- * Les opinions émises ici, notamment la critique de Huysmans, n’engagent que leur auteur et non la (...)
- 1 Clark & Lund (2000), Lund Hansen, Andersen & Clark (2001), Lund Hansen (2000) and Lund Hansen (200 (...)
1This paper* aims to analyze linkages between rescaling of commercial property markets and changes in urban governance in Lisbon. In earlier research on Copenhagen1, a method and analytical framework for analyzing globalization of commercial property markets and for probing the relations with shifts in urban governance was developed. Here, I attempt to apply these to the context of Lisbon. Some cautious comparisons with Copenhagen are made, underscoring similarities and differences.
2In the first section, I discuss the connections between globalization, rescaling and the commercial property market and present an analytical framework. In section two, I briefly unpack the connections between the concepts of urban governance, globalization, rescaling and commercial property. In the third section, methodological considerations are reported. In section four and five, I analyze globalization of the commercial property market, the ‘new economic politics’ and changes in the urban politics of Lisbon. Finally, I conclude that Lisbon has experienced regional rescaling of its commercial property market and change in its urban governance, and that these processes are inextricably intertwined. The changes in urban governance have been asymmetrical, however, benefiting private capital more than local levels of government.
"Multi-country portfolios allow us to ‘ride’ different real estate cycles."
"Globalise your portfolio"
(Nick Tyrrell, Head of European Research, DB Real Estate, Deutsche Bank Group, 2003)
3One of the world’s larges commercial property investors, DB Real Estate, Deutsche Bank Group, concludes in an analysis entitled The Outlook for European Property that the long-term trend is : "Globalization". The consequences of globalization are, according to Deutsche Bank Group : "Diversification benefits, higher income/returns, more opportunities, better understanding/less fear of ‘foreign’ markets, exchange rate risk eliminated for euro zone." Moreover, as suggested in the opening quote, large real estate investment firms are thinking about the geography of investments and how it is possible to "'ride' different real estate cycles" (Tyrrell, 2003).
4One could ague that DB Real Estate’s new strategy is part of a larger scalar transformation in the commercial property investment industry. The impetus to find a new ‘scalar fix’ (Smith 1991) is a result of the inner logic of capitalism itself. Capital is, as David Harvey (2001, 83) reminds us : "… always promoting ‘internal revolutions’ within the accumulation process - revolutions which are forced through by crises which affect the production and use of the built environment. The ebb and flow of urban investment in both space and time is a product of this permanently revolutionary force which capital itself expresses".
5In the broadest sense, globalization is to expand over contextually given borders - not only spatial, but also temporal, cultural and conceptual ones (Clark and Lund, 2000). As such, the human activity of globalization has been going on, however unevenly, for millennia. Today it is widely accepted that the term ‘globalization’ captures a complex web of processes. In the sphere of economic geography, globalization can be defined as : "… the rapid proliferation of cross-border production, trade and investment activities spearheaded by global corporations and international financial institutions that facilitate the emergence of an increasingly integrated and interdependent global economy" (Yeung, 2002, p. 287).
6In order to analyze globalization of property markets we are in need of a definition appropriate to the context of property markets. Globalization of a property market can in very general terms be defined as increasing shares of agents at increasing distances from the market area, involved in the production, ownership, maintenance, use and reproduction of the built environment. In this study, I define globalization of the property market as increased shares of foreign investment and ownership.
7My theoretical understanding of property investments is first of all informed by David Harvey’s analysis of the Limits to Capital (1982), where he shows how capital’s constant search for 'spatial fixes' underlies urban change. As a complement, the particular understanding of the dynamics of changes in commercial property markets draws on three perspectives.
8The first is a historical model (Lindahl 1995), in which three successive models of property investment are identified, illustrating the nature of scalar transformation from a predominantly local scale and relatively closed model to a highly open and globally oriented model. Lindahl calls his first model of investment in commercial property the ‘simple model’. In this model, capital flows are local. Local developers invest in the built environment with loans from local banks. At the end of the 1970s, institutional actors came to dominate the production of the built environment. This gave rise to a second model which Lindahl terms the 'the institutional model'. Three factors are outlined as important for this development. First, the institutional investors (especially pension funds) were accumulating more and more capital concurrently with still more people achieving a superannuation scheme. Long-term investment in the property market was made with this capital. Second, there was a pronounced growth in the service sector with a rising demand for commercial property buildings. Third, the inflation was high in this period. Consequently, large investors only (like pension funds) were financially involved in these high-risk development projects. Even if the new institutional agents came to dominate the market, the development process remained primarily regional. The third model, ‘today’s model’, describes a revolutionary move towards the liquidification of property capital through stocks and securities. The securitization of real estate through Real Estate Investment Trusts (REITs) has revolutionized the market for investment in commercial property in a number of ways. It is possible to buy and sell properties in smaller parts, which facilitate new types of investments. REITs open up for borderless investment in commercial property, radically facilitating rescaling of a traditionally localized market. While REITs clearly contribute to the financial fluidity of otherwise fixed capital, they are unable to change the localized character of the fixed capital they liquefy.
