Portugal’s interest in Belt and Road” strategy increases

24 July 2017

The Portuguese government’s interest in the country taking part in the “Belt and Road” initiative is becoming apparent through new instruments of institutional and financial cooperation.

After the Portuguese prime minister said during his visit to China in 2016 that the country wanted to “actively participate” in the initiative, namely through the port of Sines, the first memorandum of cooperation was signed on 11 July by Portugal, which mentions Portugal’s participation in the New Silk Road.

Signed by the presidents of the parliaments of Portugal, Ferro Rodrigues, and China, Zhang Dejiang, during his visit to Lisbon, the agreement states that, “within the framework of their responsibilities, both parties will support their governments in improving the documents and consolidating the legal basis for bilateral cooperation in all areas.”

It also specifies that cooperation covers the “Belt and Road” initiative “in order to create a better legal and political environment for enhancing mutual political trust, promoting economic and trade cooperation and exchanges between the two peoples.”

The agreement comes just weeks after Portugal confirmed it is preparing to issue debt on the Chinese financial market, becoming the first country in the Euro Zone to join the so-called “Panda Bonds.”

“From a practical point of view, the launch (of the issue) is intended to increase the financing channels for Portugal, opening up a new stock market and supporting the internationalisation of the renminbi,” said the spokesman for the Portuguese Prime Minister’s office, speaking to Reuters.

In May, Portuguese Finance Minister Mário Centeno said that selling bonds in renminbi would allow Portugal to take advantage of rising demand for its debt, at a time when its credit rating is xpected to improve, due to a better economic outlook.

Thedebt issue will also be useful because of the planned end, in December, of the European Central Bank’s debt buy-up programme for Eurozone countries, making Panda Bonds attractive to other countries that are part of the European single currency.

In recent years, some foreign countries have issued Panda Bonds, including Poland, South Korea and Hong Kong.

For the Chinese government, opening up to foreign debt issuance is a way of internationalising the renminbi, while providing financial resources to the countries involved in the “Belt and Road” initiative.

Richard Mazzochi of the KVM (Hong Kong) law firm told Reuters that the issuance of Portuguese “Panda Bonds” would be easier if it were linked to a specific project.

“Offerings are easier to do when there is an established link and it would be useful for the issuer to use the funds in conjunction with Belt and Road (strategy),” he said.

A recent study by the ESADE Faculty of Economics and Law (Spain), said Portugal is currently the main destination of Chinese investment in Europe in proportion to the size of its economy.

The Portuguese companies in which Chinese shareholders have taken a stake in recent years are Energias de Portugal (China Three Gorges, with 21% of the capital) and Banco Comercial Português (Fosun, 24%). (macauhub)