Rough Sailing Ahead?

"We believe e-commerce will be a big revolution and we need to prepare for it." "Portugal is such a very nice place to live and the Portuguese are very nice peopel to work with"

These are uncertain times for the Portuguese economy as analysts predict that the period of robust growth, almost 100% employment, low inflation and easy credit just may be about to end. But Portugal´s new Economy Minister, Mario Cristina da Sousa, says he has seen things much worse and is not overly concerned at taking the helm when there might be rough sailing ahead.

"I was prepared for this job. I worked as a Secretary of State for planning in the Finance Ministry from 1983 to 1985 when the country was facing much harder times," he recalls.

"Portugal was facing a financial crisis, we had run out of foreign currency, we had a serious problem with the balance of payments and the IMF was instituting a stablization program. That was a big crisis".

The country is now in the second year of a seven-year government support program for the economy which, officials emphasize, is taking a "multisectoral approach." This means, the minister says, that not only industry, but technology, tourism and trade will also be targeted.

According to Mr. da Sousa, the government does not intend to make direct investments in the economy. Rather it will do so through partnerships with business associations to promote projects designed to make the business environment easier.

"The main priority of the program is to promote the New Economy all across the economy and particularly in the small and medium enterprises which have more difficulties," he explains. "We believe e-commerce will be a big revolution and we need to prepare for it."

"And for one example of a sector we´ll be focusing on and why, let´s look at tourism. This is a critical industry for Portugal and one which is growing very rapidly. So the strategy is to create a more diversified offer for tourists."

"In this sense our support program is multisectoral because we want to cover all the sectors of the economy and all the companies involved," the minister says.

And the government is planning other reform measures with a long-term view. Mr. da Sousa notes that anything enacted or begun now will not have any immediate effect and it is not like fiscal or monetary policy which can produce results in a year or so. He also emphasizes that measures taken in the past, especially the years of European Union support funds, have had a major impact on the Portuguese economy.

"Thanks to those programs, our productivity has been growing incredibly fast over the last several years and we´ve embraced a period of extensive growth and job creation."

"But now we´ve arrived at a point of technical full employment and it is clear that the main concern of businessmen today is the lack of labor. They want their businesses to grow, but they don´t have the people to make that possible," the minister explains.

This full employment has caused other problems. Tens of thousands of immigrants, mostly from North and sub-Saharan Africa and some from Eastern Europe, are pouring into the country seeking the work that the Portuguese disdain, such as on construction sites or farms.

The Portuguese are a welcoming people, but some analysts warn that the influx of foreigners could spark a backlash. The minister says the government is aware of its need to use immigrants to fill badly-needed jobs, but only as long as the immigration is legal. "Another answer is to retrain and requalify people for higher technological requirements, at least for those mid-level jobs in industry and services. In tourism and construction, of course, the need for qualifications are lower," he points out.

There has been another factor boosting the Portuguese economy in recent years and that is foreign investment. Major multinationals from around the world have poured money into the country to take advantage of low wages, a skilled workforce, a generous incentive program and other offerings.

Mario Cristina da Sousa says the country is still a great place to invest and easily ticks off the list of attractions which bring investors to Portugal.

"In my opinion, the most important thing is that Portugal is such a very nice place to live and the Portuguese are very nice people to work with," he boasts. "There is also great weather and while this kind of thing is not central to an economic analysis of a country, it is still important.

"But just take a look at our vastly improved infrastructure, telecommunications networks and, something very important these days, our ability to adapt to new technologies. And now that we have full employment, technology is what we want foreign investors to bring to Portugal these days."

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