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Portugal (05/09)


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For the most current version of this Note, see Background Notes A-Z.

Flag of Portugal is two vertical bands of green (hoist side, two-fifths) and red (three-fifths) with the Portuguese coat of arms centered on the dividing line.

PROFILE

OFFICIAL NAME:
Portuguese Republic

Geography
Area: 92,391 sq. km.; includes continental Portugal, the Azores (2,333 sq. km.) and Madeira Islands (828 sq. km.); slightly smaller than the State of Indiana; located in Europe's southwest corner bordered by Spain (North and East, 1,214 km.) and the Atlantic Ocean (West and South, 1,793 km.).
Major cities: Lisbon (capital, metropolitan area pop. 2.1 million); Porto (metropolitan area pop. 1.9 million).
Terrain: Mountainous in the north; rolling plains in the central and southern regions.
Climate: Maritime temperate (Atlantic-Mediterranean); average annual temperature is 61°F. Temperatures may drop into the low 30s (°F) at night during the coldest months, with daytime highs in the 50s and 60s. The remainder of the year is normally sunny with minimal rainfall. Days are pleasant, with temperatures seldom exceeding 95°F, except in the southern interior of the country; afternoons and evenings are breezy, with nighttime temperatures in the 60s and low 70s; May-October (dry and warm), November-April (cool with rain and wind in the north, mild in the south).

People
Nationality: Noun and adjective--Portuguese (singular and plural).
Population (2007 est.): 10.6 million. Ages 0 to 14 years--1.6 million (male 840,000; female 798,000). Ages 15 to 24 years--1.3 million (male 646,000; female 620,000). Ages 25 to 64 years--5.9 million (male 2,881,000; female 2,987,000). Ages 65 and over years--1.8 million (male 764,000; female 1,065,000).
Population density: 114 per sq. km. (44 per sq. mi.).
Annual growth rate (2008 est.): 0.8%.
Ethnic groups: Homogeneous Mediterranean stock with small minority groups from Africa (Angola, Cape Verde, Mozambique), South America (Brazil) and Eastern Europe (Ukraine, Romania).
Religion: Roman Catholic 92%, Protestant 4%, atheists 3%, others 1%.
Language: Portuguese.
Education: Years compulsory--9. Literacy (2004)--93.3%.
Health (2007 est.): Birth rate--10.59/1,000 (1.07 male/female). Death rate--10.56/1,000. Infant mortality rate--4.9/1,000. Life expectancy--77.87 years.
Work force (2008 est.): 5.6 million. Government and services (60%); industry and manufacturing (30%); agriculture and fishing (10%).

Government
Type: Republic.
Constitution: Effective April 25, 1976; revised 1982, 1989, 1992, 1997, 2001, 2004, and 2005.
Branches: Executive--president (head of state), Council of State (presidential advisory body), prime minister (head of government), Council of Ministers. Legislative--unicameral Assembly of the Republic (230 deputies): PS=121, PSD=75, PCP=11, CDS/PP=12, BE=8, PEV=2, NINSC=1. Judicial--Supreme Court, District Courts, Appeals Courts, Constitutional Tribunal.
Major political parties: Socialist Party (PS), Social Democratic Party (PSD); Portuguese Communist Party (PCP); Popular Party (CDS/PP); Left Bloc (BE); Green Party (PEV).
Administrative subdivisions: 18 Districts (Lisbon, Leiria, Santarem, Setubal, Beja, Faro, Evora, Portalegre, Castelo Branco, Guarda, Coimbra, Aveiro, Viseu, Braganca, Vila Real, Porto, Braga, Viana do Castelo); 2 Autonomous Island Regions (the Azores and Madeira).

