Country Report

Background
Geography
People
Government
Economy
Economic Indicators
Communications
Transportation
Military

Background

Following its heyday as a world power during the 15th and 16th centuries, Portugal lost much of its wealth and status with the destruction of Lisbon in a 1755 earthquake, occupation during the Napoleonic Wars, and the independence in 1822 of Brazil as a colony. A 1910 revolution deposed the monarchy, for most of the next six decades repressive governments ran the country. In 1974, a left-wing military coup installed broad democratic reforms. The following years Portugal granted independence to all its African colonies. Portugal entered the EC in 1986.

Since joining the European Union, it has been one of the major beneficiaries of EU funding, which has enabled the Portuguese Government to invest in large infrastructural projects.

Geography

Area and geographical features

Mainland area: 91,985 km². (92,391 km² including the Azores and Madeira islands of which 91,951 km² is land and 440 km² water).

Situated on the South Western side of the Iberian Peninsula, Spain is Portugal''s only neighbour.

The coastline is 1,793 km in length.
Main rivers are the Tagus (Lisbon) and the Douro (Porto).
The island of Madeira lies about 800 km South West of Lisbon.
Continental Portugal is mountainous north of the Tagus River with plains to the south. Portugal''s highest mountain is Mt Pico, located on the Azores. The nine islands of the Azores are scattered over an area of approximately 1,000 km² about 1200 km west of Lisbon in the Atlantic Ocean.

Location: South Western Europe, bordering the North Atlantic Ocean, west of Spain
Geographic coordinates: 39 30 N, 8 00 W
Map references: Europe

Areas:
Total: 92,391 km²
Land: 91,951 km²
Water: 440 km²
(Note: includes Azores and Madeira Islands)

Land boundaries: total: 1,214 km
Border countries: Spain 1,214 km
Coastline: 1,793 km

Maritime claims:
Contiguous zone: 24 NM
Continental shelf: 200-m depth or to the depth of exploitation
Exclusive economic zone: 200 NM (370 km)
Territorial sea: 12 NM (22 km)

Climate: Maritime temperate; cool and rainy in north, warmer and drier in south
Terrain: Mountainous north of the Tagus River, rolling plains in south

Elevation extremes:

Lowest point: Atlantic Ocean 0 m
Highest point: Ponta do Pico (Pico or Pico Alto) on Ilha do Pico in the Azores 2,351 m
Natural resources: Fish, forests (cork), tungsten, iron ore, uranium ore, marble, arable land, hydro power

Land use:
Arable land: 26%
Permanent crops: 9%
Permanent pastures: 9%
Forests and woodland: 36%
Other: 20% (1993 est.)

Irrigated land: 6,300 km² (1993 est.)
Natural hazards: Azores subject to severe earthquakes, as well as the continental coast. Wild fires. Extreme weather. 
Environment - current issues: soil erosion; air pollution caused by industrial and vehicle emissions; water pollution, especially in coastal areas.
Environment - international agreements: party to: Air Pollution, Biodiversity, Climate Change, Desertification, Endangered Species, Hazardous Wastes, Law of the Sea, Marine Dumping, Marine Life Conservation, Ozone Layer Protection, Ship Pollution, Tropical Timber 83, Tropical Timber 94, Wetlands.

Signed, but not ratified: Air Pollution-Persistent Organic Pollutants, Air Pollution-Volatile Organic Compounds, Climate Change-Kyoto Protocol, Environmental Modification, Nuclear Test Ban.

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People

Population: 10,566,212 (July 2005 est.)

Population density: 114 people per km²

Age structure:
0-14 years: 16.6% (male 916,234; female 839,935)
15-64 years: 66.3% (male 3,468,844; female 3,538,779)
65 years and over: 17.1% (male 744,787; female 1,057,633) (2005 est.)

Population growth rate: 0.39% (2005 est.)
Birth rate: 10.82 births/1,000 population (2005 est.)
Death rate: 10.43 deaths/1,000 population (2005 est.)
Net migration rate: 3.49 migrant(s)/1,000 population (2005 est.)

