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Boost for Growth In common with several of its European neighbors, Portugal has had its own economic problems during the last couple of years. As a result, the center-right government has exercised budgetary prudence – but despite this, both central and local government have made huge outlays on infrastructure for this summer’s tournament. The state footed a quarter of the bill for the 10 new or renovated stadiums, while a further €112 ($137) million has gone toward access routes, €80 ($98) million on two new bridges in Coimbra, and €200 ($245) million on works nationwide. On a broader canvas, Portugal’s motorway network, including a direct link between Lisbon and Madrid, is all but complete. But national roads, many of them inadequate or unsafe for today’s traffic volumes, are still being extended, and there is an abundance of other projects under way. Secretary of State for Public Works Jorge Costa cites plans to make the most of Portugal’s geographical position on what officials call Europe’s “Atlantic platform.” A new road is planned from the deep-water port of Sines on the west coast to link with motorways to Madrid, enabling Sines to compete with Valencia. The port is also being groomed for use as a transshipment terminal to transfer cargo from oceangoing ships to smaller vessels bound elsewhere in Europe. By contrast, plans to relocate Lisbon’s airport are on hold. Instead, the government intends to almost double capacity at the current facility, as its position just 20 minutes from downtown is seen as a major convenience. In fact, the Portuguese know that improving physical infrastructure is not the sole factor in boosting competitiveness. The hundreds of millions of euros in EU subsidies the country continues to receive, even following the entry of the poorer former communist nations, will be increasingly invested in its “human capital”: education, training and scientific research. There is also acknowledgement of the need to streamline business practices and to “sell” the real Portugal abroad, while executives dismiss as wrongheaded an idea often expressed about the Portuguese, that they resist change. In fact, they adapt well.
Local commentators often note that Portuguese working abroad have a good reputation, thanks to their flexibility and hard work, while at home, productivity lags in neighboring Spain. This prompts trade unions and some economists to argue that the real drag on Portuguese productivity is not stick-in-the-mud labor, but poor management. Business executives acknowledge a problem, admitting that there is a tendency to accept excuses for not achieving goals. “When you put Portuguese people here with mixed [part-foreign] management, productivity goes up,” says Custódio dos Santos, chairman of motorway operator Auto-Estradas do Atlântico. “From what I see outside Portugal, people are much stricter about setting and accomplishing specific goals. Mixed management and cultures cause the lack of accountability to diminish, and productivity goes up.” With more international contact, the management ethos is changing. Some aspects of the business culture are positive: Verbal contractual agreements have strong moral force, and relations with the U.S. are in excellent shape. “The stability and consistency of the relationship is the big positive,” says Tony Coelho, one of only a handful of Portuguese-Americans to be elected to Congress.
Tourism’s Chance
to Score It would be hard to overstate the importance of this summer’s Euro 2004 soccer championships for Portuguese tourism. Up to half-a-million additional visitors are expected, staying an average of four nights. That may not seem a large number, given that Portugal welcomes some 12 million visitors each year, but billions more will watch the event on television. Even though only European teams take part, it is the world’s third-largest sports meet, which is keenly followed in Asia.
Euro 2004 is projected to bring 260 ($318) million in extra revenues, but the so-called ‘Barcelona effect’ – recalling the boost to that city’s economy imparted by the 1992 Olympics – could be worth up to €360 ($440) million annually over the next six years. Madalena Torres, who heads the commission to promote Portugal and Euro 2004, sees a unique opportunity to transform the country’s image elsewhere in the world. “This is an excellent way to update, rather than change, our image,” says Torres. “We have a fabulous heritage already, and it is important to show that we are more than sun and sea, or a golfers’ paradise.” After the campaign depicting tourist sights nestling on a soccer pitch – with the punning slogan: “In Portugal, extra time is always the best part of the game’” – Torres and her colleagues will seek to transmit the country’s diversity through a “go deeper” campaign promoting its unique Atlantic heritage. Portugal has seven tourism regions, the three prime ones being Lisbon, the Algarve and the island of Madeira. Lisbon saw visitor numbers soar following the 1998 Expo. Since then, overnight stays have climbed steadily and hotel capacity has doubled. Tourism has become one of the most important activities for the region’s economy – and soccer is not the only game in town. A range of smaller events, from the World Bodyboard Championships to the Motorcycle Grand Prix, will be covered by broadcasters from more than 120 countries. Sport is one way Portugal reduces the seasonal nature of tourism. Another is the lucrative conference business in which Lisbon is making strides in developing the U.S. as an important market. Many Americans also stop in in the city as part of a cruise. Altogether, an average of 220 cruiseships call each year, bringing 150,000 passengers, and work has begun on a new eight-ship terminal near the planned casino. But aside from this, Portugal struggles to attract attention in the U.S. “The market is very big, so it is extremely hard to work it with the budget we have,” says Torres. “But the U.S. is becoming important for us. In 2002 it was fifth in terms of receipts.” One of the big beneficiaries of Lisbon’s higher profile is the city’s public transport company, Carris. Launched by Carris, Carristur introduced tourist trams and double-decker sightseeing buses, joined with a private operator to offer river cruises and acquired a company operating a minature train. It has also linked up with airlines and cruise operators to provide dedicated transport downtown. “The development of Carristur is a prime example of Carris’ capacity to make the most of what is on offer to tourists in Lisbon and other cities,” explains Director António Proença. Carristur is now building on its expertise to launch similar services in two other Euro 2004 host cities, Oporto and Coimbra, in partnership with local public transport companies.
