Pedro Reis at the ICPT: All hot air and nothing new

A former president of Portugal’s overseas investment and trade organisation, AICEP, Pedro Reis, says that the country’s governance is bankrupt of new ideas on how to break two decades of anaemic growth.

And in a nod to the surprise municipal elections, in which both the centre-right and far-right wing political parties gained ground on the ruling PS socialist government — now a caretaker executive pending elections in January – Reis said the elections showed that society had greater ambitions than the current political ecosystem which has a serious “attitude problem”.
Pedro Reis, who is standing as a candidate in the elections to appoint a new president of the Portuguese Economists’ Association (Ordem dos Economistas) was speaking at a lunch organised by the International Club of Portugal (ICPT) at the hotel Sheraton Lisboa Spa in Lisbon on Thursday.
He said that the gains by the PSD in Lisbon with the election of Carlos Moedas as Mayor of Lisbon, as well as gains in other municipalities up and down the country, showed that voters were getting impatient regarding politics and were demanding real change.
Pedro Reis pointed to the fact that the Portuguese economy was facing huge challenges, but said that Portugal was blocked.
In a presentation on “The Challenges of the Portuguese Economy” Reis said the economic landscape had changed worldwide since the Covid-19 pandemic, with Portugal and other countries facing challenges to do with sustainability, the circular economy and energy efficiency.
“If there is now a new economic paradigm, if companies are looking for new directions, and if consumers have new demands, then why (is the government) continuing on with the same model of public policies?”
“Over the past 20 years Portugal’s growth has been anaemic, resulting in Portugal’s economy becoming blocked,” he said.
“The world has changed and accelerated, but Portugal is blocked, is failing to get out of its comfort zone, is scared of reform. There is a lack of attitude, ambition, courage, political will and strategy, when tackling this should be the real challenge for the Portuguese economy”, he said.
But there is a problem to this lament. Over the past 20 years, I have heard economist after economist parade through such luncheon events like a group of respiratory disease specialists, pointing out that the patient has chronic emphysema , but 20 years later it’s still the same prognosis — negative.
You see, the problem is Portugal’s body politic which is like a chronic smoker. It knows the cigarettes will kill it eventually, but somehow doesn’t want to quit its dependence on nicotine. In other words, it is the unhealthy and incestuous political framework that needs to change.
What the candidate for the Portuguese Association of Economists did not say was that Portugal’s RRP plan, which together with EU grants and loans with up to €40Bn over the next 10 years, is ambitious and, in fact, is geared towards modernising, greening and digitalising Portugal’s economy and improving the number of those who go into higher education.
Reis says it doesn’t go far enough. He says that there needs to be more Public-Private Partnerships like they’re ambitioning for Greece. I remember that being tried in the UK under Tony Blair and Gordon Brown. The UK made extensive use of PPS to build hospitals and schools in the 2000s and the results were disappointing.
They are associated with high lifetime costs for taxpayers, are prone to badly-negotiated contracts (read back-handers) whereby private companies and the government can end up being a bad client.
The risk is that the PPP model means clients (the Government) can be dominated by producer interests, over-specified projects, lack commercial or negotiation skills to successfully manage procurement, and spend fortunes on external advice from consultants. Such arrangements would have to be well policed and supervised and that is hard in a country like Portugal which does have systemic corruption and influence issues.
And since a country’s wealth is partly secured by exports, by Reis own admission in the summer, the results of Portugal’s exports showed “a resilience on the part of our enterprises” which bounced back with a 9% growth in the first six months of the year, exporting €1.5Bn more in goods and services than they did between January and May 2011 (the height of the financial crisis). So, they are not doing too badly.
Pedro Reis said that Portuguese citizens and companies are stifled by taxes, and that companies need capitalisation. But he didn’t address where this money would come from without endangering the future of the Portuguese national health service. If you cut taxes you inevitably cut back on health, social and public services and public education which are already at breaking point.
And the economist failed to grasp that few large Portuguese companies actually expand in Portugal, let alone have their head offices for tax reasons based in the country, because labour and taxes are cheaper in countries like Poland and the Czech Republic.
And as for the new startups and tech companies, they can’t find the capital to stay in Portugal. These typically need to be near their capital investors and their clients. Usually, they open offices in the States or other large cities in Europe and just keep the back office in Portugal as their business grows and expands overseas. Carlos Moedas, Lisbon’s new mayor wants to invert this trend by setting up a Unicorns Factory in Lisbon. It will be interesting to see how that pans out without huge subsidies and incentives from the government.
The candidate didn’t seen to realise that the very talented young people who are the “leaders of tomorrow” — he has a plan to draw more young people into the association if he wins — don’t stay in a country where the average wage is €1,300 per month. The cream of the crop of Portugal’s talent is already working in Germany, Switzerland, France, Holland, Luxembourg, Canada and the United States.
He is right when he says that the model that has been followed for the past 20 years is broken and offers no hope to future generations, but short of privatising Portugal’s government positions and putting out tenders in the Financial Times for political and public admin posts, it is hard to see how the deeply ingrained gravy train of party politics in this country can seriously be changed. There are just too many entrenched interests at stake who would stand to lose.
I am not trying to be negative here. But it is rather unjust of Pedro Reis to slam the Government’s very real attempts to move Portugal forward through its RRP under the appointed recovery Tsar António Costa e Silva who, as a seasoned business man in the oil industry, does in fact have a clear blueprint and roadmap for change.
Of course changing the body politic in Portugal is something else and a much more complicated matter.