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Portugal discovered and colonized the uninhabited islands in the late 15th century, setting up a sugar-based economy that gave way to coffee and cocoa in the 19th century - all grown with African plantation slave labor, a form of which lingered into the 20th century. While independence was achieved in 1975, democratic reforms were not instituted until the late 1980s. The country held its first free elections in 1991, but frequent internal wrangling between the various political parties precipitated repeated changes in leadership and four failed, non-violent coup attempts in 1995, 1998, 2003, and 2009. In 2012, three opposition parties combined in a no confidence vote to bring down the majority government of former Prime Minister Patrice TROVOADA, but in 2014, legislative elections returned him to the office. President Evaristo CARVALHO, of the same political party as Prime Minister TROVOADA, was elected in September 2016, marking a rare instance in which the positions of president and prime minister are held by the same party. Prime Minister TROVOADA resigned at the end of 2018 and was replaced by Jorge BOM JESUS. New oil discoveries in the Gulf of Guinea may attract increased attention to the small island nation.

Sao Tome and Principe’s youthful age structure – more than 60% of the population is under the age of 25 – and high fertility rate ensure future population growth. Although Sao Tome has a net negative international migration rate, emigration is not a sufficient safety valve to reduce already high levels of unemployment and poverty. While literacy and primary school attendance have improved in recent years, Sao Tome still struggles to improve its educational quality and to increase its secondary school completion rate. Despite some improvements in education and access to healthcare, Sao Tome and Principe has much to do to decrease its high poverty rate, create jobs, and increase its economic growth.

The population of Sao Tome and Principe descends primarily from the islands’ colonial Portuguese settlers, who first arrived in the late 15th century, and the much larger number of African slaves brought in for sugar production and the slave trade. For about 100 years after the abolition of slavery in 1876, the population was further shaped by the widespread use of imported unskilled contract laborers from Portugal’s other African colonies, who worked on coffee and cocoa plantations. In the first decades after abolition, most workers were brought from Angola under a system similar to slavery. While Angolan laborers were technically free, they were forced or coerced into long contracts that were automatically renewed and extended to their children. Other contract workers from Mozambique and famine-stricken Cape Verde first arrived in the early 20th century under short-term contracts and had the option of repatriation, although some chose to remain in Sao Tome and Principe.

Today’s Sao Tomean population consists of mesticos (creole descendants of the European immigrants and African slaves that first inhabited the islands), forros (descendants of freed African slaves), angolares (descendants of runaway African slaves that formed a community in the south of Sao Tome Island and today are fishermen), servicais (contract laborers from Angola, Mozambique, and Cape Verde), tongas (locally born children of contract laborers), and lesser numbers of Europeans and Asians.

The economy of São Tomé and Príncipe is small, based mainly on agricultural production, and, since independence in 1975, increasingly dependent on the export of cocoa beans. Cocoa production has substantially declined in recent years because of drought and mismanagement. Sao Tome depends heavily on imports of food, fuels, most manufactured goods, and consumer goods, and changes in commodity prices affect the country’s inflation rate. Maintaining control of inflation, fiscal discipline, and increasing flows of foreign direct investment into the nascent oil sector are major economic problems facing the country. In recent years the government has attempted to reduce price controls and subsidies. In 2017, several business-related laws were enacted that aim to improve the business climate.

São Tomé and Príncipe has had difficulty servicing its external debt and has relied heavily on concessional aid and debt rescheduling. In April 2011, the country completed a Threshold Country Program with The Millennium Challenge Corporation to help increase tax revenues, reform customs, and improve the business environment. In 2016, Sao Tome and Portugal signed a five-year cooperation agreement worth approximately $64 million, some of which will be provided as loans. In 2017, China and São Tomé signed a mutual cooperation agreement in areas such as infrastructure, health, and agriculture worth approximately $146 million over five years.

Considerable potential exists for development of tourism, and the government has taken steps to expand tourist facilities in recent years. Potential also exists for the development of petroleum resources in São Tomé and Príncipe's territorial waters in the oil-rich Gulf of Guinea, some of which are being jointly developed in a 60-40 split with Nigeria, but production is at least several years off.

Volatile aid and investment inflows have limited growth, and poverty remains high. Restricteded capacity at the main port increases the periodic risk of shortages of consumer goods. Contract enforcement in the country’s judicial system is difficult. The IMF in late 2016 expressed concern about vulnerabilities in the country’s banking sector, although the country plans some austerity measures in line with IMF recommendations under their three year extended credit facility. Deforestation, coastal erosion, poor waste management, and misuse of natural resources also are challenging issues.

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