Sex ratio:
At birth: 1.07 male(s)/female
Under 15 years: 1.09 male(s)/female
15-64 years: 0.98 male(s)/female
65 years and over: 0.7 male(s)/female
Total population: 0.94 male(s)/female (2005 est.)
Infant mortality rate: 5.05 deaths/1,000 live births (2005 est.)

Life expectancy at birth:
Total population: 77.53 years (2004 est.)
Male: 72.25 years
Female: 81.03 years (2005 est.)

Total fertility rate: 1.47 children born/woman (2005 est.)
HIV/AIDS - adult prevalence rate: 0.74% (1999 est.)
HIV/AIDS - people living with HIV/AIDS: 29,461 (30 June 2006 est.)
HIV/AIDS - deaths: 6,506 (2006 est.)

Nationality:
Noun: Portuguese (singular and plural)
Adjective: Portuguese

Ethnic groups: homogeneous Mediterranean stock; citizens of black African descent who immigrated to mainland during decolonization number less than 100,000

Literacy:
Definition: age 15 and over can read and write
Total population: 93.3%
Male: 95.5%
Female: 91.3%

Standard of living: The standard of living in Portugal is still relatively low in comparison with some of its fellow EU members although recently Portugal has begun to make real progress in this area. GDP per capita in 2005 was $19,300. The minimum wage (monthly) is 385.90 euros. The average monthly wage is 524 euros.

Principal commercial centres and towns:

Business Hours: Most businesses are open from 9:00 a.m. to 6:00 p.m.

Public Holidays
Portugal has 13 national holidays and 1 local holiday each year. Public holidays falling on Saturday or Sunday are not made up during the week. The national holidays designated for 2006 and 2007 are listed below. Dates in italics vary from year to year.

	2006	2007
New Year’s Day	1 January	1 January
Carnival Day	28 February	20 February
Good Friday	14 April	6 April
Liberation Day	25 April	25 April
Labour Day	1 May	1 May
National Day	10 June	10 June
Corpus Christi Day	15 June	7 June
Ascension Day	15 August	15 August
Republic Day	5 October	5 October
All Saints Day	1 November	1 November
Independence Day	1 December	1 December
Immaculate Conception Day	8 December	8 December
Christmas Day	25 December	25 December

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Government

History & Political situation: Portugal was a monarchy from the 11th Century until 1910 when an armed uprising in Lisbon drove King Manuel II into exile and a republic was instigated. A period of great political instability ensued until eventually the military intervened. A new Constitution was drawn up in 1933, which gave formal expression to the corporative "Estado Novo" (New State), personified by Dr Salazar, who ruled the country from 1932 until 1968. Dr Caetano succeeded Salazar but his failure to liberalise the regime or to terminate the wars in the African colonies resulted in his Government being overthrown by a military coup on 25 April 1974.

The country underwent a period of dramatic and turbulent change after the coup. The African colonies were given their independence, censorship was abolished and trade unions permitted. A new national assembly based on universal suffrage was elected. The banks and many of the country''s most important industries were nationalised and large agricultural estates were seized. In November 1975 a coup by the extreme left was narrowly averted by the firm action of a small group of moderate army officers. This was followed by a move back to the centre in politics, resulting in the election in April 1976 of the first constitutional Government under the Socialist leader Dr Mario Soares. Portugal''s recent economic story has been one of remarkable achievement. It was one of Europe''s fastest growing economies during the 1980''s and successfully tackled inflation in the 1990''s, bringing the rate down from 14% in 1990 to it''s current rate of around 3%. Government deficit was cut from 7.1% of GDP in 1993 to 4% in 1996. While the recession during the mid 1990''s has hit growth, the economy is still expanding by an average of 3% per annum.

