São Tomé and Príncipe became a colony of Portugal in 1522 and was administered by Portugal for the next several hundred years. A liberation movement emerged in the 1960s, resulting in the creation of the Movement for the Liberation of São Tomé and Príncipe (MLSTP) in 1972. Based in Gabon and led by Dr. Manuel Pinto da Costa, the MLSTP led the country to independence following a military coup in Portugal in 1974. The new Portuguese administration oversaw the peaceful transition to independence over the course of the next year.
After declaring independence on 12 July 1975, Dr. Manuel da Costa became the country's first president. The ruling MLSTP party adopted a socialist economic program, providing state ownership and direction of all the islands' industries. There were several unsuccessful coups and attempts to overthrow the regime of President da Costa, yet da Costa maintained close links with the communist bloc countries amid worsening economic conditions.
The severe drought of 1982 prompted President da Costa to change his priorities in international relations. In 1984 the president proclaimed São Tomé and Príncipe a nonaligned state. This meant that the government adopted a strategic and political position of neutrality towards the major powers aligned with the United States and the U.S.S.R. Most of the Soviet, Cuban, and Angolan advisers had to leave the country. New international links were established with neighboring African states and Portugal. The initial attempts to reduce state control over the economy halted after the minister of Planning and Commerce and the minister of Foreign Affairs and Co-Operation were dismissed.
In August 1990 a referendum indicated that 72 percent of the electorate (90.7 percent of participating voters) favored a newly drafted constitution. The new constitution declared the republic as a sovereign, independent, unitary, and democratic state. The MLSTP lost its dominating role as the new constitution allowed a multi-party system. At new National Assembly elections on 20 January 1991 the MLSTP was defeated. It obtained only 21 seats in the 55-seat unicameral National Assembly, while the opposition Party for Democratic Convergence (PCD) secured 33 seats. The remaining seat was won by the Partido Democratico de São Tomé e Príncipe—Coligacao Democratico de Oposicao (PDSTP-CODO). Miguel Trovoada of the PCD was chosen as president and retained that role in elections in 1996.
Members of the National Assembly are elected for 5-year terms in free and fair multi-party elections. The president of the republic is elected to a 5-year term by direct election. The president names the prime minister from a name submitted by the party holding a majority in the National Assembly. The prime minister then names the 14 members of the cabinet. In 2001 Miguel Trovoada was the president and Guilherma Posser da Costa was the prime minister. The next presidential election will be held in July of 2001 and the next legislative election will be held in 2003.
There are 4 types of taxes imposed by the government on imported goods: an 8 percent transaction tax; import duties ranging from 0 percent on basic foodstuff and pharmaceuticals to between 6 and 50 percent on alcoholic drinks and 10 and 66 percent on petroleum products; a 3.5 percent customs duty; and a consumption excise tax , which varies significantly on different types of goods (from 0 percent on basic foodstuff to 250 percent on tobacco) and is levied on the after-tax value on goods.
In the late 1980s, the new government requested international assistance in order to improve the economic situation. The new economic policy included economic liberalization, currency devaluation , price liberalization, and privatization. Drastic economic measures imposed by the IMF and the World Bank as part of the economic recovery programs led to a significant decline in the living standards of people. According to the EIU Country Report, inflation ballooned from 35.5 percent in 1996 to 68.5 percent in 1997. However, the annual inflation rate was reduced to 10.5 percent in 1999, and the annual GDP growth rate grew from 1.0 percent in 1997 to 3.0 percent in 2000.