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Portugal
has modernized and enjoyed steadyeconomic growth
within the European nion. today,itis closing the developmentgapand
building its futureon exports, tourism and private investment
Strong ties with Europe offer the best prospects |
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An independent
state since the 12th century, Portugal has spent
much of its history facing away rom Europe and
towards the Atlantic Ocean. One of the great seafaring
nations, it ventured out to seekits fortune in
the wider world, pioneering the Age of Exploration
and establishing a vast trading empire that extended
from Africa to Asia and South America.
The curtain fell on the Portuguese Empire at the
end of 1999, when the last of the country’s
colonies reverted to China.
Ties with Africa and Brazil remain, but modern
Portugal sees its future firmly in Europe. Portugal
joined the European Community (EC), the forerunner
of the European Union, in 1986. In 1999, it became
a founding member of the Eurozone, replacing its
national currency, the escudo, with the euro in
2002. Portugal has twice held the EC/EU presidency,
and today the head of the European Commission
is a Portugese, José Manuel Barroso, who
relinquished his job as Prime Minister to take
up the post.
The economic benefits of Portugal’s membership
in the EU have been enormous.
Over the years, a huge inflow of EU structural
and cohesion funds has enabled the country to
boost its economic performance through extensive
modernization of its infrastructure. In the six
years up to 2006, Portugal will have invested
almost 50 billion euros (more than $60 billion)
in regional development projects, with half the
amount provided by the EU.
Soon after joining, Portugal became Europe’s
fastest-rising economy, and for much of the 1990s
enjoyed growth above the EU average.
Foreign trade remains central to the Portuguese
economy, accounting for more than half of GDP
over the last decade. EU states – notably
Spain, Germany, France, Italy, and the United
Kingdom – are the country’s main trading
partners and the leading source of the significant
foreign direct
investment it has received. At the same time,
Portugal supports strong ties between Europe and
the United States. It is a founding member of
NATO, and has given strong backing to U.S. policy
on Iraq. The Portuguese economy has followed the
European trend, becoming diversified and increasingly
service-based. New technologies have been introduced
to modernize the agricultural sector and raise
production levels. In industry, production of
automotive components, electronics and pharmaceuticals
is gradually shifting the balance away from the
dependence on traditional products such as textiles,
footwear, ceramics, and cork. Tourism represents
approximately 8 percent of the GDP, providing
employment for one in ten of the labor force.
The sector is being upgraded to |
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the country a broader appeal, with the
aim of attracting visitors to areas beyond
the beaches of the Algarve and to get
them to come throughout the year.
Earlier this year, Portugal’s international
profile was considerably enhanced when
it successfully hosted the threeweek European
soccer championship in June—an event
on which it spent millions of dollars,
building new stadiums and related infrastructure,
and from
which the tourism industry is expected
to benefit for years to come.
Driven by rising demand for Portuguese
exports from its EU partners, economic
recovery is under way after a downturn
in recent years. GDP, which shrank by
1.3 percent in 2003, is forecast to grow
by 1.4 percent this year.
The relationship with the EU remains at
the heart of the economic and foreign
policies of the government of Pedro Santana
Lopes, who was appointed as Mr. Barroso’s
successor as premier in July. The former
Mayor of Lisbon has declared that his
focus will be on consolidating the national
budget and on investment. A prime objective
is to meet the |
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The
historic city of Porto, famous
for port wine, is one of the countr
y ’s leading industrial
and economic centers |
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terms
of the EU’s Stability and Growth Pact, which
requires Eurozone members to keep their public
deficits below 3 percent of GDP.
Over the past decade, Portugal has privatized
state-owned enterprises, and key areas of the
economy such as the financial and telecommunications
sectors have been liberalized.
Recent structural reforms are aimed at increasing
the country’s competitiveness and creating
an optimum business environment. These include
a new Labor Law intended to make the labor market
more flexible, a reduction in corporate tax rates
to 25 percent, with a further reduction to 20
percent from 2006 onwards, and administrative
reforms to ease company licensing requirements. |
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Reforms have been
introduced and taxes
cut to increase
competitiveness
and create the best
possible business
environment |
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Mr. Santana Lopes has pledged to continue
with the privatization program. Sale of
state property outlined in the 2004 budget
would raise 1 billion euros ($1.2 billion)
this year alone.
On the list is part privatization of the
national oil company, Galp Energia, and
the national energy grid REN, and a further
reduction in the state’s remaining
stake in Electricidade de Portugal (EdP),
the largest electric utility in Portugal
and one of Europe's major electricity
operators.
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Portugal has actively promoted the liberalization
of the energy market, and has been working with
Spain on the creation of an integrated Iberian
electricity market (see article, page 3). |
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