SCENESETTER FOR CODEL LEWIS' TRIP TO CAPE VERDE, NOVEMBER

UNCLAS PRAIA 000265


AF/W FOR EMILY NARKIS, H FOR DIANE RICH

E.O. 12958: N/A
TAGS: PGOV PREL ECON MARR OTRA ASEC CV
SUBJECT: SCENESETTER FOR CODEL LEWIS' TRIP TO CAPE VERDE, NOVEMBER
6-8, 2008


1. (U) Welcome to the Republic of Cape Verde, one of Africa's
success stories. It is an island nation, approximately the size
of Rhode Island, located in the north Atlantic Ocean
approximately 300 miles due west of Senegal off Africa's west
coast. Cape Verde has a population of 450,000 people spread
over nine inhabited islands. Politically stable, Cape Verde
enjoys excellent relations with other countries in the region
and has played an important mediator role in the peace keeping
process in the sub-region; it has one of the continent's highest
literacy rates, per capita incomes, and health indicators. It
also enjoys one of the region's best human rights records.
There are no political prisoners, freedom of religion is
respected, and there is an active media and internationally
recognized freedom of expression. In 2007, Cape Verde obtained
a special partnership status with the European Union, which will
assist the country to modernize its institutions and provide
more market access. Cape Verde's good governance and human
rights indicators have earned the country important political
and economic benefits. Its impressive economic growth
performance has raised it to the ranks of lower middle-income
countries, with a per capita income of approximately $2,000.
Bilateral relations between the United States and Cape Verde are
excellent. The United States and Cape Verde are drawn together
by a shared commitment to democracy and by strong family ties.

U. S. diplomatic activities in Cape Verde include strengthening
security and rule of law, including combating drug trafficking,
supporting the consolidation of democracy, creating economic
opportunity so as to enhance the archipelago's viability, and
providing quality consular services to our many consular clients.

POLITICAL OVERVIEW


2. (U) Cape Verde is strongly committed to democracy. Cape
Verde has had seven rounds of elections since independence in
1975, all considered free and fair, and has one of the best
records in Africa in terms of good governance. Cape Verde held
municipal elections on May 18, 2008. The voter participation
rate was 78%. The main opposition party, the MPD (Movement for
Democracy) won in 12 of the 22 municipalities and the governing
PAICV (African Party for the Independence of Cape Verde)
accepted defeat. The National Electoral Commission judged these
elections free and fair. An independent audit found that the
voter registration process was credible. All parties are,
however, aware of the need to improve the electoral system and
further revisions to the electoral code will continue, including
discussion of the voting process and the voting regime for the
Diaspora, a large percentage of whom resides in the United
States.


3. (U) In 2007 and 2008 several hundred illegal migrants
attempting to reach the Canary Islands were intercepted in Cape
Verdean waters. Cape Verde is seeking international cooperation
with a view to solving the human rights, economic and social
issues that could arise from increased illegal migration.

MILLENNIUM CHALLENGE ACCOUNT


4. (U) The size and depth of the Millennium Challenge Compact
program, one of the first Compacts to be signed, is recognition
of Cape Verde's strong record of democratic governance,
intolerance of corruption, commitment to supporting and
promoting agricultural development, private sector activity, and
effective use of limited resources to address the needs of its
people in a sustainable way. The $110 million Compact, now in
its third year of implementation (as of July 2008),supports
Cape Verde's national development goal of transforming its
economy from aid-dependency to economically and socially
sustainable growth. This funding by MCC makes the U.S. one the
largest donors in Cape Verde. MCC funds are being applied to
improve the country's infrastructure to support increased
economic activity, improve access to credit, and provide access
to markets, employment, and social services; increase
agricultural productivity; as well as carry out key policy
reforms for sustained development and economic growth. At the
completion of the Compact, the program is expected to increase
Cape Verde's annual income by at least $10 million.

