Is Europe falling apart?

1930s, 20th century. Europe. Post-war. After the Roaring Twenties, our continent is facing deep changes. Common trait: the national sentiment. In Germany and Italy it has a more extreme expression. But also in Spain or Portugal, among others, the far-right politics seemed to be the response to the expansion of Communism of Soviet Union and to the economic liberalism of  United States.

Nationalism involves a sense of isolationism. In practice, we think that “we are better alone” and that “we don’t need other people in order to live and develop.” In more radical sectors, there is even a feeling of superiority relative to other people/countries. Actually, it’s considered that “our way of thinking, our culture, our way of being, should prevail to the detriment of other people, which are considered inferior.” Going back to the 30s of the twentieth century, we know very well where this ideology led us…

Let’s stop for a while and look at the current scenery. In Catalonia there is an open talk about independence. In Italy, in rich regions as Lombardy and Veneto, referendums had overwhelming results in favour of more autonomy. In the Czech Republic, nationalists won recently. In Austria and the Netherlands, nationalism has increased too. In France, in the last presidential elections, we lived the unthinkable: the far-right discussing, on an equal footing, the presidential election. Well, and then we also have Brexit. At the same time, Scotland has clear independence intentions. On the other side of the Atlantic there are also isolationist intentions. Trump’s leadership has brought somehow a paradigm shift in US foreign policy, which naturally affected its relationship with Europe.

Over the last 70 years, Europe has experienced its greatest period of economic and social expansion since the end of World War II. It has its ups and downs, off course, however the union of Europe has consolidated peace on the continent and contributed for years of economic growth and social development. The European Union as we know it today, with all its faults and virtues, has contributed to the emergence of an European feeling among many of the citizens of the various countries. A citizen of any European country has a set of rights guaranteed in case of moving to another EU country and has the opportunity of work there and build a life. For instance, today we take for granted the free movement of people and goods, but if we look back, we observe the long journey that has been made so far and how difficult to conquer it has been. Could we imagine going to Spain and having border control again?

On the other hand, Europe can only aspire to be a relevant global player if it maintains and consolidates its union. The rise of China, the (still) dominant US position in some strategic interests, Russia’s energy relevance, will tend to claim all the protagonism on the main stage of global geo-strategic decisions, unless Europe has the capacity of stay united and get ahead too.

Is there a lot to do in order to consolidate a Europe which could be of all of us and for all of us, inclusive and supportive? Certainly it is. However, division probably is not the ideal way. When solidarity between nations no longer prevails and we start to contemplate our navel above all, we can not expect a bright future. We’ve already passed trough it, in the past, but it seems that we didn’t learn anything from it…

See you soon!

Marco Libório

CEO of UWU Solutions / Consultant / Teacher

blog@marcoliborio.me

Qatar: religion or economy?

Saudi Arabia, Bahrain, Egypt and the United Arab Emirates have recently announced a cut in diplomatic relations with Qatar. According to them, the breakdown of relations was based on Qatari’s alleged support for jihadists, notably those of the self-proclaimed Islamic State (Daesh).

In recent days the diplomatic crisis has intensified with an ultimatum to Doha by the Gulf’s Arab neighbours, with a list of 13 demands. The ultimatum includes the demand for the closure of the al-Jazeera television channel as well as a military base in Turkey, and the reduction of diplomatic links with Iran. Qatar’s response, voiced by its foreign affairs minister, was the utter rejection of the ultimatum. From Doha’s point of view, this is a violation of the country’s sovereignty, and therefore is “unacceptable”.

Let us now look at this issue of the Gulf from another perspective. Qatar is one of the world’s largest producers of natural gas. Recently it announced the increase of the production by 30%, becoming the world’s largest exporter of LNG (Liquefied Natural Gas). In the coming decades LNG seems to be a very valid (perhaps the main) alternative to oil. If this trend is confirmed, it means that in the coming years we will see the fall in the price of oil in favour of natural gas.

We know the importance of oil to nations like Saudi Arabia and the United Arab Emirates. It is precisely these countries that are at the forefront against Qatar in the latest Gulf crisis. In this tactical ‘game’, the position of the major oil companies (ExxonMobil, Shell, Total, etc.) seems relatively ambiguous. Although there are pressures from Saudi Arabia and the United Arab Emirates, these companies have very relevant interests in Qatar, strategically positioned in the production of LNG, taking into account its growing relevance in the world energy market.

And so we have reached this point. On the one hand, a political and religious-based ultimatum, based on a presumed support from Qatar to Daesh. On the other, a complex tactical game that involves control of the world’s major energy sources.

