Trends in the global economy set to be good for Portugal

The first of a series of four events organised by ULI Spain, ULI Portugal and Iberian Property, which aim to bring the capitals of both countries a little closer together in the context of real estate investment, the economy and collaboration to create a common real estate market, took place in Madrid on Thursday the 20th of April. The ULI Iberian Property Talks will take place in Madrid and Lisbon throughout the year and will be attended by leading figures from the real estate sector in both countries.

The offices of the Pérez Llorca law firm, an emblematic building located in Paseo de la Castellana, were the venue for this first event in the ULI Iberian Property Talks series, a series of meetings whose common denominator is an interest in promoting a common real estate market that recognises and highlights the similarities between Spain and Portugal, while at the same time taking into account the particularities of each country, each city and each project. This event, like the other three that will complete the cycle, was reserved for members of the Urban Land Institute (ULI) and for subscribers to Iberian Property and, which in addition to its face-to-face nature was broadcast live via streaming.

The event was divided into two parts: after the arrival of the participants accompanied by a welcome coffee, Pedro Siza Vieira, lawyer at PLMJ and former Minister of Economy of the Portuguese government kicked-off the debate in a keynote presentation format; Secondly, a round table in which Alberto Valls, chairman of ULI Spain; Frederico Arruda Moreira, board member of ULI Portugal; Pedro Marques da Gama, Partner at Pérez Llorca, and Pedro Coelho, CEO of Square AM, spoke about relevant issues such as the differences and similarities between Spain and Portugal and the real estate investment scenario in Iberia.

António Gil Machado, director of Grupo Iberinmo, welcomed the audience and took the stage to present the Iberian Property Awards an initiative that is part of a "joint effort to share and create an Iberian scenario".

After Alberto Valls, chairman of ULI Spain, shared a few opening ideas as well, the discussion was carried through a presentation of the former minister for the economy of Portugal, whose mandate took place during one of the worst moments in financial constraints.

Pedro Siza Vieira's task was to outline the current situation of the Portuguese economy, providing enough background to enable any non-expert to understand the deep and immediate causes of this situation, and to shed light on what can be expected in the short and medium term for the future of Portuguese finance, real estate and investment markets.

To share with the audience his vision of the evolution of the Portuguese economy, Siza Vieira did not need to go back any further than 1986, the year in which his native country joined the European Union. From then until the beginning of the new millennium, the national GDP grew by 85%. However, a series of events around 2000 caused this growth to stagnate and even decline in the following years.

"Portugal was one of the big losers of globalisation", Pedro Siza Vieira began by explaining. A phenomenon, he continued, that "has been very beneficial for many aspects of the world economy, but which has also had its negative side".

As the former minister explained, in the past "Portugal based a large part of its economy on the export of medium-quality products, seeking competitiveness at low prices". With the arrival of the 21st century, there were three circumstances that had a most damaging effect on the financial stability of the Portuguese state. Firstly, the arrival of the euro: "the relative value of the new currency benefited Germany, which had just come out of reunification and the 'German mark' was at its lowest level, but it was devastating for the economies of southern Europe," Siza Vieira pointed out. On the other hand, China's entry into the World Trade Organisation allowed its goods, which in many cases competed directly with Portuguese goods but at lower prices, to flood the European market, condemning, above all, the Portuguese textile industry.

Finally, the third event that had a negative impact on the favourable development of the Portuguese economy was the adhesion of the Eastern European countries to the European Union. Economically, they may not have been major powers, but they did have a strong industry and a highly educated population, and they were much closer to the major European markets than Portugal or Spain.

As a result, Portugal's GDP fell to 7%, and "during the first ten years of the century the country's deficit was 10% of the national GDP", Pedro Siza Vieira pointed out in his presentation. But from then on "we started to rebuild", the former minister added. By investing in technology, education and R&D, and taking advantage of opportunities, a country that was financially devastated has become the first in Europe in relative terms of attraction of foreign investment and the eighth in the Old Continent in terms of total investment volume.

Today, Portugal is clearly a country on an upward trajectory, with an export value of around 50% of GDP, with an exemplary resilience that has allowed it to recover - in economic terms - from the COVID-19 crisis in just two years, and with a keenness to spot opportunities that until recently it had not been able to develop.

It was precisely the pandemic that exposed the fragility of supply chains in many industries, including real estate. This led the major economies of the West to decide to start, from 2021, to "put productive capacity closer to home, moving from the concept of offshoring to others that we could call nearshoring or friendshoring", Siza Vieira reminded. And that, of course, "benefits countries like Portugal or Spain to a large extent".

In addition, "we have abundant and very cheap green energy on the Iberian Peninsula, in fact Iberia has the cheapest electricity in Europe", defended Pedro Siza Vieira.
What do the great industrial areas in the recent history of the Old Continent, such as the Ruhr area in Germany, the north of England or the Basque Country in Spain, have in common? "That there were large coal mines in these regions". "The big industrial areas emerged where the energy was, and now Portugal and Spain have the opportunity to become the new nerve centre of economic, industrial and technological development in Europe.

During the round table that followed Pedro Siza Vieira's presentation, the differences that characterise Spain and Portugal, and which make them two sister nations, but not twins, were discussed in depth.

According to Alberto Valls, chairman of ULI Spain, one of the main differences between the two countries lies in "the importance that each country attaches, and has attached in the past, to investment in education". As we know, "Spain has an endemic problem affecting the construction sector: thousands and thousands of people, generally heads of families, work in this sector and are therefore permanently exposed to the cycles of the real estate market, with the added risk that they have received little or no training in other subjects or disciplines, making them easy targets for crises".

With regard to real estate investment, Alberto Valls clarified that there are two main types: "there is the purely transactional type and then there is the type that brings added value, that which positively transforms part of the environment and society surrounding the investment". The chairman of ULI Spain advocates that in Iberia we must strive to capture the second type.

After turning the page on the pandemic, investment in commercial real estate in Iberia soared in 2022, reaching €18.6 billion, a figure that represents a year-on-year increase of 32% and marks a new all-time high. The figures are undoubtedly excellent, although Pedro Coelho, CEO of Square AM, wanted to remind that in order to reap these figures, there must be a regulatory framework that favours national and foreign investment, an agile and proactive government when it comes to making decisions and legislating, and an administration aligned with the ultimate objective, which is none other than the economic development of the country or region.

One of the main differences between Spain and Portugal that Pedro Marques da Gama, partner at Pérez Llorca, highlighted was precisely in terms of administration. "Let's remember that in Portugal there are no autonomous communities, which means that in Spain there is greater complexity when it comes, for example, to obtaining planning permission". For his part, Frederico Arruda Moreira, board member of ULI Portugal, focused on the importance of having robust fundamentals, both on the part of the investing companies and on the part of the local companies that develop the projects and, of course, of the continuous market in which they operate.