ECONOMIC TRANSITION AND PROGRESS


5. (U) Cape Verde's status as a small open economy, with a
relatively high level of external public debt and heavily
dependent on emigrants' remittances and external aid, makes it
vulnerable to external shocks. As an archipelago, the country
faces large internal transportation and communication costs; it
has no energy resources or tradable raw materials. Its
agriculture sector is susceptible to frequent droughts, making
the country over-reliant on food imports. Cape Verde has high
levels of poverty and unemployment, partly attributable to a
lack of obvious economic growth opportunities and a scarcity of
resources, particularly water. The warm climate and lack of
rain, combined with the country's stable political environment,
has encouraged the development of a dynamic tourism industry.
Cape Verde seeks to diversify its economy into other services,
in particular international maritime and air transport. It is
aided in this area by its strategic geographical position and
its excellent relationships with the United States and Europe.
Services represent over 70% of Cape Verde's economy.
Agriculture, though still significant in employment terms,
contributed only 8 percent of GDP in 2004. The country has been
able to develop a successful economy based on tourism,
transport, and other services and, to a lesser extent, on light
manufacturing industries.


6. (U) Since 2007, Cape Verde signed an agreement of special
partnership with the European Union, acceded to World Trade
Organization (WTO),and graduated from Least Developed Country
(LDC) status. The United States provided technical assistance
during accession negotiations, and the European Union also
provided strong support. The country's macroeconomic evolution
continues to be monitored by the IMF under a Policy Support
Instrument, signed in July 2006. The Cape Verde currency, the
Escudo, is pegged to the Euro at a rate of 110.27 escudos to 1
Euro. Cape Verde benefits from the absence of exchange-rate risk
in relation to the Euro. The Cape Verde Central Bank is
studying the possibility of adopting the Euro as local currency.
This is expected to be a lengthy process and will not be
completed in 2008.

FOOD SECTOR


7. (U) Cape Verde imports over 90 percent of its food
consumption. Water shortages and successive droughts have
greatly weakened its crop production capacity over the last
century. Any decline in Cape Verde's import capacity as a
result of the price increases or grain shortages would have
serious implications for the food security of the country where
corn, rice and bread represent the basis of the dietary
consumption. In response to the international food crisis, the
National Assembly approved the reduction in import duty on
wheat, and the exemption from value-added tax for maize, wheat,
milk products and cooking oils.

ENERGY SECTOR


8. (U) Current energy generation is insufficient to meet current
needs and projected growth of the tourism industry, which is
highly dependent on stable provision of electricity and fresh
water. The country has studied various solutions to overcome
its major development burden including a floating Russian
nuclear energy station. However, it has strategically decided
to invest in alternative energy resources. The announced goal
is to produce 25% of energy needs from renewable sources by 2011
and 50% by 2020. There are also plans to make the island of Sal
fully reliant on renewable energy (a combination of solar, wind,
wave, and biofuel) in the next 5 to 10 years. Until then, Cape
Verde will remain highly vulnerable to exogenous shocks in both
the energy and food markets.

AVIATION SECTOR


9. (U) Aviation is an area where the United States and Cape
Verde have cooperated very effectively. Cape Verde has received
high ratings for its civil aviation services. On September 9,
2003, Cape Verde became the first of the Safe Skies countries to
meet ICAO safety standards and achieve Federal Aviation
Authority (FAA) Category 1 as a result of the technical
assistance provided under the Safe Skies Program. With the
upgrading of the international airport on Sal, the recent
inaugurations of Praia and Boavista International Airports and
finally, with the imminent inauguration of a fourth
international airport on the Island of Sao Vicente, Cape Verde
can expect a boom of its tourism industry.
TACV, the state owned airline is undergoing restructuring to
stem losses and privatization has been promised every year for
the last 5 years. Recently a new private airline Halcyonair has
started operations with a limited fleet of only one aircraft.
The company expects to soon reinforce the fleet with additional
aircraft.

HUMANITARIAN PROGRAMS


10. (U) Our Peace Corps Volunteers are active in English
language teaching; English teacher training; working with youth
on HIV/AIDS prevention throughout the islands; and supporting
municipal offices, youth centers, and local NGOs with
Information Technology training. There is no USAID presence in
Cape Verde. The Embassy's Special Self-Help Program and
Democracy and Human Rights Funds have become important and
highly desirable funding mechanisms, enabling the Ambassador to
respond quickly to the growing needs of local communities.
These projects and other U.S. assistance efforts in Cape Verde
generate much public awareness and goodwill towards the United
States. Whether it is access to potable water, income
generation, or equipping local schools, the projects selected
exemplify the philosophy of these funds by assisting grassroots
organizations to play a role in their development.


