Wealth from water The country has a long maritime Doing Business in tradition and is now seeking to exploit the sea in fresh ways, writes Victor Mallet PORTUGAL Page 4 FINANCIAL TIMES SPECIAL REPORT | Wednesday April 11 2012

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Inside this issue The euro Even in the Resolved to see reforms through depths of the worst recession up to his promise to press scru- in 30 Structural adjustment pulously ahead with the adjust- years, ment programme, establishing a enthusiasm targets are being met is undiminished Page 2 but at enormous cost, reputation for Portugal as the quiet, diligent student among Economy Amid the gloom, writes Peter Wise the eurozone’s three bailed-out some light is beginning to countries. appear Page 2 decision to cancel con- Presenting the conclusions of struction of a high- the third quarterly review of the Banking Bankers will tell speed rail link between agreement by the so-called you how different Portugal Lisbon and Madrid has troika – the European Commis- is from Ireland and Greece Athrown into sharp relief the dis- sion, IMF and European Central Page 2 appointment of Portugal’s hopes Bank – in early April, Mr Weiss, that joining the euro would put who is deputy head of the EC Privatisation Controversial the country on the fast track to mission to Portugal, said Lisbon programme will clear almost becoming a mainstream Euro- had fulfilled the agreement every saleable asset off the pean economy. “almost to the letter”. Compli- state’s books Page 2 Once seen as a milestone of ance was “extraordinarily modernisation, the €3.3bn good”. Reform Commentary by project was abandoned in The government cut the the March, less than a year after an budget deficit from 9.8 per cent country’s greatest imminent financial collapse of gross domestic product in 19th forced the country to follow 2010 to 4.2 per cent last year. century Greece and Ireland in seeking a This was significantly below the novelist is multi-billion-euro bailout from official target of 5.9 per cent, but given a the European Union and Inter- included the one-off impact of new airing national Monetary Fund. revenue from a transfer of bank Page 3 For the indefinite future, pension funds to the state, Europe’s high-speed rail net- equivalent to about 3.5 per cent Politics If the bailout fails, work will stop at the Spanish of GDP. it will not be because of border, after Pedro Passos Coe- Lisbon was nevertheless on political opposition Page 3 lho, Portugal’s prime minister, track for a structural adjust- ruled definitively against build- ment in the deficit amounting to Business climate Even ing the Portuguese stretch of a 7.5 per cent of GDP over 2011 contrarian investors must line that would have connected and 2012, according to the troika consider a series of the two capitals in three hours, report. “This is enormous,” said alarming data Page 4 three times faster than today. Mr Weiss. “This is very ambi- Tourism The industry is In terms of living standards, Pedro Passos Coelho, the prime minister, who took office without any previous government experience, addresses the PSD congress Epa tious.” He also noted that two- since joining the single cur- thirds of fiscal consolidation pinning its hopes on visitors from the newly wealthy in rency, Portugal has moved fur- cost of belatedly adapting its done much to deserve the living tion, measures to strengthen the way forward. He formed a was being accomplished Latin America Page 4 ther away from the rest of economy to life in the eurozone: standards we enjoy. But, like financial sector and wide rang- government coalition with the through spending cuts. The defi- Europe, rather than closing the a debt crisis, painful austerity the 2m people who left Portugal ing economic reforms to tackle conservative Popular party cit target for this year is 4 per Energy Green technology gap as it had hoped. According measures, its deepest recession for Europe from the 1960s, the low growth and weak competi- (CDS-PP), ensuring a comforta- cent of national income, falling has placed Portugal among to Peter Weiss, a European for more than 30 years and generation below 30 is becoming tiveness, seen to be at the heart ble majority in parliament. to 3 per cent in 2013. the vanguard of alternative Commission economist, income record unemployment, 15 per genuinely European. They know of Portugal’s difficulties. Having promised to “go Targets are being met at enor- energy per capita fell from 70 per cent cent in February and is still the state is not going to employ Mr Passos Coelho, whose beyond” the requirements of the mous cost. Public sector employ- states. But of the EU average in 1999 to 63 climbing. One in three people them, that they will have to go centre-right Social Democrats bailout, Mr Passos Coelho told a ees will see their income cut by credentials per cent in 2011 and is expected under 25 is out of a job. out and compete for a job.” (PSD) won a general election PSD congress in March that Por- up to 30 per cent over 2011 and have come to fall to “close to 60 per cent” José Adelino Maltez, 60, a In return for €78bn in bailout less than three weeks after the tugal was engaged in a “tran- 2012. Private sector pay is also at a high this year. political scientist at Lisbon’s funds, the previous Socialist rescue agreement was signed, quil revolution” of economic falling sharply. Social payments cost After the euphoria of becom- Technical University, says: government agreed in May 2011 took office without any previous reform. “The country will not have been reduced and taxes, Page 4 ing a founding member of the “Compared with the suffering to a three-year adjustment pro- government experience, but a have a second chance,” he said. particularly VAT, increased. single currency, Portugal is hav- and effort of many central Euro- gramme based on three main firm belief in the adjustment “We cannot [afford to] fail.” ing to come to terms with the peans, my generation hasn’t components: fiscal consolida- programme as the best and only The prime minister has lived Continued on Page 2 2 ★ FINANCIAL TIMES WEDNESDAY APRIL 11 2012 Doing Business in Portugal Hardships fail to diminish enthusiasm for euro Resolved to see António Pinto Costa, a politics “People who remember how of sacrifice as some central Euro- real terms in 2011 and 2012 – a young biologist, who had previ- Single currency professor at Lisbon’s Institute of poor Portugal was before we pean countries,” says Prof which, to varying degrees, is ously been a BE supporter. The Social Sciences, says: “Euro- joined are not going to say bad Maltez. being replicated in the private hardline Communist party reforms Commitment to the scepticism has increased as liv- things about Europe,” says José “But we haven’t achieved the sector. gained 16 of the 230 parliamen- project remains strong, ing conditions have worsened, Adelino Maltez, a political scien- same levels of education or pro- The Portuguese, however, have tary seats in the election, com- but these feelings have not been tist at Lisbon’s Technical Univer- fessional training.” a tradition of resilience. pared with 15 previously. reports Peter Wise mobilised politically and there is sity. In terms of development, he Portugal, he believes, has Some commentators express Neither party campaigns for through virtually no anti-German or says, Portugal has moved in a begun making those sacrifices, support for the view that it is Portugal to leave the euro, call- nationalistic anti-European senti- short period from a country com- particularly the younger genera- German and French banks that ing instead for “a more social Continued