Espirito Santo’s Losses Reverberate in Portugal’s HamptonsHenrique Almeida
Luis Rocha came to the Portuguese village of Comporta as a 2-year-old and he was working in the local rice fields before he’d even hit double figures.
About two decades later, he was employed by the Espirito Santo family after it bought the farmland in the late 1950s. Between stints carrying 100 kilogram bags of rice, Rocha watched the surrounding area of sandy beaches and fishermen’s huts turn into a playground for one of Portugal’s richest dynasties and the ensuing throngs of wealthy tourists.
Now the latest chapter in their entwined history is unfolding. As creditors sift through the wreckage of the country’s biggest corporate collapse in a generation, a few weeks ago Rocha noticed the name of the family’s bank, Banco Espirito Santo SA, was being removed.
“A few men came and changed the name of the bank to Novo Banco,” said Rocha, an 86-year-old pensioner who likes to while away the days chatting to friends on the steps of the branch in the early winter sun. “There is talk that the family will have to sell the land. Jobs will be lost.”
Portugal is struggling to shake off one of the darkest periods in its financial history. The country completed a three-year international rescue program in May, only to find itself bailing out Banco Espirito Santo to the tune of 4.9 billion euros ($6.1 billion) three months later.
Some of the 1,200 or so residents of Comporta are starting to think the worst might be yet to come for them.
The family’s Espirito Santo Group used the bank to finance a web of holding companies with businesses that ranged from a soybean farm in Paraguay, a diamond mine in Angola and real estate in Brazil. There was also Herdade da Comporta, the company that owns the farmland, rice fields and the houses and hotel complexes still to be finished.
“Many of us don’t understand what happened, but we all feel sad,” said Isidora Valentim, owner of the only convenience store in Comporta as she stood next to newspapers that still carry the name Espirito Santo on the front page. “It’s as if we share their pain,” she said.
Rioforte Investments SA, part of the Espirito Santo Group, is now looking to sell Herdade da Comporta. The family is looking for a “quick solution,” Caetano Espirito Santo Beirao da Veiga, who has been in charge of some of the businesses since the collapse of the bank, said in an interview on Nov. 21.
Ricardo Espirito Santo Silva Salgado, the former chief executive officer of Banco Espirito Santo, is scheduled to attend a parliamentary inquiry on the collapse of the bank and Espirito Santo Group on Dec. 9.
“Of course people are worried,” said Beirao da Veiga. “They will be worried until they see this resolved.”
The 125-square kilometer (48 square-mile) estate, flanked by a 12-kilometer stretch of sandy beaches south of Lisbon is dotted with pine and cork trees, a vineyard and a wine cellar overlooking green rice fields.
The Espirito Santo family, whose role in Portuguese finance goes back to 1869 when Jose Maria do Espirito Santo e Silva started trading credit securities and lottery tickets from a small street in Lisbon, has been coming to the rural backwater since acquiring the rice plantation.
Locals came to rely on the largesse of Portugal’s last banking dynasty and one of the country’s biggest landowners for employment, either directly on the land or indirectly by opening hotels and stores to cater to the influx of wealthy visitors.
Last year, the Espirito Santo family announced plans to build a resort in a pine forest near the beach about 13 kilometers south of the village. The 92-million-euro project would feature an Aman Hotel and spa, an 18-hole golf course and villas aimed at overseas buyers.
“When I was younger, the town had a bakery, a grocery store and a handful of farming huts,” said Rocha. “Today there are mansions, hotels and boutique stores that get filled with tourists in the summer.”
Mandy de Azevedo Coutinho, who runs villa rental operator Almond Blossom, said Comporta has become the refuge of the famous. French shoe designer Christian Louboutin can be seen strolling around the village in the summer.
“This place is popular with famous people because it reminds them of Ibiza in the 1980s or the Hamptons in the 1990s,” Azevedo Coutinho said. “They are attracted to the low-key existence, to the simple charm of Comporta.”
Days after the collapse of Banco Espirito Santo in August, grocery store owner Valentim remembers seeing members of the family in Comporta. About 120 kilometers north in Lisbon, politicians and regulators were trying to contain the damage caused by the downfall of their business empire.
Many of its components requested creditor protection and are now being groomed for sale to help pay off debts. That includes Rioforte, which on Oct. 10 agreed to sell a 51 percent stake in Portuguese hospital operator Espirito Santo Saude to Shanghai-based Fosun Group.
Rioforte estimated in its 2013 earnings statement the Comporta estate and its assets are valued at 174 million euros. A Luxembourg court today confirmed its Oct. 17 decision to reject creditor protection for Rioforte, which had appealed.
“In the end, the goal is to try to sell everything and pay off creditors,” Beirao da Veiga said in the interview. There’s been interest in Herdade da Comporta and “whoever buys it will restart the construction work,” he said.
Meanwhile, the iron gates at the entrance to the construction site of the Comporta Dunes resort were wide open on Nov. 18 with no construction activity in sight. The fear is that some of the projects that were underway will stop and jobs will go, said Alcidio Gomes, who grows rice on the 8 hectares of land he rents from Espirito Santo family.
“Some of my family members work for the Espirito Santo family. Will they be able to keep their job?” said Gomes, 60. “I don’t know if the new owners will allow me to continue to farm on this land.”
For now, dozens of Espirito Santo family members still own second homes in Comporta. Many of these properties were converted from fisherman’s huts into mansions.
Rocha, the pensioner, holds fond memories of the early days of the family’s involvement in the village.
He recalls “escaping” to work on the Tagus Bridge project when he was about 30 before the family got message to him that they wanted him to return as a supervisor in the rice fields. Rocha declined, he said, because of an injured back from carrying the rice when he was younger. So the family offered him a space to set up a fruit and vegetable store.
Rocha, who relies on crutches to walk, says he doesn’t feel sorry for the younger Espirito Santo family members whose businesses today are falling apart. Many of them became “dazzled” with so much money and ended up making the wrong decisions, he said.
“I feel sorry for those who worked hard to build all these businesses only to see them fall apart in a matter of months,” said Rocha, shedding a tear. “But that’s just the opinion of an old farmer who doesn’t know how to read and write.”