VIII.  Trade and Project Financing

 Banking System

 Financial services to the private sector are limited, with
 the result that the existing system is considered
 inadequate to efficiently and effectively satisfy the
 private sector's needs for credit.  Until 1993, the
 Capeverdean financial system comprised two public
 institutions, the Banco de Cabo Verde (BCV) and the Caixa
 Econ mica de Cabo Verde (CECV).  The BCV was the principal
 financial institution in the country, combining the
 functions of a central bank, commercial bank and a
 development bank.  The BCV has limited experience in the
 modern economy, especially in investment and export.  One
 result of this problem is that entrepreneurs who want to
 start a new business or expand an existing one are
 discouraged from doing so.  The CECV operated somewhat like
 a savings bank.

 With the liberalization of the economy and the subsequent
 reform of the financial sector, the BCV was separated, in
 September 1993, into a central bank  and a
 commercial/investment bank called the Commercial Bank of
 the Atlantic (BCA).  While this was an encouraging sign,
 the bank remained majority state-owned, and because of the
 lingering bureaucracy, major changes that would directly
 benefit private sector customers have not been felt.
 According to BCA officials, negotiations with the BCV
 regarding the transfer of assets, liabilities, etc., have
 been dragging and much effort has been made in putting up
 the new structure.  So it remains to be seen how the
 restructuring of the BCV will affect credit availability.
 Current non-discriminatory credit facilities available in
 Cape Verde include bank loans, letters of credit and lines
 of credit (the BCA itself provides no lines of credit).
 Within the scope of the privatization process underway, the
 World Bank is assisting in the establishment of a credit
 line in order to allow the participation of the local
 private sector.  The BCA corresponds with some twenty
 international banks. In the U.S. it corresponds with
 American Express and City Bank.

 The CECV has undergone a complete restructuring and
 modernization.  Its new statutes changed it from a public
 institution into a corporation and a universal bank.  The
 portion of the share capital reserved for the private
 sector has not been raised yet.  The CECV is however,
 expected to be privatized sometime in the near future.  It
 now offers normal banking services with the exception of
 international operations which are expected to begin
 shortly.

 CECV is now in the process of getting correspondent banks
 overseas in major trading partners.  In the U.S.
 negotiations with the Chemical Bank and the Bank of Boston
 are underway.  CECV's light structure is allowing it to
 offer relatively quick service which is highly beneficial
 to the development of the private sector.

 Legislation which allows for establishing private banks was
 approved in March 1993.  There are no restrictions for
 foreign banks;  all that is needed is an authorization from
 the central bank and 50% of the workers must be Capeverdean
 nationals.

 There are no foreign exchange controls affecting trade.