Portugal and Switzerland – a flourishing relationship built on shared communities and quality exports
Relations between Switzerland and Portugal have a rich tradition, partly due to the 260,000 Portuguese nationals living in Switzerland. The Portuguese community is the third-largest foreign community in the country, while the Swiss business and residential community in Portugal is growing. Essential Business talks to the Swiss Ambassador to Portugal Denis Knobel.
Text & Photos : Chris Graeme, additional photos: CCISP
According to statistics from Swiss Abroad for 2021, 5,379 Swiss nationals were living in Portugal at the end of that year. However, this number has increased since the end of the COVID-19 pandemic, with more than 7,000 Swiss nationals now residing in Portugal.
Since 2015, trade between the two countries has grown by nearly 50%. As Ambassador Denis Knobel says: “The trade development is positive and growing on both sides, with a trade surplus on the Portuguese side regarding exports to Switzerland, which by 2022 stood at €110 million, with a combined trade of 2.3Bn Swiss francs, or €2.3Bn, and 1.3Bn Swiss francs in services.”
Services have been growing with the boom in the IT sector and the investment in service centres in Portugal. Many Swiss companies are coming here and opening IT branch offices, and this has been growing with a lot of requests at the chamber.
Since the Great Recession and the COVID-19 epidemic, Swiss companies that are noted for their quality have remained resilient and resisted international global shocks. After years of offshoring, some companies are even now returning, while Switzerland is exporting more pharmaceuticals (+50%), chemicals, machines and watches.
Denis Knobel explains that Switzerland’s pharma industry, much of it based in Basel, dominates the country’s exports, both to Portugal and worldwide, and that tendency is getting stronger.
“Switzerland was always very export-oriented, and we have a very small market. If we want to do business, we have to export. We were compelled to engage in foreign trade and be competitive, meaning, as a small market, we had to specialise in certain segments.
“We don’t produce cars in Switzerland, as there is competition from France, Germany and Italy, but we do produce certain car components and, of course, watches, and we do well in areas where we bring added value through reliability and quality,” he adds.
This is a strategy that Portugal, also a small market, is opting for more and more. The cheap textile manufacturers in the 1990s in Portugal did not survive unless they aimed for niche and quality products. Portugal is increasingly adopting the Swiss way, too.
And the balance of Portugal’s exports to Switzerland is growing, currently worth around €100-€110 million, and includes textiles and clothes (+20%), agricultural products, foodstuffs, car components and machinery.
Economy and bureaucracy
Ambassador Knobel points our that of every two francs of Switzerland’s GDP, one franc is earned abroad. “Switzerland is a very open market and is among the countries with a record number of world trade agreements.”
However, he says there are always opportunities for closer and increasing trade ties between the two countries.
“Portugal is a country where we could have more contacts and exchange. Trade is steadily growing, and we see companies from Switzerland contacting us for support.
“One of the services we offer these potential customers is assistance with navigating Portuguese bureaucracy. Switzerland has to sell products at higher prices because the exporter is producing in Swiss francs. However, the reliability of the Swiss economy is quite extraordinary and unique,” he says.
And continues: “Being export-oriented is the best way to be competitive, and for decades, Swiss companies have been trained to be internationally competitive.”
The ambassador says that youth unemployment is high in Portugal, although decreasing.
“This does not happen in Switzerland because we have a dual education system—a unique blend of classroom instruction and on-the-job training. Students split their time between attending vocational schools and working in companies, gaining both theoretical knowledge and practical skills simultaneously. These advantages make the Swiss economy very resilient,” he explains, suggesting that such a system might benefit Portugal too.
And expands: “What is important now in Europe is not just the bilateral trade between countries. It is increasingly difficult to identify what is a Swiss or Portuguese product, as different components are manufactured in various countries.
“On a regional level, we see a division of labour with a production chain, where parts come from different locations and regions and are assembled elsewhere. This is the potential I see between Switzerland and Portugal.”
“When I was Ambassador in Slovenia, we had more than €11Bn in trade between two very small countries. This was because large factories and groups were part of international production and distribution of labor within the group. What is important is to be part of this production chain, not just focusing on bilateral trade and promotion,” adds Ambassador Knobel.
“We have seen this in the chip industry, which wants to develop to be more independent from China and Taiwan, so a final chip goes around the world in the value chain to become a final product. Switzerland also has great companies in these areas, but they only contribute one step out of 10. Therefore, we must define what is Swiss-made,” he insists.
Denis Knobel explains that, in Switzerland, there is a very clear law defining what it means to be “Swiss Made”. For example, TX Media Group has parts developed in Serbia and parts in Portugal, with teams from around the world.
