Pigs don’t fly

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Economist, newspaper columnist and author of “What now, Portugal?” Eduardo Teixeira highlights the challenges Portugal faces now and in the future.

Portugal is a “fantastic country” says Eduardo Teixeira, with “bags of potential” in terms of tourism. An “amazing gastronomy”, culture and society set in “stunning landscapes” bathed by the vast Atlantic Ocean.
Foreign newspapers and magazines wax lyrical about its hospitality, its music, history and monuments. Business seems to be booming. Lisbon and Porto are buzzing with visitors, trendy new shops, cosmopolitan eateries and hotels are springing up like mushrooms. What could possibly be wrong?
But despite improvements in growth, a more solid banking structure, valiant attempts to balance the annual state budget and more companies operating in the international market, he admits it continues to suffer from “serious structural problems”.
Some of the fundamental roots of the country’s problems lie in its weak democracy, a need to reform the electoral and political systems. As Teixeira says, “The Portuguese need to believe in their institutions, in justice, in fairness, in proportional representation and in a balanced Social State in order for current confidence to be reflected in greater political participation. That is the only way that a better country can be built, with a more robust economy and a fairer society.”

Text and photos: Chris Graeme

In 2017 Portugal’s economy grew an interesting 2.7% while over 20 million tourists poured into the country in 2018, bringing a welcome boost to the construction, real estate, hotel and hospitality, restaurant, trade, agrotourism, transport and leisure services sectors.
Teixeira says that both tourism and real estate were “decisive” in increasing salaries, cutting unemployment and in job creation which all contributed towards wealth generation in Portugal.
By 2017 unemployment fell to 8% from 10.2% in 2016 – the best results since 2004 – while the total number of Portuguese in employment reached 4,776,000 (75% of working age population).
Tourism revenues rose 16.6% last year on 2017, bringing in €3.39Bn, with 20.6 million guests and 57.5 million overnight stays. The property market too boomed with 153,292 houses bought and sold in 2017 – 26,186 more than in 2016.
“We should be in no doubt that tourism and property are today activities which are essential for the socio-economic development of our country — on our national wealth and the employment they generate and the impact they have on our cities and our company fabric,” he says, pointing out how Lisbon, Porto and many other cities were regenerated on the back of both.

One of Portugal’s problems is demographic, with among the lowest birth rates in Europe, while the population is top heavy in terms of the elderly. “We need to rapidly change this by creating effective conditions to attract young Portuguese who have emigrated and provide incentives to families to have more children”, he says.
“If nothing is done then, by 2030 Portugal will only have a population of around 7 million and we’ll lose 20-30% of our current population. Why is this important? If we lose population then this will impact on our economic growth and we will cease to grow,” he adds.

While Portugal’s economy is robust in areas such as tourism, real estate, textiles, footwear and car industry components, Teixeira says that effective solutions have to be found to drive economic growth and reduce an extremely high public and private debt.
The EU considers that Portugal’s public and private debt continues to be worryingly high. Bank default ratios have improved after the injection of many millions of euros into the system to recapitalise them, but defaults continue to be comparatively high compared to the rest of Europe.
“Portugal’s current account is stable on the whole, but without prudent housekeeping and improvements in competitiveness it will be hard to lower our net balance of payments to safer levels,” Teixeira warns.
“Our huge private and public debt coupled with continued credit default on bank balances make us vulnerable within Portugal’s current context of low growth, productivity and exports. The balance of trade deficit continues to be high and that has to be improved”, the economist stresses.
In fact, since 2011 Portugal’s public debt has remained above 100% of GDP and growing. “Portugal continues to be the third EU state with the largest debt with a debt ratio of 124.9% of GDP, only overtaken by Greece (179.7%) and Italy (133.1%).

The continued uncertainties over Brexit are having a negative economic impact on the European Union and Portugal for whom the United Kingdom is an important export market not only in terms of exports of goods and services, but also tourism.
Teixeira warns that the effects of a hard Brexit will have huge consequences for the Portuguese. There are 302,000 Portuguese citizens registered at Portuguese consulates in the United Kingdom, while over the past decade the UK was the main destination of Portuguese emigration, with over 120,000 moving to the UK between 2011 and 2015, whose legal status will, despite assurances, inevitably change with new rules governing access to the jobs market and public services. (Education, health, social security and pensions)
“Portuguese companies with investments in the British market will have to adjust to new customs, import and export, tax and financial realities on their import and export transactions and cross-border investments”, Teixeira explains.
“The impact of British tourism in Portugal is incalculable and is already being felt: in 2018 this market had fallen by 10% and the expectations are that it will continue to fall with visible effects in both Madeira and the Algarve”, he says.
The Portuguese Confederation of Industry estimates that that the effects of Brexit on Portugal’s economic growth will be disastrous: the negative impact on Portugal’s GDP could be -1% while export turnover could fall by as much as 26%.

Portugal once had a robust, home-grown banking sector, but after years of privatisation and liberalisation most Portuguese brands have vanished and only a State bank, Caixa Geral de Depósitos, a cooperative bank (Caixa Agrícola) and a mutual bank (Montepio) are still in national hands.
“The reality is that the liberalisation of the banking sector saw the disappearance of many brands, while business is now concentrated in a few foreign banks. Portugal should have protected the independence of its banks as a question of sovereignty and national independence.
“I am not saying that foreign banks should not operate in Portugal; on the contrary, it makes for a diversified, structured, universal and competitive system. What I would like to see is a healthy balance between private Portuguese capital (and centres of decision-making as a consequence) and private overseas capital”, the economist opines.
“Financial lending to Portuguese companies should not be totally dependent on international business interests for the good of our economy and for all of us,” warns Teixeira.

Eduardo Teixeira does not downplay the successes and victories that Portugal has made since the dark days of economic hardship and austerity in the wake of the worst economic recession from 2008-2014 it had faced since the 1980s.
But he says: “It is vital that people understand the key political and economic issues that Portugal is facing now and which will have repercussions in the future”.
Portuguese society must be aware that ‘pigs don’t fly’ (he uses the Portuguese colloquial expression “cows”) and points out that: “social tensions have been rising to the fore” under the present Socialist government of António Costa with “strikes by nurses” and now, more worryingly, from lorry drivers who have succeeded in holding the country to economic ransom this summer.
Teixeira believes that the time is ripe for a centre-right victory at the voting urns in the forthcoming elections. But Essential Business believes that until rampant corruption, an over-complicated tax and biased judicial system are tackled and a nepotistic and ‘jobs for the boys’ approach to public administration is swept away, the current and entrenched social apathy towards and mistrust of local and central government and its politicians will ensure Portugal get’s more of the same that it has largely suffered for the past 40 years.