11. (U) The Embassy coordinates U.S. DoD Humanitarian Assistance
donations that have helped build community centers in 22
municipalities around Cape Verde. Five additional community
centers and fire stations are planned for the near future.
Excess property including water trucks, dump trucks, generators,
patrol boats and supplies have also been donated. Additional
projects include building classrooms and renovating schools in
impoverished districts. Many of these projects are located on
islands that can be reached only by ship, so these humanitarian
construction projects are of great significance and value.

MILITARY AND SECURITY ASSISTANCE


12. (U) The Armed Forces of Cape Verde is a limited force of
approximately 1,300 personnel, recently reorganized into the
National Guard and the Coast Guard. The National Guard consists
of the military police corps, the Marine Corps, the artillery
corps, and additional support units. It is organized
territorially and is the main component of the Armed Forces
designed for country-wide military defense, through territorial
and amphibious operations, as well as internal security support.
The Coast Guard consists of naval, aerial, and ground forces
units. It defends and protects the nation's territorial waters
through aerial, terrestrial, and amphibious operations. The
Security Assistance Program, coordinated by the Embassy, assists
the Cape Verdean Armed Forces to enhance its professional
Officer Corps, particularly at the middle management level. It
also promotes cooperation in areas of joint interest, including
counter-terrorism, maritime law enforcement, search and rescue,
disaster preparedness, and the interdiction of narcotics shipped
through Cape Verde waters.

THE GROWING DRUG PROBLEM


13. (U) Cape Verde's strategic location on the maritime and
aerial routes between Africa's mainland, Europe, and South
America makes it an attractive location for transshipments of
illegal drugs from the Caribbean, Colombia, Brazil, Venezuela,
Europe and possibly the United States. The Embassy is
monitoring closely the increase in drug trafficking that is
taking place in Cape Verde. Police seizures of cocaine destined
for Europe have increased greatly in the last year, and there is
increased domestic drug use as well as drug-related crimes.
There are also suspicions of organized crime involvement in
money laundering and trafficking activities. Police in Cape
Verde seized 43,257 kg in 2006 and 509,358 kg of cocaine in
2007; most of these drugs were being smuggled to Europe. We
have seen no indication that cocaine is being smuggled to the
United States from Cape Verde, though now with direct flights,
we cannot rule out the possibility.

CONSULAR RELATIONS


14. (U) Cape Verde has a long history of immigration to the
United States, and this pattern of immigration continues today.
The Cape Verdean community in the United States is estimated
between 350,000 to 500,000 with the overwhelming majority in
Massachusetts and Rhode Island. The Cape Verdean population in
the United States rivals the total number of Cape Verdeans in
the archipelago of Cape Verde itself. There are an estimated
2,000 to 3,000 Americans permanently residing in Cape Verde.
During the summer months, there may be more than 10,000 Cape
Verdean-Americans in country. Nearly all Americans resident in
Cape Verde are dual nationals, or have access to dual
nationality. Most of the senior citizen Americans in Cape Verde
are naturalized Americans who have returned to their home
islands of Fogo and Brava for retirement.

USG FOOTPRINT IN CAPE VERDE


15. (U) The American Mission to Praia is comprised of Department
of State, the Peace Corps, and the Millennium Challenge
Corporation (MCC). Our direct-hire American contingent is
composed of the Qassador, Deputy Chief of Mission/Management
Officer, MCC Resident Country Director, Peace Corps Director,
Peace Corps Assistant Director, Consular Officer,
Political/Consular Officer, and Office Management Specialist.
Our locally engaged staff includes 95 FSN/PSAs (MCC, Peace
Corps, and State),some of whom are American citizens, and 11
Contractors (Peace Corps). As of September 2008, 52 Peace Corp
Volunteers serve on seven of Cape Verde's islands. Our mission
also enjoys regional support from other USG agencies located in
Dakar, Lisbon, Cairo, and Frankfurt.


MYLES