2013 Index of Economic Freedom

Cape Verde

overall score63.7
world rank65
Rule of Law

Property Rights70.0

Freedom From Corruption55.0

Limited Government

Government Spending65.4

Fiscal Freedom77.9

Regulatory Efficiency

Business Freedom58.9

Labor Freedom40.3

Monetary Freedom78.0

Open Markets

Trade Freedom66.9

Investment Freedom65.0

Financial Freedom60.0

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Quick Facts
  • Population:
    • 0.5 million
  • GDP (PPP):
    • $2.1 billion
    • 5.0% growth
    • 5.8% 5-year compound annual growth
    • $3,947 per capita
  • Unemployment:
    • 10.7%
  • Inflation (CPI):
    • 4.5%
  • FDI Inflow:
    • $93.1 million
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Cape Verde’s economic freedom score is 63.7, making its economy the 65th freest in the 2013 Index. Its overall score is 0.2 point better than last year, with declines in labor and monetary freedoms counterbalanced by substantial gains in property rights, freedom from corruption, and management of public spending. Cape Verde is ranked 4th out of 46 countries in the Sub-Saharan Africa region, and its overall score is higher than the global and regional averages.

Cape Verde’s transition to a more open and flexible economic system has been facilitated by substantial restructuring and the relatively effective rule of law. With property rights strongly protected in comparison to other economies in the region, the small island economy’s substantive reforms have reduced corruption and enhanced the quality of the regulatory environment.

While maintaining macroeconomic stability, Cape Verde has made considerable progress in income growth and poverty reduction. The government continues to support policies that promote free trade and open markets, but public spending and debt are approaching levels that cause concern.

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Background

Cape Verde, a West African archipelago, is a stable, multi-party parliamentary democracy. The African Party for the Independence of Cape Verde maintained its majority in the February 2011 legislative elections, installing Jose Maria Neves as prime minister; opposition leader Jorge Carlos Fonseca won the more ceremonial presidency later that year. Cape Verde has few natural resources and is subject to frequent droughts and serious water shortages. Services dominate the economy, but light industry, agriculture, and fishing employ a majority of the work force. Cape Verde has close economic and political ties to the European Union, and its currency is pegged to the euro. The EU has granted Cape Verde special partnership status, under which Cape Verde and the EU cooperate on governance improvements, security and stability, regional integration, and anti-poverty efforts. Cape Verde joined the World Trade Organization in 2008. The economy is helped by tourism and remittances.

Rule of LawView Methodology

Property Rights 70.0 Create a Graph using this measurement

Freedom From Corruption 55.0 Create a Graph using this measurement

Private property is reasonably well protected. The constitutional provision for an independent judiciary is generally respected, but the judicial system is inefficient, and the case backlog causes significant delays. Several recently signed treaties provide stronger protection for intellectual property. Political and economic governance is generally regarded as among the region’s best.

Limited GovernmentView Methodology

The top income tax rate is 35 percent, and the top corporate tax rate is 25 percent. Other taxes include a value-added tax (VAT). The overall tax burden amounts to 19.1 percent of total domestic income. Government spending amounts to 33.9 percent of total domestic output, leading to a budget deficit of 8.9 percent of GDP. A 2010–2011 public investment stimulus program contributed to a rising public debt that is over 70 percent of GDP.

Regulatory EfficiencyView Methodology

The business start-up process has been simplified, but bankruptcy procedures remain underdeveloped. The cost of launching a business has been reduced to about 20 percent of the level of average annual income. Despite efforts to increase flexibility in the labor market, a high unemployment rate persists, particularly among the young. The market determines most prices, and inflation has declined as global food prices have fallen.

Open MarketsView Methodology

The trade-weighted average tariff is 11.6 percent. Non-tariff barriers include restrictions on access to services markets. Foreign investment is officially encouraged and receives the same treatment as domestic investment. The banking sector continues to expand, and the number of non-performing loans has decreased. With credit generally allocated on market terms, small and medium-size enterprises have increasingly adequate access to financing.

Country's Score Over Time

Bar Graph of Cape Verde Economic Freedom Scores Over a Time Period

Country Comparisons

Bar Graphs comparing Cape Verde to other economic country groups

Regional Ranking

rank country overall change
1Mauritius76.9-0.1
2Botswana70.61.0
3Rwanda64.1-0.8
4Cape Verde63.70.2
5Madagascar62-0.4
6South Africa61.8-0.9
7Ghana61.30.6
8Uganda61.1-0.8
9Namibia60.3-1.6
10Burkina Faso59.9-0.7
11The Gambia58.80.0
12Zambia58.70.4
13Tanzania57.90.9
14Gabon57.81.4
15Benin57.61.9
16Swaziland57.20.0
17Mali56.40.6
18Kenya55.9-1.6
19Senegal55.50.1
20Malawi55.3-1.1
21Nigeria55.1-1.2
22Mozambique 55-2.1
23Seychelles54.91.9
24Côte d'Ivoire 54.1-0.2
25Djibouti53.90.0
26Niger53.9-0.4
27Cameroon52.30.5
28Mauritania52.3-0.7
29Guinea51.20.4
30Guinea-Bissau51.11.0
31Central African Republic50.40.1
32Ethiopia49.4-2.6
33Liberia49.30.7
34Burundi490.9
35Togo48.80.5
36Sierra Leone48.3-0.8
37São Tomé and Príncipe 48-2.2
38Lesotho47.91.3
39Comoros47.51.8
40Angola47.30.6
41Chad45.20.4
42Republic of Congo 43.5-0.3
43Equatorial Guinea42.3-0.5
44Democratic Republic of Congo39.6-1.5
45Eritrea36.30.1
46Zimbabwe28.62.3
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