9The second theory addresses this issue in terms of the transparency vis-à-vis the opaqueness of financial product types (Clark and O’Connor, 1997). Clark and O’Connor distinguish between transparent, translucent and opaque financial products. An example of a transparent financial product is gold. Information about the value of gold is easy to access and it is easy to buy and sell. The risk is low and it does not take special knowledge to deal with a transparent financial product. The product can easily be dealt globally. At the other pole are opaque financial products, exemplified by REITs. It is harder to get information about an opaque financial product, which leads to a longer process of buying and selling. The risk is higher and it takes special knowledge to deal with opaque financial products. The probable market scope is local - according to Clark and O’Connor. Translucent financial products have an intermediate position. I find Clark and O’Connor’s analysis central to the understanding of processes of globalization in property markets, but disagree with their view that REITs exemplify opaque financial products, restricted to the scope of local markets. REITs seem rather to involve a radical step towards the translucency of investments in property capital, breaking the local barrier. The rescaling of commercial property market investment is intrinsically tied to transformations that increase the fluidity of this form of fixed capital, and in this context, REITs play an important role (Clark and Lund, 2000).
10The third perspective I want to discuss here stresses the importance of the local elite on the market and their global networks (Olds, 1998). Olds’ study builds upon Arjun Appadurai’s (1996) concept of the ‘global cultural economy’. The perspective draws on socioeconomic literature about the embeddedness of ‘economic actors’ in net-works and institutions which are reflective of the sociocultural and professional systems which they are part of. I use this perspective as reminder of how ‘globalization’ is not an alien force drifting around the globe - it is always people who make the decisions. By focussing on the actors and their networks (Latour 1991) it is possible to bridge the global and the local. In Olds’ case study of the Pacific Place Project in Vancouver, he launches a critique of the predominant discussions about forces propelling the global spaces of flows. Olds finds that much literature about the global spaces of flows is "merely assumed rather than examined", "dangerously over generalized" and that there is a lack of "historically specific" analysis. I agree with Olds’ critique that much of the discus-sions about globalization and those global spaces of flows remain too abstract and need empirical focus.
- 2 World Trade Organization (WTO), International Monetary Fund (IMF) and World Bank (WB).
11Two very different interpretations of ‘globalization’ and its consequences can be identified. One sees globalization as a genuine positive force that creates global equality. Another set of voices can be heard in the streets of Seattle, Genoa, Porto Alegre and Cancun etc. During the end of the 1990’s a new swell of global resistance against neo-liberal globalization in general and global institutions like WTO, IMF and WB2 in particular, can be identified. Through organized meetings and events, a plurality of social movements comes together and resists uneven global flows. But how are we to understand globalization in relation to urban contexts ?
12Lisbon is a globalizing city. It is not, however, a mere passive recipient of the influences of mysterious external forces of globalization. Like all cities, it is actively engaged in generating globalization. Indeed Lisbon, for centuries, has been active in broadening our global horizon, especially when it during the ‘age of exploration’ became a world city. Today, flows of capital, ideas, people, images, goods, species and pollutants are multidirectional, pouring into and issuing from Lisbon and Portugal.
- 3 For more on scale see e.g. Brenner (1998), Marston (2000), Smith (1991, 1995) and Swyngedouw (1997 (...)
13One common assumption is that globalization has led to ‘the end of geography’ (O’Brian 1992). I find this notion seriously flawed. In this study, I aim to show how globalization has rather led to intensified struggles over geography in, among other places, Lisbon. As David Harvey (1982) so effectively argued, space constitutes the limits to capital, with capital’s constant search for ‘spatial fixes’ underlying urban change. In this optic, struggles over geography - the global-urban nexus of space wars (Lund Hansen, 2003) - are integral to the social architecture of capitalism. Moreover, capital’s constant search for ‘spatial fixes’ captures a central characteristic of what Cindi Katz (2001) characterizes as vagabond capitalism, where capital moves through all imaginable scales3, from the body to the extra-planetary, in search of profits. One of the consequences of the increasingly global capitalist production is a neglect of "… many of its particular commitments to place, most centrally those associated with social reproduction, which is almost always less mobile than production" (Katz, 2001, 709). The search for new spatial fixes entails local disruptions for people living where capital finds new opportunities. Investors, banks, real estate agents, developers, local politicians and the state are powerful actors in the political economy of urban space (e.g. Clark & Gullberg, 1997 ; Harvey, 1982, 2001 ; Smith, 1996, 2002).
