The Portuguese Miracle: Young Entrepreneurs Lead Country Out of Crisis
Portugal's economic resurgence is a remarkable success story. Only four years ago, the country was forced to turn to the EU for a bailout. Today, a new generation of entrepreneurs and start-ups have fueled a turnaround and fostered a new national spirit.
The panoramic terrace with views of the buildings in Lisbon's Old Town glows in the evening sun. Couples snuggle on benches, a street musician plays Brazilian melodies on saxophone, the Tagus River flows down beneath and a giant Jesus statue can be seen on the other bank. Tourists and locals alike raise their mobile phones into the air as they try to snap the prettiest views. Then they stroll over to the lime-green Piaggio Ape owned by Mónica Santos and João Reis.
When they learned that Lisbon's city government was permitting people to set up businesses using Asian-style Tuk-Tuks, they borrowed 30,000 ($33,873) from their families and the bank and purchased a Piaggio Ape and the kitchen equipment they needed to run their business. Santos had always enjoyed cooking, and now she finds herself spending 10 hours a day on her feet, taking turns with Reis at the crêpe griddle and the juicer. They prepare the ingredients the evening before.
Santos and Reis have already recouped half of their investment. With things going so well, Reis is also considering setting up a second food truck on the beach in his hometown in the Algarve region, where he used to wait on tourists as a boy in his parents' own restaurant. He says he'd like to employ jobless friends there.
After all, they're not the only ones to have lost jobs. When the country had to turn to the European Union for a bailout in 2011, Portugal was forced to implement harsh austerity measures. Some 485,000 Portuguese, particularly young university graduates, left the country during the crisis to try and find opportunities abroad. They went to Germany, Brazil and even to the former African colony of Angola.
Entrepreneurial Energy and a New Spirit
Around 60 percent quickly returned. Others never left the country, with many of them trying to find a way to eke out a living after finding themselves unemployed. They took risks and established their own businesses, reinventing traditional products, opening hotels with new twists and unusual restaurants. They developed software and became fashion designers. In doing so, they also transformed Lisbon into one of Europe's most popular travel destinations while at the same time creating an unexpected economic upswing and helping to bring an end to the country's blues.
The transformation is particularly apparent in Lisbon, but also in many other places. You see it in the Embaixada, an 18th century palace that has been converted into a chic shopping center in Lisbon's historic quarter. It's a collective concept store and serves as a sort of embassy for the best products made in Portugal.
"Just sitting around at home was no answer," says Raquel Guedes, 29. "If you can't find something in your own field, then you have to get something else going." Guedes started out as a nursery school teacher and had gotten by over the years covering for other women on maternity leave. But eventually she got tired of it and instead set off on her own designing children's clothing. Now she rents her own small shop inside Embaixada.
The general mood in Lisbon ahead of Sunday's parliamentary elections in Portugal is a cheerful one. The unemployment rate has fallen from 17 percent in 2012 to 12 percent. The government's tax revenues are strong and almost twice as much has been raised through privatization than agreed to with the country's lenders. Last year, Portugal was able to end its aid program and successfully raise its own money on the markets. Since then, the economy has grown steadily, with 1.6 percent growth this year -- a figure that is higher than the euro-zone average. It's even possible the country will achieve its deficit goal of 3 percent of gross domestic product.
It's useful data for the current coalition government -- comprised of the conservative Social Democrats and the center-right, business-friendly People's Party -- because its leaders can point out that, after four difficult years, it has successfully led Portugal out of the crisis. Of course, it wasn't easy: The government raised taxes significantly, it liberalized the labor market, laid off civil servants, reduced salaries for public workers as well as pensions and social services. That also led Prime Minister Pedro Passos Coelho, 51, to earn the reputation of being a cold-hearted master pupil of German Chancellor Angela Merkel. Nevertheless, he hopes the Portuguese will reward him for his success.
But that's only the economic side of the Portuguese miracle. The crisis also unleashed a new energy in the Portuguese -- it swept away old structures and also opened the door for a new spirit in the country. The city government in Lisbon played an important role, too. Five years ago, the capital city began providing support to young entrepreneurs, creating a network of contacts, providing access to investors, largely abroad. Mayor António Costa, who is now running as the Socialist's candidate for prime minister, served as the driving force.
The city founded the Start-up Lisboa incubator, which has yielded more than 250 entrepreneurs and created 800 new jobs. The city also helped to make office space available, with software developers and programmers now working in three renovated buildings the historical city center. Those working in tourism, trade and fashion are centered around the magnificent boulevard Avenida da Liberdade. Recently, a center for artists was opened at the foot of the fortress that towers over the city. The EU's Committee of Regions bestowed the city with its "European Entrepreneurial Region of the Year" honor for 2015.
There are reasons behind the success story. People are well-educated in Lisbon, and salaries are lower than in other European metropolitan areas, as are living costs. Seed capital that would disappear in just weeks in London can be enough to fund a company for an entire year here. The city is even beating out rivals like Amsterdam and Barcelona. Lisbon will be the host for the next three years of the Web Summit, one of the largest conferences of its type for young tech entrepreneurs, with 40,000 guests anticipated.
'The Crisis Was an Opportunity'
That's important too, because most of the 108 new businesses that are created in the country each day are linked to hospitality sector. Revenues from tourism alone have increased this year by 12 percent.
"The truth is that the crisis was an opportunity," says Duarte D'Eça Leal. He's only 30 years old, but D'Eça Leal runs one of the hippest hotels in Lisbon -- a luxury hostel whose name says everything: the Independente. From the rooftop bar, he looks out over the throng of colorful buildings on Castilo Hill. He never dreamt he might one day be running a hotel.
When he was 15, D'Eça Leal went to a boarding school in Oxford and later to college at the London Business School. A decade later, he began his career at a major real estate company in Britain. "But I felt something was missing," he says. He decided he would rather invest his talent in Portugal and try to implement his ideas back home. "I felt like Portugal had a lot of potential," he says.
At the end of 2011, he and his brothers renovated the old palace at the edge of the Bairro Alto and opened a hostel and suites for travelers. Now he's the master of over a dozen sleeping spaces, with everything from bunk beds to double rooms and suites, all filled with vintage furniture and fine fabrics from Portuguese mills. Two restaurants are also located inside the Independente.
Establishing the operation was no easy task, considering that, right at the time the Independente opened, the conservative government increased sales tax from 13 to 23 percent. The tax hike forced many family run-businesses to close, but the Independente not only persevered, it also managed to grow, with the brothers since purchasing a neighboring building and now employing a total of 120 workers. D'Eca Leal's success is the product of his own creative initiative. But he has also been helped along by a government program that funds internships for young unemployed people that pays for half of their costs for nine months. The only condition with the government program is that at least one out of three interns must be hired as a permanent employee at the end of the program. "We are able to train people for half the cost and then we can handpick the best ones," says D'Eca Leal.
A year and a half ago, Neto established the start-up Chic by Choice, a company that offers luxury clothing for rent online. She obtained a half a million euros in venture capital to launch the company, no small responsibility for a young woman. From its office in Lisbon that was provided by the city, the staff of Chic by Choice purchases and sends Haute Couture all across Europe.
The company is so successful that Neto aims to hire two new people each month. And that's not all, she says with a smile: In August, she acquired a German competitor.
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