Hidden business in the future of the Algarve

By Advertiser, in Legal News, Business · 16-07-2021 01:00:00 · 0 Comments

The past Portuguese governments defined an economic development strategy for the Algarve based on tourism. Since the late 70’s, great things have been built like infrastructure, roads, marinas and healthcare facilities.

The Algarve tourism model combines breath taking beaches, international golf courses, proper accommodation and lavishing cuisine. The weather and the beauty of the region made the Algarve an award-winning holiday destination. We are all proud of the Algarvian lifestyle, a family like treatment to national and to international citizens.

The magnificent resorts of Vilamoura, Vale do Lobo and Quinta do Lago are some of the examples of how successful this model was.

But there is a lot that remains to do as well. The national programmes for fishing, agriculture and industry are not something we can be proud of.

Portugal has the 3rd biggest fishing area in the EU, more or less the size of continental Europe and one of the best wild fish in the world (our tuna goes up to several hundred Euros per Kg in the Japanese fish markets). But our fleet/fishing quotas are not enough to supply our domestic markets and we import a lot of product. Nor are we able to sell (export) it directly to the dish of our tourists. It is like having a mine next door and not caring about it, especially if we don’t have the associated freight costs.

The same can be said about agriculture. We don’t even need to start production: it literally falls from the trees and rots. This is the situation with oranges. The Algarve has a massive area of orange trees and a lot of it is not being used because the labour cost versus the sale price doesn’t make a profit. This poor business model comes from a huge lack of entrepreneurial vision. An orange is not just an orange: it is juice, pharmaceutical supplements and medicine, alcohol (fuel and medicinal), sweets, liquor etc.

In a similar way, but with differences in production quantities, we can talk about the carob, the fig and the almond.

All these transformed products can be sold with a lot of added value and can be easily exported to the EU market (500 M people) without customs tax. Instead of selling oranges at a few cents of the Euro per Kg, we can sell delicacies at several Euros per unit. The mindset makes all the difference.

To establish transformation units close to the EN125 road or to the A22 highway shouldn’t be a big deal either, as the prices of land in these areas are quite low.

The government already recognised that the Algarve tourism model should be reviewed, after being surprised by the travel restrictions to Portugal implemented by other countries, due to COVID-19. With the money bazooka coming from the EU, there will be conditions to generate profit and to create a sustainable economic model for the Algarve, developing the primary and secondary sectors and improving our award-winning tourism sector even more. Companies will be able to increase profit through reduction of the product purchase costs, wages will increase and cost of living will become lower. We see all this in productive economies like Spain, France or Germany.

Recently I’ve been travelling to the Bay of Aljeciras and Gibraltar for business purposes.

When you arrive to the bridge of the port of Algeciras (the biggest in the Med), you can see cranes as high as 20 storey buildings. The business that is generated from the cargo ships and that port is astonishing. The amount of jobs also. The quantity of lorries with containers that I see on the way back to Portugal is massive. The closest port to the Algarve similar to that one is located in Sines, close to Lisbon. With such a connection to the sea, it doesn’t make any sense the Algarve does not have a large port able to receive long distance tourism and cargo ships. The dozens of giant vessels that come daily into the Mediterranean sea (as well as into the Terranean, the Ionian and the Adriatic seas) via Portuguese waters could all stop here to unload part of the cargo. Our (new) port and our (today empty) A22 would be channels of progress and wealth for the Algarve and for Portugal.

If we want to know how inflated the consumer market is in the Algarve we only need to check two simple things: the fuel cost and the amount of building cranes in the sky. Right now, the cost of fuel is outrageous and the construction sector is continuing to grow, meaning that the consumer market is alive and trading at considerable values.

The pandemic hit the Portuguese economy hard and especially the Algarve, with huge losses in revenue, namely in restaurants, accommodation units and all the other services that are part of this cluster.

With extra leverage from EU money bazooka and an inflated consumer market, maybe it is time to look to the future Algarve.

Gustavo Guerreiro
A G INTERNATIONAL | Law Firm

Corporate Lawyer | Business Intelligence
& Tax Management
Digital Helpdesk: www.aginternational.eu



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