Expo, Euro Bring a New Dawn for Long-Struggling Portugal

LISBON —  This dour, sleepy corner of Europe is staying up late for a change as it celebrates its coming-out party--a $3-billion, summer-long binge known as Expo ’98.

The daily show at the world’s fair goes on until 3 a.m., featuring 10,000 sea creatures in a giant oceanarium, polyglot performances on 10 stages and midnight fireworks over a 150-acre global village in Lisbon’s new riverfront park.

A feat of world-class organization, Expo ’98 is a celebration of Portugal’s quarter-century passage from backward, shut-off dictatorship to the club of modern Europe. It follows the country’s acceptance into the group of 11 European nations that will adopt the euro as a single currency on Jan. 1.

Both achievements, many Portuguese say, are helping their country recover some of the pride it felt as a seafaring power after native son Vasco da Gama discovered a sea route to India 500 years ago--the event commemorated by Expo ’98.

“I can’t believe I’m here,” said Mario Andre, 10, the son of a Lisbon garbage collector. Gawking at the Disney-like Pavilion of Utopia, the boy exclaimed: “I’ve never seen anything like this!”

Nor have many of his 10 million compatriots, who appear equally awed that their self-effacing little country is pushing itself into the mainstream.

Portugal’s rise reflects a widening of Europe’s prosperity. Like Ireland and Spain, which are also relatively poor, Portugal is growing much faster than wealthier nations such as France and Germany. Because of this narrowing gap, the euro will unite more countries and a bigger market than its designers first expected.

But the festive mood here is tinged with uncertainty over whether Portugal can continue to catch up. As the currency union’s poorest member, this nation runs the risk that its enterprises will be swamped by stronger competitors within a border- and tariff-free zone, say farmers and labor leaders across the country. The same doubts assail Europe’s other weaker nations.

“There are many risks,” Prime Minister Antonio Guterres agreed in an interview. But Portugal, he argued, has much to gain by belonging to what promises to be the world’s second-largest economy. “The question is, what are the risks of staying back, of being more and more peripheral?

“We have made a big jump in the past few years,” he added, reviewing the rush both to build for Expo ’98 and to meet the currency union’s strict entry standards. “What it all represents is a maturing of the Portuguese economy. And that maturity is accompanied by a new self-esteem--the idea that we are not necessarily behind the others. In some areas, we’re getting to be better.”

Portugal qualified for the euro last spring by pushing down its jobless rate to 6.3%, one of the lowest in Europe, while trimming its debt and budget deficit. Its economy is growing at a nearly 4% pace this year, vying with Spain’s for the hottest on the continent. The Lisbon stock exchange is one of Europe’s busiest, as investors buy up shares of privatized state companies.

In less than five years, the Portuguese have acquired more cellular phones per capita than any European nation outside Scandinavia. They were first to digitalize their highway toll system so that drivers with debit cards can pay by cruising past an electronic scanner--and without taking a foot off the gas pedal.

“Sometimes, when you are a little bit backward and if you are clever enough to know what is going to be the future in terms of technology, you can skip a few steps,” said Belmiro de Azevedo, pioneer of upscale Portuguese shopping malls and president of Sonae Investments, the country’s biggest conglomerate.

He is building hyper-markets and American-style specialty shops in Brazil and Spain, contributing to another milestone: Portuguese now invest as much in producing and retailing abroad as they do at home.

Even before the euro loomed, Portugal’s stable currency, the escudo, was luring foreign capital for such high-tech ventures as a $2.54-billion Ford-Volkswagen factory and a $380-million memory-chip plant opened by Siemens, the German electronics giant.

Stunning Architecture for World’s Fair

But no progress has been more spectacular than the renewal of Lisbon’s riverfront to make way for Expo ‘98, with its 146 national pavilions, 8 million expected visitors and theme of preserving the oceans.

Six years ago, when Lisbon won the right to stage the fair, the rundown strip featured a slaughterhouse, a garbage dump, an arms factory, a gasworks and an oil refinery.

That’s all gone now, replaced by a fairground lined with gardens, fountains and palm trees. Visitors arrive via two works of stunning new architecture: the airy, split-level Oriente rail terminal and the Vasco da Gama suspension bridge--Europe’s longest--which arches gracefully 11 miles over the wide Tagus estuary.

