EconomyEuropePoliticsPortugal

Diversifying Portugal’s Economy

New lithium mining projects represent major economic potential, but may also conflict with Portugal’s eco-friendly goals. Meanwhile, the country’s untapped rural interior is a resource already paying dividends to the tourism sector

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Portugal’s remarkable economic recovery is holding strong post-crisis. This year, third-quarter unemployment rates fell to new lows of 6.1 percent, and The National Statistics Institute revealed that the youth unemployment rate – for citizens ranged 15 to 24 – also fell to 17.9 percent, from 18.1 percent in the previous quarter.

Even so, Portugal is not entirely immune to the changes felt by the rest of the EU, and did slowdown in the third quarter, growing only 0.3 percent in comparison to the previous quarter’s 0.6 percent.

The Centre for Economic Studies of the Portuguese Economy, known as the NECEP, noted that “The recovery of the Portuguese economy started in 2013 is still underway, although now with signs of slowing down.” Though growth of 2.1 percent was originally forecast for this year, the possibility “has become less plausible, with growth prospects remaining around 2 percent”.

Portugal isn’t planning to coast on its successes however, and aims to revitalise growth in its rural interior with one particular substance: lithium.

Portugal’s “White Oil”

Portugal’s booming lithium mines represent millions of euros in investment. As Europe’s largest producer, Portugal is preparing to break into green technology by offering higher-grade lithium needed to produce rechargeable batteries like the ones used in electric vehicles.

“I honestly believe lithium could be the new gold”, said Maroš Šefčovič, the European Commission’s energy chief. If EU Parliament targets are met, 35 percent of new cars and vans sold in Europe will be electric, or fuelled by other zero-emission technologies by 2030.

Most of the lithium currently used by the EU comes from Australia, Chile, China, and Argentina. Portugal’s is primarily used in the ceramics industry – but that is about to change. Mining company Lusorecursos is in the midst of negotiating a 400 million euro funding deal with several international players before beginning exploratory drilling in the northern region. “The funding is being negotiated with companies from the Far East, but we are also in contact with companies from Europe and the Middle East”, said Ricardo Pinheiro, chief executive of Lusorecursos.

The mine holds a lot of promise, and Pinheiro has said that the company is planning to build its own refinery in Montalegre as a way “to secure the entire value chain, from mining to obtaining the final product: lithium hydroxide”. Processing and refining lithium is expected to begin in 2023, but of the 400 million euros in total investment, the refinery will take most of it, costing 300 million euros to build.

The Portuguese government calculates that the five most promising areas in the country could generate over 3 billion euros of investment, and is therefore keen to open an international licensing tender for lithium exploration in more than a dozen locations. Preparatory exploration is in the works in three areas: in the northern districts of Vila Real and Gerês, and in the central district of Beira. But in all three cases, well-organised community opposition has emerged, with some concerned about the mines’ long-term environmental impacts.

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The Portuguese government has awarded mining company Lusorecursos concessions to explore a mine in Vila Real. Now, a group in the region, called Association Montalegre with Life, has filed a lawsuit to cancel the concession contract between the two entities. Copyright: Steve Heap / Shuttershock.com

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A Mining Controversy in Vila Real

This past March, the government awarded Lusorecursos concessions to explore a mine in Montalegre in Vila Real, near the border with Spain. The company is prevented from drilling, however, until they can get final approval pending the results of an environmental impact study. Last week, a group in the region, called Association Montalegre with Life, filed a lawsuit with the aim of cancelling the concession contract between the government and Lusorecursos.

The association contends that the contract is illegal as the name on the agreement is that of another firm, formed three days prior to signing, as opposed to Lusorecursos itself – the company the government actually granted prospecting rights to in 2012. But Lusorecursos argues that by law the company can be as young as the day the contract is granted, making the entire lawsuit baseless.

Environment Minister Joao Matos Fernandes has said it is “crystal clear” the government complied with the law, and Lusorecursos believes the lawsuit is “totally unfounded”.

“It began with granting a licence for exploration. This was done in accordance with the law, which says that after the exploration there is a right to exploitation”, said Fernandes. An Environmental Impact Assessment is being carried out, which will be “assessed by the administration”. “If it goes well, there will be exploitation, if it does not go well there will be no exploitation. These are the rules. This process is a rigorous one, from both an administrative and environmental point of view”.

But the leader of Portugal’s People-Animals-Nature party Andre Silva criticised the move, calling it “yet another project by the Socialist Party destroying the environment in the name of economic growth”.

Mining is a dirty business, and when done recklessly, can endanger the local environment by polluting the soil and destroying the natural habitats of endangered species. Now, protest movements have sprung up across the country as requests from both domestic and international companies pour in. Portugal’s biggest environmental NGO, Quercus, opposes any large-scale lithium exploration, warning it could jeopardise the country’s carbon-neutrality goals.