Economy
GDP (2008 est.): €169 billion (approx. $228 billion).
Annual growth rate (2008 est.): 0.8%.
Per capita GDP (2008 est.): €15,945 (approx. $21,547).
Avg. inflation rate (2008 est.): 2.46%.
Services (gross value added 69.2%): Wholesale and retail trade; hotels and tourism; restaurants; transport, storage and communication; real estate; banking and finance; repair; government, civil, and public sectors.
Industry (gross value added 28.3%): Textiles, clothing, footwear, wood and cork, paper, chemicals, auto-parts manufacturing, base metals, diary products, wine and other foods, porcelain and ceramics; glassware, technology; telecommunications.
Agriculture (gross value added 2.5%): Livestock, crops, fish.
Trade (2007): Exports--€37.5 billion (approx. $50.6 billion): machinery and tools 19.8%; vehicles and other transport materials 12.8%; base metals 8.8%; clothing 6.9%; plastics and rubber 5.7%; minerals and mineral products 5.7%; chemical products 5.1%; food products 4.6%; textile materials 4.5%; wood pulp and paper 4.5%; oil products 4.4%; wood and cork 4.3%; agricultural products 3.9%; footwear 3.5%; optical and precision instruments 0.9%; skin and leather 0.3%. Imports--€57 billion (approx. $77 billion): machinery and tools 19.8%; minerals and mineral products 14.0%; vehicles and other transport material 12.0%; base metals 9.9%; agricultural products 9.0%; chemical products 8.7%; plastics and rubber 5.0%; food products 3.6%; textile materials 3.1%; clothing 2.8%; wood pulp and paper 2.4%; optical and precision instruments 2.1%; minerals and mineral products 1.6%; wood and cork 1.3%; skins and leather 1.0%; footwear 0.9%. Export partners--Spain (27.47%); Germany (13.2%); France (12.46%); United Kingdom (6.0%); United States (4.9%); others (35.6%). All EU-27 (76.41%). Import partners--Spain (31%); Germany (13.1%); France (8.46%); Italy (5.5%); United States (1.6%); others (40.4%). All EU-27 (75.4%).
U.S. trade with Portugal (2007): Exports--$2.4 billion: electrical machinery, telecommunications 37.2%; aerospace 16.5%; machinery and mechanical appliances, computers 9%; oil seeds and grains 4.9%; all others 32.4%. Imports--$3.1 billion: mineral fuels, oils 25.7%; electrical machinery, telecommunications 14.9%; vehicles and parts 13.2%; cork and articles of cork 6.1%; all others 40.1%.
Foreign direct investment (FDI, 2007): Incoming FDI by industry: manufacturing--29.1%; real estate, rentals and services to companies--25.5%; wholesale and retail--23.8%; financial activities--8.4%; transport, warehousing, and communication--5.2%; construction--2.0%; electricity, gas, water--0.8%; exploration industry--0.7%; agriculture, silviculture, and fisheries--0.2%; other--4.3%. Incoming FDI by country in Euros (total €30 billion; approx. $40.5 billion): Germany--19.9%; United Kingdom--15.5%; Netherlands--14.7%; Spain--13.0%; France--11.2%; Luxembourg--4.3%; Belgium--3.0%; Switzerland--2.9%; United States--2.6%; Ireland--2.1%; other--10.8%. Portuguese FDI abroad by country in Euros (total €12.3 billion; approx. $16.62 billion): Netherlands--37.2%; Spain--12.8%; Brazil--4.6%; United Kingdom--4.6%; Angola--3.6%; United States--3.4%; Turkey--2.3%; Poland--2.2%; Luxembourg--2.0%; Romania--1.4%; other--25.9%.
Exchange rate (October 24, 2008): US$1 = €0.74 EUR

HISTORY
Portugal is one of the oldest states in Europe. It traces its modern history to A.D. 1140 when, following a nine-year rebellion against the King of Leon-Castile, Afonso Henriques, the Count of Portugal, became the country's first king, Afonso I. Afonso and his successors expanded their territory southward, capturing Lisbon from the Moors in 1147. The approximate present-day boundaries were secured in 1249 by Afonso III.

By 1337, Portuguese explorers had reached the Canary Islands. Inspired by Prince Henry the Navigator (1394-1460), explorers such as Vasco da Gama, Bartolomeu Dias, and Pedro Alvares Cabral made explorations from Brazil to India and Japan. Portugal eventually became a massive colonial empire with vast territories in Africa (Angola, Mozambique, Cape Verde, Guinea Bissau, Sao Tome) and Latin America (Brazil), and outposts in the Far East (East Timor, Macau, Goa).