from Page 1 When a waiter accidentally split ment.” parable with Morocco to “some- tion, as the unemployment rate lent unwisely, rather than Portu- Europe”. a tray of beers over Angela Mer- Portugal’s qualification as a where near the suburbs of among under-25s rises above 35 gal itself that is being bailed out. “Euro-scepticism has no party The unemployed, who have kel, the German chancellor, in founding member of the euro- Madrid”. per cent and many graduates But by every discernible sign, political representation in Portu- had their benefits cut, February, a Portuguese TV com- zone in the late 1990s was European structural funds emigrate in search of jobs befit- the Portuguese remain commit- gal,” says Prof Costa Pinto. workers earning the mini- edy programme quickly adapted greeted with euphoria, as the have made an important contri- ting their qualifications. ted to keeping the euro, what- “No extremist groups or patri- mum wage of €485 a month the scene, making the employee country began to enjoy the bene- bution to modernisation and Before joining the euro, the ever the cost. otic anti-European parties have and elderly people receiving a mischievous Portuguese immi- fits of falling interest rates and a higher living standards. But the country kept its exports competi- The radical Left Bloc (BE) lost emerged in the way they have in state pensions of even less, grant intent on revenge for the construction boom fuelled by questionable benefits of some tive through low wages and by eight of its 16 seats in last June’s Austria, the Netherlands, France find it increasingly difficult perceived wrongs a German-led European Union funds. infrastructure investments and devaluing its currency, a policy election. The party had declined and elsewhere.” to make ends meet. Europe was inflicting on his Even today, when the costs of public-private partnerships are that had the effect of stoking to meet representatives of the so- “The political parties that José Cordeiro of Cáritas country. adapting to euro membership seen as symptoms of a past lack inflationary pressures and lower- called “troika”, the European formed in Portugal after the Portuguesa says requests to The sketch may have raised a have become starkly evident to a of fiscal rigour that led to the ing living standards. Commission, International Mone- return of democracy in 1974 are the Catholic Church welfare laugh, but the Portuguese are country facing its worst reces- current debt crisis. One of the most important fac- tary Fund and European Central all based on German models,” agency for assistance rose not given to blaming Germany, sion in more than 30 years, polls “We, the passive majority of tors now contributing to the Bank, when they visited Lisbon says Prof Maltez. “Many of our more than 40 per cent over Europe or the euro for the sover- show that only 16 to 18 per cent the Portuguese, have seen our lower costs needed to make to discuss the bailout. leading politicians were educated 2010 and 2011, a growing eign debt crisis or the hardships of the population describe them- lifestyles improve over the past exports more competitive is a “I was furious that they in German institutes. number of them coming many people face as a result of a selves of distrustful of European two decades, mainly for electoral sharp reduction in public sector refused even to talk to the troika “Portuguese democracy is from previously self- deep and protracted recession. integration. reasons, without the same sense pay – a loss of up 30 per cent in and put their views across,” says European from the inside out.” sufficient families on mod- est incomes. “Portugal has a tradition of ‘honourable poverty’; people don’t like to show it. They keep it to them- Banks expect they will selves,” says Prof Maltez. Country “But every day, you see people in shops asking for half a cutlet, one piece of soon be in a better state fruit.” Despite the hardships, protests have been peaceful prepares and relatively low key. Fol- ECB liquidity provision Financial services €bn lowing the biggest general strike to date, in November, Recovery is forecast 200 a second 24-hour stoppage to begin next year, in March drew less support Italy for life after the second-largest says Victor Mallet Spain trade union confederation 150 Ireland agreed a labour pact with Greece government and employers. The first thing a Portuguese Portugal Uppermost in people’s 100 banker will tell a visitor is after debt minds, says Antonio Costa how different the country’s Pinto, a professor at the financial sector is from Institute of Social Sciences those of Ireland and Greece, 50 contract 3.4 per cent this (ICS), is uncertainty over the other two eurozone Economy year, according to the Bank whether the sacrifices being members bailed out by the of Portugal. asked of them will produce European Union and the 0 Positive signs The central bank has also the promised results. International Monetary 2007 08 09 10 11 12 are emerging, revised its growth projec- The risks are many. A Fund. Source: National central banks tion for 2013 to zero, from deeper than expected down- Unlike in Ireland, they writes Peter Wise 0.3 per cent, a more pessi- turn in the EU, which will say, it was not the mistic view than govern- accounts for 75 per cent of banks that sank the nation are still dependent on life take even “one cent”, while ven in the good ment forecasts, which exports, has already led to a with rash financial manage- support in the form of ECB Millennium BCP, for exam- years before the envisage a mild recovery downward revision in ment, but the other way liquidity. And, like the ple, is expected to accept global crisis, the next year. If the bank is growth forecasts, with the round. state, they still need to find €2bn. Portuguese econ- right, Portugal will have economy expected to con- Unlike in Greece, they a way to move beyond crisis If all goes to plan and the Eomy was stagnant. seen minus or zero growth tract by 3.4 per cent this will add, the crisis-stricken management to recovery economy begins to recover This was the alert in four out of the five years year and stagnate in 2013. economy of Portugal is well and growth. after this year, the state sounded by Poul Thomsen from 2009 to 2013. A recession in Spain, the placed for a recovery As recently as the end of should actually profit from of the International Mone- Chronic annual trade defi- country’s biggest export because of its international March, Moody’s, the rating its bank recapitalisation tary Fund said in May 2011, cits of 7 to 11 per cent of market, would be even investments and relatively agency, again downgraded lending, with escalating when the European Com- gross domestic product over more disruptive. Heavy strong exports. Bank depos- or partially downgraded the interest rates to encourage mission, European Central the past decade led to a dependence on imported oil its have risen, not fallen, five main banks: the state- early repayment. Bank and IMF negotiated steady accumulation of pri- also makes Portugal vulner- since the crisis began. controlled Caixa Geral de In the meantime, Portu- Lisbon’s €78bn bailout vate and public sector debt. able to any further increase “In Portugal, the banking Depósitos; Banco Comercial guese banks are being package. By 2009, combined house- in crude prices. sector was not at the heart Português, or Millennium asked to recapitalise, The idea that low growth hold and non-financial cor- In common with other of the crisis,” says a senior BCP; BES; Banco BPI; and reduce their debts, and and a lack of competitive- porate debt had reached countries implementing executive at one of the Banco Santander