Cabo Verde, an archipelago off the coast of Senegal, has long been known for its political stability, with peaceful transfers of power since multiparty rule began in 1991. The latest election on May 17th saw the African Party for the Independence of Cabo Verde (PAICV) defeat the Movement for Democracy (MpD), which had governed for a decade. Francisco Carvalho, the PAICV's leader, was sworn in as prime minister on June 19th. The PAICV secured 37 of the 72 seats, while the MpD obtained 33.
The peaceful transfer of power and prompt acceptance of the result reinforce Cabo Verde's record of political stability, supporting continued investor interest. However, concerns have been raised about the state's predictability as a contractual counterparty. The country's judiciary is considered honest by regional standards but struggles with speed, with a clearance rate of 95.4 percent for 14,419 new cases in the 2025-26 judicial year. The backlog is growing, particularly in lower courts where commercial disputes begin.
The Supreme Court is an exception, with only 303 cases pending and a clearance rate that exceeds the number of new cases. The judicial council's president attributes improvements in critical areas, such as civil courts on Sal and Boa Vista, but acknowledges uneven progress. Weak or missing alternatives to litigation are also blamed for the bottleneck. The previous government aimed to cut the backlog by 70-80 percent by 2026 but missed the target.
The state as a party to contracts is a significant risk for investors, as exemplified by the inter-island ferry concession awarded to CV Interilhas in 2019. An arbitral tribunal ruled in favor of the operator in 2025, ordering the state to pay approximately €40m for breaching the contract's exclusivity clause. The previous government contested the award and sought annulment in the Supreme Court. The new government must decide whether to honor the arbitral award or pursue the matter.
The ferry concession is not an isolated case, with other contracts, such as the airports concessioned to Cabo Verde Airports, a company established by VINCI Airports with ANA Portugal holding a 30 percent stake. These contracts sit on a strained public balance sheet, with the IMF warning that state-owned enterprises pose a significant fiscal risk and high debt is a source of vulnerability. The Heritage Foundation estimates public debt at 111.2 percent of GDP.
Concessionaires already report arrears, with ETE stating that the state has been behind on its financial obligations since the concession began, with €9.5m owed. Investors are advised to track key developments, including the ferry award, the balance of power after the presidential election on November 15th, the appointment system for the top court, and the independence of regulators, particularly the multi-sector economic regulator ARME.
The outcome of the presidential election will have implications for contract risk in Cabo Verde. If José Maria Neves wins, the PAICV will control both the presidency and government, while an opposition victory would preserve divided political control. The appointment of Supreme Court judges and the independence of regulators will also be crucial in determining the country's commitment to the rule of law and contract enforcement.
Key points
- The new government must decide whether to honor an arbitral award in the inter-island ferry concession or pursue the matter.
- Cabo Verde's judiciary struggles with speed, with a growing backlog of cases.
- The country's public balance sheet is strained, with high debt and state-owned enterprises posing a significant fiscal risk.