Dynastic disputes led in 1580 to the succession of Philip II of Spain to the Portuguese throne. A revolt ended Spanish hegemony in 1640, and the House of Braganca was established as Portugal's ruling family, lasting until the establishment of the Portuguese Republic in 1910.

During the next 16 years, intense political rivalries and economic instability undermined newly established democratic institutions. Responding to pressing economic problems, a military government, which had taken power in 1926, named a prominent university economist, Dr. Antonio Salazar, as finance minister in 1928 and prime minister in 1932. For the next 42 years, Salazar and his successor, Marcelo Caetano (appointed prime minister in 1968), ruled Portugal as an authoritarian "corporate" state. Unlike most other European countries, Portugal remained neutral in World War II. It was a charter member of NATO, joining in 1949.

In the early 1960s, wars against independence movements in Portugal's African territories began to drain labor and wealth from Portugal. Professional dissatisfaction within the military, coupled with a growing sense of the futility of the African conflicts, led to the formation of the clandestine "Armed Forces Movement" in 1973.

The downfall of the Portuguese corporate state came on April 25, 1974, when the Armed Forces Movement seized power in a nearly bloodless coup and established a provisional military government.

GOVERNMENT AND POLITICAL CONDITIONS
Portugal moved from authoritarian rule to parliamentary democracy following the 1974 military coup against dictator Marcelo Caetano, who embodied a continuation of the long-running dictatorship of Antonio Salazar. After a period of instability and communist agitation, Portugal ratified a new Constitution in 1976. Subsequent revisions of the Constitution placed the military under strict civilian control; trimmed the powers of the president; and laid the groundwork for a stable, pluralistic liberal democracy, as well as privatization of nationalized firms and the government-owned media. Portugal joined the European Union in 1986 and has moved toward greater political and economic integration with Europe ever since.

The four main branches of the national government are the presidency, the prime minister and Council of Ministers (the government), the Assembly of the Republic (the parliament), and the judiciary. The president, elected to a five-year term by direct, universal suffrage, also is commander in chief of the armed forces. Presidential powers include confirming the prime minister and Council of Ministers; dismissing the prime minister; dissolving the assembly to call early elections; vetoing legislation, which may be overridden by the assembly; and declaring a state of war or siege. The Council of State, a presidential advisory body, is composed of six senior civilian officers, former presidents elected under the 1976 constitution, five members chosen by the assembly, and five selected by the president.

The government is headed by the prime minister, who is nominated by the assembly for confirmation by the president. The prime minister then names the Council of Ministers. A new government is required to present its governing platform to the assembly for approval.

The Assembly of the Republic is a unicameral body composed of 230 deputies. Elected by universal suffrage according to a system of proportional representation, deputies serve terms of office of four years, unless the president dissolves the assembly and calls for new elections. The national Supreme Court is the court of last appeal. Military, administrative, and fiscal courts are designated as separate court categories. A nine-member Constitutional Tribunal reviews the constitutionality of legislation.

The Azores and Madeira Islands have constitutionally mandated autonomous status. A regional autonomy statute promulgated in 1980 established the Government of the Autonomous Region of the Azores; the Government of the Autonomous Region of Madeira operates under a provisional autonomy statute in effect since 1976. Continental Portugal is divided into 18 districts, each headed by a governor appointed by the Minister of Internal Administration.

Current Administration
Parliamentary elections on February 20, 2005, gave the Socialist Party a comfortable majority for the new Prime Minister, Jose Socrates. Socrates' government formally assumed power March 12, 2005.

The Socialist Party's 2005 victory followed a period of transition after center-right (PSD) Prime Minister Jose Manuel Durao Barroso resigned to accept the nomination as President of the European Commission. Durao Barroso, elected in 2002, committed his government to public-sector austerity and business incentives to promote growth, trade, and productivity. It faced rising unemployment, meeting Eurozone fiscal requirements, and adapting to European Union and NATO enlargement. After Durao Barroso's resignation, President Jorge Sampaio asked the former mayor of Lisbon, Pedro Santana Lopes, to form a new government. Sampaio lost confidence in that government by the end of 2004, dissolved parliament, and called for new parliamentary elections.

