Addressing business movers and shakers at a luncheon organised by the British-Portuguese Chamber of Commerce, with the participation of the French, German, South African, Swiss and Dutch chambers of commerce, the high-flying banker pointed out that, in macro-economic terms, both countries were not out of the woods with regards to the crisis despite some positive signals in some areas.
Recovery would be slow and painful in 2010 and 2011, although the UK economy was likely to recover quicker from the financial crisis than Portugal because it was a larger and richer economy, although both countries were seeing an increase in savings and family indebtedness.
He said that negative growth and high unemployment had translated into a lack of consumer and business confidence and a continued retraction in credit lending on the part of the banks in both countries.
The banker said that the current situation was having a profound impact on companies’ financial performance as well as investment and productivity strategies, with most companies pursuing a dual agenda of growth amid cost management and increased operational efficiency, while larger companies that had completed mergers or acquisitions since the downturn were well placed to outperform their competitors.
Dr António Horta Osório said it was important that companies should direct their energies into boosting their competitiveness and internationalisation strategies.
He explained the origins of the Credit Crunch was caused by an excess of liquidity and credit lending in the Western World, particularly in the United States housing market which had led to the Freddie Mac and Fannie Mae disasters.
Referring to what he called the ‘Seven Capital Market Sins’ he said that a lot of risky debt had been sold on to AAA rated investment groups which bundled them up into ‘toxic’ derivatives and hedge funds when no due diligence had been carried out thanks to poor regulation.
Deposits should always be made in a properly insured bank, care had to be taken on the credit quality of any bond issuer to be invested in, stock and share portfolios needed to be diversified in different sectors, and asset investment needed to be sufficiently liquid and not invested in too many stocks and bonds from small companies and niche markets.
