Foreign Direct Investment (FDI) in Cabo Verde

Foreign Direct Investment in Cabo Verde: Resilience, Recovery, and Strategic Diversification (2020–2025)

Cape Verde has achieved Upper-Middle Income Country status, thanks to political stability and a major shift in its economy—from depending on foreign aid to relying on private investment and service exports. Between 2020 and 2025, the country's investment story has been shaped by a strong recovery after the pandemic, major infrastructure deals, and government efforts to expand beyond traditional beach tourism.

Investment Trends and Numbers: A Bumpy Recovery

Foreign Direct Investment (FDI) is crucial to Cape Verde's economy and has historically made up a significant chunk of GDP. The years from 2020 to 2024 show a pattern of crisis, comeback, and settling down.

• The Pandemic Hit (2020): When COVID-19 arrived, the economy crashed hard (estimated between 14.8% and 19.3%), and investment stopped flowing in as the tourism industry shut down completely.
• The Comeback (2022-2023): As tourism roared back—reaching over 1 million visitors in 2023—foreign investment surged. In 2023, FDI hit approximately €376 million (about $430 million). This jump was partly due to one-time major deals, including handing over the country's airports to VINCI Airports, which brought in a large upfront payment.
• Cooling Down (2024-2025): Early numbers for 2024 show a "cooling off" period. Foreign investment dropped by roughly 40% compared to the year before, falling to about 3.1% of GDP (down from 6.0% in 2023). This drop represents a return to normal levels after the exceptional inflows of 2023, not a sign that investors are losing confidence.
• Looking Ahead: For 2025 and 2026, economic growth is expected to stabilize between 4.8% and 5.5%, supported by continued investment in tourism and the digital economy.

Where the Money Comes From: Europe is the main source of foreign investment. Portugal is usually the top investor, followed by the United Kingdom, Spain, and Italy, reflecting strong tourism connections and historical ties with the Eurozone.

Key Sectors for Investment

While the government is actively working to diversify, tourism remains the dominant force, though new opportunities in the "Blue" and "Green" economies are gaining ground.

A. Tourism and Real Estate: The Heavyweight

Tourism directly accounts for about 25% of GDP and drives 40% of all economic activity.

• Current Situation: Investment is heavily concentrated in the "all-inclusive" sun-and-sea model on the islands of Sal and Boa Vista, which have most of the hotel rooms.
• Investment Patterns: In 2023 and 2024, roughly 90% of foreign investment still went into tourism and tourism-related real estate.
• New Directions: The government is actively looking for investment to diversify tourism offerings into nature tourism, water sports tourism, and high-end experiences to reduce dependence on mass-market vacation packages.

B. Transport and Infrastructure (The VINCI Effect)

The transport sector has seen game-changing foreign investment through Public-Private Partnerships.

• Airports: The 40-year contract giving VINCI Airports control of seven national airports in 2022/2023 was a landmark deal, bringing immediate money to the government and committing the company to major infrastructure improvements.
• Ports: Investment is ongoing in port upgrades, such as the cruise terminal in Mindelo (São Vicente) and port expansions in Maio and Santo Antão, supported by Global Gateway financing from the EU.

C. The Blue Economy

With an Exclusive Economic Zone that's huge compared to its land area, Cape Verde is positioning itself as a maritime logistics center.

• Fishing: This is the main export sector for physical goods (over 80% of goods exports), dominated by canned tuna. Opportunities exist in modernizing the fishing fleet and adding more value through processing.
• Logistics: The São Vicente Special Maritime Economic Zone (ZEEM-SV) is a flagship project designed to attract investment in ship repair (Cabnave shipyard), refueling services, and cargo transfer operations.

D. Renewable Energy

To reduce heavy dependence on imported fossil fuels, the government is aiming for 50% renewable energy by 2030.

• Investment Incentives: The sector is open to Independent Power Producers. Recent issuances of Green Bonds and Blue Bonds on the Cape Verde Stock Exchange show growing interest in sustainable finance tools to fund solar and wind projects.
• Investment Needs: Money is needed to upgrade the power grid for stability and to expand solar and wind capacity, with the government looking for private investment to fill a climate financing gap estimated at over $120 million per year.

E. Digital Economy

Cape Verde wants to become a mid-Atlantic digital hub, taking advantage of the EllaLink submarine cable that connects Europe to Latin America through Praia.

• TechPark CV: The government has invested about €45 million in a Technology Park (with locations in Praia and Mindelo).
• Tax Breaks: The Special Economic Zone for Technologies (ZEET) offers a very competitive 2.5% Corporate Income Tax rate for qualifying tech companies, along with customs and VAT exemptions.

Investment Climate and Incentives

Cape Verde offers a stable democracy with a currency tied to the Euro, providing a high degree of predictability for investors.

• Tax Incentives: The country offers a layered system of incentives, including tax credits (up to 50%) for investments in priority sectors like tourism, renewable energy, and manufacturing.
• Special Zones: Beyond the ZEET for technology, the International Business Center (CIN) offers reduced corporate tax rates (2.5% to 5%) for export-focused businesses.
• Diaspora Investment: Special programs exist to encourage wealthy Cape Verdeans living abroad to invest, including tax exemptions on dividends and reduced customs duties for construction materials.

summary

Between 2020 and 2025, Cape Verde has shown remarkable resilience. While the immediate post-pandemic foreign investment boom has normalized, the structural shift toward privatization (state-owned enterprise reforms), high-value tourism, and the digital/blue economies presents a maturing market for investors. The government's clear strategy to use tax incentives to overcome geographic fragmentation and energy costs makes it a competitive, if niche, destination for foreign capital in the Atlantic.

Key Facts & Figures for FDI in Cabo Verde

Economic Impact includes the creation of 5,000 jobs between 2020 and 2023, with FDI contributing 6% to annual GDP growth as estimated for 2024. Incentives Driving FDI feature a 10-year IRPC exemption, VAT relief on imports, and the CIN-CV regime requiring 80% output abroad. Challenges encompass tourism volatility that saw a COVID dip to USD 80 million in 2020, alongside bureaucracy in approvals, though the BUI has reduced this to 75 days. Outlook suggests 2025 inflows are projected at USD 160 million with a 20% year-over-year increase, including a 40% non-tourism share, while the AfDB forecasts 5.5% GDP growth.