Given what I mentioned earlier, and if we add a few other data to the equation (for example, Saudi Arabia’s current budget deficit), I am led to conclude that, once again in the History of Mankind, religion is the ideal pretext to justify a conflict that will have no other objective but to conquer economic power. The centuries go by, but the most important things stay the same. Unfortunately for all of us.

Till next post!

Marco Libório

UWU Solutions CEO / Consultant / Lecturer

blog@marciliborio.me

The dark side of Portugal

Portugal is on the rise. They are the sports victories. It’s the song festival. They are the numbers of the economy. So, it’s just good news!

Take the example of Tourism. It has never been so well, and our major cities are developing, mostly based on this large influx of tourists. Lisbon and Porto are currently cities with a high level of attractiveness, rivaling the best European cities. Portugal knows how to host as few, and security is a very valuable asset these days.

But there is the other side, our dark side… The dark side of Portugal is the forgotten country, fertile territory of forest fires. I have several foreign friends who, recurrently, ask me the same question: how is it possible that in Portugal there are so many forest fires every year? Well, actually I do not know for sure either. Every summer, experts in the field, each with their point of view, certainly based on knowledge and experience that I obviously do not contest. It is not my area of expertise, and therefore I simply listen to who knows and wait for those responsible to act in accordance with technical advice. But I do not stop reflecting on this problem… and it is this invitation to reflection that I appeal to you, who is reading this article.

“Thus, both the decline of the population in forest areas and their accelerated aging are a fire risk factor, which, combined with the lack of young manpower and the lack of forestry owners, oblige to leave the forests to themselves; as a result, the lack of cleaning will much facilitate the progression of the fire. (…) Another vital aspect of the forest economy of future years is that, by keeping the current rate of fires, whose destruction is far superior to the regeneration capacity of the trees, the forest is doomed. In fact, the area of uncultivated areas has been increasing in recent years, in proportion to the area burned in the forest.” These excerpts belong to an article published in 1991 (!!!), by Prof. Luciano Lourenço. Apparently the problem is no longer new. Although those words are more than 25 years old, they sound tragically current, especially given the recent events in Pedrógão Grande.

The experts present several explanations for the scourge of fires in Portugal, and many of them even come up with solutions to the problem. As I said before, and again, I do not have the technical knowledge to evaluate the reasons or the most appropriate solutions. But as a relatively informed citizen it is my duty to revolt against this situation, and to demand that something changes.

The key question is whether, as a society, we are prepared for the necessary change. For example, there is talk of the need for an exhaustive cadastral survey, with which it is possible to identify landowners. The objective will be, after this identification, to hold the owners responsible for cleaning up what is theirs. Given the predominance of smallholdings in our territory, this work may take a long time. Well, then, it is better to start now. The cleaning of the land seems to be a fundamental aspect to slow the propagation of a forest fire.

For its part, the State will be in a position to demand of citizens if it fulfills its part. There seem to be several forest territories owned by various state agencies, which are not properly cleaned and maintained. They will tell me that in a state of law, it will be enough to make the laws, and all the owners will have to comply. Well, the law already exists, but apparently it is not being enforced in most situations.

I believe that “setting the example” is the key. Let us be more demanding with the responsible state agencies, and let us salute them even when they are more demanding with us as citizens.

Are we, who inherit a piece of land in the middle of nowhere, prepared to take on this civic responsibility, and at the same time demand that others (citizens and State) do so? This is the question for reflection.

If we do nothing, certainly Pedrógão Grande will repeat itself. That’s the price we’ll pay. This is our dark side.

Till next post!

Marco Libório

UWU Solutions CEO / Consultant / Lecturer

blog@marciliborio.me

Once upon a time, there was an… external debt

Joana and Nuno have just got married. Fortunately, they are already both employed. Nuno works as a consultant, and Joana is a nurse. As “wedding asks for a dwelling”, Joana and Nuno went to the Bank to ask for a mortgage loan.

Does Joana and Nuno know where the money comes from to pay for their home?

The level of saving in Portugal is extremely low. It has improved with the crisis, given the contraction in consumption, but still does not support the financing needs. That is, the level of savings of households, businesses and State should be sufficient to support the credit granted, but it is not.

In its genesis, the banking business is extraordinarily simple: the bank receives our savings, and pays us at a rate of (let’s say) 1.5%; at the same time, the bank “takes” these savings and loans them to Joana and Nuno, on which charges 3%. So, this means that our savings would be used to finance the acquisition of our young couple’s home, and the bank would make a profit on the “resale” of our savings’ money.

Let us now imagine that our savings were not sufficient for the bank to finance that acquisition, but that the financial institution is still interested in moving forward with the transaction. Since internally there are no resources available, since internal saving (in this simple example, represented by our savings) is not enough, then the bank will finance itself abroad by resorting to foreign banks, which in their turn have collected savings in their countries. In this context, the house of Joana and Nuno will have been financed (at least partially) by money coming from outside, creating foreign indebtedness.

