Portuguese growth can’t be achieved through Russian-style ‘doping’

The growth of Portugal’s economy has to be done sustainably and not faked through some kind of Russian style ‘doping’ warned the parliamentary chief whip of Portugal’s ruling PS party this week.

This is according to Eurico Brilhante Dias who addressed a group of business leaders and diplomats on May 30 at a luncheon organised by the International Club of Portugal (ICPT).
Eurico Brilhante Dias – an expert in exports and balance of trade because of his time as executive director at Portugal’s overseas trade and investment agency AICEP Portugal Global, when he had the task of boosting the export capacity of Portuguese companies — made clear that Portugal had to grow without “doping Portugal’s debt and balance of payments deficit by gradually moving towards new sustainable business models.
The chief whip said that Portugal’s GDP per capita was far from being the only relevant indicator when analysing Portugal’s economy and used by way of example Portugal’s shocking debt burden.
According to the latest information for 2022 on Portugal’s debt, public debt increased by €2.8Bn in February to €274.8Bn, the third highest in the European Union after Greece and Italy. This growth was essentially down to a sovereign bond issue of €2.5Bn.
But the real shock is when Portugal’s total debt is examined for families, companies and the State which rose by 0.4% between January and February to an eye-watering €777.4Bn — the highest in Portugal’s modern democratic history, outstripping even the debts accrued in 2011 when Portugal sought a €78Bn bailout from the IMF-ECB-EC troika.
Portugal’s GDP-per-capita has risen since 2018 from €19.950 (annual variation of 4.9%) to €20,530 (annual variation 5.7%) in 2021. It is, in fact, the 7th lowest in the EU at 74% of the average EU GDP-per-capita.
“If we have an (hypothetical) economy that has 50% of public debt as a percentage of GDP, whose share of public investment in contributing towards gross fixed capital growth is double Portugal’s, and if that country’s unemployment rate were double the national jobless rate, then right there you have the basic conditions in the medium term to grow more than Portugal”, he said.
Given such a constraint as a result of the burden of public debt (which is far more than 50% and currently stands as 136% of GDP), Eurico Brilhante Dias suggested an alternative road to growth.
“No responsible government can artificially ‘dope’ Portuguese growth. In this case ‘doping’ means debt. What is expected from the Portuguese government is that it puts the country on the path to growth in a sustainable way without doping”, he said.
Eurico Brilhante Dias went on to discuss a second challenge facing the Portuguese economy — pursuing new business and employment models in order to be more competitive.
“When I say that the Portuguese have more qualifications, have other ambitions and that there is a challenge of hybrid working solutions, or remote working with the integration of Portuguese resources in international operations, this also means that the added value from Portugal-based companies will force new business models”, he said.
And warned “The business models of the past are becoming redundant because the resources used are not the same, footwear is no longer produced in the same way as it was 10 years ago, the business model had to change”, he said by way of example.
In the case of the footwear industry, Portugal went from a low-tech model to an extremely high-tech model in a matter of 20 years. As João Maia, a former Executive Director of the Portuguese Footwear, Components, Leather Goods Manufacturers’ Association (APICCAPS) once said: “During the 1970s and early 1980s we were basically just selling production minutes, i.e., the sources of competitive advantage were based on the low cost of labour and economies of scale based on large volume. By the 1990s that was no longer possible, even less so today because there is no such thing as a low-tech industry.
Eurico Brilhante Dias also highlighted the consequences of Portugal’s progressive demographic decline.
“This impact of a falling population will (also) force a change in business models. We will have to manage production differently, we will have to move up the value chain, otherwise we will not generate opportunities, or the economic growth we need to sustain Portugal’s social model”. (National Health Service, National Insurance, Welfare and Unemployment Benefits and Pensions)