Chinese Dragon in Cape Verde

On April 25, 1976, as the People's Republic of China in Beijing jousted for recognition with the Republic of China on Taiwan, the tiny Republic of Cape Verde, which consists of 10 islands 570 km off the coast of Western Africa in the middle of the Atlantic Ocean and hosts about half a million Portuguese-speaking people, made a fateful decision.

Cape Verde recognized Beijing as the rightful stewards of China's then billion-odd people as the People's Republic sought to thwart the energetic blandishments - and ample funds - of a series of Taiwanese presidents to counter Beijing's UN recognition. Taiwanese diplomacy ultimately resulted in recognition by 23 microstates and the Holy See in the Vatican - but not Cape Verde.

If nothing else, the contest over recognition at least taught China where the obscure island chain is, and triggered a relationship that continues to this day and has begun to grow as Cape Verde's geographical location enhances its attractiveness, particularly for China's vast commercial fishing fleet.

Small entrepreneurs started opening Loja Chines - Portuguese for Chinese shops - some 15 years ago, in the mid-1990s. The first arrival was usually the head of the family, with other family members arriving later. They settled in all of the islands, preferring the more isolated ones like San Nicolau. Today, according to 2008 statistics, the Chinese number around 3,000 with at least 200 stores dispersed throughout Cape Verde.

Journalist Tao Tao Holmes wrote in 2011 that they came via package deals with Chinese big bosses who allegedly arranged the round-trip tickets, visas, food, housing and clothes. They would start businesses and stay for five years and decide if they wished to remain after termination of the period or go back to China.

Because of the generosity of China's foreign aid to Cape Verde, the government has been supportive of the Chinese small shop owners even if the Cape Verdeans complain privately that the competition is unfair. Many Cape Verdeans are thankful for the availability of cheap things like clothes in the Chinese shops, so that many do not resent the presence of the Chinese, who as a community live as a very separate group. As the number of Chinese shops increases, the tougher the competition it poses for Cape Verdean livelihood and the government will be forced to address the problem sooner or later.

Small entrepreneurs led the way

Now that the small Chinese investors have opened the business gates, larger companies are reportedly attracted to establish themselves in the tourism business, notably Macau millionaire David Chaw, who reportedly announced his intentions to invest US$100 million for a huge entertainment park with casino, restaurant, hotel and marina on the islet of Santa Maria, off Praia in Santiago.

The premier Macau casino tycoon, Stanley Ho, visited Cape Verde to look at investment possibilities. He has reportedly established a casino in Guinea Bissau and bought 60 percent of the Banco da Africa Occidental. How he fares in Cape Verde depends upon the other major actors with ties to powerful mafia families in Corsica and Sicily, which are known to operate extensively in the Canary islands and Madeira.

Lately, China's large state-owned companies have started to arrive. In 2003, the China Building-Material Industrial Corporation for Foreign-Technical Cooperation signed a contract with the Cape Verdean government to build a US$55 million cement plant. The facility is expected to produce 350,000 tonnes of cement per year, thus changing Cape Verde from net importer to exporter.

China has also pledged various human development projects such in education and health, as well as building infrastructures such as schools, government buildings, a 15,000-seat sports stadium and social housing projects. The aid package is said to be US$80 million.

China increases foreign aid

Last July, the Chinese Premier Wen Jiabao announced that China would increase its financial aid to Cape Verde to US$21 million in donations and interest-free loans. China had earlier written off Cape Verde's bilateral loans. This new aid package consists of US$8.5 million in donations and USD12.5 million in interest free loans for projects in tourism, air transport, marine economy, information technology, energy.

The most prioritized is the transformation of the Cabnave shipyard into a support base for international shipping fleets, the national airline TACV and the power company Elektra. The Cape Verdean shipyard Cabnave or Estaleiros Navais de Cabo Verde has been struggling for years for modernization. It is today near privatization and the choice partner is the China Overseas Fisheries Company or CNFC. Sources close to the government said that the privatization plan which began in 2008 is taking time "because the Cape Verdean government is doing a lot of thinking on how much control it is prepared to give the Chinese in the management of the shipyard." One can say that, in Cape Verde - the "No stress" land, progress can wait.

CNFC operates some 250,000 fishing vessels off the west coast of Africa between Morocco and Sierra Leone. (The magnitude of China's distant-water fleet can be found here)The servicing and repair of these vessels would provide higher revenues.

Refrigerated warehouse

China National Fisheries Corp. announced its plan to build a 2.000 sq m refrigerated warehouse in Sao Vicente for its fish harvest in the Atlantic ocean, the Cape Verdean state port company announced last year. It will be located in the container area of the Mindelo port, based on a 2008 agreement. According to CNFC, its vessels uploaded 2,461 tonnes of fish during the first half of 2012. The contract is for one year and is renewable with the condition that the Chinese company "may not in this location carry out any other activities or services that are not compatible with those indicated in the contract."

It is hard to say at this point how long it will take to complete it the project. As with most other foreign investment projects offered to Cape Verde, the waiting time is long and tiring and in most cases, resource-draining, meaning that investment money has dried out before permits and licenses have been approved.

Alongside the Chinese partnership, the Cape Verdean government also wants to establish with Spain a partnership in the fishing sector by modernizing the Interbase refrigeration unit for the storage of frozen fish and crustaceans for further export to other countries. The most important actor in the maritime sector is China Ocean Shipping Group or COSCO, which is working in partnership with state-owned port authority Enapor.

Cape Verde is also a candidate to host one of the five "economic cooperation zones" that China plans to establish in Africa, according to a report by journalist Leo Horta. Sao Vicente is the likely candidate as a "special economic zone" primarily as a major fisheries processing center to service the Chinese fishing fleets operating in the Atlantic.

Accordingly, China also plans to make the island a "transit point for replenishment and logistical support to thousands of Chinese ships crossing the South Atlantic for Europe." On the other side of South Atlantic, China is heavily investing in Brazilian ports such as Salvador in the state of Bahia.

An important lesson with the Chinese small shopkeepers' arrival in Cape Verde is that they have become the economic motor especially in the more interior islands less traveled by ships and planes. It was the small businesses that led the way for the larger companies to follow. Another lesson is that some Chinese are not always after raw materials and fast profit from resource-rich African countries with despotic rulers. China has shown adaptability to well-governed countries with little natural resources such as Cape Verde.