Totta, simultaneously continue to ness form the crux of the almost 240 per cent of GDP, austerity programmes, Por- country’s big five banks. “It subsidiary of Spain’s provide credit to the real country’s difficulties is an one of the highest levels in tugal also runs the risk that was the result of fiscal pol- Santander group. economy. It is a tall order. almost universally accepted Europe. Amid the gloom, drastically cutting public icy developments and the Moody’s said it expected “Banking sector delever- diagnosis. however, some light is spending will aggravate its downgrades of the economy deterioration in the banks’ aging is the linchpin of pri- As a consequence, the beginning to appear. fiscal problems, killing the [by credit rating agencies].” domestic asset quality and vate sector deleveraging,” rescue programme has been Whether growth next patient with the cure. José Maria Espírito Santo profitability, given the poor says Cristina Casalinho, designed to place more year is slightly below or Some economists believe Ricciardi, president and outlook. It also blamed the BPI’s chief economist. “But emphasis on raising produc- above zero, economists the bailout package was up chief executive of the downgrade – all are now if the credit tap is closed by tivity and reducing labour hope the trough of the to €20bn below what Portu- investment banking arm of classed as “junk” or non-in- the banks … that seeps into costs than those agreed recession will be in 2012. Export engine: car sales overseas make up 13.3% of total gal needed, having failed to Banco Espirito Santo (BES), vestment grade – on the the economy and the pri- with Greece and Ireland. Ms Casalinho says: “If we take into account public says that Portuguese banks banks’ risks arising from vate sector acts accord- “The country needs to can avoid a quarterly con- But positive signs are also consistently making sector debts of about that were well provisioned and ingly. You see investment become more open to com- traction of more than 4.5 emerging. Exports grew 13.5 inroads into new markets amount. profitable until the state’s shrinking, you see real petition,” said Mr Thomsen, per cent this year, com- per cent in value in 2011 to outside Europe.” It has helped fuel a belief debt and deficit problems ‘The lowering of the estate in the doldrums. who headed the IMF mis- pared with the same period €61bn, the highest annual China was the biggest that Lisbon may not be able deepened the sovereign ratings of the Housing credit has just sion in the bailout talks. in 2011, we should be able figure to date, with goods growth market for exports to resume financing its debt bond crisis and forced the stopped. Portugal is very In the decade ending in to escape a vicious down- accounting for about €42bn in 2011, increasing by 68 per in the market by September bailout. republic brought reliant on bank credit, as 2010, annual growth aver- ward cycle.” and services for €19bn. At cent from a low base, 2013, as envisaged in the Again, unlike Spain or down the banks are most continental Euro- aged 0.7 per cent, compared Public debt is forecast to the same time, a sharp drop largely due to car exports rescue agreement, but will Ireland, Portugal has not pean economies.” with an average of 1.1 per peak at 115 per cent of GDP in domestic demand has by AutoEuropa, a Volkswa- need more funds from inter- recently gone through a with the republic’ Mr Ricciardi also notes cent for the eurozone as a in 2013 – below the 120 per seen annual import growth gen plant near Lisbon. national lenders. boom and bust in the prop- the contradiction between whole. cent considered unsustaina- fall in value terms from 10.4 Vehicles are the second big- Mr Passos Coelho insists erty market. Its banks have the desire to strengthen Employment was static ble – before gradually fall- per cent in 2010 to 1.8 per gest exports, accounting for he will not be asking for not needed rescuing their large holdings of gov- banks, while wanting them over the same period. The ing to about 80 per cent. cent last year with a con- 13.3 per cent of the total, more money or more time because of sour property ernment-related debt, as to lend more to drag the figures underline the extent The risks are nevertheless traction of 4 per cent after machinery and tools, to pay. He points out, how- loans. well as lack of access to pri- economy out of recession. to which Lisbon has under- high. Recession in Europe, expected in 2012. including auto components, ever, that the EU and the “In Portugal, it was vate wholesale funding. Nearly half of BES’s performed its European which buys three-quarters From an exceptionally at 14.5 per cent. IMF are committed to con- exactly the other way The agency said: “While banking income comes from partners, but, as Cristina of Portugal’s exports, and high average of about 10 Germany, the second larg- tinuing their support for round,” says Mr Ricciardi. none of these pressures are abroad, and it is clear that Casalinho, chief economist particularly in neighbour- per cent of GDP in the dec- est market, made the big- Ireland and Portugal if they “It was the republic that new, in Moody’s view they involvement in emerging at Banco BPI points out, ing Spain, which accounts ade to 2010, the current gest contribution to export cannot return to the market created the problems for the continue to mount against markets is a source of Portugal was not alone. for a quarter, would be bad account deficit is estimated growth last year, as compa- as scheduled due to “cir- banks … The lowering of the backdrop of the euro strength for European “People worry about Por- news. A further rise in oil to have fallen below 7 per nies supplying components cumstances beyond their the ratings of the republic debt crisis.” banks when the eurozone is tugal growing so poorly,” prices would make the out- cent of GDP in 2011. Some benefited from its export control”. brought down the banks Portugal’s €78bn bailout stagnant, just as net she says. “But the fact is look even worse. economists believe a zero boom and the Portuguese- In a positive sign, yields with it. For the banks, that package included €12bn to exports could be a lifesaver that over the past decade On the domestic front, trade deficit is within reach based plants of companies on 10-year government closed the funding markets, recapitalise banks, and for the economy as a whole Portugal, Germany, Den- the principal danger is that by the end of this year. The such as Bosch, Siemens, bonds have fallen from which were substituted by executives have been decid- when domestic business is mark, Italy and Japan all the austerity programme decade-long loss in competi- Leica and Volkswagen above 17 per cent in Janu- the European Central ing whether they need the so mired in gloom. had similar growth rates.” being implemented to tiveness has also been increased overseas sales. ary to below 12 per cent. Bank.” money being pressed on Mr Ricciardi insists that But while Germany tackle the debt crisis will halted and is beginning to “Foreign investment is an “Our assumption is that Even if Portugal’s bank- them by the EU, the IMF Portugal is not Greece. “I enjoyed export-led growth fatally undermine the be reversed. important means of increas- the [adjustment] pro- ers are not to blame – and and the ECB to achieve the think the markets are per- of 3 per cent in 2011, Portu- growth the country needs “Something is definitely ing our exports,” says Pedro gramme will be enough,” there were problems at two enhanced capital ratios ceiving that we are doing gal entered its worst reces- to boost tax revenues and changing,” says Ms Casal- Reis, head