Social Democrat Anibal Cavaco Silva, a center-right candidate and former prime minister, won the Portuguese presidential election on January 22, 2006 with 50.6% of the vote. He was sworn in on March 9, 2006, replacing outgoing Socialist President Sampaio.

Principal Government Officials
President of the Portuguese Republic--Anibal Cavaco Silva
Prime Minister--Jose Socrates
Minister of Foreign Affairs--Luis Amado
Minister of Defense--Nuno Severiano Teixeira
Minister of State for Internal Administration--Rui Pereira
Minister of the Presidency of the Council of Ministers--Pedro Silva Pereira
Minister of State and Justice--Alberto Costa
Minister of Finance--Fernando Teixeira dos Santos
Minister of Economy and Innovation--Manuel Pinho
Minister of Parliamentary Affairs--Augusto Santos Silva
Minister of the Environment--Francisco Nunes Correia
Minister of Culture--Jose Antonio Pinto Ribeiro
Minister of Agriculture, Rural Development and Fisheries--Jaime Silva
Minister of Public Works--Mario Lino
Minister of Labor and Social Security--Jose Vieira da Silva
Minister of Science, Technology and Higher Education--Jose Mariano Gago
Minister of Education--Maria de Lurdes Rodrigues
Minister of Health--Ana Jorge
Ambassador to the United States--Joao de Vallera

Portugal maintains an embassy in the United States at 2012 Massachusetts Avenue, NW, Washington, DC 20036 (http://www.embassyportugal-us.org/); Tel. 1-202-350-5400; Fax 1-202-462-3726 and consulates general in New York City, Boston, San Francisco, and Newark, NJ; consulates in Providence, RI and New Bedford, MA; and honorary consulates in Honolulu, Los Angeles, Houston, New Orleans, Chicago, Philadelphia, Miami, San Juan, and Waterbury, CT. The Portuguese National Tourist Office in the United States is located at 590 Fifth Avenue, New York, NY 10036 (tel: 1-212-354-4403).

ECONOMY
Portugal's membership in the European Union (EU) contributed to stable economic growth, largely through increased trade and an inflow of EU funds for infrastructure improvements. Furthermore, Portugal's 1999 entry into the European Monetary Union (EMU) brought exchange rate stability, lower inflation, and lower interest rates. Falling interest rates, in turn, lowered the cost of public debt and helped the country achieve its fiscal targets. Until 2001, average annual growth rates consistently exceeded those of the EU average. However, a dramatic increase in private sector loans led to a serious external imbalance, with large current and capital account deficits that year.

The Government of Portugal managed to keep the budget deficit under 3% in accordance with the Eurozone's Stability and Growth Pact during 2002-2004. However, in 2005 Portugal acknowledged breaching the target when its budget deficit surged to an all-time high of 6.1%. Since that time, the Socrates government has worked hard to bring the budget situation under control. In 2006, the government reduced the deficit to 3.9%, mainly through revenue-generating measures (i.e., increased collection enforcement and higher taxes). The 2007 budget further reduced the deficit to 2.6% through spending cuts and structural reforms, and the 2008 budget brought the deficit down to 2.2%, the lowest rate in 30 years. The proposed 2009 budget projects the same 2.2%, as additional spending is offset by additional tax revenue. Helped in part by a wider EU recovery, the Portuguese economy grew by 1.9% in 2007, up from 1.4% the year before. A slowing regional economy meant the economy grew by only 0.8% in 2008, short of predictions, and the 2009 budget estimates 0.6% growth in 2009. Unemployment was 7.3% in early 2008.

The service sector, comprised of the public service, retail, tourism, and recreation, is now Portugal's largest employer, having overtaken the traditionally predominant manufacturing and agriculture sectors since the country joined the EU in 1986. EU expansion into Eastern Europe has erased Portugal's historic competitive advantage and relatively low labor costs, particularly in the manufacturing and agriculture sectors. The government is working to change Portugal's economic development model from one based on public consumption and public investment to one focused on exports, private investment, and development of the high-tech sector.

Due to slow economic growth, Portugal has lost ground relative to the rest of the EU since 2002. It was projected that Portugal's 2008 per capita GDP would stand at 65.6% of the EU-27 average and that it would drop to 19th in purchasing power parity behind Cyprus, Greece, the Czech Republic, Malta, and Estonia.

