With little state aid, zombie shops in Portugal fear short-lived reopening

LISBON (Reuters) - Leaning over the golden-plated counter of the “Fantastic World of Sardines” in Portugal’s capital, cashier Andre Moureira waited for just a single customer to break the boredom of the morning.

“It’s definitely very quiet,” he rued at the tourist-oriented shop where only three or four people have been trickling in a day to see the glitzy cans and even a fish-themed carousel.

Down the road, Rosa Amelia leaned into the window display of her shop Discoteca Amalia selling CDs of the melancholic Portuguese fado music, picking up each and carefully dusting them down. “I’ve had four customers since I opened on May 4,” she said. “It’s horrible.”

For two-and-a-half months during the coronavirus crisis, Portuguese businesses have struggled through a near-total collapse in custom with little to no state aid.

Since the start of the pandemic, a total of 83,000 companies received an average of just 432 euros ($471) per worker in government funds to prop up salaries, Ministry of Labour data showed.

Rent, mortgages and bank loan repayments were suspended on a temporary basis, but debts will need to be repaid.

Some 6.2 billion euros totalling 3% of GDP were allocated in credit lines for companies - but that was far less than similar schemes in other European nations where, for example, the figure was 8% in neighbouring Spain and 40% in Italy.

As Portugal’s restrictions ease, shops and restaurants are slowly rolling up blinds and unlocking doors, faced with losing access to support for layoffs altogether if they do not open within eight days of being allowed to do so.

But the days are slow, to say the least, and with rising debts, no liquidity and barely any revenue on the horizon, the atmosphere has turned gloomy just when it had been picking up from years of austerity.

“Businesses were just getting the confidence to make investments and long-term plans again. But without liquidity to get through this, we’ll end up right back where we started,” said Ana Jacinto of restaurant and hotel association AHRESP.

‘DRIBS AND DRABS OF AID’

Portugal’s economy is dominated by small businesses.

A mere 5% of firms employ more than 10 people, according to the National Institute of Statistics, and just under one in five of its workforce is self-employed.

Before the coronavirus, things were finally looking up as exports and tourism created more jobs and boosted revenues.

Finance Minister Mario Centeno had just achieved his long-time goal: converting a deficit measuring 4.5% of GDP when the Socialists took office in 2015 to a surplus of 0.2% at the end of 2019.

But with one of the smallest household savings rates in the European Union and the lowest minimum wage in Western Europe, personal finances were nowhere near robust enough to withstand a sudden drop in income.

As the weeks have rolled by, the government has expanded support programmes bit-by-bit. Each group added to the list would be eligible for payments from the next month onwards, if they could prove a drop in income of 40% over 30 days.

“Support measures are coming in dribs and drabs,” said Susana Peralta, economist at Nova University.

“But the slowness of our social security system is known, and we just don’t have enough information on what is going on. Who is getting help, are there delays, and why?”

Of the 6.2 billion euros allocated in credit, just 1.1 billion has reached applicants’ bank accounts so far - a delay Prime Minister Antonio Costa blamed on banks taking a long time to assess whether applicants were credit-worthy.

“The banks aren’t waiting for the mutual guarantee fund. They’re waiting for, I don’t know what, and the companies are waiting,” he said in parliament last week.

Associations say firms cannot hold much longer if liquidity does not reach them soon.

“We know injecting funds directly costs money,” Jacinto said. “But so do unemployment subsidies.”

($1 = 0.9175 euros)