In the finest traditions of blinkered motorsport reporting, today there are stories about there being a Grand Prix in Portugal, at the fabulous Portimao circuit in the Algarve. It is a great idea, but the one thing missing from the theory is a very large sum of money.
The F1 world tends to live in a vacuum and has failed to notice that Portugal is in a financial mess. Bankruptcies last year were up by a staggering 83 percent in the first half of the year and Parkalgar, the company that built Portimao, has been in trouble with its primary financiers: the Banco Comercial Português and construction company Bemposta. Among the other creditors are the Formula One group, which is owed $4 million for GP2 races that took place there years ago. The circuit has adopted a revival plan which will include a cut in staff, but it is also having to cope with no further help from the various tourism bodies and councils that had been keeping the business afloat. There may be some government money forthcoming to get Bemposta to finish construction of a hotel and apartments at the track, but there is no guarantee that there will be any buyers as the real estate market at the moment in the region is disastrous, added to the fact that there will be fewer races held so less demand for the accommodation from racing people.
The planned technology park in on hold because of lack of interest. The local authorities have huge debts, to such an extent that they do not have cash for the most obvious tasks, such as investing in the cruise ship port which needs to be upgraded and could bring in 250,000 high-spending tourists a year at far less cost that a Grand Prix. Other events, such as the Alpari World Match Racing Tour yacht event, have been called off because lack of money. The local council wants to try to solve problems by borrowing its way out of debt, but funds from the Plano de Apoio à Economia Local (PAEL) are being used to pay old debts that date from as early as 2007. At the same time there are reports in the region of the councils having to merge hospitals because of lack of cash.
The government has introduced a Revitalizar programme that created a $250 million fund to help businesses recover from financial difficulties, but there are around 30 businesses that have qualified for funding and Portimao is just one of them and the money would inevitably go to pay debts, rather than being risked on an F1 race.
All things considered it is highly unlikely that Portugal will be able to afford to pay for a race until there is a very good reason to do so, perhaps the arrival of Antonio Felix da Costa in F1 would help, but Red Bull’s idiosyncratic handling of its youngsters can lead to an apparent rising star becoming a has-been overnight.
The suggestion that there could be a race in Portugal is thus pretty tenuous. Turkey is not going to pay and there are no signs either that France will offer the kind of money that F1 wants to take. The teams are also beginning to baulk at 20 races, saying they would prefer fewer, with some more testing.
joeblogsf1 
Do you think Valencia would be the most likely circuit to bring it back up to 20? Barcelona seem to be hinting that they still have a contract to run the Spanish GP every year despite sharing “agreements” and while money is an issue, if anything is going to overcome common sense it is Spanish interstate rivalry.
Valencia is gone.
I heard it is awful now at Valencia circuit.
In more senses than one Joe.
Joe,
Just one point on the hopes of the Portuguese local authority to make money from cruise passengers. Business friends in the Caribbean tell me that visitors from cruise ships spend surprisingly little money indeed at their call ports. Typically, they will buy a couple of post cards and a few drinks/ice creams. The only folks who gain are the local short tour operators, attraction owners and the port authorities from mooring fees etc. The cruise industry has actually had a very negative effect on the income to the general tourism industry in the Caribbean. I don’t see why it would be any different in Portugal.
At recent testing visits to circuits in Spain and Portugal, the circuits are looking deserted and have a smell of desperation about them. Hence I agree with you, Portugal is a non-starter.
Wilson
If that is the case why are so many places building cruise ship terminals in an effort to get the cruising dollars?
The number I have came from the local politicians down there and they have no reason to make that up. Do they?
Joe,
The local authorities rake in all the mooring fees, bunkering costs and lighterage, which is a considerable amount of money and maybe a proportion of that hits the pockets of local politicians, hence their enthusiasm.
The two examples I was quoting from were Bermuda and Barbados. I know the folks who own/owned the large upmarket department stores at each location and various hotels as well. They all say that precious little money is spent by visitors from cruise ships. Triminghams in Bermuda, the inventors of Bermuda Shorts, actually closed their shop on Front Street and have gone internet only. They definitely blame the cruise ships, as folks now live and shop on the ships rather than stay in hotels and shop locally. A number of hotels have closed in the US Virgin Islands as well, due to lack of visitors.
US ships in particular, buy very little in the way local produce.
Wilson
Australian cities have started following US city figures stating that superyacht facilities make far more money than cruise ship terminals. There’s been a lot abandoned around the world. I know nothing about the situation in Portugal though.
