Made in Portugal is in fashion
After years of recession and austerity, Portugal has returned to the path of growth and modernization. We take a look at the recipes that have made this country one of the most promising in Europe.
Colorful ottomans, sofa corners, swings, ping-pong and pool tables. A tree house and a studious hive atmosphere in front of the computers. We could be in California, but we are in the vicinity of Porto. Under the big glass roof of Farfetch, the world champion of online luxury sales.
Launched by Portuguese entrepreneur José Neves in 2008, the company has 1.56 million customers in 190 countries worldwide and posted sales of 171.6 million euros in 2016, 74 % more than the previous year. It operates between London and Porto. Selling chic and exclusive, well-known brands as well as cutting-edge labels. Previously found in a handful of trendy stores around the world, now accessible in three clicks.
We have succeeded in shaking up a sector as conservative as luxury by introducing a new privilege, time savings.
"In 2016, we were 600 people in Portugal. Today there are 1,300, more than half of whom are IT engineers, says Andreia Gomes. Communication Manager of Farfetch. We have succeeded in shaking up a sector as conservative as luxury by introducing a new privilege, the time saved "she explains.
Take off again
The company is now exploring new terrain, such as the "stores of the future," to offer, it says, "new customer experiences and a tailored offer by leveraging both the benefits of the digital revolution and augmented reality".
The story of Farfetch is one that tells of the Portuguese economy taking off again. Gone are the days when Portugal was a low-cost supplier to the major textile and leather goods chains.
The country, which is re-emerging after years of recession and austerity, has dusted off its traditional sectors. It has modernized and opened up to international markets at full gallop to survive, despite domestic demand stalling during the crisis.
Labour market flexibility
Five years after being forced into a €78 billion rescue package and a severe adjustment plan. Portugal is now one of Europe's most promising economies.
The Socialist government, which came to power in November 2015 with the support of the far left, promising to turn the page on austerity, had nevertheless been greeted with skepticism by its European partners. But, against all odds, Prime Minister António Costa has managed to revive the machine.
"He played his cards right, sending reassuring signals to the middle classes, and unblocking salaries and pensions. Without, however, going back on the reforms that had made the labor market more flexible and reduced the size of the State".explains political scientist António Costa Pinto, professor at the University of Lisbon.
It's this Scandinavian-style mix of recovery and flexibility. It is this Scandinavian mix of recovery and flexibility that is boosting consumption and reinvigorating the country's economy, driven by both the tourism boom and exports.
Growth takes off
Growth is taking off. It reached 2.6 % in 2017, while unemployment fell to 7.8 %, the lowest figure since 2004, and the public deficit was reduced to 1.4 %. Its lowest level for forty years. The whole of Europe is wondering about the Portuguese recipe.
In the wake of successes such as Farfetch. Lisbon and now Porto have become fashionable destinations for start-ups, attracted by a skilled and easily multilingual workforce, a pleasant environment and proximity to prime surfing spots. But the rest of the industry is also benefiting from a new dynamic.
SMIC at 650 euros
In addition to a flexible labor market, the country clearly benefits from low labor costs, with a minimum wage of 650 euros. But that's not all, says Luis Castro Henriques, President of Aicep. Aicep is a business development agency that supports Portuguese export companies and facilitates the entry of investors. "What makes a company decide to locate here is a complex productivity equation. Which introduces other factors such as the ease of attracting talent. Professional and university training, knowledge of languages, as well as the quality of the country's infrastructure and social stability. Which offers long-term visibility.
We have moved from shared service centers or simple back-office operations to more complex activities, from advanced engineering centers to software development.
French companies are at the forefront of productive investments. Those that have been there for a long time are consolidating their positions, such as Renault, PSA, Faurecia and Altran. But the profile of newcomers is changing," says Luis Castro Henriques: "We've moved from shared service centers or simple back-office operations to more complex activities, be they advanced engineering centers or software development."
