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By Portugal on the Move, Essential Business

  Posted 3 Abril, 2024 

 In Economy, Immigration/Emigration, News, Original, Real Estate, Relocating

Recently, a successful artist friend of mine was sat in a popular Portuguese restaurant near Praça das Flores in Lisbon with five American friends, all of whom had successfully relocated to Portugal since the pandemic.

On the adjacent table was a group of four Portuguese women. During the course of the dinner my friend struck up a conversation with the woman nearest to him who complimented him on his Portuguese.

“We tend to hear more English or French spoken in this neighbourhood than Portuguese these days, so well done for making the effort to learn our language!” she said, admitting it was a hard language for foreigners.

That moment of pride didn’t last long. Her friend got up with a scowl on her face and asked his table: “Where are you lot from. Americans are you? Investors? The woman curled her finger around her nose as if to infer sniffing around to make speculative financial deals.

The woman, despite her friends’ protests, then launched into a tirade of verbal abuse and hostility against the baffled occupants of the other table, accusing them of making them foreigners in their own city, claiming they were responsible for the high rents and house prices, and even going so far as to suggest that people like them were the reason why her own daughter had to emigrate and live and work in the Netherlands.

Needless to say, the embarrassed friends of this ranting and raving lady calmed her down, and shortly after they left the restaurant leaving the proprietor to apologise to the mystified Americans, whose grasp of the language was still rudimentary, for her rudeness.

An isolated incidence or an increasingly common phenomenon? I myself suffered a similar ranting and raving from a Portuguese man in his early 40s in my own neighbourhood; the first I have ever suffered in 26 years living in this country, who also insisted that as a foreigner I was “part of the housing problem”.

Lisbon and Porto, he said, were being completely destroyed by gentrification and speculation from “rich and mostly retired 50+ foreigners and digital nomads”. “Expats are everywhere”, he added, attracted by the 10-year tax free status. “Looking around, what do you see? Luxury houses and foreign estate agents everywhere, while meanwhile Portuguese people pay high taxes and have among the lowest salaries in the EU”.

And hammered on: “We are paying high taxes so that these foreigners can live cheap lives here while Portuguese people are forced to move out and away from their own cities where they have always lived, and lose their homes!”

Needless to say, I felt extremely uncomfortable just existing here for the fist time ever in 26 years and began to wonder if he might be right. Were us foreigners simply overprivileged leeches sucking the blood life out of the system. Merciless exploiters of the hard working, long suffering Portuguese?

In February, I had dinner with a much respected US entrepreneur at my house which no doubt is one of the cases of speculated property acquisition driving up prices and forcing out the locals that this neighbour had in mind, and we exchanged stories on our shared experiences.

This lady came to Portugal just before the pandemic, took a huge risk and invested a pretty penny in Portugal in a luxury real estate office business not far from Lisbon on the Estoril Coast Riviera.

Today that business has grown exponentially selling luxury villas and town houses never built or meant for the Portuguese middle classes, and employs 35 staff.

Over Alentejan pork with clams washed down with a good bottle of red, we discussed mounting a defence to the growing criticism and started compiling a list of all the positive benefits that overseas relocaters brought to the Portuguese economy. The fact many of them are wealthy means precisely that they have no intention or need to be a burden on Portuguese society or the State.

BETTER OR WORSE?

So do immigrants make Portugal a better or worse country in which to live? I started with the European Social Survey which found that on the whole most Portuguese were fairly positive to the influx of overseas settlers, Portugal occupying 7th place out of 23 European countries with 5.63 points out of 10. As to the question of making Portugal a better or worse country in which to live, there was more indifference with Portugal falling down to 12th position.

Iceland topped the list of countries whose population showed the most positive attitude to the advantages of immigration classifying them with 7 points and 6.67 points respectively when it came to improving the economy. Hungary, at the other end of the scale with just 3.03 points, had less faith that immigrants were helping the economy.

While the survey did not specify the net economic worth of relocaters, or make a distinction between economic migrants from countries like India, Pakistan, Nepal or Bangladesh, and those from other EU countries, the US, Middle East or Brazil, for example, the data did reveal that in Portugal there was a strong correlation between thinking that Portugal should accept immigrants (of a different race, ethnic group, in this case) and thinking that immigration was a good thing for the country.

In other surveys, the congruence couldn’t be stronger. Portugal is one of the countries that most opposes immigration when it comes to other ethnic groups, and this was related to racist beliefs with those canvassed using as justifications well-worn and not very accurate topes such as “they’re stealing our jobs”, “placing downward pressure on salaries, and “abusing the national health and social security systems” despite these fears being easily debunked.

These fears were adeptly preyed upon in the run-up to Portugal’s general election on March 10 by the far-right protest party Chega (Enough!) that managed to net 18% of the vote with 48 seats in the Portuguese Parliament on the back of an anti-immigration campaign; illegal immigration, admittedly.

POSITIVE IMPACT ON STARTUPS AND SOCIAL SECURITY

According to Portugal’s Social Security department, overseas immigrants in all wage brackets brought in a positive balance of €1.604Bn — double the amount four years ago in 2019 – and were contributing far more than they were taking out, making the highest ever contribution.

Immigrants are responsible for 7.5% of the total population according to the annual Migration Observatory, mostly employed in low-paid jobs where they are working in insecure conditions and more hours than the Portuguese, often doing jobs the locals would disdain to do.

