Portugal bets on data centers and tech to move beyond tourism

Portugal intends to diversify its economy with tech rather than relying on seasonal tourism. A $9.9 billion data center called Start Campus is already in the works in the coastal city of Sines to that effect.

Portugal’s economy has always leaned heavily on tourism, with its sunny beaches and surf towns attracting millions of tourists each year. But in the coastal city of Sines, two hours south of Lisbon, the government is trying to replace the port and power plant the city is known for with servers.

Portugal’s entry into the tech industry

The Sines coast has a web of undersea cables connecting Europe to Brazil, Africa, and soon, South Carolina through a new Google link. These connections make Sines a natural gateway for data traffic across continents. Now, Portugal intends to use that advantage to build an economy that’s less vulnerable to seasonal tourism.

The main example of Portugal’s entry into the tech industry is Start Campus, an €8.5 billion ($9.9 billion) data center that could become one of the biggest in Europe. It opened its first building in March and will host cloud and computing services for clients across the continent.

Tech giants Nvidia and Microsoft have already agreed to lease space in the facility. By 2030, the site is expected to include six buildings, all running entirely on renewable energy.

The data center is located next to an old power plant that represents Portugal’s failed attempt in the 1970s to make Sines an industrial hub. Residents of the city remember the surge of workers that arrived in the 70s to build the port and refinery.

Unfortunately, after the 1974 revolution, Portugal lost its colonies, and many of those industrial plans collapsed. The refinery from that time is still running today, but the power plant shut down in 2021 when renewable energy became cheaper.

Now, parts of that old infrastructure, like its cooling systems and seawater pipes, are being reused to support the new data center.

Locals have reasons to be skeptical of the government’s plans

Residents of Sines remember when a surge of workers arrived to build the port and refinery in the 1970s. However, the economy stalled soon after, and many of those newcomers eventually left, taking their earnings with them.

This time, Portugal’s government estimates that projects in the area, including the data center, a €2 billion battery factory by China’s CALB Group, and a port expansion, add up to investments that are equal to 4.6% of national GDP and could create more than 5,000 jobs.

The Minister of Economy, Manuel Castro Almeida, referred to Sines as “the heart of the transformation of the Portuguese economy.”

To attract foreign investment, the government has offered incentives such as up to €350 million in funding for CALB’s battery plant. Once completed in 2028, it is expected to produce batteries for more than 200,000 electric vehicles each year and employ 1,800 people.

The Port of Singapore Authority is doubling the capacity of the deepwater terminal to strengthen Portugal’s position as a logistics hub between Europe and the Atlantic.

Still, residents are worried that the promised growth will only cause strain for locals. Housing shortages in the city are already severe.

Transportation is another problem, as plans for a new highway and rail links to Spain are already years behind schedule. Freight trains remain slow, and there is still no passenger rail service to Sines. Pedro do Ó Ramos, head of the Port Authority, says the lack of modern infrastructure limits the port’s potential.

“I was told for years there wasn’t enough traffic to justify a highway,” he says. “But today there’s already too much.”

Locals insist that despite the billions in investment, the town still struggles with poor infrastructure and limited public services.

If you're reading this, you’re already ahead. Stay there with our newsletter.