I live where many super yachts are made and berthed. I can tell you that there are a lot for sale, and have sat in the water for many years. The trend, at least where I live, is that people are giving up their super yachts and downsizing, with 50 foot or less being the desired size. Super yachts are still being made, but at a slower rate and fewer in number. Our town relies on yachting throughout the year, and if you have a place to berth or tie up, boaters will spend the dollars.
The vast majority of the world’s superyachts are for sale at any one time; with varying degrees of seriousness, and that hasn’t really changed in the last 5 years. If you look at the figures coming out of the industry, business is good, there is a shortage of experienced crew, and wages for those working on yachts that are 30 metres plus are steadily increasing (unlike most industries in Europe), and new Marinas are being built in the med with private money to cope with the shortage of berthing. Not usually signs of an industry in crisis
Andrew has it bang to rights. They seem especially for sale when another boat yard leaks they’re commissioned to build a bigger and longer one, see Larry Ellison and “Rising Sun” 🙂
Politicians making stuff up? Surely not…
Strictly speaking, rather than actually making numbers up, politicians cherry-pick figures they like the sound of, and then use them out of context. The effect can be much the same, however.
Muito obrigado, Joe. A shame this track isn’t on the calender….
Didn’t Red Bull and Lotus criticise mid season testing after Mugello in 2012? Which teams do prefer more testing and which don’t want it all?
Perhaps I missed it, but what happened to the talk of Austria? That looked briefly hopeful…
No-one wanted to pay.
So when we look at this “news” getting out who has to gain from it?
– off course the media talking about it get some readers
– Bernie might be happy to show there are many interested in races, esp. after Australia (once again) talks about how it might be too expensive. And if there still is any chance of either France or Turkey (or Austria) finding the money to stage a race, this might spur them on to dig a bit deeper.
– the track owners might like being in the news in a bit of a positive way, especially when looking at selling some of their assets to pay off debts, or when needing to refinance.
I see how its pretty unlikely that if Austria can’t find the money (despite Red Bull being positive of it), and France is unable to pay up the needed amount, a near broke Portugal is even less likely to do so.
I doubt Bernie is mentioning Portugal for any reason other than stirring the pot as he tries to squeeze some cash from someone else. I also doubt that he thinks a race will happen in such circumstances. Perhaps his people have looked into the Portuguese economy, perhaps not.
As to the media, it is not a question of gain. It is a question of needing to fill empty spaces, every day. What I was remarking upon is that this is being done without any thought or research being involved.
Do you think they’ll take less cash from someone just to have a 20th race?
Otherwise bit of gap in the calendar.
No, I don’t believe they will
Joe, you are spot on with that comment. It is my impression that what BE doesn’t say is more important than what he does say. I agree that he is probably artificially inflating the demand, in order to get the established venues to toe the line.
“Bernie might be happy to show there are many interested in races, esp. after Australia (once again) talks about how it might be too expensive”
Speaking of which – we must be due for the annual Bernie off season headline – “Melbourne must become a night race or it will be dropped”
I was totally expecting the article to consist solely of the following three words:
“Because they’re broke.”
END.
As a Portuguese I say that, whoever came up with this idea, hasn’t been in Portugal lately. We are in the doldrums financially and it won’t improve any time soon. For instance, car sales fell 40.8% last year after having already fallen 30% in 2011. Austerity rules in this country. People have to save money and they won’t take it lightly if someone (never mind the government) ‘wastes’ money in racing. Unless they are private companies, whom most of them are struggling with cash flow and debt. If I correctly recall, not even back when money existed the government wanted to cough up some cash to keep the race in Estoril, never mind right now. The only chance I can see for that to happen is if someone in Britain decides to come up with the cash…
I was watching a documentary about how in the North (I forget where) because of the proximity of another town across the border in Spain, it is faster to get medical attention to drive the 30 miles, than it is to wait on emergency services which have been cut to less than a skeleton. Saddens me deeply how little is known how vital services are being devastated in the name of these bailouts. Portugal has truly been beaten up, and left bloodied in the gutter as the rest of Europe walks on by. When you consider that until very recently, France was a nett recipient of EU funding (this sort of thing is why the UK erroneously gets a bashing for having negotiated a “rebate” – we were hacked off that rich countries were recipients, then “gave back” the “rebate on a promise of CAP reform which never happened) you have to question the morality. I tend to feel we’re in a post – moral “union”, though. 😦
I can only agree to this article and Daniel, also even if there’s money to pay for the GP, who the hell in this country has money to pay for such high-priced tickets? People are already looking for ways to make the trip for the WRC at Algarve a lot cheaper, I know someone who went from Porto to Faro back int 2012 only using the national roads, to avoid paying taxes on the freeway. I can only think Bernie is talking about Portimao, as Joe said, to stir things up a bit and see if there’s anyone stupid enough to pay his unbelievable high-priced demands for being part of the calendar.