This is the case for Mecachrome, a French group specializing in high-precision mechanics for the aerospace industry, which inaugurated a new plant in Evora last October. A few hundred meters away are the facilities of Brazil's Embraer, the world's third-largest aircraft manufacturer. Together, the two companies are creating fertile ground for a new Portuguese aeronautics cluster," says Mecachrome plant manager Christian Santos, impressed by the efforts made by the local administration to facilitate the installation of new arrivals, especially in terms of recruitment.
"There is a real business service attitude on the part of public employment services"he explains. Not only have they developed tailor-made training courses for specific aeronautical trades, from boiler making to sheet metal work, painting and machine control, but local Pôle Emploi managers are also interested in employer satisfaction, to see how training can be made more effective. "They're looking to anticipate, to know what headcount I'll need in six months' time and with what concrete training so they can adapt their modules to demand and shorten the 'time to job'."
For us, it's not a question of low cost, but of 'best cost'.
A reliable, trained and motivated workforce is one of the country's calling cards when it comes to convincing companies to locate here. "For us, it's not about low cost, but 'best cost', says Christian Santos. There is also a geographical and cultural proximity. Which makes collaboration easier than in Poland or Turkey."
Alongside the newcomers, the country's traditional industries have also undergone a revolution, explains the Secretary of State for Industry, Ana Teresa Lehmann, citing the textile and leather sectors as examples: "They've opened up to innovation in production, they've also worked on the notion of brand and the perception of quality, reorienting the image of made in Portugal towards an idea of high-end design and added value."
Invest, innovate, reinvent: this is also the recipe applied by Vista Alegre, the emblematic brand of Portuguese porcelain, to resurrect itself after being crushed by debt in 2009. "The company, which relied on the national market and a portfolio of loyal customers, has bounced back by prospecting new markets, and has succeeded in promoting its know-how to open up to new collaborations.says board member Alda Costa.
A hundred kilometers south of Porto, Aveiro's Vista Alegre factory offers a dapper image frozen in time. Framed by the white and ochre buildings of the chapel and theater, where workers were educated. Nothing seems to have changed since its foundation in 1824.
And yet, in addition to its usual production lines, the company has landed a major contract with Ikea. It delivers 30 million pieces per year to the Swedish giant. with the prospect of increasing to 48 million pieces in the coming years. For Vista Alegre. This collaboration marks a renaissance, as does the development of collections for brands such as KitchenAid or Nespresso, or the design of custom tableware for star chefs.
In a very different sector, the Amorim group, world leader in cork, has also managed to pass a difficult stage. "Who was going to bet on cork, when aluminum or plastic caps threatened to dethrone it? "says Antonio Rios de Amorim. The president of the company, which produces 4.7 billion corks a year, a third of the world's production.
Keeping up with the times has required constant innovation in manufacturing processes, cork quality and traceability. But also to develop the use of cork in other sectors, such as the production of artificial turf. Its introduction into the manufacturing processes of railway carriages and cruise ship decks. And its use in the aerospace industry.
After some difficult years, "The winds finally shifted and came from the East", he asserts. In the end, it was Chinese consumers' marked preference for cork. That tipped the scales in its favor and convinced the wine industry to return to its origins. Boosting demand after years of slowdown.
We have a problem of scale, with many uncompetitive micro-businesses.
In Lisbon, in his office with a breathtaking view of the 25-April Bridge. António Saraiva, President of the Confederation of Portuguese Industry, is cautiously savoring the country's recovery.
"We have barely 20,000 exporting companies out of 400,000 in total. This represents barely 5 %, he recalls. We have a problem of scale, with many uncompetitive micro-businesses. Those that have survived the crisis are the strongest. They have shown great resilience and have been able to open up and transform themselves. But we can't stop there," he warns. To move forward, we need to gain volume. We will need to merge, absorb and promote the path of concentration." There was no question of him stopping on the way.