On a late April morning at the prestigious Harvard Club in New York, Portugal’s deputy prime minister Paulo Portas could easily be taken for a foreign socialite. Sporting a tweed jacket, he is at ease delivering a speech that includes references to German poets, surfing and Portuguese wines. His accent is posh English and he has the self-confident flair of someone at ease in the spotlight.
And Mr Portas has good reason to be so confident. After four years of battling financial crisis and enduring tough austerity measures, Portugal’s economy finally seems to be experiencing better days. “Four years ago our [budget] deficit was higher than 10%, now it is below 3%. [Yields of] our 10-year bonds were about 12% to 16%, now they are between 1.5% to 2%,” Mr Portas tells the 30 or so investment bankers and entrepreneurs gathered at the club.
In 2014 alone, Portugal's tax revenues rose by 2.3% to a record high of €37.1bn, government spending was down €1.2bn and the country’s economy expanded while unemployment fell to a three-year low. Not bad for a country that in 2011 was forced to request a bailout and dubbed one of the ‘Piigs’, a derogatory acronym to describe eurozone countries battered by sovereign crisis, including Italy, Ireland, Greece and Spain.
Also in 2014, Portugal managed to exit the Economic Adjustment Programme, a reform roadmap devised by the Troika of the International Monetary Fund, European Commission and the European Central Bank as a condition of its bailout.
When asked what new laws played the biggest role in putting Portugal’s economy back on track, Mr Portas points to two: labour code reform and corporate tax reform. The former weakened some of the employment protection policies, the latter decreased corporate tax from 25% to 21% with the aim to further decrease it to 17% by 2018.
“The labour code reform is very relevant because it makes large progress towards flexibility [of the job market], and with the corporate tax we keep on reducing it, aiming at being a country with one of the lowest corporate taxes in Europe,” says Mr Portas.
There is still a lot of room for improvement though. According to greenfield investment monitor fDi Markets, last year Portugal attracted only 30 greenfield crossborder projects. This is a far cry from 2004, when 83 foreign ventures chose to set up business in Portugal. What is more, the unemployment rate, although contracting, still stands at a high 13.6%.
However, Mr Portas says the fact that things are changing for the better is being felt among his countrymen. “I like to describe it as the changing pace of realism. Three years ago it was on the pessimistic side, now it is closer to the optimistic one,” he says. “Confidence in the Portuguese economy is the highest among consumers [and entrepreneurs] since 2002... so we have the momentum.”