Country name:
Conventional long form: Portuguese Republic
Conventional short form: Portugal
Local long form: República Portuguesa
Local short form: Portugal

Government type: Parliamentary democracy
Capital: Lisbon
Administrative divisions: 18 districts (distritos, singular - distrito) and 2 autonomous regions* (regiões autónomas, singular - região autónoma); Aveiro, Açores (Azores)*, Beja, Braga, Bragança, Castelo Branco, Coimbra, Évora, Faro, Guarda, Leiria, Lisboa, Madeira*, Portalegre, Porto, Santarém, Setúbal, Viana do Castelo, Vila Real, Viseu
Independence: 1140 (independent republic proclaimed 5 October 1910)
National holiday: Portugal Day, 10 June (1580)
Constitution: 25 April 1976, revised 30 October 1982, 1 June 1989, 5 November 1992, and 3 September 1997

The Portuguese constitution was approved by the Constitutional Assembly in 1976 and amended in 1982, 1989, 1992, 1997 and 2001. It provides for a parliamentary political system, with the president having certain reserve powers. Executive power is vested in the Assembleia da República (the assembly), which is composed of 230 deputies who are elected under a system of proportional representation.

Legal system: Civil law system; the Constitutional Tribunal reviews the constitutionality of legislation; accepts compulsory ICJ jurisdiction, with reservations
The constitution provides for universal access to the courts. This concept was incorporated into the constitution by the amendment of 1982. Criminal defendants lacking financial resources are not denied access to the legal system. The courts have the exclusive power to administer the law. The various courts and their functions are described below. Courts of Primary Jurisdiction are designated county courts and can, as a rule, hear most cases of a general nature. They can also act as a specialist court in matters relating to criminal cases, family law, minors, labor law and other similar areas. In cases in which the value involved is less than €3,740.98, the courts’ decisions are final. Cases in which the amounts exceed this sum can be appealed against to the Court of Secondary Jurisdiction. Courts of Secondary Jurisdiction act as a court of appeal for legal decisions of the Court of Primary Jurisdiction. A decision of the Court of Secondary Jurisdiction may be appealed to the Supreme Court if the value of the matter at issue exceeds €14,963.94. Otherwise, the decision is final.

The Supreme Court of Justice is the highest court. It sits in Lisbon and hears cases from all parts of the country. It may render decisions in civil, criminal and commercial matters.

The Constitutional Court hears only cases that involve fundamental principles, such as those contained in the constitution.
Portugal also has administrative courts and tax courts. Administrative courts handle all matters involving the local and national governments, while the tax court hears tax cases. Both courts have primary and secondary levels. Certain decisions of the Court of Secondary Jurisdiction, including those on administrative matters, may be appealed to the Supreme Administrative Court.

The Central Administrative Court, which sits in Lisbon, serves as an intermediary court between administrative courts and the Supreme Administrative Court. This court was created in 1996 to hear cases that were previously heard by the Supreme Administrative Court.
Suffrage: 18 years of age; universal

Executive branch

Chief of state: President Jorge SAMPAIO (since 9 March 1996)
The President is directly elected for a five-year period and may serve for a maximum of two consecutive terms. The chief powers of the president are the right to appoint the prime minister.
The socialist Jorge Sampaio was re-elected president in January 2001 and is serving a five-year term. In parliamentary elections held on 17 March 2002, the Social Democratic Party (PSD) received 40.15% of the vote, while the Popular Party (PP) received 8.75% of the vote.

Head of government: Prime Minister: José SÓCRATES (since 20 Februrary 2005).

Cabinet: Council of Ministers appointed by the President on the recommendation of the Prime Minister.
(note: there is also a Council of State that acts as a consultative body to the President)

Elections: President elected by popular vote for a five-year term; election last held 14 January 2001 (next to be held January 2006); following legislative elections, the leader of the majority party or leader of a majority coalition is usually appointed prime minister by the president

Election results: Jorge SAMPAIO re-elected President; percent of vote - Jorge SAMPAIO (Socialist) 55.8%, Joaquim FERREIRA Do Amaral (Social Democrat) 34.5%, Antonio ABREU (Communist) 5.1%

Legislative branch: unicameral Assembly of the Republic or Assembleia da Republica (230 seats; members are elected by popular vote to serve four-year terms) elections: last held 17 March 2002 (next to be held by March 2006) election results: seats by party - PSD 102 (40.12% of vote), PS 95 (37.85%), PP 14 (8.75%), CDU(PCP) 12 (6.97%), The Left Bloc 3 (2.76%). Abstention 37.65% out of total electorate of 8,711,829

Judicial branch: Supreme Court or Supremo Tribunal de Justica (judges appointed for life by the Conselho Superior da Magistratura)