of Aicep, the said Mr Weiss. “The pro- small banks, including applied across Europe. our work well,” he says. sion in more than a genera- reduce social spending. inho. “Imports are no investment and trade gramme is very ambitious Banco Português de Negó- Bankers and analysts esti- “People are aware that now tion. “The treatment is so longer such a huge drain on agency. “Portugal can serve and we don’t believe the cios, nationalised in 2008 mate only about half the it’s time to work, time to The economy, hit by strong, I fear that we may growth. Exports are the investors both as a door to government can do more. after the collapse of Leh- offered money will be taken suffer, and time to get out stringent austerity meas- kill the patient with the only engine we have and Europe and a window over- Whether Portugal is able to man Brothers when it ran up, with Mr Riccardi saying of this situation – and hope- ures, shrank 1.6 per cent cure,” says Carlos Loureiro, there are encouraging looking Latin America and convince the markets is, of up €700m of losses – they BES does not think it will fully never to return to it.” last year and is expected to a tax partner with Deloitte. signs that exporters are Africa.” course, another question.” Extensive sell-offs constitute irreversible retreat by government

raise up to €7bn in direct invest- Gorges Corporation outbid agency, says: “These privatisa- Most of the privatisations block, as well the state’s Investors buying into Portu- Privatisation ment over three years, is also rivals from Germany and Brazil, tions represent a structural shift were already part of Mr Passos remaining 7 per cent stake in guese companies are interested one of the most politically sensi- to acquire 21 per cent of EDP for in the role of the state in Portu- Coelho’s election manifesto. But Galp Energia, the dominant oil not only in the domestic econ- ‘A rapid and full tive issues on the government €2.69bn, a 53 per cent premium gal, marking a positive point of the economic adjustment pro- and gas utility. omy, he says, but also in the divestment’ is in train, agenda. over the market price. no return. The state will no gramme agreed with the EU and In addition to the stated aim country’s “natural markets” in There is potential conflict The deal involves a total longer be an active player in the International Monetary Fund of the privatisations to “reduce Africa and Latin America, par- writes Peter Wise between the prime minister’s investment and credit package economy.” requires the government to government financing needs, ticularly, but not only, former pledge to reduce the high subsi- of up to €8bn, much of which Mr Passos Coelho signalled accelerate the plan by pursuing stimulate competition and colonies such as Angola, Brazil Pedro Passos Coelho, the prime dies paid to producers of renew- will be focused on overseas mar- his commitment to this philoso- “a rapid and full divestment” attract foreign capital”, Mr Reis and Mozambique. minister, scored a big success as able energy and government kets, including Brazil, the US phy by quickly abolishing the from EDP and TAP, the state sees a strong alignment between State Grid Corporation of a pro-market reformer by selling commitments made to the two and elsewhere in Europe. special voting rights, or “golden airline. the sell-off programme and Por- China is committed to finance stakes in two state-owned Chinese utilities that acquired Two months later, State Grid shares”, held by the state in TAP and Aeroportes de Portu- tugal’s efforts to expand its totalling €1bn, including joint energy utilities at high premi- the state holdings in Energias Corporation of China, the coun- Energias de Portugal (EDP) and gal, the airports authority, both export markets beyond Europe. ventures in Angola and Mozam- ums within eight months of de Portugal, the dominant try’s biggest utility, paid €387m Portugal Telecom. 100 per cent state-owned, are the “The premiums paid by the bique. Both the EDP and REN coming to office power utility, and Redes for 25 per cent of REN, a 40 per Despite European Union next companies scheduled to be investors who bought stakes in sales are also expected to pro- The sales raised close to Energéticas Nacionais, operator cent premium on the market Court of Justice rulings against sold. EDP and REN show that they vide the Portuguese utilities €10bn in investment and financ- of the national grid. price. them, previous governments CP Carga, the state railway see value in them that goes with a toehold in China. ing commitments. According to a Portuguese The privatisation programme had resisted relinquishing these freight service, Correios de Por- beyond their market value, their “If it was not for these privati- But his plan to include water analyst, “short-term cash pres- will clear almost every saleable rights, which enabled the gov- tugal, the post office, and Caixa technical competence or the sations,” says Mr Reis, “it would utilities and RTP, the state tele- sures may have held sway over asset off the state’s books. ernment to veto strategic deci- Seguros, the insurance arm of quality of their management – have taken Portugal years to vision broadcaster, in an exten- more long-term perspectives”. Pedro Reis, head of Aicep, Por- sions by the former state-owned state-owned bank Caixa Geral that is their growth potential register on China’s strategic sive list of sell-offs, expected to In December, China’s Three tugal’s investment and trade monopolies. de Depósitos will also go on the abroad.” radar.” FINANCIAL TIMES WEDNESDAY APRIL 11 2012 ★ 3 Doing Business in Portugal External pressure ‘best chance for change’

Competitiveness Legislation

For the first time, Other business-related there is appetite reforms tabled or under way: ● A bankruptcy law, based on for structural reform, the US “Chapter 11”, to replace reports Peter Wise current legislation which, according to Carlos Loureiro, a tax partner at Deloitte, ur situation is compa- condemns companies to a rable only with that of “slow and painful death”, but Greece: the same pov- offers no hope of recovery for erty, the same politi- many that face financial calO disgrace, the same economic difficulties but are viable. mess.” This caustic observation, ● A competition law to give written in 1872, is one of numer- regulators greater powers and ous commentaries by José resources to gather evidence Maria de Eça de Queirós, widely and ensure fairness. Under the considered Portugal’s greatest current system, consultants 19th century novelist, being say regulators are losing too given a new airing by modern many cases on appeal. pundits. ● An industrial licensing law Cristina Casalinho, chief econ- that Álvaro Santos Pereira, the omist at Banco BPI, says: “Eça economy minister, describes as de Queirós was a very cynical the “most advanced in and sceptical writer who every- Europe”, aligned with the best one likes to quote nowadays. He practices in the world and criticised corruption, the mal- exempting the vast majority of functioning of the judicial sys- companies from the need for tem, the poor quality of politi- an industrial licence. cians, the lack of business drive ● Tenancy regulations to and much more.” replace antiquated controls A number of Portuguese com- that stopped many rents from mentators are suggesting the being increased significantly for problems underlying the coun- decades, leaving flats empty in try’s lack of competitiveness city centres and hampering stem from traits that are not labour mobility. just a few decades old but go back more than a century. Ms Casalinho is not wholly convinced by the pessimism. Procedures are to