FOREIGN RELATIONS
Portugal has been a significant beneficiary of European Union funding and is a strong proponent of European integration. Portugal held the presidency of the EU Council for the third time during the latter half of 2007. During its presidency, Portugal oversaw the signing of a new EU reform treaty, staged EU summits with Brazil, Russia, India, China, and Ukraine, and held a second EU-Africa summit.

Portugal is a founding member of NATO; it is an active member of the alliance by, for example, contributing proportionally large contingents in Balkans peacekeeping forces. Portuguese forces also participate in NATO operations in Afghanistan. Portugal proposed the creation of the Community of Portuguese Language Countries (CPLP) to improve its ties with other Portuguese-speaking countries, and it currently holds the chairmanship of the Community of Democracies (CD). Portugal has also participated in a series of Ibero-American summits. Portugal was a strong advocate of independence for Timor-Leste, a former Portuguese colony, and has committed troops and money to Timor-Leste in close cooperation with the United States, Asian allies, and the United Nations. Portugal contributed a small gendarme force to Iraq that it withdrew in February 2005, and has contributed funds and personnel for other training and development projects for Iraq reconstruction, including the NATO Training Mission. Portuguese forces are also part of the UN force in Lebanon.

U.S.-PORTUGUESE RELATIONS
Bilateral ties date from the earliest years of the United States. Following the Revolutionary War, Portugal was among the first countries to recognize the United States. On February 21, 1791, President George Washington opened formal diplomatic relations, naming Col. David Humphreys as U.S. minister.

Contributing to the strong ties between the United States and Portugal are the sizable Portuguese communities in Massachusetts, Rhode Island, New Jersey, California, and Hawaii. The latest census estimates that 1.3 million individuals living in the United States are of Portuguese ancestry, with a large percentage coming from the Azores. There are about 20,000 Americans living in Portugal.

The defense relationship between the United States and Portugal is excellent, centered on the 1995 Agreement on Cooperation and Defense (ACD). For 50 years, Lajes Air Base in the Azores has played an important role in supporting U.S. military aircraft. Most recent missions are engaged in counter-terrorism and humanitarian efforts, including operations in Afghanistan and Iraq. Portugal defines itself as "Atlanticist," emphasizing its support for strong European ties with the United States, particularly on defense and security issues. Portugal sees its role as host of NATO's "Joint Command Lisbon," located near Lisbon, as an important sign of alliance interest in transatlantic security issues.

U.S.-Portuguese trade is relatively small, with the United States exporting $2.4 billion worth of goods in 2007 and importing an estimated $3.1 billion. While total Portuguese trade has increased dramatically over the last 10 years, the U.S. percentage of Portugal's exports and imports has been growing at a slower rate. The Portuguese Government is seeking to increase exports of textiles and footwear to the United States and is encouraging greater bilateral investment. U.S. firms play significant roles in the pharmaceutical, computer, and retail sectors in Portugal, but their involvement in the automotive manufacturing sector has declined in recent years.

Principal U.S. Officials
Ambassador--Thomas F. Stephenson
Deputy Chief of Mission--David Ballard
Political/Economic Affairs--Richard Reiter
Consular Affairs--Eugene Sweeney
Management Affairs--Jesse Coronado
Public Affairs--Wes Carrington
Regional Security Officer--Gazman Xhudo
Commercial Affairs--Dillon Banerjee
Defense Attache--COL Karl Johnson
Office of Defense Cooperation--CDR Ted Bradfield
Consul, Ponta Delgada--Jean Manes

The U.S. Embassy is located at Avenida das Forcas Armadas, 1600-081 Lisbon, Portugal (tel.: +351-21-727-3300). The embassy homepages are: http://portugal.usembassy.gov and http://lisbon.usembassy.gov/.

The Ponta Delgada consulate is located at Avenida Principe Monaco, 6-2 Frente, Ponta Delgada, 9500-237 Sao Miguel, Azores (tel.: +351-29-628-2216). The consulate homepage is: http://www.usconsulateazores.pt/. The consular agent in Funchal, Madeira is Edgar Potter (tel.: +351-29-174-1088).



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