Political parties and leaders: The Greens or PEV ([Isabel CASTRO); Popular Party or PP (Jopsé Ribeiro e CASTRO); Portuguese Communist Party/United Democratic Coalition or PCP/CDU (Jerónimo SOUSA); Portuguese Socialist Party or PS (José SÓCRATES); Social Democratic Party or PSD (Marques MENDES); The Left Bloc (Francisco LOUÇÃ)

International organization participation: AfDB, Australia Group, BIS, CCC, CE, CERN, EAPC, EBRD, ECE, ECLAC, EIB, EMU, ESA, EU, FAO, IADB, IAEA, IBRD, ICAO, ICC, ICFTU, ICRM, IDA, IEA, IFAD, IFC, IFRCS, IHO, ILO, IMF, IMO, Inmarsat, Intelsat, Interpol, IOC, IOM, ISO, ITU, LAIA (observer), MINURSO, NAM (guest), NATO, NEA, NSG, OAS (observer), OECD, OPCW, OSCE, PCA, UN, UNCTAD, UNESCO, UNIDO, UNMIBH, UNMIK, UNMOP, UNTAET, UPU, WCL, WEU, WFTU, WHO, WIPO, WMO, WToO, WTrO, ZC
Flag description: The Portuguese National flag is a 2:3 rectangle divided vertically into green at the hoist (2/5 of the flag’s length) and red at the fly (3/5). Centred in this partition a coat of arms consisting on an armillary sphere charged with the traditional Portuguese shield.

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Economy

Economy overview: The Global Competitiveness Report for 2005, published by the World Economic Forum, places Portugal on the 22nd position, ahead of countries like Spain, Ireland, France, Belgium and Hong Kong. This table shows that Portugal has stepped two places regarding the 2004 ranking. On the Technology index, Portugal was ranked 20th, on the Public Institutions index Portugal is the 15th best and on the Macroeconomic index, Portugal is placed on the 37th position.

Most of the country''s trade is with countries of the European Union. 74.2% of Portugal''s imports are from other EU countries and 79.7% of its exports are destined there. Portugal remains a member of EFTA, jointly her second trading partner, taking 9% of exports and providing 6% of imports. Overall the country''s main suppliers are Spain, Germany, France, Italy and the UK. The principal Portuguese export markets are Germany, Spain, France and the UK.

Portuguese industry is characterised by small and medium enterprises. 85% of them average 15 employees or less and most are family-owned concerns. Following the 1974 revolution many of the country''s major industries, both manufacturing and services, were taken into public ownership. Since 1987 a series of privatisations has returned most back to private ownership, and in some cases to former owners. The State still retains a handful of large concerns, which it intends privatising as soon as possible.

The country''s most important industries are fabrication of transport equipment, textiles and clothing, footwear, electrical equipment, manufacturing and mechanical engineering.

In 2001, the service sector accounted for approximately, 69.2% of Portugal’s GDP, while manufacturing and construction accounted for 27.3%. Like the economies in other industrialized countries, a shift has occurred towards the service sector over the past decade.

Tourism has grown rapidly in recent years, from 20.7 million visitors in 1992 to more than 28 million by the end of 2001. It is now a key sector of the economy. Portugal’s major tourist centres are Lisbon and its outskirts, the Algarve region and Madeira. Financial and retail services are also booming.

The major manufacturing industries include textiles, clothing and footwear. These industries together with foodstuffs and beverages (primarily wine) accounted for approximately 27.3% of total industrial production. In 1999, the textile industry employed nearly 36.3% of the industrial labour force. These sectors are composed primarily of small and medium-sized companies that are now restructuring to improve competitiveness. Because of the elimination of EU import quotas, companies in the textile and clothing sectors will face increasing competition from the newly industrialized countries in Asia.

Other significant industries are chemicals, rubber and plastics. In 1999, these industries accounted for approximately 8.7% of total industrial production and for nearly 12.7% of the industrial labour force.

The last few years have seen an influx of foreign investment in the automotive, industrial and paper sectors. Construction has become a significant contributor to GDP as a result of the construction of EU-funded infrastructure improvements, particularly roads, and the construction of new factories. However, as a result of the reduction in the construction of public works, the growth rate of investment in construction decreased from 6.2% in 1998 to 3.5% in 1999.