be simplified “The progress on the trade bal- and measures introduced to ance couldn’t have materialised clear the backlog of existing unless the Portuguese economy cases, including arbitration to was more competitive than peo- A statue of José Maria de Eça de Queirósm, ‘a cynical writer who criticised corruption, the malfunctioning of the judicial system and the poor quality of politicians’ Dreamstime increase out-of-court settlement ple think,” she says, pointing to and justices of the peace to a 13.5 per cent increase in the Until recently, many interna- than a decade, but successive Carlos Loureiro, a tax partner most protected in Europe, with annual leave restricted to maxi- handle small-claims disputes value of exports last year and tional analysts thought both governments have shied away at Deloitte, says: “This time, we dismissal compensation averag- mum of 22 days, from a previous cases. the possibility of a zero trade countries would be forced out of from the political cost of imple- have a window of opportunity to ing about a month’s pay for potential maximum of 25 days. “The justice system is one deficit by the end of 2012. the eurozone. But most Euro- menting them. do something less cosmetic and every year worked. Unemployment benefits will be of Portugal’s most serious Miguel Sousa Tavares, one of pean leaders and economists The reforms now lie at the more structural than in the The new laws will increase reduced and paid for shorter problems and for the first the country’s most trenchant now acknowledge that it would heart of the economic adjust- past, especially in those areas working hours, introducing an periods than previously. time, structural changes that columnists and himself a best- be wholly unfair to equate Por- ment programme Lisbon has where it will be politically pun- “hour bank” of up to 150 hours Portugal’s slow-moving justice were obvious to many people selling novelist, commented tugal with Greece in terms of agreed with the European Union ishing.” a year. system is also due to undergo are going ahead,” says Mr recently: “Eça was perhaps the scale of its debt difficulties, and the International Monetary New labour laws, expected to The aim is to introduce what Mr Loureiro describes as a Loureiro. more caustic than we are today the transparency of its public Fund, which see them as vital to take effect within months, are greater flexibility by enabling “courageous” reform. Getting these and other and that’s cause for optimism. A accounts or its cross-party com- the sustained export-led growth among the most politically con- employers to draw on this bank The current bureaucratic sys- reforms (see box above) on the hundred years ago, he saw no mitment to reform. needed to lift the economy out tentious reforms. The new legis- and extend the working week to tem, in which cases, including statute book will represent an future for Portugal, but we’re Eça de Queirós’s scathing of debt and recession. lation will make it easier to fire a maximum of 50 hours during tax disputes, can take many important step toward greater still here.” commentaries have been The agreement sets out tight workers and substantially peak periods, compensating years to resolve, is seen as a competitiveness that no previ- Portugal and Greece were revived amid a debate over eco- deadlines for implementing reduce the cost of doing so. workers with time off during serious deterrent to foreign ous government has attempted viewed “in foreign books and nomic reforms seen as vital to them over three years. According to the Organisation slack times or pay at normal investment. so comprehensively or so fast. magazines” as two “chaotic” making Portugal more competi- Many believe this external for Economic Co-operation and rates. Specialised courts are to be If they also produce the countries that could be “erased tive and productive. The need pressure is the best chance Por- Development, employees in Overtime pay will also be cut, created to deal with business lit- desired results in practice, even from the map of Europe”, wrote for structural reforms has been tugal will have to push the Portugal with open-ended con- four of the 10 bank holidays a igation, with priority for tax Eça de Queirós would have had Eça de Queiroz. widely acknowledged for more reforms through. tracts have been among the year will be eliminated and cases involving more than €1m. to formulate a rare accolade. Bailout agreement enjoys support across party lines

Portuguese General Election Almost half the ministers in the government are tech- Politics Jun 5 2011 (% and number of seats) nical experts without previ- But there is no ous experience of political guarantee that Socialists (PS) 74 Popular Party office, far from unusual in (CDS-PP) 24 Portugal and a little below austerity will pay Social the average for the past 20 off, says Peter Wise Democrats Democratic Unity years. According to one (PSD) 108 Coaliition sociologist, academics and 28.1% (PCP) 16 “independents” in govern- If Portugal’s €78bn bailout 11.7% ment are seen as symbols of agreement fails to produce competence and openness the desired results, it will Left Bloc to civil society. 7.9% 8 almost certainly not be 38.7% (BE) Antonio José Seguro, the because of political opposi- 5.2% PS leader who succeeded tion, social unrest or a lack Others Mr Sócrates, accuses the 0 of government belief. 8.5% government of ideological As Antonio Costa Pinto, a zeal in implementing the political scientist at Lis- Source: National Electoral Commission adjustment programme, bon’s Institute of Social Sci- resulting in excessive aus- ences, puts it: “All the polit- terity that he says will ical conditions are in place agreement that the previ- the agreement in an effort choke off any potential for to fulfil the programme: a ous Socialist government to restore confidence in the growth and result in a secure government coali- had negotiated only a debt-stricken economy, say- downward spiral of debt tion that firmly believes in month earlier with the ing he will “surprise” finan- and recession. what it’s doing; support European Union and Inter- cial markets by achieving The PS opposes plans to from the main opposition national Monetary Fund. deficit-reduction targets extend the privatisation party; and a low level of But Mr Passos Coelho, ahead of schedule. programme beyond the bail- social confrontation.” who formed a majority coa- As important ministers, out agreement to include When Pedro Passos Coe- lition with the small, con- he has appointed techno- assets such as water utili- lho, the prime minister, led servative Popular party crats with no political expe- ties and RTP, the state tele- his centre-right Social Dem- (CDS-PP), is decidedly more rience. vision broadcaster. ocrats (PSD) to a general committed to the three-year Álvaro Santos Pereira, Only the hardline Com- election victory in June programme than the centre- the economy minister, was munist party (PCP) and the 2011, he inherited a rescue left Socialists (PS), who previously a professor at a radical Left Bloc (BE) were forced to negotiate the Canadian university. A oppose the bailout deal. The agreement to avert an book he published a month BE saw its share of the vote imminent financial col- before negotiations on the drop sharply in the election. Contributors lapse. bailout began advocates The two parties polled just Peter Wise Prof Costa Pinto com- many of the same reforms. under 13 per cent of the Lisbon Correspondent ments: “The government is Vítor Gaspar, a previous vote between them. not implementing the pro- head of the European Cen- The Communist-leaning Victor Mallet gramme because it