Portugal’s privatization program has created a new confidence in the country which Joaquim Pina Moura, the former Portuguese Minister of Finance is determined to maintain. “With a growth rate of over 3% year after year since 1996, a strong commitment to the EU and social stability in the labor market, we have been able to modernize the textile and shoe industries and attract healthy U.S. investment into the auto industry and telecoms, and we want to see this trend continue.”

However, Mr. Pina Moura recognizes that with rising inflation, near full-employment and industry running at 80% capacity, Portugal has limited room for maneuver. “Now, our priorities are changing and we need foreign investment in infrastructure, education and training,” he says.
Manuel Alves Monteiro, President of the executive committee of the Lisbon and Oporto Exchange (BVLP), confirms the minister’s view. “There have been reversals in the capital markets and there is a slow down in the economy, but the forecast is still good. If the government maintains fiscal responsibility and controls inflation and the deficit, then Portugal will be in good shape,” he explains. “Portugal needs to raise its voice and be heard in international capital markets and make investors aware of the opportunities the country offers.”

With the introduction of the euro, Portuguese financial institutions have been preparing for increased competition mainly through mergers and acquisitions. The Banco Comercial Portugues (BCP) is the biggest private sector bank in Portugal and is listed on the New York, London and Frankfurt stock exchanges. Having orchestrated a number of takeovers, mergers and acquisitions of its own, it is big enough to survive and stake a claim on the new European financial scene.
Jorge Jardim Goncalves is chairman and CEO. “Today, competition in the Portuguese financial system, which includes insurance, asset management and so on, is European rather than just domestic. We now have a total of 120 billion euros of assets under management in Portugal. Our contribution to the Portuguese economy is immense. So, in spite of Portugal’s small size and peripheral position, we have gained in international markets and major institutions now respect us.”

Founded in 1840, Montepio Geral is a mutual society that owns the Caixa Economica savings bank. It has 152,000 associates, small in comparison to BCP, which has 3.5 million clients. But that doesn’t worry Antonio de Seixas da Costa Leal, president of Montepio’s administration council. “Our by-laws make it impossible for any of the big players to buy us out, so consolidation is not something we have to worry about,” he says.
In 1990, Montepio Geral gained a license to operate abroad and can now carry out all the financial operations any other bank can. “We are not on the stock exchange, but since we were authorized to carry out foreign operations we have begun to internationalize and have opened up offices in Paris, Toronto, Geneva, Newark and are about to open an office in Frankfurt. We have also been well rated by Goody’s and Fitch, which is important to our international operations.”

The introduction of the euro will mean increased competition for banks

Small fry or big fish, international expansion is clearly a priority for the Portuguese financial sector, coupled with investment in new technology, particularly e-finance and Internet banking. “We are completely up-to-date in technological terms, data processing and computer systems,” says Mr. de Seixas da Costa.
Mr. Jardim Gonçalves is more specific as to the benefits of linking BCP to the communications industry. “The finance and communication industries are getting increasingly closer. In 1994 we started the first telephone banking operation in Portugal, Banco 7, which later went on to the Internet. In 1998, 81% of contacts at Banco 7 were made by phone, the remainder over the Internet. In 2000, 75% of transactions took place over the Internet. Our Internet clients also purchase a lot more products. Today, the average Internet client has 6 products against 3.5 for phone clients,” explains the BCP chairman.

Portuguese finance operators such as BCP and Montepio Geral are a yardstick for Joaquim Pina Moura who believes the sector has good reason to be quietly confident of the future. “The inflationary trend is under budgetary control and Portugal’s privatization plan is still firmly on track. I think Portugal is a good place to invest,” he says. “Whether new investments are in traditional sectors or in new clusters, all foreign investment is welcome.”