After the fair ends Sept. 30, an 840-acre neighborhood will rise on and around the site, embracing luxury and middle-class apartments, schools, a business district and a marina. Europe’s largest oceanarium and many other Expo ’98 attractions will remain.

How can Portugal afford such mega-projects while meeting the currency union’s austere budget requirements?

As one of the European Union’s youngest members--it joined in 1986--Portugal got millions of dollars in European development aid. The government plowed much of that seed money into Expo ’98 construction and then won crucial backing from private developers, who will cover most of the project’s cost by buying up riverside property around the fairground.

The result is a virtuous cycle of rising employment, construction income, consumer spending and national output.

“When I moved here five years ago, Lisbon was a backward Third World city,” said Maria Jose Flavio Zelante, a retired university professor from Sao Paolo, Brazil. “I never imagined it could have developed so quickly.”

Rough Times in the Mid-1970s

The place looks even better compared with what it was in the mid-1970s, when a stultifying right-wing dictatorship gave way to a quiet but painful leftist revolution in which the country gained a democracy but lost an African empire. While reeling from the global shock of soaring petroleum prices, Portugal had to cope with 1 million citizens returning home from lost colonies in search of land and jobs.

“I cannot imagine anything harder than those years,” said Mario de Jesus Fernandes Barros, an olive producer in the southern town of Moura who lost most of his orchards to peasant unions in the revolution’s early excesses and took 15 years to recover them.

Adjusting to the euro, he said, is bound to be less trying. But the 64-year-old grower is still worried because, he said, rival producers in Spain invest and market more aggressively than the Portuguese, who since the revolution have been reluctant to take risks.

Likewise, textile firms and shoemakers fear that the euro will speed the decline of their industries, which account for 30% of Portugal’s exports.

Farmers and blue-collar workers alike worry that the euro will tie Portugal to a collective standard of fiscal restraint set mainly by richer countries; in the face of any setback that hit it harder, Portugal would no longer have recourse to deficit spending or currency devaluation to cushion the blow.

“This is a 5,000-meter race among Germany, France and some runners like Portugal who aren’t in shape,” said Carlos Carvalhas, an economist who leads the Portuguese Communist Party. “We have just finished a 100-meter dash to qualify for the euro, and now they’re saying, ‘No, no, the race doesn’t end here; it’s only the start.’ I don’t believe we can maintain this pace.”

Prime Minister Guterres, a market-minded socialist, acknowledged that Portugal must hold down already low wages and tackle long-delayed reforms to keep up with its neighbors.

Health care and pension systems must be streamlined before their growth wrecks the budget, he said; in a country where nearly half the working-age population can barely read or add, grown-ups must be sent back to school and trained for more productive and higher-paying jobs.

The most poignant complaint about Expo ’98 comes from construction workers--many of them unskilled African immigrants--who labored for substandard wages to build its pavilions and who say the $28 price of admission is beyond their reach.

Optimism Also Stands Out

But equally striking is the optimism voiced about their country by Portuguese who can afford the fair and come each day by the tens of thousands.

Laurentina Pinheiro, 26, and Jorge Dias, 27, grew up with the revolution, finding a niche as artisans in the northern city of Oporto. Portugal’s move toward the euro has shaped their lives in at least two ways.

By favoring an export-driven economy, it has encouraged them to display their beautifully painted terra-cotta pottery at trade fairs aimed at foreign buyers. Last year, they signed their first export contract, with a merchant from Chile.

And as the euro became a certainty in Portugal, interest rates plunged from 11% to less than 6%, allowing the couple huge savings on the two-story, $117,000 home they are buying with a 30-year mortgage.

During an evening visit to Expo ‘98, Dias ventured the opinion that perhaps the money Portugal laid out for the fair might have been better spent on schools and hospitals.

His fiancee shot him down.

“Expo won’t solve our problems, but it will call attention to our abilities,” she said. “We are too pessimistic. Since I was a baby, I was forced to think that way--that only big countries can do great things, not poor little Portugal. Maybe it’s time to go back 500 years and say again: ‘We believe in ourselves.’ ”