is CGTP, the main trade Madrid Bureau Chief obliged to, but because it ‘All the union confederation failed truly believes this is best to mobilise substantial sup- Miles Johnson conditions Madrid Correspondent way forward.” are in place’ port for a 24-hour general The sovereign debt crisis Álvaro strike in March, the second Jill James led to an early general elec- Santos in four-months, reflecting a FT Contributor tion less than three weeks Pereira relatively low level of after the rescue agreement labour unrest and social Stephanie Gray was signed. José Sócrates, resistance to the adjust- Commissioning Editor the Socialist leader who had tral Bank’s research depart- ment programme. been prime minister for the ment, brings impeccable Union leaders said a Steven Bird previous six years, suffered technical credentials to his sharp reduction in purchas- Designer a heavy defeat and with- job as finance minister. One ing power meant that many Andy Mears drew from active politics. Lisbon newspaper has workers could not afford to Picture Editor Mr Passos Coelho, who described him as “the voice lose a day’s pay. had no previous govern- of Portugal’s sat nav”, un- Prof Costa Pinto com- For advertising details, ment experience, formed a emotionally guiding the ments: “The chief difficulty contact: coalition government with country along the route to facing the government is Danny Aldred on: the CDS-PP that commands fiscal rectitude. not political opposition, a + 44 (0)20 7873 4246; a comfortable majority of 34 Nuno Crato, education lack of commitment or email: seats in the 230-seat parlia- and science minister, is a labour unrest. It’s uncer- [email protected] ment. Including the PS, prizewinning mathemati- tainty. now the main opposition cian who has written books “Uncertainty among the All FT Reports are group, the three parties on educational reform, but population over whether available on FT.com. that support the bailout not previously held political the sacrifices they are being Go to: www.ft.com/reports programme won more than office. asked to make will bring 77 per cent of the vote, Paulo Macedo, the health the promised reward of an Follow us on twitter at although the turnout was minister, is a banker who economic recovery, or www.twitter.com/ftreports only 58 per cent. was headhunted by the pre- whether a recession across The prime minister has vious PS government to Europe will leave us even promised to “go beyond” beef up tax collection. worse off than we are now.” 4 ★ FINANCIAL TIMES WEDNESDAY APRIL 11 2012 Doing Business in Portugal Hopes pinned on a new economic model Oceangoing

cent, following Standard & tor fell 19 per cent year-on- expected by troika inspec- some non-eurozone coun- ther Chinese investment. Business climate Poor’s decision in January year in the fourth quarter tors in a report released at tries. In the same period, Reform of the labour nation opens to cut Portugal’s credit rat- of 2011. the end of last year. the UK saw FDI fall 53 per laws, regarded as among Miles Johnson ing to junk. Yet the shopping streets At the end of March, cent. the most inflexible in the considers the Such an environment is of Lisbon bear witness to Portugal reported that its Pedro Reis, head of Aicep, European Union, will relax hitting many businesses continued consumption by 2011 general government Portugal’s investment and rules on hiring and firing prospects for hard, as consumers the wealthy, and some deficit had come in at 4.2 trade agency, sees the eco- workers and reduce the new chapter foreign investment retrench and credit remains shops have opened in the per cent of GDP, lower nomic situation as “chal- costs of extra hours. difficult to come by, as the city since the crisis began. than the 5.9 per cent pro- lenging”, but a series of This, says João Alves, banking system hoards The recent opening of a jected by the troika in labour market reforms country managing partner Generating value from If attracting outside invest- funds so as to meet higher flagship store by Gucci on December, and down from intended to boost the coun- at Ernst & Young, will help Maritime industry the sea in the short term ment can be difficult during capital requirements. Lisbon’s Avenida da Liber- 9.8 per cent in 2010. try’s competitiveness are market the relatively young remains difficult. a recession, tempting for- John Duggan, a former dade may be of little conso- expected to help. and educated workforce bet- A hard-headed In freight, the container eign capital into a country partner with PwC in Portu- lation to those who are “The new economic ter. business approach terminal at Sines, south of that has received an inter- gal, says: “It is going to be struggling to make ends Reform of labour model of Portugal and the “There are many quali- Lisbon, on the routes from national bailout is a gruel- difficult to get the economy meet, but it is one of a laws, among way out of this situation fied young professionals seeks ways to the Americas and Asia to ling task. working properly until we small group of companies will be through the open- working abroad, and many profit from the sea, Europe, could become a At present, Portugal see credit come back. expanding into the country the most inflexible ness of our economy,” he Portuguese are very com- hub, but there is stiff com- would not appear likely to “When you speak to peo- during its difficulties. in the EU, will says. “By that I mean both fortable working in the says Victor Mallet petition from busier ports attract a queue of investors. ple you hear that trading Other encouraging exam- the attractiveness for for- English language,” he says. in northern Europe and in Anyone pondering whether conditions are difficult in ples include Yo! Sushi, the relax rules eign investment and the Cultural ties to Brazil, In the midst of an appar- Valencia, Spain. the country’s current busi- service industries. Demand British restaurant com- internationalisation of our Angola and Mozambique ently interminable eurozone In fisheries, there is scant ness climate may present a is there, but pricing is pany, which opened in Lis- on hiring and firing companies”. can also provide its compa- crisis, the Portuguese can capacity for further exploi- contrarian opportunity under pressure and people bon last year, while Klépi- Privatisations will bring nies with a unique selling be forgiven for wallowing in tation of strained resources, must at the same time con- are working twice as hard erre, the French shopping While fewer investors are in foreign investment, with point to foreign investors nostalgia when it comes to except perhaps through sider a series of alarming for half the money. Many centre operator, opened its willing to commit them- partners likely to be looking to enter those fast their maritime history. marine aquaculture. data. retailers also had a terrible fifth site in the Algarve last selves to the country selected not only for the growing markets. After all, this small “The fisheries industry is Unemployment, while Christmas, with sales start- April. against the backdrop of the price they will pay but also “Portugal no longer stops nation on the Atlantic not a heavyweight eco- lower than Spain’s, stands ing early.” More recently, there has European debt crisis, and for their ability to attract at the borders of Europe,’ shore discovered most of nomic sector in the context at 15 per cent and gross Ernst & Young expects a been some encouraging with foreign direct invest- subsequent investment. says Mr Reis. the “new world” previously of the domestic economy,” domestic product is fall in consumer spending progress in reducing the ment plunging by 46 