c.2013 New York Times News Service

c.2013 New York Times News Service

MOURA, Portugal — Portugal is finding that increasing exports is the way to pull its economy out of a recession.

For 127 years, Herdade de Manantiz has been producing olive oil, mostly for the domestic market. But having suffered through recession like thousands of other traditional businesses, it has started overhauling its operations and searching for customers outside Portugal.

In February, Manantiz installed its first irrigation system, an investment of 197,000 euros, or $263,000, that is meant to help quadruple production. In May, the company completed its first overseas sale — to a Brazilian retailer that bought 504 bottles of oil. It is pursuing buyers in Sweden and Japan for its oil made from galega olives, which are unique to Portugal.

“It’s difficult to change direction for very small companies like ours, but there comes a point when there is really no other choice,” said António Morais de Almeida, who is part of the fifth generation of the family that owns and operates Manantiz.

Portugal is clearly hitting its export stride, a step that economists view important not only in a Portuguese rebound but in the revival of other parts of Europe.

Small businesses like Manantiz cannot on their own mend Portugal’s long-suffering economy. But as many of the country’s businesses have accepted that true growth must occur beyond the country’s borders, the economy is beginning to improve.

Portuguese authorities said this month that rising exports were the main reason Portugal posted the strongest growth in the second quarter among the nations of the European Union. The country’s gross domestic product rose 1.1 percent from the previous quarter, according to data from Eurostat, the union’s statistics agency.


Struggling eurozone countries cannot make themselves globally competitive by devaluing the local currency to make their exports cheaper because they belong to the currency union. But Portugal’s unexpected increase in GDP, which followed 10 consecutive quarters of contraction, “shows that you can increase export competitiveness even without the option of an exchange rate devaluation,” said Luis Cabral, an economics professor at New York University.

Like other economists, Cabral warned against overstating Portugal’s turnaround. Its economy is still expected to contract over the full year, partly because the second-quarter results were buoyed by seasonal factors like better prices for petroleum.

Further drag on the economy is expected because the government is likely to introduce further austerity measures to help meet its budget deficit targets.

Still, Cabral suggested that Portugal had reached “if not the end of the recession, at least the beginning of the end of the recession.”

Further indications of whether a broader eurozone recovery is taking shape might come on Friday, when data including the region’s July unemployment rate will be released.


Lisbon continues to have financing difficulties despite the bailout worth 78 billion euros it negotiated in 2011 with international creditors. Several of the country’s banks have possible capital shortfalls, say analysts at Barclays Capital in London.

Barclays cited the continued deterioration of the loan portfolios of the six largest Portuguese banks, estimating that their ratio of nonperforming loans would rise to 15 percent by the end of next year, from 11.2 percent in June. That could leave those banks, which account for four-fifths of the country’s banking sector, with combined losses of 20.5 billion euros, or 9 percent of all their loans, exceeding their existing reserves by 6.6 billion euros.

Miguel Morale de Almeida, another member of the olive-producing family, said Manantiz had wanted its irrigation system in place earlier in the crisis, but was unable to arrange an affordable bank loan.

“Had a bank given us credit, we could have done this irrigation revolution two or three years earlier,” Morale de Almeida said.

Eventually, Manantiz managed to tap into European and Portuguese rural development subsidies to cover 40 percent of the construction cost. The rest of the financing came from the savings of family members, which Morale de Almeida called “a significant personal sacrifice, but a controlled risk.”

Overall, after falling about 9 percent in 2008 at the onset of the financial crisis, Portugal’s olive oil exports have more than doubled since, according to data from Casa do Azeite, an industry body. Last year alone, olive oil exports rose 20 percent.

Mariana Matos, secretary general of Casa do Azeite, estimated that Portugal had added about 20,000 hectares of olive trees during the past five years, in part because of investors from countries like Spain, Italy and Switzerland.

Manuel Costa Reis, an economist at Present Value Consulting in Lisbon, which advises Portuguese banks and other corporations on asset valuations, said that Portugal’s export competitiveness was “without a doubt a very surprising and positive outcome of this crisis.”

“Portugal had been one of the losers in the globalization process because most of our industries were competing directly with the emerging markets,” he said.

He said that the economic crisis had forced companies to start producing higher-quality products that can be marketed at a higher price. Manantiz is a good example of that. Its initial shipment of olive oil to Brazil sold at nearly $26 a bottle, four times what it sells for in Portugal.

Portuguese exports rose 6.2 percent in the second quarter from the comparable period in 2012, according to data this month from Portugal’s national statistics institute.

Exports of fuels and lubricants soared 37 percent, as a result of the upgrade of the Port of Sines refinery operated by Galp Energia, the Portuguese oil company, which has turned Portugal into a net exporter of diesel fuel. Exports of food and beverages rose 11 percent in the quarter, while capital goods — excluding transport equipment — climbed 6 percent.

Costa Reis cited, among other positive economic indicators, recent increases in business confidence and industrial productivity. Portugal’s unemployment rate also fell back to 16.4 percent in the second quarter, from 17.7 percent in the previous one, the first quarterly decline in two years.


In a twist, it was Portugal’s high jobless rate that played a part in persuading the family owners of Manantiz to double down on their agricultural business. António Morais de Almeida, 27, became exports director, in charge of finding clients overseas, after being let go earlier this year by a Lisbon-based bank where he had traded currencies. His 48-year-old aunt, Cristina, has also devoted more time to the family business since losing her job last December as a compliance officer at another bank.

Many businesses have shuttered, but the remaining producers have emphasized more efficient production and pursued outside markets more aggressively. The value of Portugal’s furniture exports, for example, topped 1 billion euros last year, rising for a third consecutive year. That was 10 percent above pre-crisis levels.

“We’ve been through a very bad time, but I think that everybody has now understood that, without exports, no company in Portugal is certain to survive,” said Mário Silva, chief executive of AM Classic Furniture, which has annual revenue of about 7.5 million euros.

Silva said his company, which was founded by his parents in the northern town of Paços de Ferreira, had in the past four years added three new export markets: Germany, Russia and China. It raised productivity by about 15 percent, notably by switching to just-in-time production, whereby its furniture is made only to meet demand. For this year, he is forecasting an increase in exports of 20 to 30 percent.

“I am positive that we have reached the bottom and this is the beginning of a recovery, although not a fast one whatsoever,” Costa Reis said.