The Business Year

Manuel Caldeira Cabral

PORTUGAL - Economy

Keys to Success

Former Minister of Economy, Portugal


After recording several years of economic growth above the EU average, Portugal is now set to go beyond and focus on up-and-coming sectors.

Portugal’s economy has seen five years of unprecedented growth. How has an anti-austerity policy mix contributed to this?

The government used anti-austerity measures to unleash society’s existing growth potential by following responsible and moderate policies. The first major impact of this was to boost citizen and consumer confidence, which was also reflected in the confidence of investors. These generated an atmosphere of certainty and led to an acceleration of this growth, far above the EU average. Our investment grew by 13% in 2017, the biggest increase in 18 years, mostly in private investment, both Portuguese and FDI. Second, we instilled stability into the public accounts. With more growth, we have more revenue and reduced unemployment, which reduces the costs of unemployment benefits and social security. We also sent a clear message about fiscal stability in our three approved budgets: we have no need to drum up revenue by hiking taxes. We succeeded through better management and by harnessing the opportunities created by economic growth to reduce the debt burden, while maintaining fiscal stability. This reduction of the deficit—to 1.3% in 2017, well below our ambitious targets—works as a guarantee of our ability to retain this fiscal stability, as we will not have more urgent needs in the short or medium term.

Is fintech becoming a priority area for the government, and how do you envisage technology-based economic development in the long term?

We see technology as a key factor for the evolution of the country. In terms of innovation, we have launched three different programs. One of these was Startup Portugal, which streamlined fiscal rules and instruments of venture capital, matched funds to co-invest with foreign investors in technology firms and created a network of incubators. In terms of fintech, we see many start-ups going from strength to strength, with some firms already securing significant investment. The latest example was Finzay, a leading firm in cybersecurity that won an injection of EUR50 million. Another development is that fintech has allowed banks and financial organizations to reorganize their production and services all over the world. Certain large financial institutions are moving key departments, such as cybersecurity or application development, to Portugal. We see two forms of movement: new firms experiencing rapid growth and investors and incumbents eyeing the market with interest. The Web Summit, held in Lisbon, helped to considerably draw attention to the Portuguese ecosystem.

How will Portugal capitalize on its image as an attractive hub for relocating companies?

We see many businesses moving to Portugal in different areas. There are new investments in terms of industry, namely in machinery, aeronautics, and the automotive industry, coming mainly from France, Germany, India, China, and the US. We have several banks creating large pockets of jobs in shared services in Portugal; there are engineering companies that have built R&D centers and many software companies investing here and growing fast. This has translated into an almost 11.9% increase in our exports in 2017 and a strengthening of our industrial capability because of nearshoring. One of the main attractions of opening shop in Portugal is our robust and diverse talent pool. It is a great opportunity to find engineers, software developers, people who speak different languages, people from the finance sector, managers, and people with different competencies.

What impact has qualified labor had on Portugal’s export mix?

We have seen considerable diversification. This used to be more centered on traditional sectors such as footwear, textiles, and clothing, though we have since seen a shift toward the machinery, automobile, aeronautics, and pharmaceutical industries. Even traditional sectors have become more focused on high quality with flexible production: producing more value with less people. Parallel to this, there has been a significant increase in technological services. 10-15 years ago, there were half a dozen software firms exporting; however, today the market has blossomed.



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