14Capital’s footloose search for profits paradoxically necessitates localized investments. The capacity for multinational firms to move investments and jobs at the ‘click of a mouse’ is a real issue for - and an imagined threat used by - local urban decision makers (Kelly, 1999). One consequence is considerable effort and investment by cities to become (or create an image of being) attractive locations for capital investment (e.g. Harding 1995; Harvey 1989, 2001; Molotch 1999). The question at the top of the agenda is how to create 'the perfect city' for business and (the right) people in the globalized economy.
15In this context, property markets are central to the urban economy. The construction of good conditions for fixed capital investments is therefore a central issue for urban decision makers, facilitating that which is essential to capitalist economies: Profits, growth, expansion. The fixed nature of these markets, place them strategically at the heart of territorially competitive urban politics.
16The city as the 'powerhouse' of the globalized economy constitutes the context for capital accumulation and regulation (Amin and Graham, 1997), and the traditional patterns of government have changed accordantly. From hierarchical top-down co-ordination, with the nation state as the central player, to "…the art of steering multiple agents, institutions and systems which are both operationally autonomous from one another and structurally coupled through various forms of reciprocal inter-dependence" (Jessop, 1997, p. 95) on different spatial scales (e.g. Brenner, 1998 ; Smith, 1991 ; Swyngedouw, 1997). This shift has been labeled as a shift from urban government to urban governance, or as Harding and Le Galès (1998) and Ward (2000) point out, a combination of government and governance.
- 4 For a more detailed account of the problems met in the Copenhagen study see Clark and Lund (2000) (...)
17Data was sought on both foreign and domestic ownership and investment flows over an extended period. There were however a series of problems in gathering systematic data on ownership4. Focus here is therefore on investments. Locations and distances would be of interest _ e.g. Spanish based investments across the border, or Hong Kong based investments across the globe. This kind of data was available from the period 1996-2001. Before 1996, however, the investigation is primarily limited to foreign direct investment as an aggregate (both inward regardless of origin and outward regardless of destination). Globalization is therefore, in this case, operationalized as increases in cross-border investment relative to total investment in Lisbon. Time series over the following variables were constructed :
I) the value of foreign investment in the Lisbon commercial property market,
II) the value of total investment in the Lisbon commercial property market, and
III) the value of Lisbon based investment in foreign commercial property markets.
- 5 I am indebted to Ana Maria Patricio and Joaquim Antonio at the statistical Office of the Bank of P (...)
18Variables (I) and (III) are based on data from the Bank of Portugal. The bank was - after special dataruns5 - able to provide data on foreign direct investment (FDI) (inward and outward) in commercial property markets from 1980 to 1995 and FDI in 'real estate' from 1996 to 2002. The bank does not keep data on FDI in the commercial property market of Lisbon (Patricio, 1999 ; Antonio, 2004). Qualitative data suggest, however, that Lisbon commercial property market is the most important commercial property market for foreign investors (Duarte, 1999 ; CB Richard Ellis, 2003). It is therefore reasonable to assume that the vast majority of foreign direct investment in the commercial property markets of Portugal is geographically concentrated in Lisbon commercial property market (the same goes for Denmark and Copenhagen). For the period 1996-2002, Bank of Portugal was able to provide data on foreign direct investment in 'real estate' in Portugal. Unfortunately, it was not possible to get data on the investments in the ‘commercial property markets’ in this period. The category 'real estate' includes data on individual investments in both commercial and non-commercial property (Antonio, 2004). Therefore, the two time series from 1980-1995 and 1996-2002 are not directly compatible, because they are not based on the same categories. For the period 1996-2002, data on the origin and destination of the investments was available.
- 6 The value of the newly constructed commercial properties in Greater Lisbon was 12 billion PTE in 1 (...)
