A German entrepreneur living in the Algarve for 24 years criticized the Portuguese government’s support measures for small and medium-sized businesses affected by Covid-19.
He stresses that the economic strategies that worked in the past will not work today in the aftermath of a pandemic, and that the Portuguese state should act, in addition to its regulatory position, as an investor during this period. critical.
After a career in the German banking sector, Karl Heinz Stock invested in real estate, law and oil in Russia. He was even an advisor to the former mayor of Moscow Yuri Luchkov, then “a serious candidate for the post of Vladimir Poutine”, and created the first private law firm in Russia. In 1996 he turned to Portugal where he saw “great potential” and decided to redirect his investments to help small and medium businesses as an owner or shareholder, while enjoying a more peaceful life. in the Algarve.
Today he is best known for his wine and artistic businesses which operate from his award winning Quinta dos Vales estate in Estômbar, Lagoa. There is always something new, just a few weeks ago he opened the very first wine resort in the Algarve, “The Vines”, a complex of 16 small houses each with 2 villa-suites, 2 swimming pools , tennis court nearby, paddle tennis, mini golf and pétanque court.
To crown this system, he also recently introduced an evolving project in the wine industry, which allows amateurs to become winegrowers, “The Winemaker Experience”. For a fraction of a normal investment and completely hassle-free, customers can authentically produce their own wine, under the supervision and guidance of Quinta dos Vales’ team of winemakers.
So far, Stock is invested in 12 companies employing around 200 people in the tourism, media, construction and industrial equipment manufacturing sectors.
But decades after his long and successful career, “the unthinkable has happened.”
“Our perfectly balanced business models of democratic, market-oriented, society-oriented economies were brought down by a simple virus in just a matter of weeks,” said Karl Heinz Stock.
“All the procedures, laws and regulations that have been developed in the past could not prevent this. The reason for the failure is simple. These procedures were developed for a dynamic economy, not for the one we are currently facing, at a standstill, especially in the tourism industry, ”he explained.
“We understand that the virus cannot be cured with existing drugs and that a new treatment must be developed to bring it under control. Using this deadly virus as an analogy, what makes us think that the measures that have been developed for a dynamic economy will now “cure” an economy that is far from dynamic?
“They won’t. A crisis is the right time for a paradigm shift, ”he said.
While Mr. Stock acknowledges that some of the support measures implemented so far – such as the simplified dismissal scheme and lines of credit – may solve some of the cash flow issues that businesses face, they “will create more problems in the future ”.
As he explained, these measures “are not a cure but a symptomatic treatment”.
“The main objective in tackling the economic crisis should be to avoid long-term stagnation, which is more deadly for economies than a heavy blow. All the solutions to date aim to support companies in difficulty in the short term and mean overloading them with repayment obligations in the years to come ”, he underlined.
What is imperative now, says Karl Heinz Stock, is that the Portuguese government intervene as “the most powerful actor in the economy”.
“Over the past year, many programs have been hastily created, changed and announced while the worst-case scenario has been ignored. Some countries are more progressive than others, but the tools they use are the same: dismissal assistance and easier access to loans. However, the sudden transition from a dynamic economy to a virtual standstill overloads this legislative and regulatory framework. They were not made for this new reality and will not work, ”he said.
“In times of crisis, the state should not only act as a regulator but also as an investor. If we want to create business and income, we have to be innovative and we have to invest in people and machines, ”he said.
“While other EU countries bear the costs of the redundancy scheme for a year, instead of letting people lose their jobs and then paying them unemployment benefits, the Portuguese government is only offering one limited version of this scheme, which is not at all acceptable, ”said the entrepreneur.
“Both employers and employees have already ‘invested’ heavily in the past through their social security contributions, which means that they have helped to secure the payment of unemployment benefits and similar subsidies. Now that this (crisis) has arrived, it is more than fair that the government provide the appropriate support, instead of asking SMEs facing liquidity problems to take on more debt, ”said Mr. Stock.
In fact, he said the government should view the money it gives to businesses as an “investment to get the economy going, not a loan that has to be repaid in the future.” A recent example of a government investing in its own economy is that of the United States, with the decision to invest $ 1 trillion in its infrastructure. European states do not need to take such drastic measures, it might already be enough to simply convert covid loans into government grants, which would revive the most affected sectors of the economy.
“Capital has been, is and will be lost. It is a fact that we have to live with. I think some governments have realized that new capital is needed to overcome these unproductive and dangerous times and restart the economy with as little damage as possible, ”he said.
“This is the only way to restart the economy and society as we knew them before the pandemic. It is much more difficult to start a stopped train than to move it forward.
According to the entrepreneur, the government should take advantage of this “unique moment to act not only as a regulator but also as an active player in the market, using its powers, which could be assimilated to a hypothetical monopoly, to invest in the economy. . This will result in a greater return on investment (ROI).
“The monopoly position of the state allows it to create a win-win scenario that no other investor would be able to achieve,” he added.
“Every euro we spend has already been taxed time and time again before it reaches us, and then it will be again, through taxes on corporate profits, dividends, wages, consumer spending funded by salaries and social security contributions, all of which result from the company’s turnover, ”the entrepreneur explained, adding that business leaders invest in“ material and human resources to create added value , which will then be shared among all the actors of modern society ”.
According to Mr. Stock, nearly 50% of the domestic turnover of active companies ends up in the state coffers, which in turn reinvest this in the interest of the country. The loss of a company’s turnover is not only a loss for the company but even more for the state. This is why any support given to SMEs must be rethought as an “investment”, concluded the entrepreneur.
Contact: Karl Heinz Stock
Email: [email protected]
Organization: Quinta dos Vales – Agricultura e Turismo, Lda. Address: Sítio dos Vales, Caixa Postal 112, 8400-031 Estômbar, Lagoa (Algarve), Portugal