Reducing Poverty Through Growth

Fact Sheet

July 4, 2005 www.mcc.gov

Cape Verde and Millennium Challenge Corporation:

Building a Dynamic Partnership for

Poverty Reduction through Economic Growth

Millennium Challenge Corporation (MCC) and the Government of Cape Verde signed a five-year, approximately 

$110 million Compact.

Cape Verde has embraced MCC principles. The size and depth of the Millennium Challenge Compact program 

is a recognition of Cape Verde’s strong record of democratic governance, intolerance of corruption, commitment 

to supporting and promoting private sector activity, and effective use of limited resources to address the needs of 

its people in a sustainable way. 

The Compact will support Cape Verde in achieving its overall national development goal of transforming its 

economy from aid-dependency to sustainable, private-sector led growth. MCC funds will be used to improve 

the country’s investment climate and reform the financial sector; improve infrastructure to support increased 

economic activity and provide access to markets, employment, and social services; increase agricultural productivity and raise the income of the rural population; as well as carry out some key policy reforms needed for sustained economic growth. At the completion of the Compact, the program is expected to increase Cape Verde’s 

annual income by at least $10 million.

Cape Verde’s Development Priority -- Fighting Poverty

Cape Verde suffers from high levels of poverty and unemployment because of limited economic opportunities 

and scarce natural resources, particularly water. Roughly 25% of Cape Verde’s economy is sustained by foreign 

aid and by remittances from emigrants. After being selected to apply for an MCA grant, Cape Verde’s government consulted with local governments, the private sector, community-based associations and the general public 

to better understand the priorities needed to fight poverty. The program Cape Verde and MCC agreed to is 

designed to:

•	 Increase agricultural productivity on the islands of Santo Antão, Fogo, and São Nicolau by improving 

water management and soil conservation, strengthening agribusiness development services, and increasing access to credit and capacity of financial institutions;
Millennium Challenge Corporation

Fact Sheet: Cape Verde July 4, 2005 2

•	 Integrate internal markets and reduce transportation costs by improving transportation networks 

through road and bridge infrastructure on the islands of Santiago and Santo Antão and upgrading the 

Port of Praia; and

•	 Develop the private sector by reducing obstacles to private sector investment, particularly in priority 

sectors, and reforming the financial sector.

The Watershed Management and Agriculture Support Project 

MCC will provide approximately $10.8 million to fund activities to increase the capture, storage and distribution 

of rainfall water, which will allow poor farmers to irrigate their fields and increase agricultural productivity. It 

is expected that this will more than double farmers’ household income. A more reliable water supply, combined 

with increases in irrigated land, will help Cape Verdean farmers shift from low-value, rain-fed agriculture to 

higher value-added crops that require more intensive cultivation. This project is designed to mobilize agricultural support activities such as applied research, pest-control, training and extension services, and credit. More 

than 70,000 people may benefit from the improved access to water, agribusiness development and marketing 

services, and access to credit. 

Infrastructure Project

Cape Verde consists of nine inhabited islands that are not linked by an efficient transportation system. This lack 

of transportation infrastructure hinders the development of a common national market, increases the costs of 

production, and impedes the movement of people and goods between islands. MCC will provide up to approximately $78.7 million for road and small bridge investments to ensure improved transportation links to social 

services, employment opportunities, local markets, and ports and airports; and for improvements to the Port 

of Praia, which handles half of the island nation’s cargo. The roads and bridges in the Infrastructure Project will 

impact over 60,000 people on the islands of Santiago and Santo Antão. The improvements in the Port of Praia 

to be funded by MCC, combined with the concurrent privatization of port services, are expected increase the 

efficiency of the port and to prevent a bottleneck to growth in commerce, in particular in the tourism industry. 

Private Sector Development Project 

MCC will provide up to approximately $7.2 million for this Project. The Government of Cape Verde, with the 

assistance of the International Finance Corporation (IFC), will focus on removing constraints to private sector 

investment. These may include policy reforms and/or projects such as vocational training and education, human 

resource development, infrastructure development, access to financial services, entrepreneurship development, 

and small and medium-sized business linkages. MCC funding will also be provided to enable the Government 

of Cape Verde to make reforms in the financial sector to help increase access to financial services and expand 

access to the primary market for government securities.
Millennium Challenge Corporation

Fact Sheet: Cape Verde July 4, 2005 3

The Compact also includes approximately $13.3 million for program management, oversight, monitoring and 

evaluation. Based on Cape Verde’s record of good governance, certain government ministries will have key roles 

in implementing the Compact program. For additional transparency, at the request of Cape Verde, MCC will 

provide funding to make an open and transparent procurement system available to every level of government in 

the country through an electronic procurement system and reforms for a unified procurement law.

While the proposed total funding by MCC will make MCC one the largest donors in Cape Verde, this program 

will involve significant donor coordination, e.g., with the World Bank and IFC, particularly in the infrastructure 

and private sector development projects. It is further expected that civil society and other beneficiaries of this 

program will also have an integral role in the implementation of the program.

###

Millennium Challenge Corporation (MCC), a United States government corporation designed to work with some of the 

poorest countries in the world, is based on the principle that aid is most effective when it reinforces good governance, 

economic freedom, and investments in people that promote economic growth and elimination of extreme poverty