Around these days the IMF estimates for public debt were published, and Portugal “does not look good in the picture”. On a positive feature, we can see a slight decrease in 2016 compared to 2015 (128.4% of GDP this year, against 129% in 2015), thus confirming the trend already observed in 2015 compared to 2014. However, among a group of 35 countries analysed, our country wins an “honourable” fourth place, with only Japan, Italy and Greece with a higher level of debt ahead.

From my point of view, more important than analysing debt alone, is analysing the same in relation to the exterior, that is, what our degree of external dependence is. This is where our real problem resides, and that has largely dictated the need to have had three ransoms in the last 40 years.

There is an indicator that helps us understand this phenomenon. This indicator is called “IIP – International Investment Position”, and provides us the “balance” between what we borrowed abroad and what other countries lend us. According to the latest data of Banco de Portugal, published in September, the Portuguese IIP at the end of the second quarter of 2016 stood at -105.7% of GDP. This means that, for each 100 euros of what we produce, we owe in net terms (already discounting what we have to receive from abroad) 105,70 euros.

Let us now look at it in comparative terms. At the end of 2015, Portugal presented an IIP of -109.5% of the GDP, while the euro area average stood at -9.2% of the GDP. For example, Italy, which appears ahead of us in the debt figures mentioned above, in 2015 presents a IIP of -24.2% of the GDP. That is, for every 100 euros of wealth produced in Italy, only 24 euros are owed abroad.

Joana and Nuno are mainly worried about paying the installment at the end of the month. But it is important that both are aware that this money leaves the country, to pay who indirectly financed, through a Portuguese bank, the purchase of their home. It is important, therefore, to be aware of the relevance of this issue to our future as a country, in particular to our sustainability and economic independence. Not that the young couple can do something about it right away. But if they are well-informed, they will be better placed to demand those policy makers not to take (any more) decisions that increase our external debt, jeopardizing the country’s future. It is a citizenship duty of Joana, of Nuno, and of all of us, don’t you agree?

Till next post!

Marco Libório

UWU Solutions CEO / Consultant / Lecturer

blog@marciliborio.me

Cabral adrift and the country we want to be

It was the year of 1500, when a Portuguese navigator joined a fleet of fifteen ships for the purpose of travelling the same route as Vasco da Gama, to India. The spice trade was, at that time, a very important revenue source for the kingdom, and profitability was such that the Portuguese navigators were willing to take the enormous risks of such a long and stormy voyage.

Until then the spice routes were made by the Mediterranean, crossing the Middle East to India. However, the instability of the territories controlled by Islamic merchants, making these routes become increasingly dangerous and costly, opened a “window of opportunity” that the Portuguese knew how to seize.

The said Portuguese navigator then began his journey along the west coast of Africa, seeking to keep the ‘land ahoy!’ as was customary at the time. Bypassing the Horn of Africa, the fleet is struck by unusually strong winds, which push the caravels away from the African coast. On the other side of the ocean, the Portuguese came across a hitherto unknown territory. They had discovered Brazil.

As you may have already guessed, the navigator I referred to was Pedro Álvares Cabral. Upon arriving in what is now Brazil, he quickly realized that he was not in India, and went on his way to his initial destination in search of such valuable spices. About a year later, Cabral returned to Portugal with only four of the initial fifteen ships. Still, the amount of spices was enough to make the trip highly profitable. On his return, Cabral reported to King D. Manuel I the events of his journey, including the unexpected discovery of the new continent.

Curiously, it would have been twenty-five years since the discovery of Brazil until the King sent someone back into the new territory. In the following centuries Brazil became “only” the main source of wealth of the Portuguese crown. It is astonishing how an accidental event has so radically changed the history of our country, and marked us so profoundly as a nation.

Honestly, I think that this remarkable event largely reflects what we are as a country. It demonstrates our ability of “unleashing”. Cabral was not disoriented by the unexpected. After the forced diversion, it followed its trip towards India, and realised the initial objective. On the other hand, it shows our inability to identify and seize opportunities. Even today that is how it is.

We now spend our lives discussing the deficit, the budget, the debt, the growth, the increases in the civil service, or the 35 hours. But we do not address the essential: what is the strategy for structurally solving our problems and advancing our country towards the goals we want to achieve. Now, the problem begins immediately in the definition of the objectives. For example, do we want to be a tourist destination? If so, what type? Of mass or exclusivity? For retired or for young people? Or do we want to attract foreign investment through new companies? It is

not possible to be everything at the same time, because that way we won’t be the best in anything.