19For variable (II), the value of new construction in Greater Lisbon6, data was only available for the years 1990-92, and 1996-99. I therefore had to rely on the only possible source of information, which according to Maia José Pinheiro (1999) from of the National Bureau of Statistics, is the number of licenses given to new constructions from 1981 to 1989. After 1989 statistics are kept on number of completed new constructions. The number of licenses given by the authorities to new constructions of commercial buildings is included in the Building Construction Statistics of the National Bureau of Statistics (Mendes, 1999). From these I have been able to construct two time series showing the number of licenses given to new constructions and 'transformação' of commercial buildings from 1981 to 2001 in Portugal and Central Lisbon. The category 'transformação' (in the following I use the term ‘transformation’) indicates the number of licenses given for the transformation of existing properties into commercial buildings. Because it is very hard to find places to build in central Lisbon, old buildings are transformed into commercial buildings (Seixas 1999). This tendency is easily recognized in the business/ commercial areas of Central Lisbon (see Photos 1, 2).
- 7 Ana Seixas, an urban planner in Lisbon laughed when I asked her if any authorities kept statistics (...)
20The time series for variable (II) does not give insight into investment in the existing stock of commercial buildings (i.e. sales). No authorities keep statistics on this (Seixas, 1999 ; Silva, 1999; Santos, 2003)7.
- 8 Gentil Sousa Duarte, University of Lisbon, Department of Geography. J.Escobar, ICEP (Portuguese Tr (...)
21In addition to the quantitative data on investment, I interviewed a number of key actors with considerable experience of and insight into processes and developments in the Lisbon commercial property market8. This qualitative input has proved highly valuable for interpreting the quantitative data and gaining insight into aspects the data leave untouched.
- 9 Ermelinda Costa, ICEP (Portuguese Trade and Tourism Office). Leonel de Sousa Fadigas, AMBELIS (Age (...)
22Changes in the urban politics of Lisbon were identified on the basis of literature studies and interviews with key actors and scientists specialized in the area of urban politics9.
23The commercial property market of Greater Lisbon can be divided into three categories : Office buildings, office parks, and buildings connected with tourism (hotels, apartments, etc). My main focus here is on office buildings and office parks. However, as tourism is a central part on the Portuguese space economy, this fraction of the commercial property market is partly included in the analysis. Office buildings are concentrated in Central Lisbon, whereas office parks are located in the suburbs of Greater Lisbon. The main office areas in central Lisbon are : Av. da Liberdade (1), Av. de República, Praça de Espanha, Amoreiras (2), 2º Circular, Campo Grande (3), the historic centre and Av. Almirante Reis (4). To the East, Parque das Nações (Parque Expo 98, S.A.) (5) is located, where some major companies such as Sony, P.T. Marconi (telecommunications), Telecel (mobile telecommunications) have moved their headquarters. In Greater Lisbon, the main office areas are located in the western corridor (situated along the A5/IC 19 motorways between Lisbon and Cascais/Sintra) (6), where major business parks are situated (Arquiparque, Quinta da Fonte, Taguspark, Sintra Business Park, Alfra Park and Central Park) (fig. 1).
Photo 1 New construction in Lisbon
(Photo: Benny K.Nielsen)
Photo2: Transformed Building in Lisbon
(Photo: Benny K. Nielsen)
Figure 1 : The commercial property areas in Lisbon
Source : CB Richard Ellis, 2002 ; 2003
24Central Lisbon accounts for c. 10%, Greater Lisbon for c. 30%, and the entire region ‘Lisboa e Vale do Tejo’ accounts for more than 50 % of the commercial property market of Portugal (National Bureau of Statistics). Greater Lisbon had a stock of c. 4.1 million square meters of office space in 2003 (CB Richard Ellis, 2003).
25Figure 2 shows inward and outward foreign direct investment in the commercial property market in Portugal between 1980 and 1995. Qualitative information indicates that for foreign investors, the property market of Lisbon is nearly synonymous with that of Portugal (Duarte 1999; CB Richard Ellis 2003). One can therefore presume that figure 2 strongly reflects foreign direct investment in the commercial property market of Lisbon. The curve that shows the outward flow illustrates that globalization, of course, works both ways - flows of capital issue from and enters into Lisbon.
Figure 2: Inward (full-drawn line) and outward (broken line) foreign direct investment in commercial property market, Portugal 1980-95.
Source: Bank of Portugal
26Figure 2 shows increasing investments in the commercial property market in the end of the 1980´s and a decline in 1991-93. The increase in foreign direct investment after 1986 is related to membership in EU. In the second half of the 1990´s foreign investment again increased, though the situation is not the same as the ‘boom period’ (Costa, 2003 ; Escobar, 1999 ; Farraõ, 2003 ; Duarte, 1999). For instance, the owner of a new commercial building in Central Lisbon (near the Saldena metro station) has only been able to lease 40 % of the property, which was symptomatic for the situation in Lisbon in the second half of the 1990s (Duarte, 1999).
