line with inflation and with efficiency and productivity gains in many areas. The final results were harmed by the strengthening of impairment in loans in order to anticipate possible adverse developments and impart greater transparency and consistency to BCA's structure."

With origins that date back over 100 years, thanks to its links with the Banco Nacional Ultramarino (National Overseas Bank) which still has a strong presence in China's Macau, the BCA has, in its 20-year history, succeeded in combining a good reputation with its customers, with a vision of modernity that marks it out as a strong innovator, visible at the level of the business models that it develops, and the products and services offered to its customers.

"We emphasize that a reputable and independent national company that undertakes studies of the market has classified the BCA as the brand of confidence in our financial system and we have been awarded Best Bank of Cape Verde by several reputable journals.

"With a business environment marked by the difficulties of some of its traditional partners, but also by the search for new and alternative markets like China, we expect public investment to continue the journey, tourism to resume its dynamic, and that we will take advantage of opportunities arising from the political and social instability in come competing destinations and captivating more FDI. We also hope the private sector strengthens its capacity to develop projects and create wealth.

"With this background, results for this year should align with those recorded in recent years, and our concern is to continue to increase efficiency in managing the resources available and to develop partnerships with our customers."