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PAM Panel on External Trade and Investments in the Mediterranean

PAM Panel on External Trade and Investments in the Mediterranean TOWARDS A SUSTAINABLE ECONOMIC DEVELOPMENT IN THE MEDITERRANEAN REGION 28 June 2012. aicep Portugal Global. Investment and Trade Promotion Agency. Investment promotion – attraction of FDI to Portugal;

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PAM Panel on External Trade and Investments in the Mediterranean

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  1. PAM Panel on External Trade and Investments in the Mediterranean TOWARDS A SUSTAINABLE ECONOMIC DEVELOPMENT IN THE MEDITERRANEAN REGION 28 June 2012

  2. aicep Portugal Global Investment and Trade Promotion Agency Investment promotion – attraction of FDI to Portugal; Trade promotion – support to internationalization activities, specially of SME’s; More than 7.000 companies, representing more than 90% of total portuguese exports, have a key account manager at AICEP and are continuously supported in Portugal and abroad, through offices in more than 40 countries. www.portugalglobal.pt

  3. The road behind XXth century facts that hindered growth • Politicalandeconomicisolation: reducedinternationalexposure for companies, reducedentrepreneurship; • Protection of local production, witha negative impactoninternationalcompetitiviness; • Wareffortinthe 60’s and 70’s; social andeconomicalcost of decolonization; • Currencydevaluation as basis for competitiveness; • 80’s and 90’s economydependingonlowcost, lowskillsproducts (textiles, clothing, shoes); • Major increaseincompetitionfrom EU enlargement (countrieswithlowcost, highskills, proximity to largermarkets) and China entering WTO; • Lowinterest rates leading to investmentinnon-tradablesandreduction of savings rates.

  4. Exports of goodsandservices Ongoingstructuralchanges– productdiversification

  5. Exports of goodsandservices Ongoingstructuralchanges – marketdiversification

  6. Exports of goodsandservices Closingthetrade deficit – Jan/Apr 2012 • Recordhighexports; • Recordlowtrade deficit; • SurpluswithThirdCountries; • 160% coverageinServices; • 96% coveragein total exports. EU ThirdCountries

  7. Exports News from the battlefront – is growth sustainable? • The exporting base is growing significantly; • Close to 60% of exports come from large companies, more immune to funding problems; • SME’s: resilient through crisis; rapid recovery, to accelerate if working capital funding is available; • Even small companies diverting focus to exports as a result of internal market outlook; • Incentives schemes focused on innovation and tradeables are increasing results. Exports of goods 1990 2011 11.000 companies 20.035 companies 15.400 M € 60.660 M € % Exports M € Exports # Companies > 50 106 47% 25 to 50 140 12% 1 to 25 3.289 36% < 1 M 16.500 5%

  8. Current situation Investment Assessment: • Investmentdecisionsdependessentiallyonmicro-economicalissuesandthenecessaryattractivenessfactors are present; • Investorswithaccess to internationalfundingandthatseekexternalmarketshavein Portugal a lowcost, highskills, reliableinfrastructurelocation; • Existingforeigninvestors are maintaininginvestmentdecisionseventhroughcrisis. Shortfalls: • Overallimageeffects of macro situation are delayinginvestmentdecisionsandcreatingdifficultiesthataffectperceivedatractivennessbynewinvestors.

  9. Current situation Exports/Imports – 96,2%inJan/Apr Assessment: • Thenumber of companiespursuinginternationalbusinessesisincreasing; • YoungtalententeringSME’s, withlanguageandmanagementskillsiscreating a largenumber of rapidlygrowingexportcompanies, inhighmarginsegments; • A substantialpart of total exports comes fromlargecompanies, withaccess to internationalfunding, enablingexportgrowth. Shortfalls: • Difficultaccess to funding for SME’sisnotallowingworking capital to meetthedemandneeds – stabilization of finantialmarketswillimmediatelyresultinaddedexports.

  10. Structural Reforms Business environment Competition Labor market Structural Transformation of the Portuguese economy Open to foreign investment and to the challenges of international competition Fully integrated in the Single European Market Political consensus on reform program and stability culture Competitive location for physical and human capital

  11. Structural Reforms Agenda Troika’s assessement of the assistance program Confidence, credibility and justice First Evaluation (August 2011) Openness, competition and competitiveness Second Evaluation (November 2011) Third Evaluation (February 2012) Entrepreneurship, innovation and labor market flexibility Fourth Evaluation (June 2012) Limited State and economic democracy • Local authoritiesaplyingthereforms as recomended. • Adjustmentprocessfasterthanexpected; • Unemploymentis a concern.

  12. Structural Reforms Privatization program as a flagship in the agenda Energy retail and production Electricity distribution Energy retail and production Television broadcasting Seguros Insurance (3) (1) (2) Seguros 2011 2012 2013 Q1 Q2 Q3 Q4 Mail distribution Water distribution Air infrastructure Air transport Railway logistics (1) Sale of “Caixa Geral de Depósitos” participation of 1% (2) Concession (3) Expected completion date by “Caixa Geral de Depósitos”

  13. THANK YOU luis.florindo@portugalglobal.pt

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