Speaking to Ethical Corporation, Renata Almeida, the leader of an active anti-lithium group in Beira, expressed fear of irreversible damage to the local landscape. “Portugal is not China or Australia, where there are genuine deserts. Here, we don’t live in a desert. There are small communities in all these areas. Plus, 35 percent of our territory is already in danger of drought and these mines will disrupt the hydrological system even more.”

Students in eight cities across Portugal joined in Friday’s climate marches on November 29th, just days in advance of the UN Climate Summit being held in Madrid. It was the fourth such strike in Portugal and one of thousands across the globe that took place that day.

The country’s parliament was the first to declare a climate emergency this past July, and Portugal is the first to commit to carbon neutrality by 2050. And this past October, it moved up the deadline for closing the country’s coal plants from 2030 to 2023. However, activists are concerned that the development of lithium mines will hamper progress on those de-carbonisation goals.

Despite environmentalists’ objections, the government is finalising plans for an international licensing tender for lithium exploration to begin this year, which will allow Portugal the chance to reduce the EU’s dependence for lithium on China. “Europe has lagged behind China”, said Environment Minister Matos Fernandes. “Portugal will be at the forefront of this project”.

The government has given assurances that all operators in any future lithium mining operations will have to meet exacting environmental standards, but such assurances must be backed by a “rigorous” human rights environmental due diligence process according to Eniko Horvath, Senior Researcher at the non-profit Business & Human Rights Resource Centre (BHRRC).

The Chief Executive of the International Council on Mining and Metals (ICMM), Tom Butler, points investors to the Sustainable Development Framework and notes that there are major upsides to large-scale lithium mining. “Our advice would be to seek to maximise communication and transparency between communities, government and mining companies [in order] to try to maximise the integration of any proposed mine into the overall development plan for the region.”

Developing the Interior

A growing number of small businesses are cropping up in Portugal’s sparsely populated rural interior, drawn by the availability of land, rising tourist interest and business funding opportunities.

More than one-third of Portugal’s population lives in rural areas, and that number has been dropping by approximately 1 percent every year. These regions, however, are now seeing a reversal of a decades-long trend. Luis Chaves, the National Coordinator of Minha Terra, the Portuguese Federation of Local Development Associations, has said that “Difficult living conditions … meant that, in the 1960s in particular, hundreds of thousands of Portuguese opted for emigration, especially to Central Europe”. With the sovereign debt crisis, emigration only became more pronounced.

But with emerging city-to-village movements, that trend is slowly reversing. In northeastern Portugal, some city-dwellers are moving to remote areas to set up tourist lodgings, motivated by EU rural development funds that give financial support for remodelling old houses. The rising cost of city living, including skyrocketing property prices, have also helped to push people away from urban areas.

Amandine Desille, a geography fellow at the University of Lisbon, believes that “Although we are not speaking in great numbers, it does change the face of some villages to have new people and new businesses…There is quite a lot of European money available to boost the countryside”. This, in turn, has increased rural production and tourism, all of which contributes Portugal’s overall GDP.

Ana Abrunhosa, Portugal’s Minister of Territorial cohesion, notes that “there is a lot of room for entrepreneurship in inland Portugal”. Speaking to Reuters via email, Abrunhosa said “Our job at the government is to make sure these businesses have the conditions they need to be sustainable, profitable, and to be able to scale up one day, to generate more jobs”.

Lack of government investment for these projects, however, has hampered their success. And many rural areas are still in need of basic services like hospitals, post offices, banks, and schools.

European Investment

In addition to developing the interior and mining for lithium, Portugal is also courting European tech investment in the hope that boosting their digital sector will drive up both exports and wages. To that end, earlier in November the government announced a 30 million euro fund backed by the European Investment Fund at the Web Summit held in Lisbon. The summit is Europe’s largest tech conference, and the fund will invest in Portuguese and Spanish startups focused on artificial intelligence, machine learning, and big data.

Economy Minister Pedro Siza Vieira said “Access to finance is an issue here in Portugal and in Europe, putting us below par to our American competitors…“Working together with European authorities allows us to leverage the very small availability of public money in this country.”

Portugal’s tech sector has exploded from bare beginnings a decade ago to attracting 485 million euros in foreign investment and accounting for 1.1 percent of Portugal’s GDP. In 2020, Portugal hopes to continue to boost those numbers.

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B. Lana Guggenheim

Lana is a freelance journalist based in New York City. She has a M.Sc. in International Conflict from the London School of Economics and Political Science. She has worked as an analyst, reporter, and editor, covering extremism, culture, economics, and democracy.

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