Portuguese Foreign Minister Conducts Economic Diplomacy

The European country’s new center-right government intends to conduct foreign policy with a business mentality.

After taking power in June of last year, Portugal’s center-right coalition government announced that the country would adopt “a new national strategic priority: a very strong economic diplomacy.” Since then, Portugal’s foreign minister, Paulo Portas, has made it abundantly clear that the “economic diplomacy is the first institutional priority of the Ministry of Foreign Affairs.”

The primacy given to economic diplomacy is also perceived as “a countercyclical policy, which gives resistance to the Portuguese economy.” The top four exporting markets of the last ten years — Spain, Germany, France and the United Kingdom — are all European countries, and they are the destiny of more than 50 percent of the Portuguese exports — and the overall exports to the European Union account for 70 to 75 percent.

The fact that the euro area is expected to enter a mild recession this year reinforces the perception that market diversification is required and urgent. The European recession and political uncertainty mean that Portugal strongly needs to diversify the markets for its exports as well as the sources of inward investment.

In order to match words with deeds, Portas has done in the past few months what he calls a “quiet revolution.” He believes that the “Portuguese diplomatic network must track the movements of the economy.” Therefore, he explained that “Portugal has to be where the Portuguese are, where are the interests of Portugal and where are the business opportunities.”

The minister conveyed this message in Qatar where Portugal opened its latest embassy in December 2011. Earlier, in November, he announced that the embassies in Andorra, Bosnia, Estonia, Kenya, Latvia, Lithuania and Malta would be shut down. The Portuguese government has also decided to have joint overseas promotion of trade, foreign investment and tourism and last month, Portas announced a “diplomatic spring” involving the biggest diplomatic reshuffle of the last ten years. Portas explained the choices saying that he was allocating the best diplomats to the most demanding posts.

The task ahead is Herculean. Portas will have to do more with less in 2012, bearing in mind that the state budget allocated less €40 million to his department which is a more than 10 percent reduction compared with 2011.

With a shorter budget but more or less the same number of diplomats, and without any specific training programs for diplomats in commercial diplomacy and economics, it will be a miracle if the ministry is able to present immediate and significant results. Budgetary constraints also mean that Portas cannot open new embassies as soon as he might like. Thus, the best he could do was to announce that new embassies would be open in Asia and Latin America before 2015.

The priority given to economic diplomacy has been warmly welcomed by the Portuguese political elite although a few critical remarks have been made.

Paulo Rangel, a former candidate to the leadership of Portugal’s ruling conservative party in 2010 and currently a member of the European Parliament, has said that it was a “mistake” to “limit the horizon of foreign policy to the economic front.” Portas rejected this criticism, emphasizing that “institutional and political diplomacies did not disappear but they are accompanied by economic diplomacy.” He never said that everything in foreign policy is about trade. Indeed, facts do not seem to support the concerns voiced by Paulo Rangel.

On the other hand, Basílio Horta, a once Socialist Party presidential candidate and incumbent lawmaker, has emphasized the continuity between what is being done by the current coalition government and what was done by the previous socialist administration.

Between 1998 and 2008, the weight of non-EU markets regarding Portuguese exports rose from 16 to 26 percent, a trend consolidated in particular since 2005, under the previous government. Political rhetoric aside, in Horta’s view, the current priority given to economic diplomacy is old wine in new bottles. Indeed, the “quiet revolution” of Portas probably is less “revolutionary” than he would like to admit.

A more relevant criticism — perhaps, the major observable flaw — focuses upon how the strategy of the economic diplomacy is being implemented. Portas wishes to build stronger bilateral relationships with the emerging economies of Africa, Asia, Latin America and the Persian Gulf. It is clear from previous statements that he perceives economic diplomacy mainly as a state to state matter. There is no strategy regarding economic diplomacy at the multilateral level.

Portas did not mention once what is the place reserved to the European Union within his strategy to promote economic diplomacy.

Yet Europe is a relevant instrument to secure trade and market access in the emerging economies and Portugal should actively support negotiations on international free-trade agreements since they would certainly provide more opportunities in order to promote exports as well as to attract inward investment.

Indeed, the cases of Colombia and Peru show how important free-trade agreements can boost economic bilateral relations. Brussels is currently negotiating free-trade agreements with Canada, India, Malaysia, Singapore, Ukraine as well as Southeast Asian nations in ASEAN and the Gulf Cooperation Council. The Portuguese economic diplomacy would certainly benefit if the list became more extensive.

Last but not the least, on different occasions, Paulo Portas had said that the work of the ambassadors will be scrutinized, measured and will have to produce results. It is unclear exactly when and how this exercise of diplomatic accountability will be done. But in order to avoid a rather subjective scrutiny, the Minister for Foreign Affairs should devise a clear evaluation grid, which must have into account the specificities of each diplomatic post.

Overall, it is too early to say what will be in the end the substantive impact of Portas’ economic diplomacy. At first glance, the changes that he wishes to implement seem to match the right strategy. Time will tell if it is so.

This story first appeared in IPRIS Viewspoints, January 2012.