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Published by Ken Pottinger, Consulting on Portugal since 1977.

All rights in any form reserved © 1991 and subsequent, Ken Pottinger.

  Weekly news: 4th week of April, 2013  
TAP appeals for an EU path to growth

Fernando Pinto, chairman of Portugal’s flag carrier TAP-Air Portugal, has appealed for Portugal and Europe, still mired in recession, to implement strategies for growth. He told an American audience that airlines tend to double earnings when economies are booming while the downside was that losses tended to double in recession.  TAP – which Government plans to privatise sometime in 2013 -- "is Portugal’s biggest exporter" and "a major employer", he said. Speaking during a CNN TV interview he noted the airline was concerned about current economic policy, because “we need to start to grow … there must be a policy soon” that charts a route to growth and development for Portugal and the EU, he added. His call comes shortly after José Manuel Barroso, a former Portuguese Prime Minister and current European Commission President said austerity in the EU had run its course. “While the policy is clearly 100% correct,” Barroso said, “I think it has now exceeded its limits”. Fernando Pinto said his concerns about the outlook extended to current economic and financial instability in Europe, a reference specifically to the crisis in Cyprus and the controversial “EU solution” which has undermined depositor confidence in banking, and overall investment confidence in the area. "We would very much encourage investors to help growth in our region," he said. He added that TAP, which operates in a Latin America and Africa niche market, reported earnings in excess of 20 million euros for 2012 (although consolidated group results were negative because of losses at its Brazilian maintenance unit). His remarks came as other reports suggested Portuguese restructuring and adjustment were now beginning to bear fruit. Exports led by Volkswagen’s AutoEuropa plant are surging. BoP-Bank of Portugal, the central bank reported the first trade surplus in 60 years in 2012 as consumer domestic spending fell and lower labour costs helped manufacturing  to revive. Among Portuguese exports leading the recovery, are Scirocco vehicles from VW-AutoEuropa and refined fuel from Galp Energia SGPS SA at Sines which are Portugal’s largest exporters. Other exports recovering strongly include paper and pulp, machinery, acrylic fibres from Fisipe Fibras Sinteticas de Portugal, PSA Peugeot Citroen commercial vans, Leica cameras, Bloco B’s quarried and finished stone and marble for construction works in Saudi Arabia and dinner services for Sweden’s Ikea Group. Peugeot Citroen, Europe’s second-biggest vehicle plant, is to boost output at its local plant by 36% in 2013 while Leica Camera AG opened a 22.5 million-euro plant in late March to replace its outdated installations at Famalicao (north). Eurostat said Portugal’s exports of goods and services represented 39% of GDP in 2012, up from 28% in 2009.

Portugal exports shine in the crisis

Ongoing improvements --  despite a global recession-- in Portugal’s export performance have   impacted positively on the balance of payments deficit. Recent statistics suggest exports continue to boom while at the same time imports fall on weaker domestic demand. The latest figures show a balance of trade deficit down to slightly more than a €1 billion. Portuguese exports were up 5.6% year-on-year at end January 2013 while imports decreased 6.9% over the same compared period says NIS-National Statistics Institute. Year-on-year exports were down some 3% in December last year making the turnaround for January a welcome development, NIS said. Exports rose by a fifth or 19.6% between December 2012 and January 2013, “thanks to improvements in almost all product groups, but particularly vehicles and transport materials exported to the European Union (EU), NIS said. But there was also some bad news. For even though export sales more than cushioned downward pressure, Portuguese beer sales declined and were now at levels last seen in the 1980s. Nevertheless António Pires de Lima  chairman of the National Brewers Association said the sector was “an example of resistance and resilience” in a difficult trading environment. Mr de Lima said the sector faced “a double digit drop in domestic consumption as hotels, restaurants, bars and cafés suffered from punishing levels of taxation and the pernicious impact of prevailing economic conditions.” As a result he said the sector had seen a severe shakedown with 10,000 of a total 70,000 establishments wound up in 2012 alone. Nevertheless the brewery sector had prospered over the last three years thanks to “dynamic export marketing by its brands and products,” with export sales improving a further 20% in 2912 to total some 300 million litres.  In the period more than 40% of all Portuguese brewery production has been exported generating a record €250 million balance of trade surplus for the sector, he said.

Sapec targets Brazil

Sapec Agro -- an 87-year-old Portuguese manufacturer of agro- chemicals says 65% of its total sales, worth some 100 million euros a year – come from exports to Spain, Italy and France. The company is currently preparing an export drive in Brazil set to launch in 2014. It estimates the Brazilian market for its products is worth some 8,700 million euros. The company says its goal in the first 4-5 years, is to achieve turnover of  some 46 million euros in the São Paulo region. It says it has identified a market for fruit, horticultural, coffee and citrus crop protection in this area. At a  later stage it hopes to extend into the cut throat protection market for sugar cane, soybeans and corn. The company says market potential is such that by 2015, Brazil should account for 50% of Sapec's total global growth, helped by a fast direct 12-day shipping service from the southern port of Sines.

Business Briefs:
Lidl Group (Germany distribution) is to invest 45 million euros in 2013 in Portugal upgrading and expanding it existing network of outlets and growing its logistics infrastructure, creating a further 60 jobs. Lidl said that 15 million euros would be invested in building a new group head office in Sintra to be started in June and opened early 2014. It said overall investment planned for 2013 was 25% higher than in 2012 despite the tough trading environment.
Lee Hannah, author of a study published in a US journal "Proceedings of the National Academy of Sciences "(PNAS) warns of possible devastating impact on Portuguese wines if the global climate changes to any significant degree. "In Mediterranean Europe, including much of Portugal, the area suitable for wine production today will decline by some 80%," the study predicts "The warming associated with climate change is transforming areas where wine grapes are currently grown," she reported. Her study used 17 climate models and relied on two forecasts: a worst case scenario by 2050 of a temperature rise of 4.7C, and a less severe 2.5 C. rise. It should be noted that climate change research in the US and elsewhere has been severely criticised by some leading academics who accuse their equally erudite colleagues of “researching to a well funded agenda”.

Datafile Portugal Executive summary of Portuguese business news by e-mail, comprehensive website database of Portuguese business, economic and political news, on subscription. Research and company profiles on request.

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