In an interview with Lusa, the professor of Economics at New York University (NYU) and collaborator at AESE Business School considers that there are obstacles to the growth of the Portuguese economy that need to be overcome, although he does not have a catastrophic vision of the state of the country.

"An important factor is the excessive regulation of some sectors of activity. I would say that construction is a good example. It is a case, a sector in which, due to European regulation, national regulation, at the municipal level, at the national level, a whole set of rules has been created that make the cost of construction not only very risky, but also very expensive. The whole part of bureaucracy, licensing, impact plans, etc., really, I think that this has been the decade in which less has been built, perhaps, in the last century", he points out.

Luís Cabral, who was in Portugal to present the session "Why is the Portuguese economy not growing?", within the scope of the first edition of 2024 of the AESE Business School's Observatory of Economics & Finance, notes that, when looking individually at each of these pieces of legislation that regulate the sector, "they are all well-intentioned and all have a direct positive effect".

"Minimum housing requirements, for example, or regional and municipal construction plans, these are all good things in themselves, with good direct effects, but it seems to me that they are not always seen as a whole, namely by estimating the impact that this can have, in this case, on the supply of housing", he argues.

For the economist, more than simplifying legislation, the focus should be "on the process of creating legislation itself".

In this sense, he advocates an "evaluation of legislation, both ex-ante and ex-post", in order to verify, when creating a law, not only the direct effect it will have according to its objectives, but also the opportunity costs that the legislation may imply at the level of economic activity.

"This exercise, which is very important, has not been done. This is not the fault of any specific government, it is the fault of all the governments we have had in Portugal in recent decades. Often, simplifications of bureaucratic processes are made that are more quick fixes than structural reforms", he considers.

The economist points out as an example the case of the "company in an hour", which he considers to have been a positive measure, but when he wants to start doing anything, he comes up against the whole licensing process.

"A more comprehensive reform would have to be carried out, not just a small step in the licensing process. I would welcome measures to simplify the licensing process, but until I see that, in practice, this corresponds to an improvement in the process, I remain somewhat skeptical", he said.

Luís Cabral also points out the civil justice system as an obstacle to economic growth, considering that there is room for increased efficiency.

On the other hand, he argues that "it may seem a bit strange, but to reduce the negative effect of bureaucracy, you may have to increase bureaucracy a little bit".

"This is to take seriously this idea of having an independent government agency, therefore, non-governmental, but, in the end, state-owned, independent, to evaluate the cost of legislation. I always like to say: 'if I were now appointed minister of doors and windows, the first thing I would do is create minimum measures for doors and windows'", he exemplifies.

With the comparison, Luís Cabral justifies that when "certain responsibilities for certain areas of economic activity" are assigned to political positions, there is "a natural incentive to think that it is the most important thing in the world".

"There is no judgment of actions here, not at all. They are always well-intentioned, but not always taking into account the costs to third parties that these legislative initiatives may have", he argues.

In practice, before approving a law in the Council of Ministers, the agency in question would make an assessment.

"There is also an aspect of inertia. This law is put on the table and then, I mean, the revocation is a process that does not have priority, there is no ministry of law revocation, it is not a priority of governments. Then there are rules, bureaucracies that at times no longer make much sense, but remain on paper and, therefore, continue to be in force", he says.

The economist also highlights that the productivity of the Portuguese economy "is low on average", with great variations between sectors.

"I would say that it reflects more a factor, in my opinion, of slowdown in the growth of the Portuguese economy, which is what some economists refer to as the curse of resources, in which there is often a resource in an economy that has a very positive direct effect, but can have a negative indirect effect, that is, it absorbs or directs so many resources from the economy to the detriment of other parts of the economy", he indicates.

For the economist, one of the examples is the tourism sector in Portugal, for which he advocates a commitment, but has implications.

"It is a relatively easy solution to open a restaurant, open a hotel. It is a business model that is well defined and that pays off. The problem is that these are investments that generate value for investors, but that do not generate a very large additional value for the economy", he considers.

Luís Cabral points out that it is a sector with very low levels of labor productivity, combined with difficulties in hiring.

He also considers that "there is often a bit of a lack of ambition" and that it is visible even in the language itself.

"It is a cultural issue, to a large extent. Many family micro-enterprises. And, therefore, people often think, at the level of five, 50 and not 50 thousand. There is a cultural issue that also has to do with a tradition, which is the tradition of a small country that has a small market", he indicates.

"What is the Portuguese market for architecture? It is zero nowadays. We, the second country in the world with more architects 'per capita', have such a market. 50 years ago, that would probably be the correct perspective, to think about the Portuguese market, because there were not many international competitions, there was no internet, there were no communications. The reality of the 21st century is different and we have to adapt the correct mentality to this new situation", he argues.

For the economist, it is necessary to bet on an international market: "We say that there is no market, that there is no construction in Portugal. So what? There is a lot of construction in China, and in the Middle East, and in many other countries", he says.

"It is a change of mentality that requires moving from the typical architecture studio with two architects, plus three assistants, because that has no scale at all. How am I going to enter an international competition? For now, I don't speak English very well. Second, I don't have any contacts here. It is not simply sending a project there", he said.

Alternatively, he said, "you have to meet people, talk, you have to go there, which costs money".

"It's a very different mindset. Unless I have received the Pritzker Prize, and then people come to me. That's something else, isn't it? But, if we want to take this idea of an international market seriously, I have to have a different mindset", he said.

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