Portugal around the web on 11/22
According to Reuters,
LISBON – Portugal may need a further 20-25 billion euros in rescue funds to finance public companies that have had their access to market funding cut off, a former government official who negotiated the country’s bailout earlier this year said on Tuesday.
Carlos Pina, who as treasury secretary in the previous Socialist administration was a key official involved in negotiations for Portugal’s 78-billion-euro bailout in April, said the loan from the European Union and IMF did not reckon with the closure of markets for public companies.
“There is a risk that the 78 billion euros will not be sufficient,” Pina told a conference. “There may be a shortfall of 20 to 25 billion euros.”
The former Socialist government collapsed in March as financing costs soared, forcing it to request a bailout, which was in place by the time a new center-right government took office in June.
Some economists have said Portugal may need more money because of large debts at its public companies, which they may struggle to roll over after the euro zone debt crisis started spreading to larger countries like Italy and Spain.
Pina said the bailout was negotiated “on the expectation that public companies would have access to markets. If that is not the case, the situation changes.”
The current government has said there is no need to change the bailout, which has led to sweeping spending cuts and across-the-board tax hikes to meet tough budget goals.
Inspectors from the European Union and IMF also said last week they did not see need for changes or additional rescue funds. ?????????
In the air…
Flights to and from Portugal are being threatened with cancellations and delays due to a general strike across the country from tomorrow (Wednesday).
The industrial action is expected to affect airports from 9pm and run until 4am on Friday with a national shutdown planned for Thursday.
Eurocontrol, the European air traffic organisation, warned that the start and end of strike times would be different across air traffic control zones and airports in Portugal. Several unions representing aviation workers announced that they will join the general strike disrupting travel.
Portuguese airport operator ANA said passengers expecting to fly after 10pm on November 23 or any time the next day should contact their airline or travel agent before heading to any airport in the country.
The Portuguese Civil Aviation Pilots Union (SPAC) announced last week an eight-day strike scheduled for December 9, 10, 11, and 12 and January 3, 4, 5 and 6.
Portugal’s economy is expected to shrink by 3.0 per cent in 2012, a bleaker outlook than the previous estimate of 2.8 per cent, the country’s finance minister said Monday.
The new forecast tallies with that of the European Commission.
Finance Minister Vitor Gaspar, however, said this year’s recession would be slightly less severe than initially forecast, with a contraction of 1.6 per cent instead of a predicted 1.9 per cent.
Gaspar told colleagues in parliament to expect ” …a better economic performance in 2011 but a greater downturn in 2012″.
The revised assessment follows newly released figures from Portugal’s national statistics department.
Portugal has seen its gross domestic product (GDP) drop since the last quarter of 2010. Its economy contracted by 0.4 per cent in the third quarter of 2011.
The revised numbers should have no significant impact on the 2012 budget, however, Gaspar added.
On November 11, Portuguese politicians approved in the first reading a budget that would impose dramatic cuts beyond even those recommended by the International Monetary Fund and the EU, which have given the country emergency loans. The final vote is set for November 30.
And here we go again…
After Ireland and Greece, Portugal is the third country in the eurozone to receive a bailout, with a 78-billion-euro ($A106.01 billion) loan package to be disbursed provided Lisbon implements austerity measures.
And as Peter Cohan puts in for forbes.com on a lucid article called “how Portugal Can Grow”, from 21/11/2011…
How Portugal Can Grow
Last week I went to Portugal where I met with its president and got a close look at how this 10 million person country is seeking to reverse a nasty economic contraction — its GDP could tumble 4% in 2012. To reverse an economic slide, Portugal needs an entrepreneurial renaissance.
Portugal’s best days as an economic power were in the 1500s. That’s when its superior skills at using the stars to navigate the seas spurred it to map out shipping routes between its harbors and those in Brazil, India, Angola and even Japan and Malaysia. The gold and spices Portugal imported from these countries formed the basis of its considerable wealth.
