Economy

Since the 1800s, the economy of São Tomé and Príncipe has been based on plantation agriculture. At the time of independence, Portuguese-owned plantations occupied 90% of the cultivated area. After independence, control of these plantations passed to various state-owned agricultural enterprises, which have since been privatised. The dominant crop on São Tomé is cocoa, representing about 95% of exports. Other export crops include copra, palm kernels and coffee.

Domestic food-crop production is inadequate to meet local consumption, and the country imports some of its food. Efforts have been made by the government in recent years to expand food production, and several projects have been undertaken, largely financed by foreign donors.

Other than agriculture, the main economic activities are fishing and a small industrial sector engaged in processing local agricultural products and producing a few basic consumer goods. The scenic islands have potential for tourism, and the government is attempting to improve its rudimentary tourist industry infrastructure. The government sector accounts for about 11% of employment.

Oil Production

In 2001, São Tomé and Nigeria reached agreement on joint exploration for petroleum in waters claimed by the two countries of the Niger Delta geologic province. After a lengthy series of negotiations, in April 2003 the joint development zone (JDZ) was opened for bids by international oil firms. The JDZ was divided into 9 blocks; the winning bids for block one, ChevronTexaco, ExxonMobil, and the Norwegian firm Equity Energy, were announced in April 2004, with São Tomé to take in 40% of the $123 million bid, and Nigeria the other 60%. Bids on other blocks were still under consideration in October 2004. São Tomé stands to gain significant revenue both from the bidding process and from follow-on production, should reserves in the area match expectations.

Economic Reforms

Following independence, the country had a centrally directed economy with most means of production owned and controlled by the state. The original constitution guaranteed a "mixed economy", with privately owned cooperatives combined with publicly owned property and means of production. In the 1980s and 1990s, the economy of São Tomé encountered major difficulties. Economic growth stagnated, and cocoa exports dropped in both value and volume, creating large balance-of-payments deficits. Efforts to redistribute plantation land resulted in decreased cocoa production. At the same time, the international price of cocoa slumped.

In response to its economic downturn, the government undertook a series of far-reaching economic reforms. In 1987, the government implemented an International Monetary Fund (IMF) structural adjustment program, and invited greater private participation in management of the parastatals, as well as in the agricultural, commercial, banking, and tourism sectors. The focus of economic reform since the early 1990s has been widespread privatisation, especially of the state-run agricultural and industrial sectors.

Foreign Assistance

The São Toméan Government has traditionally obtained foreign assistance from various donors, including the UN Development Programme, the World Bank, the European Union (EU), Portugal, Taiwan, and the African Development Bank. In April 2000, in association with the central bank, the Banco National São Tomé e Príncipe, the IMF approved a poverty reduction and growth facility for São Tomé aimed at reducing inflation to 3% for 2001, raising ideal growth to 4%, and reducing the fiscal deficit. In late 2000, São Tomé qualified for significant debt reduction under the IMF-World Bank's heavily indebted poor countries (HIPC) initiative. The reduction is currently being re-evaluated by the IMF, due to the attempted coup d'etat in July 2003 and subsequent emergency spending. Following the truce, the IMF decided to send a mission to São Tomé to evaluate the macroeconomic state of the country. This evaluation is ongoing, reportedly pending oil legislation to determine how the government will manage incoming oil revenues.

Imports

Portugal remains one of São Tomé's major trading partners, particularly as a source of imports. Food, manufactured articles, machinery and transportation equipment are imported primarily from the EU.