Figure 3: Inward foreign direct investment in “real estate” in Portugal 1996-2002, by country of origin
Source: Bank of Portugal
Figure 4: Outward foreign direct investment from Portugal in “real estate” 1996-2002, by country of destination.
Source: Bank of Portugal
27Figures 3 and 4 show the foreign direct investment in the ‘real estate’ sector in general. The curves show significant increase of both inward and outward investments from 1996 to 2002. According to this data source, UK is - with more than 50% of the investments - the single most important origin and destination of foreign direct investment in ‘real estate’ that flows into and issues from Portugal. Spain, France and Germany accounts for 10-20% of the activities, and the category ‘other origin’ accounts for another 10-20% - more than half of which is European. The only non-European country identifiable in the data from Bank of Portugal is USA - with less than 5% of the investments in the entire period.
28The data seems to suggest that the pattern of investments is 'European'. But, is this a reason-able way to map the geography of the global money flows in the commercial property sector? As Storper (1997a, 19) remind us, the statistic for foreign direct investment "reveals little about the territoriality of economic dynamics". Technological innovations and deregulation over the past three decades, furthermore, has made it difficult to track down the origin of transaction of ‘global money.’ "Travelling at the speed of light, as nothing but assemblages of zeros and ones, global money dances through the world’s fibre optic networks in astonishing volumes" (Warf, 2002, 34). The emergence of offshore banking, often located on small islands, have formed "… small ‘black holds’ in the topography of regulation through which large sums of money flow" (ibid, 45). In the case of real estate investments in Portugal, The Sunday Times has estimated that more than 80% of foreign owned real estate in Portugal has been purchased through offshore institutions, usually registered in the Channel Islands, Isle of Man or Gibraltar. Approximately 200,000 individuals in U.K. use this method to buy property in Portugal. As a means to regulate this traffic, a new law came into effect January 1 2004 in Portugal. However, new modes of avoiding taxation are created. As a Malta based lawyer firm, seeking business opportunities, writes on their home page :
29There are about 200,000 British owners who have purchased property in Portugal, apart from the considerable number of persons of other nationalities, most notably Germans and Austrians. Until recently, these property owners in Portugal had little to worry about aside from local taxes but this year most property owners have spent the summer with their lawyers and tax advisors, devising ways and means to avoid the new tax bombshell that the Portuguese authorities have fired at offshore companies owning real estate in Portugal. New legislation passed by Parliament in Portugal on July 30, 2003 and which came into effect on January 1, 2004 has targeted the corporate ownership of Portuguese real estate, in those cases where the company is registered in what the Portuguese consider to be offshore tax havens. A list of 83 ‘undesirable’ countries has been published by the Ministry of Finance of Portugal, including Gibraltar, Jersey, Guernsey, the British Virgin Islands, the Cayman Islands and the Isle of Man. The legislation rules out companies registered in Delaware (USA), Malta or New Zealand so that companies registered in these three jurisdictions are not affected by the new tax legislation. (Griscti, 2004)
30Maybe we will see a new pattern of investment in a year or two, with Malta as a ‘big player’? If it is true that more than 80% of property investments in Portugal flow through offshore institutions, then we need another methodology to determine the agents behind the commercial property investments.
31According to Gentil Sousa Duarte (1999), who has studied the pattern of foreign ownership in the commercial property market of Lisbon, 90% of the owners are fronts - often lawyers from Spain or France. Furthermore, many investments go through offshore banks.
32A focus on Av. da Liberdade, one of the main commercial property streets in Lisbon, illustrates how patterns of investment are manifested in urban space. On this particular street, the majority of investments come from Spain (ibid.). Together, these observations seem to indicate that the patterns of investment in Lisbon are regional rather than ‘global’ ; a pattern that corresponds to what we found in Copenhagen, where Swedish investment accounts for the greater part of foreign direct investment. Crossing the border between Spain and Portugal or a sound ca 20 km wide between Denmark and Sweden is perhaps not the first thing that comes into mind when we think of globalization. But, if we understand globalization as expansion across contextually given borders, then the vast bulk of globalization may arguably take the form of expansionary regionalization rather than movements and flows around the globe. This is especially relevant for the ‘sunk cost’ of spatially fixed built environments, for which local knowledge is particularly significant for risk assessment.
33Regardless of the origin of the investments, the data shows an escalation of foreign direct investment from the 1980s to today suggestive of globalization. Relative to total investment in Portugal and Lisbon, however, the picture is quite different (fig. 5 and footnote 7).
