How Europe’s westernmost nation is reaping benefits of unsettled times
Portugal, right now, is sitting pretty in a Europe overshadowed by war and galloping inflation. The first two months of this year saw an unprecedented level of foreign investment in this country, with tourism powering welcome post-pandemic recovery. The big question now is, can this economic upturn be sustained?
In a report published this week by the European Commission, Portugal is cited as one of the very few European countries “least exposed” to the repercussions of Russia’s war on Ukraine – Malta, France and Spain being the others.
As such, President Marcelo has already highlighted the nation’s “liquid benefits”, particularly when it comes to the number of foreign visitors arriving, either to stay short-term or purchase properties with a view of something slightly more permanent.
Just in the first two months of 2022 – not usually months of rampant tourism – revenue exceeded €2 billion, albeit some of it will have been through other forms of investment. But all involve ‘benefits’ to Portugal, to the extent that tourism is suddenly being viewed (again) as the engine for economic recovery.
Rosália Amorim, director of daily paper Diário de Notícias, stresses that tourism is at the root of a combination of positives: increased sales of property, improved business for restaurants, additional hotel bookings – and all these factors tend to filter through to the pockets of everyday citizens.
Talking in parliament this week, the new economy minister, former oil company CEO António Costa Silva, described tourism as being “reason for great rejoicing”. Growth in terms of visitors from the United States, for example, has been in the region of 49%. The German market – already one of the most buoyant – has grown by 7.3%, he said.
“We have noted dynamism in various sectors,” he told the commission on the State Budget, “tourism and services growing in a more robust form than we had imagined (…) The behaviour of tourism gives us some hope…”
The minister went on to ‘lament’ the fact that Portugal hadn’t sanctioned offshore exploration of natural gas – hinting that if it was up to him, he would be very enthusiastic of any proposals in that regard (see box). But the general impression was that the country has been spared a lot of the ‘damages’ of the moment, and this has become most evident through the performance of tourism.
“Players are realising more and more how important it is for the nation to be geographically far away from the epicentre of invasion,” explains Rosália Amorim. “Portugal is on the right geostrategic map to capitalise on sun, sea, culture, gastronomy and, above all, security”. It’s time for politicians to truly nurture this massive advantage.
“Portugal doesn’t need tourism just to get out of crises,” she stresses. It does not need tourism “for a year, or for a decade, but forever. It has to be well looked after, like a First Division football player – not one in the third division, as has happened through so many decades.
“Without abundant wealth in raw materials, tourism is our oil – to which one can add the potential of producing renewable energies, on land and at sea,” she considers.
The fact of the matter is that today’s good news cannot be taken out of context: a situation in which, even the European Commission admits (in the same report that highlights Portugal for coming off much more likely than other economies) that should hostilities in Ukraine continue (which they show every likelihood of doing for the next few months), there will be “new rises in food and energy prices, further stocking inflation – and as we well know, poor households suffer even higher rates of inflation than others because food and energy account for a larger share of their domestic budget”.
This is the Achilles’ heel of all the rejoicing: poverty in Portugal is still a many-headed Hydra, affecting at least one in five citizens in a country where micro and small businesses remain the fabric of society.
On Wednesday, warning against “false hopes”, Correio da Manhã ran a short editorial saying: “It’s true, tourism is being the engine of recovery, and GDP this year will accelerate at a rate we are not used to seeing – but the problem of macroeconomic analysis is it frequently forgets the real impacts on the lives of businesses and families (…) Galloping inflation is costing families extra every month. The first few months of the year saw salaries lose €25 in purchasing power. But this damage is going to get worse. Because of inflation, the rise in interest rates will be brought forwards, eating further into the available income of indebted families, and creating a problem for the State.”
Thus, rejoice Portugal can over how the country appears to be reaping the benefits of adversity elsewhere, but grey mists circulate in the wider crystal ball. There is still a long, long way to go.
Oil man ‘with no box’ vows he will welcome fossil fuel investment
Prime minister António Costa took a heroic leap of faith when he appointed the ‘father’ of Portugal’s Plan for Recovery and Resilience (PRR) as Minister of the Economy and the Sea.
António Costa Silva is an oil man through and through. He was the CEO of Partex who railed back in 2019 that the company would no longer invest in Portugal because it had been thwarted in plans for offshore fossil fuel production.
He was hugely irritated when schemes to scrape the bottom of the ocean bed for minerals around Azores were put on the back burner; even more so when movements led by everyday citizens ‘won’ a reprieve from a programmed oil and gas carve up of territory, both on land and at sea.
And now he is ‘at the helm’ of the ministry tasked with taking the country forwards economically – and has declared he will welcome any investors keen to drill for natural gas offshore.
“I do not think outside the box,” he said. “I have no box.”
His comments immediately prompted ‘righteous indignation’ from Bloco de Esquerda. LIVRE, another minority ‘ecological’ party, has said in the recent past that it is hugely concerned Costa Silva has the portfolio of the sea. What does it all mean? Will Portugal break into the fossil fuel production market just because Europe is preparing to turn its back on Russian oil and gas?
The answers are almost certainly ‘no’. Costa Silva is new to politics – and this is the second time he has said something potentially inflammatory, to find not a word repeated by anyone further up the food chain.
In spite of Bloco de Esquerda’s appeal for the prime minister to ‘pronounce’ on Costa Silva’s perceived rekindling of the natural gas/fossil fuel production ‘hot potato’, PM António Costa has said nothing.
A little like the rejoicing, the episode has to be put into context.