I’m portuguese and I have a different opinion. It’s true that company Parkalgar has a debt of 160 M€ in BCP bank for building this circuit, that already had a haircut of 40 M€. The wrong decision was to build the circuit in the first place, back then Portugal had a socialist spender govennment, that at some point took control of the management of a private bank (BCP) for some obscure reasons. However, I can’t understand how someone who already spent 160 M€ won’t spend another 10 M€ to host a F1 race. This would trigger the image of the circuit, put it in the route of winter testing circuits, host more races for fewer fees, and bring operational rentability to the day by day management. I’m sure economic viability of the circuit would be in the interest of creditors like BCP itself.
Also I think that this event would be a massive ticket selling success. The biggest challenge would be the significantly reduced visibility of F1 in Portugal following the change of TV transmissions to a pay-per-view channel. Also it’s true that people have less money and save more, however there are about 6 big indie music festivals in Portugal during the summer with prices around 100 eur for 3 days, and they are always hugely crowded with youngsters. So the crisis and the “saving money” is also a matter of focusing on the right priorities.
This could change if Felix da Costa gets the 3rd pilot role in Toro Rosso, and would be allowed an one-off race in Portugal during this next season.
But even if that doesn’t happen, just the fact that the event would take place in the Algarve summer peak of July, knowing that the majority of tourists are brits, is a garantee that there would be just enough demand to pack the grand stands.
One problem is that public opinion wouldn’t accept very well that the government would be the promoter, because the focus is on finding out how to cut public expenses. There is a public Tourism Institute that has a budget to promote the image of Portugal through whatever means (media, etc), but the ideal would be finding out a private investor, or a joint venture of that investor, along with the bank BCP and the Institute of Tourism.
I grew up in small coastal town whose council was dominated by hoteliers. I have early memories of my father lobbying against the extravagant proportion of civic budgets used to promote our town. Tourism can be good for a economy, but not when it diverts monies from essential programmes. In recent years (when I left this town had a permanent population of not much more than 80,000) untold millions had been spent on art galleries the like of which I cannot imagine have but curious interest if you are a student (moreover, the original homes for said collections had been let to disrepair no doubt as money was siphoned to promoting the hoteliers’ interests) and other totally marginal “regeneration” projects. But if you go there, there is a simply uncomfortable and unpleasant, disturbing sensation of urban decay and poverty. When finally my father decided he was too old to fight once again (he’d campaigned against this over and over across decades, literally mailshotting every home time and time again, buying adverts in local press, so on) they managed to spend 10 million on what was a single story *prefab* “Exhibition center” that was on covenant protected parkland, denying the public some much used hard tennis courts that provided for winter play. In the same park as a well televised international tournament (which incidentally was revived in the mid 1930s by my father at his own expense, a long buried glitch in the town’s marketing notes)
I guess I am simply very suspicious of tourism boards and promotions related thereto. Portugal is a wonderful country, and I am quite sure in this day and age that social media and other forms of direct promotion are far cheaper and better channels to encourage visitors. Social media is just that more effective, when you have a connexion to the place you visit, and the people you’ll meet. Time to stop bailing out dubious property developers.
Well a few remarks…first not 10 M€ to host the race, but more likely 40 M€. This investment would not bring anything back to the track except more debt. They pay FOM get the race, but all the track publicity money goes to FOM…only tickets go to the track. Doing the math…you’d need a lot more spectators than the track has capacity for.
Second thing “put it on the route of winter testing”…it’s not a great testing track. Estoril is much better…
Third “host more races for fewer fees”…the tracks pay to host races. That’s why GT1 and AutoGP don’t go there anymore, the track can’t afford it. The track gets their money back from the tickets they sell, have you been to Portimao for a race weekend? It’s always deserted.
The last thing is, is you look at tv viewings and compare them with the amount of people who follow motorsports news as fans you’ll notice that there is significantly less people following it as “addicts”. This to say the amount of people willing to go to a race is much lower than those willing to watch it on television, hence the “reduced visibility in Portugal…because of pay-per-view tv” isn’t really true or of relevance.