Figure 5: New construction of commercial buildings in Portugal 1981-2001 (full-drawn line; right scale). New construction (dotted line; left side scale) and transformation (broken line; left scale) of commercial buildings in Lisbon 1981-96.
Source: National Bureau of Statistics
34Data from National Bureau of Statistics suggests that the value of the newly constructed commercial properties in Greater Lisbon (30% of the market) went from 12 billion PTE in 1990 to 300 billion PTE in 1999 in ‘Lisboa e Vale do Tejo’ (50% of the market). Together the data shows a substantial increase in the activities at Lisbon commercial property market during the 1990s.
35Figure 5 shows the number of new constructed commercial buildings in Portugal from 1981 to 2001, in Central Lisbon from 1981 to 1996, and the transformation of existing properties into commercial buildings in Central Lisbon from 1981 to 1989. New construction in Portugal increased more than 100% from 1981 to 2001, with periods with stagnation : 1985-1987, 1989-1992 and 2000-2001. Central Lisbon basically followed the same tendency, with high growth rates in the end of the 1990’s due to preparations for Expo 98 (Fadigas, 1999). ‘Transformation’ of existing properties, however, did have a significant higher growth rate (more than 300%). As mentioned earlier, due to the lack of space in central Lisbon, old buildings are transformed into commercial buildings (Seixas 1999).
36Today, Lisbon commercial property market is still in a period of recession. As one of the largest 'fully-integrated real estate service and property finance companies in the world', CB Richard Ellis - listed on the New York Stock Exchange - writes in a report on Lisbon:
37The full impact of the economic recession is now being felt in the office rental market. … Portugal, along with many other countries in the European Union (EU), has experienced difficult economic conditions during 2003. After seeing a remarkable performance during the 1990s, with levels of GDP growth generally above that of the EU, growth rates in Portugal have slowed in recent years… However, the outlook is more optimistic for next year… The Euro 2004 football championships are anticipated to provide a boost to the economy, and recent legal and fiscal reforms, including the reduction of SISA (the property acquisition tax), should help to revitalize the property market. In the meantime, with the current economic slowdown, many companies are delaying important business and property decisions until the economy improves. (CB Richard Ellis 2003, 1)
38In spite of Portugal's active participation in the final stage of the EMU and mega projects such as Expo 98 and the preparation of the European Football Championship 2004, the current crisis is accentuated by the general crisis of the global economy and by capital flow from Portugal to the new EU members in Eastern Europe (Farraõ, 2003).
39Entrance into the EU in 1986 has entailed a rescaling of Portuguese economic policy to the European scale, associated with the dismantling of judicial, political, economical and mental borders towards the other EU countries. The 'new economic policy' of EU includes well-known neo-liberal recipes : "Deregulation, privatization, flexibilization of labor market and spatial decentralization" (Swyngedouw, Moulaert & Rodrigues, 2002, p. 548).
40The Portuguese economy experienced strong growth during the late 1990s. After 2000, however, parallel with trends of the global economy, the Portuguese economy has experienced a recession. For Portugal the new economic regime of the single currency has since 1997 been… characterized by price stability, translated into a structural reduction of interest rates and a significant easing of liquidity constraints for households and corporations. … In the context of the weak international activity, the adjustment process of private demand had led Portuguese economy to slowdown significantly in 2002 … . (Ministry of Finance, 2003, p. 16).
41Since coming to power in spring 2002, Durao Barroso's centre-right government (PSD/PP) has argued for fiscal restraint, e.g. through the new Program for the Modernization of the Economy (PRIME). including sale of state property and reduction of public spending. From January 2004 the property transfer tax and Municipal Tax, an annual local property charge, has been reduced significantly (CB Richard Ellis, 2003). This fiscal policy is integral to a new economic spatial policy ‘weapon’ in the competition between cities, aimed to facilitate investments in Lisbon commercial property markets - and the ‘fueling’ of the urban growth machine (Molotch 1976, 1999).
42As most Western cities, the economic/political space of Lisbon has undergone drastic change since World War II. Today Greater Lisbon has c. 2.5 million inhabitants and is governed by 19 municipalities. The economic base of Lisbon has shifted the past 30 years. In 2003, roughly 80% of the city’s population was employed in the service sector, which has created a higher demand for commercial property buildings in Lisbon (DB Real Estate, 2003).
