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Portugal was hit hard by the financial crisis but is now recording strong growth figures. The country's minister of economy, Manuel Caldeira Cabral, chats to Michael Deibert at the Portugal Economic Forum 2018 about how adjusting to and embracing the changes brought in during the crisis years are helping it to flourish.

Q: According to Portugal’s Instituto Nacional de Estatística (INE), the country's economy grew by 2.7% in 2017, its strongest showing in 17 years. To what do you attribute Portugal’s success in recovering from the 2010-14 financial crisis?

A: One of the things the adjustment process in Portugal had was that we embraced it. We didn’t like it. It was tough and it meant we had to make some sacrifices and important structural changes – but we embraced them; we didn’t fight them. That shows today in lower deficits and a more competitive economy. We had a highly qualified younger generation, so innovation... in our firms had already started to happen before the crisis. We gained market share in the EU, but also in the US, Brazil and elsewhere. 

Q: It seems that the recent development of Portugal’s economy is not centred in Lisbon. Do you find that significant? 

A: You have many firms moving to Lisbon, but a big number moving to Porto as well. For example the [French] bank Natixis moved to Porto; Vesta opened an office with 500 engineers in Porto to develop the new generation of aeolic engineering. Fujitsu opened two service centres in Braga, and you have other firms such as Altran [a French innovation and engineering consulting firm] opening offices in Fundão, a medium-sized city in the centre of the country. BNP Paribas has a big office in Porto and a big office in Lisbon. 

I think this results from where talent is: in the big cities but also the mid-sized cities, which have good universities and a cluster of competencies in specific areas. One of the biggest investments we have linked with research and engineering is the Bosch investment in Braga, which is doing research in the frontier areas of the firm, such as driverless cars and software introduction. [This is] linked to one of our best universities, the Universidade do Minho.

In the past, though, most of the foreign investment projects were coming to Portugal to carry out production and to be competitive with costs. Now most of the projects that are coming in include engineering and even R&D. 

Q: Where do you think the most foreign investment activity will be happening in Portugal over the next few years?

A: We have grown in a consistent way over the past 12 years. This has happened in a set of sectors, including machinery, automobiles, the aeronautical industry, the pharmaceutical industry, chemistry and plastics. But it has also happened in services, mostly software services – a sector that existed 10 years ago but which has grown at 10% a year over the past 10 years.

We’ve developed a lot of renewable energy sources, and in 2017 we produced 60% of our energy from renewable sources. This year, we've already had a full month, March, where we produced more energy than we consumed. Solar energy is only 4% of our renewable energy base but it’s going to be 25% in three years time.

The growth of tourism in 2017 was 19%, with the US we grew 40% and doubled the number of direct flights. Portugal is open for investment, but it is also open for anyone who wants to come and visit the country. This makes a lot of difference in today’s world. Some countries are getting more closed, but being open is part of our culture, and this is an area of big consensus [within the country]. 

Q: Going forward, what challenges will Portugal have to address?

A: I think we will have to address the same challenges that other countries have to face. We have to be committed to the reform of the euro and the banking union. We are promoting an agenda of openness within the EU, and we want to move forward and open more routes for trade and investment with different areas of the world.

This article is sourced from fDi Magazine
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