Reminds me of the stories about Greece looking at GP … together with Portugal and ‘PIIGS’ might fly.
Is Bernie finally (but ironically, prematurely) reaping what he has sown? We still have not heard how a destitute Nurburgring is going to stage a GP this year, though Bernie says it will all be ok? France, Turkey and Valencia can’t/won’t pay, Spa is on a knife edge that was to be blunted by sharing with France, but that’s out, so how long can it continue on it’s own? Silverstone always seems to be lurching from one new financial lifesaver to the next.
Whilst to me, for several years, this situation had looked inevitable due to the eye-watering and annually incrementing, fees demanded by FOM and co, it is unfortunate that it has happened so quickly and been exacerbated by the financial collapse of, well. the all countries involved, (but really the banks and the greedy few that ran them like casinos and champagne bars, in particular derivatives traders who devised geared instruments so complex that they never understood them themselves. )
Would a different F1 financial structure have allowed the GPs to continue throughout europe?
Possibly yes is my view. An arrangement that did not include a pure profit extraction by an outside enterprise (CVC et al) could have fees lowered to an affordable level and allow racing in every country.
The current F1 financial structure is dangerous for it’s long term survival, not only because of the problems highlighted here but also because it does not rely upon anyone watching it to generate money.
Hi rpaco, I believe the tragedy of Bernie is that his arrangements always balanced on his choice of fulcrum: his own control. He’s handcuffed to the teller, and to mix my metaphors, this ship is a shark that needs to keep swimming. I may have spent as much time thinking how I may bow out of my work / business, as I have how to grow it. Maybe because my late BP passed just as I finally had accepted and understood his argument that the near total control I exercised was preventing natural growth. In cruel irony, he passed as that second act was about to begin, so thats why I’ve thought about how to bow out so much. I wonder how much Mr Parr’s departure was entwined with an idea that Parr could have posed a successor threat. Anyone who can argue Dame Shirley Porter’s side and get a result, most certainly is a threat. Anyone with the private ear of Frank W is going to have a lot of invaluable guidance . .
We all know that F1 is a global shop window of marketing hence the huge sponsorship deals just for the drivers and teams. Portimao (& The Algarve in general) or any other touristic region of any country would benefit but probably only in the short term.
Local hotels, restaurants and bars would be benefit during the period of testing and the qualifying race weekend itself, before and after that, back to square one. BUT july 21st is already a busy time for tourists anyway. The main beneficiary would be the track, who needs it, but obviously can’t afford to host it. Pity it won’t happen!!
It’s ashame because it is a great facility but seems to be wasted in th Algarve with so few high profile racing events taking place.
My question – Surely the TV companies, in UK, SKY & BBC, are paying for 19 or 20 races?
Therefore, if only 18 races, they would be entitled to a refund on their yearly fee?
Surely the total amount paid by all the broadcasters per GP is greater than the costs involved in staging the race?
Therefore, surely cheaper to subsidise a race than reduce to only 18 races?
Let’s summarize which tracks do have some sorts of financial problems: Nurburgring, Hockenheimring, Silverstone, Valencia, Suzuka, Spa, Yeongam, Melbourne, Sepang. Shanghai never broke even. There is also no French, Austrian, Turkish, Portuguese, Argentinian or Dutch track ready in terms of money to hold the F1 race. Constant questions over Canadian Grand Prix. Bahrain is neither safe country nor venue providing good racing. So, how many races are left and can be seen as a part of calendar in the long term? 5-6? Thank you Bernie very much!
I don’t know why or how JC can say that Estoril is a better Winter testing track. Number one, Portimao is a much better circuit than Estoril and Number two, usually the weather in the Algarve is much better than in Estoril.
Therefore Portimao has to be the best option for F1 Winter Testing.
Except it is in deep financial trouble.
well, so is Estoril, just not as bad, or at least not as publicized. some may not know or just forgot that estoril had to be rescued by the government not that long ago
I do realise the problems at Portimao. I am a local hence my response to JC & Estoril. I just want to see more going on here. As you say Joe it is a great facility…………………………and unfortunately mostly unused!!
I know a few race engineers in F1 and a former F1 sporting director who have tested there and say it isn’t a good test track. It’s a good race track (good for spectacle), while Estoril is both good for setup work and for reliability.
It is a great facility and the track is super, but they don’t have any money.