Portuguese economy hampered by weakness of exporter SME network

Portugal will find it difficult to grow its GDP while its network of mostly small micro-enterprises and small companies fail to diversify their overseas investment risk.

This was the core message from the Portuguese Government’s Secretary of State for Internationalisation, Eurico Brilhante Dias who addressed members of the British and French chambers of commerce in Lisbon on Monday.

The minister said that despite some economic recovery thanks to a buoyant property and tourism market in Portugal, the country’s overall balance was still negative owing to structural problems that had not been sufficiently addressed. For example, in 2016 Portugal exported US$54Bn in goods and services but imported US$70Bn. A clear imbalance that maintains today.

In 2018, exports of goods and services represented 44% of Portugal’s GDP of which services like tourism and car components led the way. However, there was a balance of payments deficit in sectors such as energy, fuels and foodstuffs.

Minister Brilhante Dias highlighted three key problems behind Portugal’s failure to significantly grow beyond the 2.7% achieved in 2017, most of which was driven by inward property investment and tourism.

Portugal’s export sector wasn’t growing significantly or sufficiently, but had stagnated with a total of 21-22,000 mostly small companies exporting, not all of which (20-25%) consistently exported year-on-year.

Of these exporting companies that were consistent, many tended to focus on exporting to one or two client countries rather than diversifying globally. “We have lots of mono-client companies that export to just one country, particularly Spain,” said the Minister.

While exports improved overall in 2017 and 2018, only 800 significant companies formed the core base of significant exporters.

Staying power was another problem. When it came to companies that were consistently exporting the balance was not strong with 5000 companies moving out of exports for every 5,500 actively exporting.

“We’ve had few companies focusing on exports over the past five years that consistently exported every year from the 21,000 exporting companies nationwide,” said Minister Dias.

Having said that, the number of companies exporting goods to some third-party markets outside the EU, like the US, had increased by 50% over five years by 2017 with the total number of Portuguese exporters in the North American market increased from 2,000 to 3,000 companies by that year.

But it’s not for lack of trying. Dubbed ‘Portugal’s door-to-door salesman,’ Minister Brilhante Dias has clocked up over 200,000 miles in journeys promoting Portugal and its companies and national products.

However, Brilhante Dias says that Portugal’s overseas trade organisation AICEP Portugal Global simply doesn’t have the staff to help all exporters (it slashed its fill-time staff rota by 430 by 2017) to work markets and assist companies despite opening many new delegations worldwide in key markets like the US which has stretched its resources considerably.

For example, it no longer attends major trade fairs and has been unable to update its technology infrastructure. Instead, it has had to use some creative thinking to build networks.

One way of addressing this problem is that Portuguese ambassadors now have to take a greater role in acting as anchor or lynchpin between companies and AICEP overseas by organising trade events and hosting product launches.