per The sell-off of the state’s “It is well positioned, his- unknown to Europe, with says António Schiappa expected to shrink by 3.4 of 6.2 per cent this year, fol- deficit, and in the health of cent in 2010 compared with 21 per cent stake in Ener- torically, culturally, eco- the result that it became Cabral, secretary-general of per cent this year. lowed by a further contrac- the banking sector, with the the previous year to €1.1bn, gias de Portugal (EDP), the nomically, logistically, to the richest nation in the Adapi, an association of 42 Meanwhile the yield on tion of 3.1 per cent in 2013, loan exposure of its eight this fall does not look as utility, to China’s Three have an important role in west in the 16th century. commercial fishing groups 10-year government debt while investment in the largest banks being gruesome when viewed Gorges for €2.7bn in Decem- the new global economy,” The names of Bartolomeu representing 74 vessels up still hovers above 11 per non-financial corporate sec- assessed as better than against the fortunes of ber was contingent on fur- he adds. Dias (Africa), Vasco da to 80 metres in length. Gama (India) and Fernão de Mr Schiappa notes that Magalhães – Magellan, who Portugal, whose national led the first circumnaviga- dish is salted cod, consumes tion of the globe but was about 600,000 tonnes of fish killed in the attempt – echo a year, twice as much as it down the centuries. produces, and is the world’s None of this is of much third highest fish consumer practical use, however, for a per capita after Iceland and Outlook country trying to extract Japan. itself from recession and Mr Schiappa insists that, from dependence on bailout for all the talk of offshore money from the European wind farms and the devel- Union and the International opment of maritime tour- Monetary Fund. ism, it makes sense to bright The crisis has spawned a invest in research and clutch of schemes to revive sound management of the Portugal’s marine indus- established business of fish- tries – or create new ones – ing. “There’s recreational and monetise its maritime fishing, there’s sailing, but traditions. to contribute to the eco- despite Professor José Ferreira nomic growth of the coun- Machado, dean of the Nova try, I see only [industrial] School of Business and Eco- fisheries.” nomics, has this year Others believe that there launched a Major in Mari- are immediate benefits to time Business subtitled be had from promoting VAT rise “creating value with the oceans”. He says: “If you How can we had asked me two years make money Tourism two properties, a luxury boutique ago, I’d have said the only with oceans? hotel near Lisbon and a golf thing I know about oceans Prof José Luckily, the industry course near Lagos in the Algarve. is that I swim.” Ferreira Mr Coelho says the Lisbon coast The idea is to train a Machado has several factors is now very attractive to the lei- group of bright students sure and MICE (meetings, incen- who can make the most of working in its favour, tives, conferences and exhibi- the country’s marine sports and leisure tourism reports Jill James tions) segments of the market. resources, whether in areas connected with the sea. He thinks Portugal can build a such as fisheries, offshore Last summer, Cascais, better future for its tourist indus- alternative energy, shipping near Lisbon, hosted the first he financial crisis is tak- try by developing Lisbon as a and port management or round of the America’s Cup ing a long time to business centre to challenge coastal tourism. World Series – a televisual resolve, but there are Madrid and Barcelona and to “We have this discourse, sailing competition featur- three big factors working emphasise the year-round poten- this narrative of the oceans ing high-speed, wing-sailed Tin favour of the tourism sector in tial of the Algarve as a destina- that is very romantic and catamarans leading up to Portugal, one of the country’s tion. nostalgic,” he says. “This is the battle for sport’s oldest upmarket leisure companies He has a point where Lisbon is not the way of doing it. We extant trophy in San Fran- believes. concerned. City tourism has have to have a hard-nosed cisco next year. And Lisbon José Carlos Pinto Coelho, presi- become an engine of economic business approach. How will this year be one of the dent and chairman of Onyria, a growth in Europe in recent years, can we make money with stopover ports to welcome family group that runs resorts, particularly in capital cities that the oceans? How can we the round-the-world crews villas, hotels, golf courses and res- have a tourism concept in place, create sustainable value?” of the Volvo Ocean Race. taurants, says the country has says a report by consultants The government has even Mário Ruivo, an ocean- resisted the temptation to over- Roland Berger published at the more ambitious long-term ographer who heads Portu- build. In addition, its prices end of last year. It says Lisbon plans. Manuel Pinto de gal’s permanent forum on remain competitive, so that there and Amsterdam had by far the Local charm: town square in Aveiro in the north provides the undoubted appeal of an authentic lifestyle Alamy Abreu, secretary of state for maritime affairs, says the are still margins to improve. most overnight stays relative to the sea, is negotiating at ocean-themed 1998 World And thirdly, the Arab spring the number of inhabitants. to select the five most problem- from 3.6 per cent in 2010 to 3.5 per upmarket resorts centred around the UN for an extension of Expo in Lisbon showed the called attention to “the impor- “If a city can be reached easily atic for doing business in their cent last year. the Algarve and Lisbon. But for the country’s continental way towards examining tance and stability of long-term by air, it stands an excellent country and to rank them Figures produced by the those who take the time to look, shelf and the associated sea- new sectors from biotech- investments,” he says. chance of attracting many tour- between one and five. Access to National Institute for Statistics there is a lot more. North of the bed rights. nology to tourism. “We Like many businesspeople, Mr ists. Low-cost airlines are very finance, restrictive labour prac- for last year showed that French Algarve is the Alentejo, with fine Portugal, with its Atlantic have created a broader per- Coelho thinks that rises in VAT important in this respect,” the tices and inefficient government visitors are the biggest spenders inland scenery and quiet beaches. coastline and the island ception that the ocean is were bad news for the tourism report says. bureaucracy came out top. followed by UK citizens and the Central and north Portugal are groups of Madeira and the more than shipping, more sector. (In most cases VAT in Por- It adds that accessibility by air Positive developments are Spanish. still relatively unspoilt and prop- Azores, already dominates than fishing,” he says. tugal is now 23 per cent). He says has an influence on a city’s posi- Good news for investors is that erty prices lower than those in an area of nearly 2m sq km John Duggan, a former business will try to persuade the tioning as an conference location, the size of Portugal’s market is the south and around the capital. and hopes to double that if PwC partner who helped government to correct this. The too. Although the population larger than it first appears. Unlike the Algarve, where the negotiations are suc- prepare a report on the Association of Hotels, Restaurants Cities with fewer than 60 direct is about 11m, there Although the population is about many properties are attuned to cessful over the next six marine leisure