LISBON, Nov 24 (Reuters) - Crisis-hit Portugal’s cries for help from Angola, a former colony, show not only how tough times are for Lisbon, they also give the oil-rich African nation a chance to boost its foreign investments and prestige at bargain prices.
Prime Minister Pedro Passos Coelho’s trip to Luanda last week to court Angolan investment in a Portugal mired in recession produced a great deal of talk about the colonial tables turning.
But the response from Angolan President Jose Eduardo dos Santos was distinctly measured and stressed the need for mutual benefit from any deals, suggesting cold self-interest will lie at the heart of his decision-making.
“This is not humanitarian aid. It’s an opportunity for Angola to benefit from this context to increase its positions in Portugal and earn prestige with the European Union,” said Filipe Garcia, head of consultancy Informacao de Mercados Financeiros.
Angola gained independence from Portugal in 1976 but then plunged into a devastating 27-year civil war that ended in 2002.
Its massive oil revenues — it is Africa’s biggest crude producer after Nigeria — have since allowed it to post rapid economic growth, with analysts forecasting double-digit expansion next year.
They have also let Angolan firms, most of them tied to the state, invest heavily in Portugal and acquire large stakes in banks Millennium BCP and Banco BPI, oil company Galp and cable operator Zon.
State oil giant Sonangol, Angola’s de facto sovereign wealth fund, is so influential that shares in Millennium, Lisbon’s biggest private bank, leapt 37 percent on Monday on an unconfirmed report Sonangol planned to increase its stake.
Precisely how Angola may help its former master remains to be seen.
Analysts say the most likely route is by taking part in a fire-sale privatisation programme that includes the off-loading of state holdings in utility EDP, grid operator REN , oil and gas firm Galp and airline TAP.
“Galp is already being discussed,” said Cristina Casalinho, chief economist at BPI Research in Lisbon, referring to talks about Sonangol’s stated aim of turning its indirect stake in the company into a direct one.
“But EDP and REN could be of interest too, as they are in sectors which Angola needs to develop at home, so there could be benefits in terms of know-how and partnerships,” she added.
Conversely, increasing holdings in Portugal’s banks makes less sense given the dent to profits that is likely to follow from a state recapitalisation process due under the terms of Lisbon’s 78 billion euro bailout.
Since they went their separate ways, the two countries have enjoyed unusually strong links, with an estimated 7,000 Portuguese companies operating in Angola and 100,000 expatriates working in key sectors such as oil, banking and construction.
Trade is also robust, with Portuguese exports to Angola totalling over 1.9 billion euros last year, Lisbon’s fifth-biggest export destination.
“The relationship is in many ways unique. It is quite unusual for a European country to count an African country among its top five overseas markets,” said Victor Lopes, economist for Sub-Saharan Africa at Standard Chartered.
It may not be that way forever.
Some analysts say Angola’s long-term plans to diversify away from oil by boosting domestic agriculture and manufacturing will reduce its reliance on imports - thereby hitting its main supplier, Portugal.
The uncertainty surrounding the global economic outlook, and therefore oil prices, is also likely to make Angola nervous about committing too much capital to Portugal when it may be needing it for itself in 12 months’ time.
A 2008 collapse in oil prices hit Luanda hard, with the kwanza coming under huge pressure in 2009 and the government having to turn to the IMF for help as its reserves dwindled.
It also ran up more than $6 billion in unpaid bills with the Portuguese and Brazilian construction companies helping rebuild roads, railways and ports destroyed during the decades of war.
“Angola’s economy is extremely vulnerable to volatility in the oil price, and they’ve only just got out of the last downward turn,” said Alex Vines, an analyst at London’s Chatham House think-tank.
“This is about prestige and Angolan statement, rather than making money, but whether they will actually go through with some of the things the Portuguese have been offering, I have my doubts.”