In new dynamic, Portugal's former colonies bail out old master

Cash-rich Angola and Brazil are buying up Portuguese exports and helping prop up the former colonial master during its financial woes.

Francisco Seco/AP
A broker works in the trading room of a Portuguese bank in Lisbon, Wednesday, June 19. Awash with cash and in much better shape than Portugal, oil-rich Angola and emerging giant Brazil are investing heavily here, buying up Portuguese exports and helping prop up the former colonial master during its financial woes.

Portugal, Western Europe's poorest country in per capita terms, is now getting from former colonies like Angola and Brazil what amounts to a lifeline for its flat-lining economy.

Awash with cash and in much better shape than Portugal, oil-rich Angola and emerging giant Brazil are investing heavily here, increasing imports of Portuguese products, and welcoming companies and unemployed professional immigrants from their former colonial master.

It's hard to quantify the real impact of the help Portugal is getting from its former colonies, including four other African nations including Mozambique and Cape Verde. But experts and officials agree that without new flows from old colonies, the current protracted and grueling economic crisis could well be unbearable.

Lisbon in recent years has received a $102 billion bailout from the European Union, the European Central Bank, and International Monetary Fund, which imposed a draconian calendar of public cuts that has brought the country to the brink in the ongoing eurocrisis. 

That partly explains why a new post-colonial dynamic is being noticed: Portuguese exports in 2012 soared and now account for nearly 40 percent of the country's economy, from less than 30 percent in 2009. The country turned a trade surplus for the first time in decades, also the result of plummeting imports.

No other European country is so economically dependent on its former colonies as Portugal, says Alex Vines, an expert on Portugal in London's Chatham House.

To be sure, Portugal's main trading partners are still its European partners, which buy more than 70 percent of its goods. But purchases from the former colonies are quickly increasing based on their emerging economic muscle.

Here in Oporto, the country's industrial hub and second biggest urban center, the port has seen its activity increase annually, especially via the export of wine and petrochemicals. And although the crisis is noticeable, experts say it would be a lot more so without its export markets.

One in five bottles of exported Portuguese wine, much of which is sent through Oporto, is consumed in Angola, the single biggest destination. Portugal is the second biggest source of imports for Angola, from bottled water to cars. In turn Angola is the fourth biggest export destination for Portugal.

Angolans and Brazilians have also been buying up real estate, helping to blunt the construction bust and to lift property values. Investors from its former colonies have also bought stakes in some of the country's largest publicly listed companies in the past few years: mostly in banks, telecommunications, cement, and energy.

Equal to roughly 5 percent of the total capitalization of companies trading in the Portuguese stock exchange, the investments by both Angola and Brazil are worth some 5.3 billion euros, says Mr. Vines.

In fact, the prime minister of Portugal, Pedro Passos Coelho, who grew up in Angola before it won its independence, recently advised his country's jobless teachers to move to former colonies to seek work. Between 120,000 to 200,000 Portuguese have indeed moved to Angola, making them the second largest foreign population after Chinese.

"It’s a special relations, a strategic one, even if a little prickly at times," says Vines.

For Brazil, Portugal is just another investment opportunity; but close cultural and political ties are driving economic exchange. 

The financial muscle of its former colonies is now critical for Portugal's economy, which will contract in 2013 for a third straight year, by 2.4 percent. The government says it expects a return to growth in 2014, but European leaders have been saying this steadily for several years when it has not proven true – and most forecasts agree that is optimistic and unlikely. Meanwhile, unemployment continues to rise and is approaching 18 percent.

And while the help from former colonies goes mostly unnoticed as a result of the unprecedented economic pain, "the reality is that Portugal needs investment because, its economy is uncompetitive," Vines says.

Some of the investment has also been criticized, especially from Angola. The family of the African country's ruler is behind much of the investment, including influential stakes in media companies, strategic banks, and energy companies.

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