Sourcing from Portugal

In the previous decade the big story for sourcing manufactured goods was all about China, with their low wages and shiny new factories and infrastructure. Over the last couple of years the story has changed a little as wages have increased dramatically and lots of buyers have stumbled over cultural difficulties as well as the frustration of having to wait for several weeks whilst their goods are shipped round the world, when increasingly they want to have shorter product runs delivered quicker.

So it makes sense for companies in ‘rich’ countries to source nearer to home and Portugal is a country that some northern European firms have looked at to source their goods from, either from third-party manufacturers or to build their own factories there. The advantages that Portugal has to offer are:
– wages are pretty low (the minimum annual wage gross works out at around 8000 euros on a full-time contract, where 14 months a year have to be paid, but works out less for contract work)
– transport costs to northern Europe are very competitive
– generally the workforce is hard-working, dilligent and reliable, if not the most skilled
– indsutrial property prices are low
– bureaucracy has been considerably simplified in recent years and is no longer a major hurdle.

So why has Portugal not become a giant of European manufacturing? Well there are a few issues you would have to consider before building a factory in Portugal – the most pressing is the sclerotic legal system, which means that a typical court case takes over 5 years to be resolved, making contractual disputes extremely difficult to resolve in a timely manner. The woeful delays in the legal system have meant that a culture has developed where less weight is given to contractual protection in a deal and more to making sure that you do a deal with someone who is not going to screw you over. And that is where it all gets a bit murky, because it is so difficult to know who you can trust.

Portugal has only had 38 years of democracy, which has meant that there has not really been time to devleop ecosystem of tried and tested firms that have been passed down from generation to generation and with it a mature business culture and the values that inherent in it. So there is no getting away from the fact there are quite a few dodgey characters running Portuguese companies, who will promise you the world and often not deliver. There is an expression in Portugal where businesses are referred to as either “sério” or “não sério” (that is “serious” or “not serious”). If you are “não sério” it essentially means that you are a chancer out to make a quick buck, whereas a business that is “sério” will be honest and play by the rules. It is difficult for a Portuguese person to separate one from the other and of course even harder for a foreigner…

Having lived in Portugal for 13 years and worked with all sorts of companies (“sério” and “não sério”!), I do think that Portugal is a viable country to source from, mainly because there is a very good quality workforce available at a low cost and an essentially modern infrastructure to support your business. You just need to be incredibly careful with who you get into bed with. A good piece of advice would be to contact a reputable organisation like the British Portuguese Chamber of Commerce (of which I am a Director for the Northern division) and then to really take your time to try and get a feel for any prospective partner companies you may want to work with. There are some world-class Portuguese companies that you can work with, it is just identifying them that is so difficult.

We also supply an apparel sourcing service from Portugal, so please contact us if you would like to work with us directly if this is an area where your company needs some help.