But these figures pertain to general immigration in Portugal. But what about the contribution of High Net Worth Individuals, digital nomads, startup founders, and relocators who come to work in Portugal’s burgeoning technology startup and scaleup scene, or others who come to start a business in the country or simply to retire?

Figures are not so readily available on the impact to the Portuguese economy from these groups either on Portugal’s tax revenues, social security receipts or even job creation. However, it is known that the least popular route to residency status through investment under the Golden Visa programme had been the option to employ at least 10 local people by setting up a company in Portugal.

INVESTING IN AGRICULTURE

Nathan Hadlock, a US relocater who originally hailed from Ohio, and has set up the successful Pela Terra Farmland Fund managed by STAG Management SCR SA – a fund fully regulated by the Portuguese Securities Market Authority (CMVM) – says that the influx of entrepreneurs into Portugal since 2019, particularly from the US, has certainly benefited the Portuguese economy and helped build bridges between Portuguese and US tech entrepreneurs from California and other states.

From an agricultural background, Nathan, who co-founded RedBridge, a Portugal-Californian cross-border community of startups, helped set up the fund that has raised over €50 million in just three years. The money is reinvested in organic soil restoration and sustainable farming projects in the Alentejo by investing in orchards, olive groves and farmland restoration. He explains that land is one of the oldest investment classes in existence, producing enormous wealth over generations.

Nathan landed in Portugal at the start pandemic with a hunger to do something big to improve the soil. But how? And how could they scale? When Hadlock and his business partner, Alex Lawry-White learned about the country’s Golden Visa programme they thought: “Why not direct that investment” toward Portugal’s neglected agriculture?

“In a world where some proclaim that Portugal’s golden visa programme is on its last legs, Pela Terra is a living testament to the opposite. Yes, the golden visa programme is evolving, but it’s evolving into something that could be more meaningful for Portugal, its people, and our planet,” says the entrepreneur alluding to the programmes restructuring away from property acquisition to funds that benefit Portugal’s vibrant start-up, scale-up and venture capital ecosystem.

“Immigrants (including myself) see Portugal and its huge potential through a fresh lens and bring a wealth of vibrant, diverse ideas and experiences to help boost opportunities for growth and innovation. And the beauty of the diversity of perspectives is that not only do these help us to discover new ways of doing things but they also help us to welcome change in order to evolve”, he explains

Hadlock points out that an often overlooked fact is that immigrants have a stellar track record for entrepreneurship and innovation. For example, in the US, companies such as Google, Intel, PayPal, eBay and Yahoo! were all co-founded by immigrants.

Such contributions have only increased in the past decade and it is this diffusion of knowledge and the presence of a more diverse workforce that unlocks innovation — and as a result — immigrants actually supercharge the innovation capacity of migrant countries. The presence of high-skilled migrants and foreign students in higher education also boosts the creation of knowledge — in fact, evidence shows that immigrants actually increase patenting activity in migrant countries,” he stresses.

A ‘BRAIN GAIN’ FOR PORTUGAL IS A WIN FOR  JOBS AND THE ECONOMY

Nathan Hadlock says highly-skilled individuals leaving a country represent a loss of human capital for the countries they depart from, but this also means significant gains for migrant countries. “

“Many people I talk with (foreign investors and entrepreneurs alike) are proud to call Portugal their new home and are genuinely invested in contributing positively to the Portuguese society and economy”, he says.

“As such, many of my immigrant friends in Portugal are both driven and inspired to start businesses that seek to solve real world problems, create jobs and add social value. In addition — bluntly — more investors equals more tax receipts (corporation and national, personal income tax) as well as more immigrants spending money in the country and as such, represent an overall net gain for the Portuguese economy”, he explains.

Paul Stannard, the Chairman and General Partner of Vector Innovation Fund (VIF) and non-executive chair of Portugal Pathways which helps advise overseas citizens relocate to Portugal, says that the notion that overseas buyers solely inflate the market does not stand up to scrutiny and is too simplistic.

“While they contribute to the high-end segment, first-time buyer markets are primarily driven by domestic factors that need more incentives and significant government build programme”, he says.

“International relocators bring significant benefits beyond just property purchases. Their presence injects productivity, job creation, and vital spending into the economy across various sectors like construction, tourism, retail, and lifestyle services. This has undoubtedly aided Portugal’s economic recovery post-2007”, he adds.

Stannard believes the crux of the housing issue lies in the insufficient supply of starter homes and new builds and that last year’s statistic of 1 new build for every 10 buyers paints a stark picture.

Instead, he suggests Portugal needs a substantial push towards starter home construction coupled with incentives for young Portuguese to access homeownership. Social enterprise housing models could also be explored.

And predicts: “Failure to address the supply shortage, particularly at the lower and middle segments, will inevitably lead to continued price hikes as demand outstrips supply”.

“Encouraging inward investment and attracting wealth and talent remains crucial for Portugal’s continued progress. However, sustainable growth hinges on ensuring adequate housing availability to prevent price spirals, especially in middle and upper brackets”.

And concludes by recounting a recent conversation he had with a Swiss family office that was surprised that developing nations like Portugal wouldn’t readily welcome investment and wealth.

“The key lies in striking a balance between attracting investment and maintaining housing affordability for local residents,” says Paul Stannard.

Text: Chris Graeme

ORIGINAL POST LINK: https://www.essential-business.pt/2024/04/03/opinion-the-positive-side-to-relocation/