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.

By in Lisbon

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.

The two Portuguese set up Mariá Limão, a small food truck that sells homemade lemonade and crêpes here in mid-July. Originally, Mónica Santos, 33, had previously been employed as a social worker, but she lost her job during the debt crisis. The same happened to her friend Reis, 38, who studied math and marketing at college. Neither wanted to leave the country the way so many others from their generation did. And they didn't want to give up, sit back and take things easy and move back in with their parents.

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.

Filipa Neto, 25, could have established her business anywhere in Europe. And she did in fact register her company's headquarters in London, but Neto and her 13 employees are based in Lisbon. She shares the view of many other young entrepreneurs that country has been developing positively despite all the difficulties in recent years. She says she wants to stay in Portugal and help do her part to promote the upswing.

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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dom manuel 10/03/2015
Pure propaganda the day before the elections. foreign capital is buying portuguese assets in many areas. the liberal policy of the governement is not so liberal when their party members own a bank and it bankrupts. in such case the state can put some billion the help the poor, the health system and so on... nothing
tyranic.microbe 10/03/2015
2. Sinking ship
The unemployment rate is lowering because many leave the country. Take a badly-paid short-term job and you no longer count towards the statistics. There are also those that have never registered as unemployed even though they're living at their parents with no income since finishing their degrees. Mr. Passos Coelho has been involved in his fair share of scandals including tax evasion. Apparently this happened years ago and the crime prescribed so all is well. Mr. Costa used to be the president of the Portuguese capital. In Lisbon, day care centers are closing because they have no money and at the same time Mr. Costa wanted to exempt Sport Lisboa e Benfica, one of the main soccer teams in the city, from paying over 2 million owed in taxes. Remember Essen-based Ferrostaal? Many believe there were bribes made in Portugal to several people, including to Paulo Portas, during the 2 submarines deal. The Portuguese defense minister at the time, Mr Portas, took with him, and also destroyed, large amounts of documents when leaving office. An easy way to cover his tracks. This alone should have gotten him in deep trouble, but nothing happened. It is worth mentioning that Mr. Passos Coelho's party has been running the government in a coalition with Mr. Portas' party. The government makes cuts left and right and parties never agree on anything. The exception was last year when a vote was brought up on whether to keep subsidies for politicians making over 2000 Euros per month. Guess what was the decision taken by the large majority, independently of political affiliation? Keep in mind that 2000 Euros is over 4 times the minimum wage which, unfortunately, many people are receiving as their salary. And this is just the tip of the iceberg. Anyone reading different Portuguese news sources will soon realize a lot of politicians are involved in all kinds of corruption cases and none of them ever gets to go to jail.
mathcen 10/05/2015
I'm happy to hear that Portugal is doing well economically. I visited Portugal from Canada in 2003 and again in 2009. I like the country very much, and I can see why young people would not want to leave Lisbon - it's a great city. Sophisticated and cultivated and rich in history but not at all snobbish. As the best cities in North America lie on the west coast, so do they in Europe.
luis 10/06/2015
4. utopian sci-fi
Revolting article. Selling this cock-eyed idea of young entrepreneurship as a miracle economic remedy is a real insult to all those struggling. I'm happy these people are striving on lemonade, but calling success at a national level is either a deliberate provocation or a ridiculously ignorant statement based on navigating the gentrified Lisbon center as a tourist, when all the little it has is its tourism. Yes, let's all lemonade and cupcake the crisis away, because, as we all know, the biggest ailment of the southern European countries is laziness and lack of vision. Ugh. Been hearing this for 5 years and my ears are bleeding. Dear Helene, please do your homework on the still-sinking financial situation, the real figures of unemployment, the destruction of public services and corruption before you write more irresponsible garbage like this. Also go beyond the hip hotel owner who says "the crisis is an opportunity" and take a deeper and serious look at the tourism industry and its full impact on the city. And if you did and are just trolling us with propaganda, which this sentence leads me to suspect: "The general mood in Lisbon ahead of Sunday's parliamentary elections in Portugal is a cheerful one." well, many a Portuguese can surely tell you where to take a tuk-tuk ride to.
fschurmans 10/06/2015
5. propaganda
I have been living in Portugal for the last 20 years. I saw for about 10 years a huge improvement in all standards of living, but just after 2001, we all saw the first signs of crisis. The 2008 international crisis hit an already weakened economy and worse was to come. The PSD-PP coalition ruling the country since 2011 has been destroying public services such as health care, education, justice and at the same time has been "saving" banks which, as in the States, choose casino type investments. The Debt doesn't stop rising (hit a new record of 130%), the number of people living beneath the poverty line has been steadily growing, levels of corruption are now quite worrying. Portugal in this article looks like an Alice in Wonderland paradise. Next time, please, dig further, write better. That is what one expects from a newspaper such as Spiegel.
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