While care must be taken in expanding tourism in the crowded Algarve, where the majority of foreign visitors head, there is scope to step up tours in areas like the Douro valley, a dramatic landscape sculpted over centuries. The Algarve is served mainly by charter airlines, but this kind of small-group travel option could benefit national flag carrier, TAP Air Portugal. TAP is 50th in size among the world’s 300 airlines – a high position given the country’s small size. Its network is strong in South America and Africa, and it has an outstanding safety record. The airline is now building on these features to stabilize profitability. “Traditionally the company was more interested in knowing the load factor, the yield and the utilization of aircraft,” says TAP Chairman António Cardoso e Cunha. “These are still important, but the achievement of key performance indicators cannot be neglected, since our objective is to convince institutions with the financial capacity to invest in us.” TAP expects a net profit of €20 ($24.5) million this year after achieving an operating profit last year for the first time in decades and its management is mindful of the need to keep a competitive edge. “Anyone who is a frequent flyer will recognize that all airlines are basically the same,” says Cardoso e Cunha. “If we want to be different, we need to emphasize the reception, the way you prepare the check-in, the way passengers are treated during the flight.” In fact, the Portuguese are already renowned for the warmth of their welcome, but the country clearly no longer relies on this to carry it through, and the government has plans to increase the number of tourism training centers. “People here love foreigners, and we have a special attitude toward Americans,” says Secretary of State da Silva. “But you can’t be competitive just by being nice to visitors. You have to add professionalism to this natural approach.”
The Algarve is Europe’s prime year-round golfing destination, thanks to a mild climate and professional approach. Spring begins in January and February, when the hills are powdered with almond blossom and the airport carousels are laden with golf bags. The region boasts some 16 complexes catering to golfers of all levels, which are at their busiest between October and May. Among the best known and most exclusive courses are Vale do Lobo and nearby Vilamoura.
Around Lisbon, top-notch courses include Quinta da Marinha, attached to Portugal’s most expensive estate, and the Penha Longa resort near Sintra, where Bill Clinton played a few rounds during a break from an official visit. The Lisbon region has many pay-and-play courses, too. Farther north, along the west coast, establishments such as the Hotel Golf Mar in Porto Novo balance conference business with nine-hole courses. Even the pretty island of Madeira, long popular with walkers who enjoy the trails that line its hundreds of miles of irrigation channels, attracts golfers with two top-class courses.
IVN’s Salsa brand is set to expand abroad, having already added zest to Portugal’s fashion scene.
Portuguese clothes retailing has been transformed in recent years. Long dominated by family stores paying peppercorn rents that nullified incentives to brighten their image, the market now boasts a sizeable number of familiar foreign names. Spain’s Zara, with its just-in-time stock management, has made inroads, and Sweden’s H&M is belatedly gaining a foothold. But there are home-grown success stories, too. One that is attracting interest, including that of foreign investors, is the Irmãos Vila Nova (IVN) Group. Its Salsa brand features fabrics and designs whose quality has built a band of faithful customers willing to pay more than they do for the unpredictable sizing offered by some competitors. IVN took over the brand in 1997 and immediately made drastic changes, starting with distribution. At the time, it was not even clear where Salsa was selling, much less who was buying it. The company conducted market tests to determine the target group, discovering to its surprise that customers tended to be aged 18 to 25, not 25 to 35 as thought. Its collections were reorganized accordingly. The Portuguese market may be conservative, says IVN Managing Director Miguel Duarte, but a significant proportion of customers want basic items that stand out. “We couldn’t do this with the fabrics because of our size,” he explains. “So we had to provide good quality, a good fit and good designs – but with differentiation in the image.”
Duarte is the only outsider on the board of the company, set up by the Vila Nova brothers in 1998. In contrast to Zara, Salsa still sells through traditional multibrand stores. but this sector is declining, and to compensate – as well as to get a better feel of the market – Salsa started opening its own stores in 1998. The group is now expanding abroad, with a new outlet in Qatar and another opening soon in Dubai. There are plans for up to 40 more elsewhere in the Middle East within three years. In Iberia, IVN has been approached by several Spanish investors, and even the U.S. is a possibility, says Duarte, if the partner is right. Despite the publicity Euro 2004 will bring Portugal, market research discouraged IVN from linking Salsa with sports, but the group sponsored Rock in Rio, the six-day music festival scheduled over two weeks prior to the games, which is a good fit with Salsa’s emphasis on denim. The brand name refers neither to the South American dance nor the Spanish word for sauce. In Portuguese, salsa means parsley, and its products are certainly adding a distinctive flavor to the market. Back to top |