industry, and Related Businesses is pushing flight connections to other loca- 11m, worldwide 200m people British and German tastes, houses years. says that promoting mari- for the restaurant rate to be put tions are not accessible enough, are strong links speak Portuguese. Former colo- in the interior cater very much “We are not looking only nas and all the associated back to 13 per cent this year and 6 says the report. This makes them with 200m people nies such as Macao, Mozambique, for the local population and there at fisheries,” Mr Pinto de maintenance and repair per cent next year. “suboptimal locations” for confer- Angola and Brazil, still retain is the undoubted appeal of an Abreu says. “We think facilities is a good way to “All the tourism sector is under ences. Cities with between 60 and in former colonies business ties. authentic lifestyle, albeit with a there’s much more. Marine create jobs and generate pressure and [because it has] 180 direct flight connections, on As Latin American businesses very slowly improving infrastruc- biotechnology, metallic and growth. invested strongly in the past 10 the other hand, have established expand and individuals there ture. non-metallic minerals, eve- “No matter how you years, it needs time to recover themselves as perfect conference largely led by an increase in infor- become wealthier, turning to Talking of which, there is no rything that’s on the bot- measure it, water-based lei- investments,” says Mr Coelho. locations in recent years. Lisbon mation and communication tech- European countries such as more touchy subject now than tom.” sure activity is punching “To increase VAT now is to take has about 100. nology use and improved infra- Portugal as a leisure and travel that of tolls. The recent imposi- Commenting on the far below its weight,” he off from revenues important In this year’s Global Economic structure, especially roads. destination may be seen as an tion of tolls on the main A22 resources, he says: “We says. “Portugal should be amounts that were not foreseen Forum competitiveness index, The World Travel and Tourism attractive long-term investment. motorway along the Algarve coast need to discover them, taking advantage of its loca- when investment decisions were Portugal was ranked 45th out of Council says real growth in travel UK and north European inves- has prompted public petitions, prove they are there and tion and its resources to made.” 142 countries. From a list of 15 tourism as a direct contribution tors eyeing Portugal automati- action groups and even ministe- create incentives for invest- develop economic activity His own company has opened factors, respondents were asked to gross domestic product slowed cally think of golf, chic villas and rial ire. ment in this area.” and employment.” Regulatory uncertainty clouds outlook for power sector

in fuel imports since 2005, tariffs, meaning the state because of high consumer and boost confidence follow- further action will be neces- per cent state stake in EDP, Olaso, an analyst at Espir- Energy making Portugal one of the would undertake to buy energy prices and a per- ing the trauma of the Euro- sary to set the surging debt which was eventually ito Santo investment bank. few countries in Europe on electricity from green pro- ceived lack of competition. pean Union and Interna- of the electricity system bought by China’s Three The government is aware The government track to meet the European ducers at an above-market “The Portuguese energy tional Monetary Fund bail- [the tariff deficit] on a sus- Gorges in a €2.7bn deal. that, as a member of the wants to escape Union’s target for a fifth of rate for a fixed period. market has been one of the out, high electricity prices tainable path by correcting To lower the high prices Energy Charter, an interna- energy consumption to be Another issue has been least competitive in do not help to attract the excessive rents associ- would have reduced EDP’s tional agreement to protect expensive legacy green by 2020. the “tariff deficit” built up Europe,” says Carlos investment. ated to the production of value while a sell-off was investors in energy contracts, says For a country blessed over the past decade Pimenta, former secretary While the EU has praised renewable energy”. being attempted. projects, it is unable unilat- with a long and windy because of the gap between of state for the environment the progress with economic So far, efforts to renegoti- To try radically to alter erally to alter the feed-in Miles Johnson coastline, and long hours of the subsidised price con- who now runs a wind ate contracts with electric- the contracts now risks tariff agreements without sunshine, Portugal is seen sumers pay and the higher energy company. Market has ity producers and reduce damaging international triggering legal battles. as a natural geographical cost of producing electricity As the economic situation been one of subsidies, have not only credibility at a time when This means it will be Before the crisis struck, fit for turbines and solar as oil prices have risen. has deteriorated, the high the least been slow, but occasionally the country is striving to forced to negotiate a settle- Portugal’s energy sector panels. This difference, guaran- price of electricity has competitive, chaotic. attract foreign investment. ment. was lauded as an example Wind power has domi- teed by the state, stems become increasingly contro- says Carlos In March, the government With a new energy minis- Whether this will erode for others in Europe to fol- nated, with 4,300 of the from longstanding contracts versial. With public sector Pimenta suffered its first significant ter in place, analysts are the country’s competitive low, with its use of green 18,000 installed megawatts signed with producers such workers forced to accept casualty when Henrique expecting progress to accel- advantage in wind energy, technology placing it of capacity in the electricity as Energias de Portugal pay cuts and unemploy- Gomes, secretary of state erate. How policy will look a sector estimated to have among the vanguard of grid powered by gales from (EDP), the former power ment continuing to rise, reforms, the troika (Euro- for energy, resigned after in the end, however, created more than 5,000 those trying to diversify the Atlantic and the hills to monopoly, in the late 1980s. households suffered an pean Commission, IMF and clashes over the direction of remains a guessing game jobs, is also likely to play away from fossil fuels. the north. Under the terms of the increase in the VAT paid on European Central Bank) the sector under reforms for a nervous sector. on the minds of ministers. Renewable energy This success, however, financial aid package, Por- electricity from 6 to 23 per has remained under- ordered by the troika. “The regulatory uncer- “It is important we can accounts for more than 40 has come at a cost. Partly tugal is required to try to cent last October. whelmed by the lack of The government was also tainty is the most impor- reach a mutual agreement,” per cent of electricity con- to stimulate investment, renegotiate these contracts. For a country seeking to action in the energy sector. placed in the awkward tant thing in Portugal’s says Mr Pimenta. “Both for sumption and is estimated previous governments These deals have come boost its competitiveness, The most recent troika position of running the energy sector right now,” the renewables sector, and to have saved about €2.5bn adopted a strategy of feed-in under increasing scrutiny shrink its budget deficit, report argued “substantial process to sell off a 21.35 says Felipe Echevarría the country.”