Sad songs from Portugal

Published in Business Spectator (Melbourne), 21 April 2011

The large concert hall is almost silent when Ana Bacalhau of the Portuguese band Deolinda begins to sing Parva que sou. After the first few lines of the calm, sad song she is again and again interrupted by rapturous applause until with the last chord her audience rises to enthusiastic standing ovations.

Bacalhau’s voice is certainly beautiful and yet the response to Deolinda’s song has more to do with its lyrics. Parva que sou has become the unofficial hymn to Portugal’s economic disaster and the generation most hit by it. Recordings of the song have been watched almost a million times on YouTube.

It is the soundtrack of a generation that sees no future for itself in Portugal. It is the “generation without pay” that is “lucky to get an internship”. It is the “parents’ house generation”. It is the generation that puts off relationships and children because they can hardly afford to pay for the car. It is the young generation in the “silly world” of modern Portugal “where to be a slave you must study”. On behalf of them, Bacalhau asks “Parva que sou?” – “What a fool am I?”

Deolinda, who describe themselves as a non-revolutionary band, have hit a nerve among young Portuguese. Unemployment in Portugal stands at more than 11 per cent, but youth unemployment is almost twice as high. Economic indicators suggest that it may get even worse in the near future.

Economic growth was -0.3 per cent in the final quarter of 2010. The Portuguese central bank expects the recession to continue this year. Public finances are deteriorating quickly. Debt is already at 92 per cent of GDP. After a budget deficit of 8.6 per cent last year and with no improvement in sight, the Portuguese caretaker government had to ask the EU for emergency funding.

The additional loans provided by the European Financial Stability Facility may keep the government liquid for now. However, the austerity measures imposed on Portugal will be demanding – not least to satisfy voters and taxpayers in other countries guaranteeing the rescue package.

For Portugal’s young generation, these prospects must be intimidating. They are already facing a life with little reason for hope. The situation at the country’s universities is dramatic.

In a radio interview João Gabriel Silva, rector of the prestigious Universidade de Coimbra, explained that his science faculty had to cut 20 per cent of its staff over the past years while student numbers remained the same. There was no money to replace leaving professors and lecturers so “basically a whole generation of 25 to 35 year-old assistants is missing in Portuguese universities,” he complained. Those few young academics remaining have to fight for scholarships or work without pay. Little wonder that Portugal’s best qualified graduates are fleeing the country in droves.

It is a development that started well before the current euro crisis. When Portugal joined the euro, it benefitted from lower interest rates. But these low rates were only used as invitation to increase both Portugal’s private and public debt. At the same time the country’s cost competitiveness declined, its productivity stalled and the economy became sluggish.

The effect this economic malaise had on Portugal’s young professionals was already visible in a survey published in 2006. It found that hardly any other developed economy had lost as many of its university educated workers to migration as Portugal. Almost a fifth of Portugal’s graduates had left the country. Even poorer Cambodia, Senegal or Zambia were better at retaining their best qualified workers.

Alvaro Pereira, a Portuguese economist now teaching at Simon Fraser University in Vancouver, sees many reasons behind this movement. In an opinion piece he wrote that “a large proportion of our highly skilled workers is leaving not only in search of higher wages, but also in search of more and better opportunities.”

The loss of the country’s best qualified people is a disaster for the Portuguese economy – especially because Portugal has the least qualified population in the OECD. A mere 28 per cent of all working age adults have completed high school. This compares to 51 per cent in neighbouring Spain, 70 per cent in Australia or 91 per cent in the Czech Republic. If there is one country that cannot afford a large loss of its young graduates, it is Portugal.

The euro crisis has almost certainly accelerated the Portuguese fuga de cérebros (brain drain), though precise figures are hard to obtain. There is free movement within the EU and many Portuguese have left for other European countries without registering. But there are other destinations for Portuguese migrants as well. Not least Brazil.

A Brazilian consular official in Lisbon just told the BBC that last year he alone had issued 1,500 work permits, but in the first quarter of 2011 he had already completed 500 cases. The real number of migrants is much higher since work permits are also available through other channels, not least marrying Brazilian nationals, the officer added.

Brazil is particularly attractive to architects and engineers from Portugal. According to the Brazilian Federal Council of Engineering, Architecture and Agronomy, there are 1,200 Portuguese engineers registered in Brazil. The total figure for all Portuguese nationals in Brazil is rising fast. According to the Portuguese emigration research centre, Observatório da Emigração, there are 705,615 Portuguese citizens registered in Brazil – up from 646,677 in 2008 (+ 9.1 per cent).

The same development could also be observed in other traditional migration countries. In just the last two years the number of Portuguese nationals jumped 6.3 per cent in the US, 16.0 per cent in Canada and 4.8 per cent in Australia.

The European rescue package will do little to make Portugal more attractive to its young generation. They only have to watch the news from Greece to see their own future. Overly indebted, unable to fund itself at reasonable interest rates in capital markets, the government will become dependent on funds from the European rescue funds almost indefinitely. And yet within the monetary corset of the euro there is little hope to regain competitiveness without resorting to a massive and painful internal devaluation – if this strategy will work at all.

For Ana Bacalhau and her band this will mean more international touring, if she wants to stay in touch with her growing fan base. Deolinda recently performed Parva que sou in London’s Camden Jazz Cafe. As the YouTube video shows, it was a sing-along for the Portuguese expat community.

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