Switzerland, he points out, is a “high-quality precision manufacturer that excels in innovation”.
“Growth today is driven by innovation, and we are able to achieve that. We have a strong connection between research academies and the private sector. For example, the computer mouse was developed in Lausanne by Logitech, a Swiss company.”
Investments
Switzerland is the ninth-largest investor in Portugal in terms of companies. Among other investments, Switzerland has significant investments in the energy sector, such as solar and wind parks. A recent example is the Pessegueiro Solar Park near Palmela from the Swiss energy company EKZ.
And one of the biggest Swiss investments in the tourism sector was made by the Martinhal Group. In addition to hotel and residential developments, Martinhal also launched an international school four years ago. In fact, overall, Swiss FDI has created over 10,000 jobs in Portugal.
“We have a certain reputation as investors. Swiss companies don’t invest only because of lower salaries, and we don’t easily change countries due to increases in production costs. For instance, many big international companies moved from Indonesia because of rising salaries. This is not the Swiss way,” the ambassador emphasises.
Ambassador Knobel admits that Swiss investors are prudent and proceed step-by-step, but once they are here, they remain.
“Instead of global trade with Asia, we could develop stronger ties between Switzerland and Portugal because it is closer and more reliable, with lower transport costs.
“What is needed is predictability, based on a consistent legal framework. Nestlé, Zurich, SGS, and other big Swiss companies have been here for many decades, which shows how investment from Switzerland is for the long term,” he points out.
This has to do with the mentality. “We don’t go after quick fixes. I would invest right now in all the benefits that Portugal has to offer because it’s the best time to do it,” Denis Knobel urges.
Swiss and Portuguese communities
According to recent statistics, 260,000 Portuguese nationals are living in Switzerland, forming the third-largest foreign community in the country.
In some Swiss villages, such as Täsch near Zermatt, where many Portuguese work in the tourism industry, there are so many Portuguese residents that the municipality had to integrate the local Swiss residents into the Portuguese community with special activities.
The second and third generations retain Portuguese names but have a Swiss mindset and speak the Swiss national languages.
And the importance of the Portuguese community in Switzerland was underscored in 2017 by the Swiss President Doris Leuthard who, during a State visit to Portugal, expressed the hope on a tour of the Champalimaud Foundation that the Portuguese community would “remain in Switzerland”.
As Denis Knobel emphasises: “The Portuguese community is very much appreciated in Switzerland. This type of successful integration is a positive aspect of migration. It’s truly a win-win situation.
“It’s becoming circular. Switzerland launched special integration programmes, which is why it benefited from this migration,” he says, pointing out that remittances from the Portuguese community in Switzerland to Portugal now amount to over €1Bn, second only to France. “Portugal also benefits in this regard from this relationship.”
On the other hand, the Swiss business and residential communities have also flourished in Portugal.
The increase in the Swiss national population from 3,000 to over 7,000 in just a few years is a result of the “attractiveness of Portuguese investment attraction policies”, says the ambassador.
Denis Knobel says that Portugal has also become very popular now in Switzerland, both for tourism and among students.
Also, the fact that Lisbon ranks high in IT and outsourcing and has a vibrant startup ecosystem is proving to be an attractive draw for Swiss professionals and small companies.
“The Web Summit provided a boost for the entire startup community, including Swiss tech startups, as did the visa and fiscal incentives for investors,” remarks the ambassador.
Outreach events
The Swiss ambassador to Portugal, Denis Knobel, says that the Swiss Embassy pursues long-term goals to engage with the Swiss community in Portugal.
“As mentioned, we have a rapidly growing Swiss community. For this reason, we are further developing our services and opening new honorary consulates.
“We want to be more accessible and present for the Swiss community, providing focused information for the retired population. Currently, we have consulates in the Algarve, Porto, Lisbon and Madeira, and we will open a new one in the Azores in September 2024,” he informs.
“We want the Swiss community and businesses to know we are available if they need to reach out to us, particularly retired people. Therefore, we will be visiting different regions, like the Algarve, and holding outreach events,” the ambassador adds.
And continues: “When visiting Swiss companies here, I see that they don’t have many problems operating in Portugal. I have been in other countries where there were lots of complications and problems over fiscal areas, but here the message is quite positive.”
Denis Knobel says that he has noticed that existing Swiss companies are investing and reinvesting in Portugal.
“On the political side, we would like to enhance the bilateral ties more, have more visiting delegations, particularly within the framework of the EU and EU capitals. This should help to promote solutions between Bern and Brussels,” concludes the Swiss ambassador to Portugal, Denis Knobel.
