Bank sees benefit of dynamic economy

The UN recently graduated Cape Verde from Least Developed Country to Middle Income Country status, citing the island’s competitive environment


This change in status prompts Cape Verde to transform donor-beneficiary relationships with traditional foreign partners into a framework of economic cooperation and to diversify its partnerships, in particular with other developing economies. In December 2009, the IMF completed the 7th Policy Support Instrument (PSI) review, approving the country’s policies: an important signal for donors, development banks and markets.

The new PSI aims to build on the progress made under successive programmes with the Fund, with a focus on promoting a broader basis economic growth, diversifying the economy and boosting spendings with social impact. Key targets under the new PSI include:

– Supporting the exchange-rate peg to the euro through the accumulation of foreign-exchange reserves.
– Gradually unwinding the fiscal stimulus implemented in 2009-10, with the aim of bringing the country back on track with its medium-term fiscal programme.
– Safeguarding priority spending, despite fiscal tightening, with a focus on channeling resources towards increasing employment and improving training opportunities for the young.
– Reforming state-owned enterprises, with the aim of improving their financial stability and phasing out the subsidy regime.
– Scaling back external borrowing once the current phase of large-scale infrastructure projects has been completed.

Cape Verde aims at becoming an international hub in different areas: in transportation  services, given its strategic position between America, Europe and Africa and its air connections between Senegal and Guinea Bissau; in financial services and Information and Communication Technologies (ICT) for off-shoring; in maritime services through its ports and fish processing facilities; and in the culture sector, with its music, theatre festival, traditional dance, and the historical heritage of Cidade Velha, which was inscribed in UNESCO’s World Heritage List in June 2009.

Tourism is the most dynamic economic sector, with a significant and increasing contribution to the country’s GDP, and will certainly remain the most valuable and competitive activity sector.

The government of Cape Verde is promoting the private sector by easing the process of starting a business and paying taxes. It has reduced direct tax rates for firms and is implementing a reduction of tax rates on imports starting in 2010. They will gradually decline to zero by 2018 in compliance with World Trade Organization (WTO) guidelines.

The country strongly supports an innovative e-government system and is diversifying energy production, turning to renewable sources of energy to reduce its oil dependence. The development of wind and solar energy in Cape Verde exploits the advantages of the country’s unique geography, which offers abundant wind and solar resources.

The Economist Intelligence Unit’s 2010 democracy index ranks Cape Verde 27th out of 167 countries, up from 34th in the previous edition of the index and putt it among the 57 countries considered “flawed democracies.”

It was the second highest ranked country in Sub-Saharan Africa, behind only Mauritius, having swapped places in the continent’s hierarchy with South Africa since the 2008 index.

Banco Interatlântico
In January 1998, Caixa Geral de Depósitos (CGD), the largest Portuguese bank, following its Internalisation policy and considering the historical and commercial ties between Portugal and Cape Verde, inaugurated its first branch in Cape Verde islands.

One year later, considering the significant investments opportunities offered by a flourishing and modernising economy, particularly in the financial sector, Caixa Geral de Depositos, decided to upgrade its presence in Cape Verde, in order to increase its participation in the economic development of the country.

Thus, in July 1999, Caixa Geral de Depositos, and a group of local investors, created Banco Interatlântico, by incorporating the CGD Cape Verde branch’s activity.

Since the beginning of its activities Banco Interatlântico chose to be different from existing banks in the market. It decided to give special attention to corporations and high income private individuals, which was quite challenging, given the small size of the Cape Verde economy and its corporate market. These strategic options explain the bank’s competitive strategy, its branch network policy, its selective notoriety and its achievements.

As a matter of fact, as of December 2010, 69 percent of the bank’s loan portfolio was corporate loans and 58 percent of its deposits were corporate deposits. This is a unique situation in the Cape Verde banking system, where corporate loans represent about 45 percent of total loans and corporate deposits represent about 38 percent of total deposits.

Committed to delivering high quality and global financial services, Banco Interatlântico was soon recognised for its innovation and technological modernisation capacity, especially in the payment system where it played significant role in the expansion of bank automation network (ATM and POS) in the country.

Having CGD as its major shareholder and major partner, allowed Banco Interatlântico to have extended capacity in dealing with international payments, which has been a competitive advantage in the past, when foreign currency asset was an important competitive instruments.

In this regard the bank introduced a credit facility for trade finance which became very popular and has granted to the bank a good deal of awareness among imports companies.

To increase its landing capacity, since the beginning of its activity, the bank has been very active in using international financial institution facilities. Credit lines from the European Investment Bank and the French Development Agency have been used as well as guarantee facilities from GARI (west Africa, guarantee funds for private sector).

The bank’s branch network covers the four main islands in terms of economic activities (Santiago S. Vicente, Sal and Boa Vista), with nine point of sales in total, being five in Santiago Island, two in Sal, one in S. Vicente and one in Boa Vista. These four islands represent more than 85 percent of the country’s GDP.

Supporting the local economy
Banco Interatlântico has been playing an important role in supporting European companies in establishing in Cape Verde, specially Portuguese, Spanish and Italian companies. Some majors tourism projects developed in Sal and Boa Vista, are support by Banco Interatlântico, either alone or in syndication.

With the development of tourism real estate and the increasing interest of European investors, especially from the UK and Ireland, in Cape Verde’s real estate market the bank designed special lending facilities for non-residents to finance home acquisition. This facility is available under the brand “Live In Cape Verde,” a registered and promoted brand of Caixa Geral de Depósitos, Portugal.

In order to further increase its lending capacity and improve capital adequacy ratio, Banco Interatlântico issued in 2008, through the stock exchange, with great success, the first subordinated obligation in Cape Verde’s financial sector history. In 2010 the bank share capital has been increased 66 percent, from €5.44m to €9.67m, to cope with further capital need arising from the activity increase and supervision requirements.

The bank had positive evolution of all its main indicators such as total assets, asset quality, profitability, equity, number of employees and branch network. It ranks as third largest bank in the country with about 14 percent of market share in both deposits and loans, as of December 31, 2010, with total assets of €166.3m and 97 employees.

International Accounting and Reporting principles as well as an Operational Risk Prevention programme are under implementation in the bank, in order to improve its prudential indicators adequacy and the service quality.

Human resources management improvement, internal procedure enhancement, brand notoriety reinforcement and innovation in serving our customers and the country, will guide the bank in the near future.

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