43On a national scale, Portugal is presently building up a welfare state that can be characterized as "a hybrid of ideas/elements from the liberal and the corporatist regime but fused with ideas/elements from its own political and social history" (Hansen and Silva, 1998, 24). The system is "highly centra-lized, uniform and standardized, independent of location" (ibid, 27) and with emphasis on the civil society and the market. On the national scale, regional development plans are made. The task is, in cooperation with the EU, to make a comprehensive development strategy for the country, which is "to strengthen the competitiveness of the metropolitan areas of Lisbon and Oporto" (Gaspar, 1992, p. 89).
44On a metropolitan scale, 10-year regional land management plans for the Lisbon metropolitan area are made, and relations between the different bodies involved in the metropolitan area are co-ordinated. On the local scale, the municipalities make municipal land management plans, which are the most important land management instrument in Portugal (Gaspar, 1992 ; Silva, 1999). (See Silva and Syrett, 2003 for a more detailed outline of continuities and changes in Lisbon governance systems in the past two decades).
45Political decisions regarding Greater Lisbon have changed from a centralized system to a more decentralized system. Until 1989, political power was concentrated in the hands of the national government. After 1989, however, a process of decentralization has resulted in some changes, which give civil society formal opportunities to participate in the decision making of the city. Nevertheless, this opportunity is rarely used, partly due to what Jessop (1997) refers to as 'cultural characteristics'. During the dictatorship, local government and citizens were not included in the decision process. This cultural habitus is a highly integrated part of the structure of the system. As Anna Seixas from Lisbon Municipality puts it : "Even today, more than 25 years after the revolution, it still is an obvious problem". (Seixas 1999)
46These cultural characteristics explain why Portugal remains one of the most centralized countries in EU. Local administration is in charge of only 7% of public funding - the lowest in EU - and depends mainly on block grants (Sliva 1998). According to (Hansen & Silva 1998, 27) there are "no indications so far that clearly show a future move towards greater local government involvement."
47As other modern western large cities, Lisbon has produced a map in the Strategic Plan 2000-2010 showing the city in the centre of the world. For Lisbon, the strategy is to be the "Capital Atlântica da Europa" (Strategic plan 1999). The location and size of the harbor is the engine in this global ambition. This kind of urban imagining is a frequently used weapon in inter-urban warfare (Lund Hansen, 2003). AMBELIS (Agency for the Economic Modernization of Lisbon) and the newly established API (Portuguese Investment Agency) are other examples of shifts in the urban governance of Lisbon. AMBELIS is a public-private partnership established with the purpose to : … promote the city of Lisbon and its surroundings, and to contribute to the regeneration of its economic and urban fabric, thus acting as a catalyst of ideas, projects and resources mainly contributing to the modernization of Lisbon’s economic base." (AMBELIS, 1998, p. 2)
48One of the objects for AMBELIS is to attract foreign investment to the commercial property market of Lisbon. The means are the provision of analyses, studies, plans and contacts. According to the president of AMBELIS, Leonel de Sousa Fadigas, the procedures regarding the provision of contacts are "very informal and non-bureaucratic, and often built on personal acquaintances and friendships". Cross-border contacts and co-operations are dependent on mutual respect :
49"If they are open - we are open. … There has been (and still is) a tendency, towards an 'imperialistic' attitude among investors from certain Western countries: They think Portugal is an African country, where they can do as they like. Our object is of course to make money, but we like to be treated as equals". (Fadigas, 1999).
50This circumstance is one of the reasons why there is so much cross-border interaction between Portugal and Spain, thanks to the physical, mental and cultural proximity between the two countries (Ferdigas, 1999 ; Silva, 1999).
51This kind of observation is, of course, not new. The so-called ‘cultural turn’ or ‘new economic geography’ has directed attention towards the social and cultural relations and practices through which economic activities are constituted (e.g. Amin and Thrift, 2000 ; Yeung, 2001, 2003). The focus here is on "the social and especially cultural character of the economy" (Barnes, 2001, p. 558) and the social ‘embeddedness’ of economic behavior (Polanyi, 1944 ; Granovetter, 1985).
52In the case of AMBELIS it is quite clear that the feeling of being treated with disrespect leads to a particular kind of behavior. This supports the earlier assumption about globalization as expansionary regionalization rather than movements and flows around the globe. Capital is not drifting around the globe in a footloose manner - people make the decisions. Decisions depend on trust between people. Borders are central to our understanding of globalization. Judicial, political and economic issues are of importance, but equally central are the mental and cultural borders between people.
