Madonna’s welcome, but Portugal wants immigrants to lift economy

A waiter serves a customer at an outdoor cafe in Lisbon

It’s not just the likes of Madonna and the Aga Khan that Portugal wants to attract.

Unlike many governments in Europe, Portugal wants immigrants to shore up its economy as its population shrinks and ages. While it has drawn the rich – Madonna went house hunting in Lisbon in 2017 and the Aga Khan was granted Portuguese nationality this year – the country is making a push to lure back citizens who fled the euro-area crisis and attract immigrants who can fill crucial gaps in the labor market.

“This isn’t about just any immigration; it’s about drawing qualified immigrants for the needs of the Portuguese economy,” said Jorge Bravo, an economics professor at the Nova University in Lisbon. “Mostly in terms of salaries, we’re not very competitive. If there was a championship for the most sought-after countries for immigration, Portugal isn’t in the Champions League.”

As Portugal prepares for a general election in October, the lack of immigrants rather than their presence may be a campaign issue for politicians. Unlike in Italy and Hungary, where the anti-immigrant parties of Matteo Salvini and Viktor Orban are in power, and France, where Marine Le Pen’s party led the European Parliamentary vote in May, Portugal has no populist forces at play. In fact, some of the country’s businesses want politicians to come up with coherent plans to lure immigrants.

Help wanted

“It’s urgent to introduce substantial improvements to the policies for welcoming foreign workers,” said Jose Theotonio, chief executive officer of the Pestana Hotel Group, Portugal’s biggest hotel operator. “The lack of professionals already causes concern in the present and has a strong future impact.’”

The tourism and hospitality industry is among those feeling the shortage most acutely. Finding adequately skilled housekeeping and kitchen staff is the “most complicated,” Theotonio said. He wants the government to make labor rules more flexible to accommodate temporary and seasonal workers.

“The average education level of the Portuguese has increased a lot, so it’s natural that in jobs such as room service or waiters there’s a lack of workers,” said Raul Martins, the chairman of the Altis hotel chain and the head of Portugal’s Hotel Association, which represents about 600 hotel companies.

Tourism represents about 14% of Portugal’s gross domestic product and has boosted the economy, which expanded for a fifth consecutive year in 2018. That’s helped Prime Minister Antonio Costa’s minority Socialist government to lower the jobless rate and manage the budget deficit. Portugal’s unemployment rate of 6.6% in May was less than half of Spain’s 13.6% and below the euro-area average of 7.5%.

Workers throw broccoli plants into a trailer during harvesting in Alpiarca 

Hiring troubles

Still, Portugal’s debt ratio remains the third-highest in the euro area, behind Greece and Italy, and to keep the growth engine chugging along the country needs more hands.

The Bank of Portugal warned in a report on June 12 that “some indicators suggest there are difficulties for Portuguese companies to hire workers, particularly those with higher qualification levels.”

The number of immigrants in Portugal increased 14% in 2018 to 480,300, the highest since at least 1976, according to its Immigration and Borders Service. That hasn’t been enough to offset its shrinking population, which has dropped since 2010 and reached about 10.3 million at the end of 2018. Projections show it may fall to 7.9 million in 2080.

The median age in Portugal was 45.2 years in 2018, having increased by about 4.4 years since 2008. In 2017, the country had the third-highest median age in the European Union at 44.8 years, behind Italy and Germany.

Open arms

“The country’s arms are open for the Portuguese who want to return,” Jose Luis Carneiro, the secretary of state for Portuguese communities, said at a July 22 presentation of measures to get citizens to come back. The government is offering up to 6,536 euros ($7,276) to returnees.

Portugal has had some success in drawing so-called non-habitual residents. Lured by its beaches, clement weather, laid-back life and, crucially, its tax breaks, almost 30,000 people have made the country their home. A third of them earn a pension overseas.

Italian actress Monica Bellucci, French fashion designer Christian Louboutin and former Manchester United Football Club player Eric Cantona are among those who’ve bought property or are reportedly sometime-residents in Portugal.

The government has been criticized for its tax breaks to the rich. Critics also say wealthy foreigners have boosted real estate values, pricing out locals. The regime allows expatriates to pay as little as 20% on their income tax during a decade and exempts some pensioners from taxes altogether.

Like Singapore

“Retirees locally spur some sectors linked mostly to tourism and leisure, as can be seen in the Algarve, or in the cities of Lisbon and Oporto, and in small inland areas,” said Bravo. “But it’s not the solution.”

On July 23, the government expanded the regime to add farmers and machine operators to the list of eligible professions, citing difficulties in hiring workers.

Portugal needs an “intelligent immigration policy,” like in countries such as Singapore and Canada, that isn’t just based on tax incentives, Antonio Horta-Osorio, the CEO of Lloyds Banking Group Plc and a Portuguese national, said at a conference near Lisbon on May 17.

“We have an extraordinary demographic problem compared to the rest of Europe,” he said. Portugal should work on attracting “people with the qualifications and abilities that our companies and society need,” he said. Joao Lima, Bloomberg