The New El Dorados

After years of stagnation and war, some Portuguese-speaking nations are among the fastest growing economies in the world today. Angola grew by 23% in 2007 and is projected to grow by a staggering 27% this year (which at this rate implies a doubling of GDP every 3 years!). Mozambique is also racing ahead and so are Brasil, Cape Verde, Macau and São Tomé and Príncipe. Out of the 8 Lusophone nations, only Guinea-Bissau and Portugal have growth rates below the average world growth rate (see figure below). What lies behind the growth surge in some Lusophone countries?

Angola, Guinea Bissau and Mozambique are among the poorest countries in the world. Economists Landes, La Porta, Lopez-de-Silanes, Shleifer and Vishny attribute this to their colonial experiences. According to Landes, after gaining independence, Portuguese (and French and Spanish) colonies fared badly compared to their British counterparts because of the poor economic and political institutions they inherited. La Porta, Lopez-de-Silanes, Shleifer and Vishny explore the legal frameworks inherited by former colonies and show that common-law countries, i.e. former British colonies, have better property rights and more developed financial markets than former French, Spanish and Portuguese colonies (In sub-saharan Africa, for example, the most developed nations – Bostwana, Mauritius, South Africa – are all former British colonies).

On the other hand, Acemoglu, Johnson and Robinson argue that it is not the identity of the colonisers that matter, but rather, the climate and geography of the colonies. The prevalence of disease (mainly, malaria) at the time of colonisation determined the extent to which colonisers would develop institutions: while in Northern America, Australia and New Zealand, European settlers created ‘Neo-Europes’ by building schools, protecting property rights and ensuring checks against government power, in places such as the Congo, mere ‘extractive states’ were created.

It remains that many former Portuguese colonies which have been beset by civil wars following independence have only recently become peaceful. Starting from very poor, they are now growing fast. Although favourable economic conditions may explain the gains of some (Angola’s oil exports has doubled in volume since 2003, from 1 million barrels a day to nearly 2, and, given the five-fold increase in prices, oil receipts have grown ten-fold), their success is also due to good economic policies. The IMF has underlined “the success [of Angolan Authorities] in stabilising the economy … and its impressive progress in reducing inflation,” “the prudent monetary policies…the important progress in strengthening public finance management … and the ambitious second generation reform agenda, aiming at sustaining growth and reducing poverty [by Mozambique]” and “Cape Verde’s strong macroeconomic performance in recent years pays tribute to its homegrown economic reform program.”

These are exciting times indeed for Portuguese and Brazilian companies. In 2006, Portuguese exports towards Angola grew by more than 50% and in 2007, trade between Brazil and Angola went up by 80%.