The internationalization of Portuguese business

Last updated 3 October, 1996.

The internationalization of Portuguese business is just beginning. Forum Portugal Global was established by Portuguese enterpreneurs wishing to debate internationalization, so as to make government efforts more effective. The Forum also supports the activities of the Portuguese group of the Trilateral Commission, a private initiative dedicated to fostering closer cooperation among North America, Western Europe and Japan.

Government efforts to promote it began in the late 1980s, when, after a successful accession to the European Community, macroeconomic adjustment was in progress in an environment of political stability. Of course, there were sizeable resistances to structural reforms in the public administration and in state-owned enterprises. As a consequence, the ambitious proposal to make state action more effective by the merger of the Institute of Foreign Trade of Portugal (ICEP), the Institute of International Investment, the National Development Bank (BFN), the Company for Export Credit Insurance (COSEC) and the Institute for Economic Cooperation (ICE) was only partly implemented.

While some of these institutions did disappear, or at least have been renamed, there is still more that one government agency responsible for foreign economic policy. Worse yet, an artificial division has remained between industrial and tropical markets, leaving out a great deal of opportunities in-between. Even the more familiar markets of the EU and of the CPLP are more often seen as substitutes than as complements.

Instead of cooperating, ICEP, BFN, COSEC (then part of the BFE group) and the Cooperation Institute (now ICP) were ignoring each other, and Portuguese entrepreneurs lost opportunities for restructuring and for internationalizing when the world economy was booming.

Another effort was the creation of Funds for the Restructuring and Internationalization of Enterprises (FRIEs) approved shortly after the 1992 Budget, shortly before the onslaught of the European recession, whose gravity was misperceived by government and business alike, in part because of the boom in exports to Angola in the Spring of 1992.

Yet another effort was the pedagogic campaign based on the report of Michael Porter on the sources of comparative advantage for Portuguese firms, widely discussed between government officials and business leaders in 1994 and 1995. But the FRIEs never took off, due in part to the passive resistance of state-owned banks, and the pedagogic efforts were clouded by rumours about dissolution of Parliament and the threat of early elections.

The government sworn in after the upset in the general elections of one year ago maintained the medium term orientation of macroeconomic policy and the emphasis on structural reforms. It created a Ministry of the Economy, and in it a Secretary of State for Competitiveness and Internationalization and shows a continued commitment to helping the restructuring and internationalization of Portuguese business.

Most Portuguese firms acknowledge more readily the costs than the benefits of open markets for the trade in goods, services and assets. Reasons for this can be found in a tradition of state intervention which was extremely exacerbated when democracy was restored in 1974.

In banking and insurance, liberalization was blocked by nationalization: Banco Essi and Seguros Império belong to the Espirito Santo and the Mello families, whose economic groups have roots in the 1800s and had to restructure outside the country. Pleiade is a recent conglomerate, albeit with a long tradition in Africa which was reflected in the Lisbon 1992 Meeting.

A delayed liberalization was observed, for different reasons, in traditional export sectors like wine, where Sogrape has been a leading exporter since the 1950s. The same is true in sectors with a defensive reponse to interdependence like construction, where Bento Pedroso, now owned by the Brazilian concern Odebrecht, has been at the forefront of internationalization. Private firms understood the challenge of globalization in telecommunications, where Telecel, in natural resources and energy, with Portgas, in environment-related activities, with Somague and in legal services (with ML&GT).

Among the founders, 5 corporate representatives and 4 present or past individual members of the Portuguese group of the Trilateral Commission were elected to the ruling bodies. New members of FPG - especially in other sectors and under the statutory minimum of 20 -  include Banco Finantia, Lusomundo, Portucel, Semapa and Sojornal.