Portugal is the latest to be hit by economic troubles and another roadblock could appear for African investments.
The European Union is in discussions for a potential bailout for the nation that could total €70 billion after credit rating agency Standard & Poor lowered the country’s sovereign ranking by two levels to BBB from A-. In addition, the country’s Prime Minister Jose Socrates submitted his resignation after parliament rejected his plan to cut Portugal’s budget.
The January/February issue of Alternative Energy Africa featured the “unlikely bilateral partner” which highlighted Portugal’s efforts to increase ties and expand in Africa’s energy sector. North Africa is the region of choice for Portugal because of its close proximity to the European country, making it easier to transport energy.
Socrates visited the region a year ago to discuss possible involvement in North Africa, even meeting with Libyan leader Qaddafi. He also made rounds to visit Algeria’s President Abdelaziz Bouteflika and Tunisia to sign several cooperation agreements before heading to Morocco. Portuguese businesses encompass a significant portion of trade volume for the region. In Morocco, over 130 Portuguese companies are present in the country representing a trade volume of €500 million. Bilateral trade transactions had Portugal giving over €750 million toward investments in Algeria and over €65 million in Tunisia.
The importance in Socrates’ visit also highlighted Portugal’s commitment to renewable energy. Portugal has taken part in the construction of hydropower dams in Algeria including the Boussiaba dam located in the eastern province of Jijel. It had also submitted a draft MoU on renewable energy and energy efficiency.
Portugal also agreed on a joint credit line of €200 million for mutual investments in areas like tourism, industry, and energy in Morocco, but with its looming economic situation, these agreements are likely to be halted. The European country shifted its own priority to renewable energy boosting its wind energy production over 600% from 2004 to 2009. Since North Africa rules the continent with its wind energy production, it would have been a good indicator that Portugal could help exploit this industry further within the North African region.
Political instability coupled with a viable bilateral partner now facing its own crisis could leave North Africa trying to make up the difference in investments and trade should Portugal place its interests in the region on hold.
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