Land of Miranda, State and EDP – Local costs and private benefits

  • Óscar Afonso
  • 16 April 2021

The State chose to be a sponsor of national territorial inconsistency, when it claims, and very well, territorial cohesion among countries in the European Union (EU).

The State as a whole – central, regional and municipal – concerning the land of Miranda has failed. It has failed because it has allowed the Land of Miranda to have been continuously extracted and because it has not promoted, as it should, the exploitation of its potential. The State chose to be a sponsor of national territorial inconsistency, when it claims, and very well, territorial cohesion among countries in the European Union (EU).

We know that in 308 municipalities, the GDP per capita (that is, the wealth produced per inhabitant) of Miranda and Mogadouro is in positions 182 and 225, respectively. However, taking into account the wealth actually produced; i.e., also counting the action of the hydroelectric dams of Bemposta (municipality of Mogadouro), and Miranda and Picote (municipality of Miranda), the position of the GDP per capita of Miranda goes to 5th and that of Mogadouro to 25th. In other words, the average per capita GDP of the land of Miranda would practically double!

These values assure us, without any doubt, that the wealth generated in the land of Miranda is not transferred to the local population. Rather, it is extracted outside its territory. In the exploitation of this local natural resource, EDP prioritized its profit to the detriment of the population, it was so extractive that it did not even compensate the territory for the negative externalities that the hydroelectric dams produced. Just to name a few examples, agricultural production; in particular, of wine, started to require additional treatments and there are visible environmental damages.

EDP’s action benefited from the absence of a State that regulated the obvious market failure – in fact, the State allowed the extraction of local resources with damages – and, in “key” moments, as now, in the sale of the dam concession, it was present, it was active, promoting failure. In other words, by passivity or by action, the State has always contributed so that the wealth generated in the region has never been converted into local social capital. Perhaps for this reason there is a feeling in Portuguese society that Politics serves powerful private interests to the detriment of the community.

And what is the dimension of the wealth extracted in the Land of Miranda by action or inaction by the State? It is known that the sale value of the six hydroelectric dams, including the three in Douro International, had a financial inflow of 2.2 billion Euros. However, the amount charged by EDP corresponds, as always in these cases, to the current value of future profits from the concession. Assuming that the production of the six hydroelectric dams sold will continue at the level of the current annual average and knowing the concession period, it was possible to determine the gain of EDP per unit produced. In possession of this value and knowing the production accumulated by the three hydroelectric dams located in the land of Miranda, it is concluded that EDP removed more than 5 billion euros from the territory. Adding this amount to what corresponds to the current financial inflow of 2.2 billion, it can be said that EDP extracted 7 billion euros – indeed, the remaining three hydroelectric dams are not significantly profitable.

Just to have an idea of the greatness, these 7 billion euros correspond to eight Vasco da Gama bridges in Lisbon, to the budgets of the chambers of the land of Miranda – Mogadouro, Miranda and Vimioso – for 131 years, and the construction of 46 hospitals of 150 million euros each. In parallel, the region became impoverished and dehumanized.

An example of the impoverishment of the land of Miranda is the brutal fall in productive activity, which, in some productions, has fallen to less than 25% of the old value. An example of the respective dehumanization is the drop in the population that went from 45 715 inhabitants in 1950 to the current 19 338.

The Land of Miranda is not poor, but it is impoverished due to the collusion of the State, which has also failed to promote the exploitation of its potential. It is a land that is not limited to biodiversity and natural resources, but that is also distinguished by the unity of culture and that, as is known, is reflected in a language – The Mirandês. It is recognized by all that even these resources are underused.

Thus, while EDP was growing, the Land of Miranda was languishing and the State, in its entirety, was observing. Neither EDP nor the State was inclusive. EDP did not fulfill its commitment to sustainability, it was always extracting the natural water resource that the Douro transported. And the State that, by action or inaction, has always been complicit in extraction, has also failed to value its respective endogenous resources. The State chose not to promote the national territorial cohesion, which preaches so much.

The Mirandeses now expected that, with the sale of the dam concession, EDP would redeem itself and contribute to the improvement of the critical social mass, of the cultural and economic activity. Indeed, with the values of the transaction to which they should be entitled, the local authorities and the central State itself should bet on the elimination of the existing constraints, emphasizing the local economic activity that then valued the resources and potentialities, and that promoted the environmental qualification, the culture and language, so that job creation, the valorization of local resources, the boosting of economic activities and the attraction of firms and private investments could be a reality. Despite the previous evil, still, EDP would leave a good memory. But, unfortunately, with the complicity of the State, it seems that it does not want it to be so, despite formally assuming itself as a firm of social responsibility.

Now, in the EDP-ENGI business, the populations, whose destiny is naturally linked to their natural resources in all parts of the world (just to mention a very simple example, the beaches of the Algarve are the wealth that allows the Algarvians, and, well, to have a relevant GDP per capita), could not and should not be absolutely ignored and neglected in this final deal. But, unfortunately, they were.

Basically, in the land of Miranda, EDP did not want to “play” a positive-sum game in which everyone would win. EDP preferred, with action and omission by the State, to “play” a zero-sum game in which the luck of some corresponded to the unlucky of many. Unlucky of those who do not access political power, do not control the markets, do not finance electoral campaigns, and do not buy favors. Using the words of Acemoglu and Robinson, this is also why “Portugal fails” and moves away, in terms of purchasing power, from the EU average.

  • Óscar Afonso
  • President of OBEGEF and Professor at FEP - School of Economics and Management