53The planning of Expo 98 is another example of the shift in urban policy. The exhibition area crosses the border of two municipalities, which under traditional planning circumstances would have caused a series of 'time prolonging' - democratic - discussions. To avoid this, a public-private partnership, Parque Expo 98 SA, was established by the central government (Fadigas, 1999 ; Silva, 1999 ; Seixas, 1999). The result is a transformation of an old harbor area into an urban development project (UDP). The project was seen as a opportunity to "to both modernize and internationalize Lisbon" (Parque das Nações, 2004). Expo 98 shares much in common with other UDPs throughout Europe. In the past two decades local European authorities - alone or with the private sector - have used large-scale UDPs : "… as a part of an effort to re-enforce the competitive position of their metropolitan economies in a context of rapidly changing local, national, and global competitive conditions. In many cases these projects were supported by a majority of the local constituency, or at least by a silent majority. In other cases, they were initiated by means of "exceptionality" measures, such as the freezing of conventional planning tools, bypassing statutory regulation and institutional bodies, the creation of project agencies with special or exceptional powers of intervention and decision-making, and/or a change in national or regional regulations. On occasion, national governments became the main developers setting aside both local authorities and constituencies" (Swyngedouw, Moulaert & Rodrigues 2002, p. 543).
54Expo 98 is no exception : a space where property speculation, the new bodies of urban governance, the new economic policy, and the state melt together. According to Swyngedouw, Moulaert and Rodrigues’s study of thirteen large-scale UDPs in twelve European Union countries UDPs - like Expo 98 (and Ørestaden and Holmen in Copenhagen) : … accentuate socioeconomic polarization through the working of real-estate markets (prices rises and displacement of social or low-income housing), changes in the priorities of public budgets that are increasingly redirected from social objectives to investments in the built environment and the restructuring of the labor market (ibid, p. 543).
55This is a clear case of prioritizing production over reproduction (Katz, 2001). The new corporate bodies of urban governance that emerged during the 1990s have made influence through traditional representative democracy more difficult. The introduction of public-public and public-private partnerships during the 1990s was central to the turn towards market oriented planning in Lisbon, Copenhagen and the rest of Europe. The establishment of these corporations gave private capital a stronger position in decision-making, with increased transparency for the companies involved and a corresponding opaqueness for the public.
56The planning of Expo 98 serves as an icon of how the new urban governance in Lisbon and globalization of the commercial property market are connected. However, Lisbon is not alone. Together with Ørestaden and Holmen in Copenhagen and other large-scale UDPs throughout Europe, Expo 98 can be characterized as a playground for capital and attractive economically strong people in the globalized economy.
57Lisbon has experienced regional rescaling of its commercial property markets. On closer inspection, the vast majority of cross-border real estate investments in Portugal are European, though extensive use of offshore banking makes the geographical mapping of investment rhythms and patterns complex. Although 'global money' has made instant cross continent investments possible, this study suggest that geographical proximity, historical and political nearness and cultural identity are important elements in the social practice of urban political economy, and therefore central to the historical geography of fixed capital investment in Lisbon. From 1996 to 2002 UK was the investor or receiver of more than half the foreign direct investments in 'real estate' -in and out of Portugal. Moreover, there are substantial cross-border commercial property investments between Portugal, Spain, France, and Germany some of which flow through offshore banks. These observations support the conclusion of earlier studies, showing that the patterns of investment in the commercial property market in Lisbon are regional rather than ‘global.’ Similar patterns of investments were found in the Copenhagen case, where Swedish investment accounts for a large share of foreign direct investment. This conclusion supports one of the strongest arguments raised against the exaggerated claims of the globalization hype concerning ‘the death of distance’ and ‘the end of geography’, namely that the vast majority of ‘global’ exchange is upon closer inspection regional exchange.
58Marked changes towards urban governance in the past 10-15 years has facilitated investments in fixed capital. The fixed nature of these markets place them strategically at the heart of Lisbon new territorially competitive urban politics. These changes are intrinsically tied to the new rescaled economic politics of Portugal towards EU. The Urban Development Project Expo 98 exemplifies how ‘new economic policy’ and the ‘new urban governance’ are materialized as an urban topography, where actors in the ‘new economy’ find commercial property investments and central location in the city. Though Lisbon remains the most centralized country in EU, urban governance is undergoing rapid change. A shift away form top-down management of urban space to more open systems can be identified - with multiple actor structures characteristic of urban governance.
59Together the study of rescaling of commercial property markets and changes towards urban governance in Lisbon supports the view of the economy as "relations, the economic process as conversation and coordination, the subjects of the process not as factors but as reflexive human actors, both individual and collective" (Storper 1997b). These relations of new governance networks have had asymmetrical consequences, however, benefiting private capital more than local levels of government and ordinary people in the city.