Interview With Cristina Duarte
To what do you attribute the success of the country in terms of its economic, human development and governance indicators?
The main reason behind Cabo Verde’s success is the political commitment of its leaders to the people and to the country. From that everything else follows. The country is not naturally competitive in any area: the country has little rainfall, no rivers, and we rely on desalinating sea water. Our success can only be attributed to political will and political engagement.
When we set out our long-term vision for our country, Vision 2030, we ensured that there was massive stakeholder engagement. We started talking, discussing and dialoguing with everybody for about nine months. We went to every island to organise meetings with the people. Once we were satisfied with these discussions, we organised a forum to validate the vision and now we are ready to start working on the texts, the procedures, which is the easiest part of the process. The most difficult part was to get the peoples’ engagement, and our success is in part thanks to the peoples’ buy-in and validation.
In terms of the global financial meltdown and the economic crisis in the Eurozone, how has that affected Cabo Verde and how have you dealt with it?
Cabo Verde is an open economy and the financial crisis hit Cabo Verde quite strongly, essentially from the demand side, FDI and remittances. But thanks to good governance, we managed to cope with the international crisis. Until 2012, our 10 year average economic growth was 5.5%. Over the last two or three years economic growth has been down, hovering around 2%.
It’s amazing what we have achieved. It seems that we prepared the country for the international crisis, even from a social standpoint. In 2008 the government removed subsidies, and the savings we made on these subsidies, we channelled towards the social expenditure sides of the budget. Despite the international crisis we increased the social pension by 280%. We took over the school feeding programme, a programme that had been financed by the World Food Programme. And when the WFP left Cabo Verde, we didn’t cut the programme, and it is now totally financed by the government. We redistribute resources to areas that need them the most.
What can Cabo Verde offer the African continent in terms of a development model?
The quality of government policies and quiet determination: but good governance is the bottom line. Second, you need to keep a permanent dialogue with civil society. It is a win-win policy for those in power and civil society, as it feeds political and social stability, both of which are important to attract FDI. You need to work your intangible assets: credibility is not only based in the sum of all the construction contracts and roads built, it is also about building strong institutions and respecting the rule of law.
How does a bank like the AfDB contribute to development, and if you were leading the bank what would be your priorities?
First the AfDB should continue mobilising more capital to try and meet this huge gap in terms of financing, so not only mobilising internal savings but now also mobilising international resources. Africa will have some of the strongest growth patterns in the world and the AfDB can help mobilise private investment. That’s why it’s important it extends its private sector window.
The second issue is that the AfDB is
supposed to work more with the private sector in terms of new programmes, in terms of putting on the table a more balanced mix between capital markets, banking and investment funds.
The third issue is that the AfDB needs to get even closer to African countries; when I say closer, I don’t mean to put a representative office in all the countries but to help influence the quality of public policy: the AfDB can be a reference in terms of advisory services.
Fourth, I believe the AfDB can lead the process or at least can accelerate the process of human empowerment. It’s not possible to keep playing and to keep participating in these global championships with a team where half of its members [women] are outsiders looking on. Women in power is no longer a public policy, it’s an imperative.
What is the culture that exists within the Cabo Verde’s ministry of finance? What culture do you espouse and what are your personal values?
Over the past 10 years I have managed to change the culture at the ministry of finance. I embrace transparency and efficiency in quite a strong way, and this is what I based my reforms around. I didn’t make reforms for the sake of reforms; I made reforms to get public finance in Cabo Verde managed in a way that is credible, that is trusted by civil society, that is efficient and the people can be assured that every penny that Cabo Verde spends is spent in a good way. Sometimes in Cabo Verde they say that I’m too forthright, but when you have a short time to reach some targets you have to be firm and direct otherwise you’ll not get there.
You said Africa will be the continent which drives growth. What is your outlook for the continent?
Africa is on the move but you need to be careful because this “Africa Rising” scenario, that now has become a dominant story everywhere, does not benefit everyone. We Africans are still facing high levels of poverty. Poverty is declining but we still face high levels.
We still face also quite limited structural transformation. We still have economic growth but it is not inclusive, it is not leading to social economic development. So what is the conclusion that we take from our experience over these past 15 years? That economic growth on its own is not enough to end the poverty cycle – we need to do more than that. I believe that developing effective institutions must be considered a key factor for the next decade in Africa, we cannot move forward with this lack of quality in terms of institutions. And the second key factor is human empowerment. We cannot succeed in the next 10 years if we don’t solve the issues concerning women’s integration.
You mentioned tough negotiations with the IMF, that you had to convince them so that they understood your way of thinking and your country’s needs. Can you give us a bit more information on that?
Since the start of our negotiations with the IMF, I told them that with me the game is clear, we don’t hide or withhold information to IMF, you have all the facts on the table, including the public deficit. I play in a very open and clear way but at the same time I fight for my ideals and my convictions.
Three years ago the IMF decided to advise us to cut public investments in Cabo Verde and I told them, it’s not possible. The public investment is the only tool that Cabo Verde has now to cope with the international crisis, to keep feeding the domestic demand.
Cabo Verde achieved grade status [with the ratings agencies], and there is a window to [fund] infrastructure at a very low cost. If I do nothing for the infrastructure of the country when the cost of capital is 1%, you will tell me to fund infrastructure in five years’ time with a commercial rate because the window has gone. It did not make sense and I fought our corner.
We are islands, how am I supposed to unify the domestic market to create a more friendly business environment so Cabo Verde can start walking with its own legs? Without infrastructure, it didn’t make sense. From a political and economic standpoint, to cut infrastructure investment, to cut the public investment programme, did not make sense. The public debt ceiling is high but at the same time it’s within sustainable limits because the other three indicators – debt, debt repayment to revenue ratios, debt to export revenue ratios – are all within comfortable limits.
Their demands did not make sense from a political and economic standpoint, and this is what I explained to them. It took time to get this across but I’m patient, it might not always appear it but yes, I’m quite patient.