What do we want to be as a country? This is the fundamental question. What goals do we want to achieve in order to be a more developed society, socially and economically?

Is there a clear definition of objectives for Portugal? I did not realise anything until now. I must be inattentive…

Without clear objectives, there is no strategy. There is a set of single and disarticulated measures. A recent example: we created (we did not actually create, we just copied what other countries already did) the golden visa to attract foreign investment. In this context, we “sell” to the non-European investor the possibility of being able to move through the countries of the Shenguen space, in exchange for the purchase of a property with a minimum value of 500 thousand euros. At the same time we are preparing to create a special tax on real estate above that value. I do not dispute the fairness of this measure (this is for another article…), I only question the coherence between the two apparently contradictory measures.

Unlike Cabral, Portugal of today sails aimlessly. Cabral knew what he wanted and where he wanted to go. Portugal has no strategic direction, no clear objectives are identified, it is hard to understand what we want to be as a country. But already in Cabral’s contemporary Portugal so it was, to a certain extent. And the proof lies in the fact that the golden age of the Portuguese empire being based on an event by chance, and not on any planning or strategy.

I wonder, are we waiting for a “new Brazil”? Something that, resulting from the combination of the stars, brings us fortune and solves all our problems? Maybe that’s why we play so much in Euromillions. We have been like this for nine hundred years of history. Perhaps we can change … and continue to be Portuguese.

Till next post!

Marco Libório

UWU Solutions CEO / Consultant / Lecturer

blog@marciliborio.me

The clover, the apple and the sin

According to Christian doctrine, Adam and Eve were warned by God that if they ate the fruit of the tree of the knowledge of good and evil (by the way, an apple), they would surely die. However, influenced by the serpent, both ate the forbidden fruit. They were still alive, but were expelled from the Garden of Eden. It is the so-called “original sin”.

The 3-leaf clover has an interesting history in Ireland. St. Patrick, the patron of the country, used the shamrock clover (term of the ancient Gaelic language, which designates a young three-leafed plant) to explain the mystery of the Holy Trinity, because its leaves are divided into three and attached to a single stem, just as God is an entity with three Persons and convinced the Celtic kings to convert to Catholicism. Since then, Ireland has adopted the clover as a national symbol.

You are wondering by now, what the “apple” has to do with the “clover”. Apart from both being linked to the history of Catholicism, apparently nothing. However, given the current situation, I am sure you have already discovered the connection… Apple (apple in English, and name of an American giant of consuming electronics) and Ireland (whose national symbol is the clover) are in the order of the day because of tax issues. Let’s say it was a different way (I’m not sure if good…) to introduce the theme of the moment. And there is still the “sin”… we will get to that.

Let’s start from the beginning. The European Commission recently said that the agreements between Ireland and Apple are illegal. Brussels contends that the company will have to pay the back taxes for the period between 2003 and 2014, which according to their calculations amount to 13 billion euros. The European Commission considers that Apple has benefited from “improper” tax benefits, which is “illegal” under state aid rules because Apple has been able to pay substantially less tax than other companies.

Both (Apple and Ireland) are in disagreement with that position. As for the company, it’s obvious why. As for the country, the case is a bit different. It should be noted that the EC is not “asking” for tax payments for itself, but for Ireland itself. So why does it object to receiving 13 billion euros? Well, if we think a little beyond the immediate (the Irish are doing), we easily realise the “pandora box” that would open (or will open) in Ireland, and which impact will certainly be very negative for the country in a long-term, starting with the attractiveness of foreign investment (it should be remembered that tax attractiveness in Ireland has been a strategic issue for many years).

Let us deepen the question. Parallel to the actual activity in Ireland, which employs thousands of skilled technicians, Apple has another, created for tax savings purposes. In practice, the company records the sales made in the European single market in that other entity, whose tax residence is not in the US but is not in Ireland, and therefore falls outside the scope of taxation, as there is no territorial jurisdiction to tax. We face an elaborate tax scheme, which effectively allows Apple to save a lot of money on taxes.

Ireland has the legitimacy to invest in fiscal competitiveness to create wealth in its territory. But it is no longer legitimate to do so at the expense of obscure schemes, and to the detriment of the other Member States. There resides the “sin”.

I have nothing against Ireland, let alone against Apple (I even use its great products), but it seems clear to me that this time, the European Commission is on the side of reason.

The mere fact that we have arrived here, and of Brussels having had the courage to confront a world-wide giant, is already very positive. It follows, of course, a long and complex legal battle. May “the good ones” win, just like in a Hollywood movie…

Till next post!

Marco Libório

UWU Solutions CEO / Consultant / Lecturer

blog@marciliborio.me