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A few days ago, I spoke to someone I didn’t know about the Panama Papers. The man, whose name I never found out, told me how he had set up an account in the 1990s to hide under a billion escudos (roughly €5 million) from a deal that I didn’t catch. The recommendation came from a friend and his bank account manager. They sent him to a lawyer, who charged him a good few thousand for the transaction. There isn’t really a moral to this story, except the idea that the use of offshore accounts to hide money or pay less tax is much older and more widespread than people think.
The most interesting part, in my opinion, came next.
The story began with a business importing and selling textiles which started at the end of the 1980s. Portugal’s entry into the EEC had stimulated the economy, and things were were going well. Sales were going up, and more shops were opening too. The properties were rented and, since not much capital was involved, the entire business rested on credit. The problem is that this wasn’t a problem. Credit was a way for banks to expand and there was plenty of it in the 1990s, a time when the banking sector was being privatised and liberalised. Account managers competed to see who could offer the best conditions. Competition was fierce, and a loan for ten or so million escudos (€50,000), plus an overdraft of a few more, was incredibly easy to get. Lorries brought more and more boxes imported from France. Only some business was declared, so only some tax was paid. It was an honest business, but that was how things were done.
He told me that, knowing what he knows today, he had an eye for business. He knew how to buy well and sell even better but, with only basic education, he wasn’t able to stop and realise that the fortune that passed through his hands went out as easily as it came in. “I thought that I was getting richer but it was just a balloon; when it burst, everything would pour away.” And that’s exactly what happened.
Everything changed with the arrival of the euro. Textile imports and sales were no longer done in the same way, and the big multinationals entered the market without mercy. With so much debt and so much interest, a slight drop in sales was enough to upset the shaky balance on which the business was based. Bankruptcy was only a matter of time, and later there was nothing the banks would accept to restructure the debt. There were no assets, there was only debt.
It may seem like a very ordinary story, but it’s the story of the boom in the 1990s and what came afterwards. I hope this man doesn’t mind me telling it. I thought it was 15 minutes very well spent.
Article published originally in Jornal de Notícias on 12 April 2016. Translated by Tom Williams for esquerda.net/English.