How Angola Rescued Portugal From Financial Crisis

Despite Portugal being one of the first countries to adopt the euro, in 1999, for over a decade before 2012, the country had seen severe economic slump caused partly by the country’s inability to efficiently allocate the foreign capital inflows it received after joining the Eurozone.

Ricardo Reis argues that underdeveloped credit markets in Portugal caused foreign capital to go to unproductive firms in the non-tradable (services) sector. This, in turn, caused productivity to fall and the real exchange rate to appreciate, taking away resources from the tradable (manufacturing) sector. 

Reis notes that in spite of the large increase in unemployment in Portugal — almost 17 percent at the end of 2012 — labor costs only recently started falling. While in the past Angolans relocated to Portugal seeking political refuge, as well as, economic advantage, the tables soon turned. 

Angola, on the back of its oil revenue, emerged as the country which invested heavily in its former colonial government’s country. Under its former president Eduardo dos Santos’ leadership, Angola was wooed by former Portuguese Prime Minister, Pedro Passos Coelho (2011 to 2015) to invest in Energias de Portugal and [national grid] REN, as well as, other state-owned institutions in a privatization move.

Other state-owned entities the Prime Minister sought investment for included the national airline, Tap, and the Banco Português de Negócios. At the time, José Eduardo dos Santos’ eldest daughter, Isabel dos Santos was part owner of Banco BIC of Angola. The businesswoman, who is reputed to be Africa’s richest woman made a bid for distressed Banco Português de Negócios bank for €40 million (about $44 million today).

And while Angola invests in the Portuguese economy, the country’s 1.8m barrel-per-day oil industry attracted Portuguese skilled and unskilled to throng the country in search of business and work opportunities.

According to Ceslo Filipe, the deputy head of business magazine Jornal de Negócios, a survey revealed that Angolan assets and investment in Portugal was in the region of  €10 billion ($11 billion) and €15 billion ($16 billion), with a wide range of interests in: the media (Impresa), energy (Galp), banking (Banco Comercial Português, Banco Português de Investimento), building and agrifood. 

In 2017, Angola exported $30.3B and imported $10.4B, resulting in a positive trade balance of $19.9B. During that year, the GDP of Angola was $122B and its GDP per capita was $6.64K.

The top export destinations of the country are China ($18.5B), India ($3.77B), the United States ($2.41B), South Africa ($1.34B) and Spain ($964M). 

The top import origins are China ($2.24B), Portugal ($2.02B), Brazil ($669M), South Africa ($637M) and the Republic of the Congo ($523M).