But my visit there last week suggests that Portugal needs to spend less time longing for the good old days and tap its long-dormant entrepreneurial DNA to launch a new wave of economic discovery — a theme introduced in Pioneers of Globalization: Why the Portuguese Surprised the World — on the global information superhighway.
That’s because this spring Portugal took a $105 billion bailout from the IMF that required the country to cut government spending – my colleagues in Portugal estimate that such spending accounts for between 60 percent and 70 percent of demand – and to raise taxes.
This policy is designed to reduce Portugal’s budget deficit. But it’s having an unintended side effect of creating what looks to me like a deflationary spiral. That’s what happens when a drop in demand causes prices to drop, companies to shrink and fire employees – Portugal’s official unemployment rate is 12 percent; and lower tax revenues – despite higher tax rates – due to a bigger drop in taxable income.
So Portugal’s leaders are applying at least two strategies. One is for Portugal’s Prime Minister Pedro Passos Coelho to visit Portugal’s oil-rich former colony of Angola with hat in hand asking for capital. For example, Angola’s got a $24 billion surplus thanks to Chinese demand for its oil.
This should not be too big a stretch because the daughter of Angola’s leader is already the biggest shareholder in two of Portugal’s biggest companies – a bank, Millennium BCP and a dominant Portuguese media company, Zon. But these investments will not help Portugal grow.
To grow, Portuguese companies need to export to markets with growing demand for their products and Portugal needs to turn its smart technologists into leaders of successful start-ups. These were among the topics I presented to a group of about 140 business leaders in Coimbra – a university town that’s a two hour drive north of Portugal’s capital, Lisbon.
Then I was a speaker at a conference in Lisbon called Silicon Valley Comes to Lisbon where I gave a two hour talk to a packed room of entrepreneurs at one of many former Lisbon palaces now rented out for meetings and tourists.
That talk got to the heart of Portugal’s biggest challenge if it seeks to grow – a culture of inertia. Unlike in India, whose entrepreneurs have no hesitation in getting on an airplane and flying to Silicon Valley to raise capital for their startups; Portugal’s young entrepreneurs have not yet shown they can do that.
But based on the dozens of entrepreneurs I met at this conference, there is a significant amount of energy, passion and technical skill that has come out of Portugal’s universities – many of which have world-class technology.
I had the opportunity to speak briefly with Portugal’s president, Dr. Aníbal Cavaco Silva, to discuss with him the work I have been doing to help change Portugal’s entrepreneurial culture since 2010 — such as leading a learning tour for business leaders from the Azores (a group of nine volcanic Portuguese islands in the Atlantic) to MIT and its spin-off companies.
And Dr. Silva himself had just returned from Silicon Valley from a trade mission to introduce some leading Portuguese entrepreneurs to Silicon Valley investors.
But I am convinced that in order for Portugal to take the enthusiasm that I saw and turn it into successful businesses, it will need to build a bridge that connects those young start-up CEOs to the capital providers around the world who are willing to take a risk on their ability to succeed.
And I believe that bridge ought to be built on shared technology expertise. Simply put, that means that the entrepreneurs must seek out the venture capitalists around the world with the greatest expertise in their particular technology.
If the Portuguese start-ups can learn how to persuade those investors to provide them with capital, then there’s hope that Portugal can reverse its economic decline.
But doing that will require a cultural transformation. Instead of inertia, Portuguese entrepreneurs will need to take responsibility for their own success and take risks — such as bootstrapping to find a viable business model and traveling to meet with potential capital providers who can help spur their further growth.
Perhaps they can find inspiration from the Portuguese explorers who left its shores in boats and returned with lucre. Or they can look at more recent success stories, such as Coimbra-based Critical Software, about which I wrote in June.
In a November 15th meeting with its CEO, Goncalo Quadros, I was impressed that he has the indomitable spirit needed to bash away any obstacles to Critical Software’s future growth. Among his biggest concerns now is making sure that the company does not become complacent.
And if Critical Software’s success — and that of other successful Portuguese start-ups — can serve as role models for its emerging ventures, Portugal’s entrepreneurial renaissance could indeed spur an economic revival.