The Algarve region is currently experiencing a cycle of “total tourism”, a real growing tourist bubble. Tourism is a fundamental factor in regional development, but it is also a very sensitive factor to variations in the geopolitical and geoeconomic cycle.
Therefore, an excellent opportunity has been created to discuss the various possibilities for diversifying its regional economic base. Yes, because it is in the high phase of a cycle that the problems of the low phase of the cycle should be discussed. And the low phase of the cycle will not fail to appear, sooner or later.
The external effects, positive and negative, of a tourist bubble are known, and they are all the more excessive the narrower the region's economic base.
However, if we are warned and take the appropriate precautionary measures, it is perfectly possible to anticipate, moderate and regulate these external effects.
Let's look at some of the risks involved in the formation of this tourist bubble and then the chances of diversifying the regional economic base.
I. The risks involved in the formation of a "tourist bubble"
It is not worth ignoring, recent facts demonstrate to the evidence that there is a strong return of geopolitical and geoeconomic risks. The entire European border is now involved in a “ring of fire” that could explode at any moment.
Tourism is the economic activity that reacts most quickly to these changes in political and economic risk, that is, it is an especially volatile activity and very sensitive to changes in risk. In this sense, we need to be aware of the following risks:
– There is a high risk of “touristification” if the tourist flow further narrows the existing economic base (mono-industry) and if the “Algarve economy” is progressively replaced by the “Algarve events”,
– There is a high risk of touristification if the omnipresence of the touristic mono-industry conditions the development of other sectors, thus preventing the restructuring of the regional economic base,
– There is a high risk of touristification if the region attracts “predatory investments” in search of a quick return and, at the same time, provokes the sudden devaluation of other regional assets,
– There is a high risk of “liquidification” of the regional labor market and local daily life, if everything, or almost everything, revolves around tourism and if structured employment is replaced by unstructured work and the total mobility of this factor of production , in an increasingly undifferentiated and deregulated regional market; on the other hand, this “liquidification” of the labor market devalues technical staff from other areas trained in the region and who will not find professional occupation here,
- There is a high risk of gentrification of the "downtowns and lows" of towns and cities, if there is an excess of gamification and patrimonialization of these urban areas that leads to unusual real estate pressure on the respective residents, in particular, the elderly and unprotected,
– There is a high risk of touristification if, through excessive gamification, the Algarve becomes a cosmopolitan region and a platform low cost of tourist and cultural events, in an accelerated regime of substitution through small investments of very varied origin,
– There is a high risk of touristification if there is an excessive consumption of public budget resources by virtue of this activity and, in particular, an excessive consumption of water resources that can jeopardize the water supply to populations (climate and water wars ), at the very moment when the most harmful effects of climate change are being felt,
– There is a high geopolitical risk, in terms of internal and collective security, especially in the management of the border line from the Western Maghreb, which may imply the taking of restrictive measures and even the suspension of the freedom of movement of people for certain periods .
II. The diversification of the regional economic base
It is not an easy task to speak of diversification of the regional economic base when we are in a counter-current or counter-cycle situation, as is the case in the present situation.
However, it is worth remembering that the diversification of the regional economic base is justified by the extreme variability of tourism flows to geopolitical and geoeconomic risk and that this regional diversification is called into question because, precisely, the tourist activity is the one that remunerates the small ones more quickly. savings and small investments made.
At this juncture, the value chain is on the tourism side, but, as we all know how tourist bubbles end, it is our obligation to make some alerts to navigation.
This diversification of the regional economic base can be internal to the tourism sector, due to the differentiation of its activities, and/or external to the sector, due to complementarity with other activities.
1. Diversification within the tourism sector
The tourist cycle tells us that the first phase is the massification of the offer to meet the sudden influx of new tourists (between 3 to 5 years) and that a reactive internal response to the increase in demand is carried out by “adjusting the offer” and led by local and regional investors;
The second phase is the previous “supply differentiation”, once some flows have been consolidated and new segments of tourists and investors from the countries of origin of these flows have been conquered (between 3 and 5 years);
The third phase is, if all goes well in the previous phases, the “intra-sectorial diversification and selective segmentation” to serve specific market niches and clienteles (between 5 to 10 years).
In other words, a successful tourism cycle needs a favorable environment of close to 20 years to bring about all its positive external effects and, we hope, to moderate and regulate the negative effects.
The longer the tourist cycle, the greater the probability of self-regulating, and all the more so as it is capable of generating many network effects and strong capillarity towards other sectors of activity.
2. Diversification outside the tourism sector
With regard to diversification outside the tourism sector, but closely correlated with it, there are two main ideas that it would be important to capitalize on: the first, inter-regional cooperation between the Algarve and Alentejo, the “Grande Sul”, to develop the countless functional complementarities between the two regions, and the second, closely associated with the first, the “Euroregion AAA” or the “Grande Triple A Corridor”, which will link the metropolitan area of Lisbon to the metropolitan area of Seville.
These are two very close geo-economic scenarios, on which it is worth working in the near future and which open up very broad horizons for the three regions involved (Alentejo, Algarve, Andalusia) due to the mutation that they provoke in the repositioning of the most relevant investments.
For example, the agri-food sector has a fundamental position here that can serve to relaunch the Portuguese “Great South” region.
Second, external diversification will certainly be highly correlated with maritime and marine activities.
To do so, it will be enough to remember, for example, the two research centers of the University of the Algarve in this area to substantiate this positive hope.
The South Atlantic facing the PALOP countries and Latin America will certainly be a great opportunity, but the expansion of our maritime platform will also be an opportunity to increase public resources in the direction of the economy of the sea.
Thirdly, external diversification will necessarily have to go through the new ventures of the digital economy. A cosmopolitan region can only be a smart region, tourism and the sea will always be very demanding activities in this regard.
In the Portuguese “Greater South”, the Universities of Évora and the Algarve should create an “intelligent digital ecosystem” as a fundamental infrastructure for the “smartification” of the AAA Euroregion), a major peninsular research and development project for the launch of a line of start-ups in the economy of the sea, tourism and culture.
Final grade
It is all too obvious that the two regions of the “Great South” do not know how to think of themselves, let alone together.
In your case, it's not the dream that rules your life. For a long time prisoners of opportunistic clienteles and corporations, the two regions, which make up half of the national territory, do not even have 1 million inhabitants and only elect 16 deputies.
If we are able to extend the tourist cycle for 20 years, moderating and regulating its most critical outcrops, there are favorable conditions for the “Great South” and not only the Algarve to grow demographically, but also to be exemplary from the point of view of urban rehabilitation, but , also, of the green and circular economy (reduction of its ecological footprint), be the headquarters of several technological platforms in the areas of the economy of the sea, tourism and culture and offer the opportunity of a “2nd rurality”, with more cities in the countryside and more countryside in the city, functionally embedded in the urban universe and where a large agro-food and agro-energy program is developed based on agroecology and biological agriculture.
I will return to the subject, the next programming period 2020-2027 is coming, and we do not have any strong idea for the “Great South” that would change the balance of power that prevails today.
Author António Covas is a full professor at the University of Algarve and a PhD in European Affairs from the Free University of Brussels
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