The agricultural, forestry and fishing sector accounts for 3.5% of gross value added and employs about 12.7% of the employed labour force The agricultural sector suffers from structural problems such as low productivity, inefficient use of land and an over reliance on manual labour.

For many years Portugal has relied on foreign investment to achieve economic growth. Since it joined the EU in 1986, additional funds have been available in the form of grants and subsidies. EU membership and other economic reforms have had a major impact on industry. Transfers of EU funds (net of taxes paid to the EU) totalled €26.5 billion for the period of 1989 through 1999. Loans from the European Investment Bank resulted in additional funds of €6.5 billion.

Small and medium-sized enterprises firms dominate the economic structure. According to the National Institute of Statistics in 1998, approximately 69% of the 265,025 registered companies had less than five workers.

Portugal is currently benefiting from a major injection of EU funding to bring its infrastructure up to the standards of other EU countries. Infrastructure schemes thousands of kilometres of new motorways; upgrading of main railway lines; redevelopment of the ports of Lisbon, Oporto and Setúbal; expansion of the Lisbon metro and building a new light railway in Porto; modernising the water system; improvements to post and telecommunication systems; and new hospitals, schools and housing.

The government continues to follow a policy of political and economic reform that is designed to liberalize the economy, improve competitiveness and reduce the role of the public sector. The most significant of these reforms include the following:

• A privatization program
• The modernization of Portuguese industry and the improvement of agriculture
• The introduction of tax reform, and
• The modernization and regulation of the stock market.

The government actively encourages foreign investment, particularly if the investment attracts new industries and technologies, or is export-oriented. A variety of incentive schemes are available on a non-discriminatory basis to foreign investors. A company establishing operations in Portugal may negotiate attractive financial grants and tax exemptions. The significant increase in foreign investment in recent years demonstrates the government’s success in attracting foreign investors. The scale of investment varies from the purchase of small family companies to multimillion-dollar turnkey projects involving Fortune 500 companies.

Portugal has a sizeable skilled labour force, and labour costs are low compared with those of other EU countries.

After joining the EU in 1986, Portugal began a cycle of economic growth supported by political stability. Portugal’s economy grew at an annual rate of approximately 3% from 1990 to 2000, which exceeded the EU average of 2%. However, the per capita gross domestic product (GDP) in 2001 was still one of the lowest in the EU.

Since 1992, the government has closely monitored inflation to keep it within the convergence criteria fixed by the EU. This goal was achieved in 1999 when the inflation rate was 2.3%. The rate for 2000 was 2.8%. In 2001, it was above 4%. In 2002, it was 3%.

Portugal’s unemployment rate has been traditionally low, but its current level of 6.5% is not among the lowest in the EU.

In recent years, the Portuguese current account moved into deficit as a result of the increase of domestic demand. This trend is now changing as a result of economic growth combined with a sharp decrease in domestic demand.

Financial System

The banking sector, together with money and capital markets, has developed steadily since Portugal joined the EU. Economic growth, increased competition and the easing of government controls have contributed to the growth of the sector. In 1992, new legislation governing banking activities entered into force (Decree Law No. 298/92, of 31 December 1992), classifying entities as credit institutions and finance companies, and implementing EU directives on bank coordination and supervision of credit institutions.

Central Bank

The central bank is named Bank of Portugal (BOP). Under the European System of Central Banks, the European Central Bank (ECB) has assumed the BOP’s role in determining monetary policy. The ECB implements euro monetary policy. For example, it issues banknotes, establishes payment systems and conducts foreign-exchange operations. The BOP is the administrator and regulator of the banking system and has powers of supervision and inspection. It authorizes the establishment of credit institutions and finance companies as branches or subsidiaries of companies incorporated in other EU member states. The Ministry of Finance is responsible for licensing non-EU banks, which must operate as Portuguese branches of such banks.

Stock Exchange and Securities Regulating Authority

Securities Exchanges

In 2001, the Lisbon and Oporto Stock Exchange joined Euronext and changed its name to Euronext-Lisbon.

Euronext was originally created by the merger of the stock exchanges in Amsterdam, Brussels and Paris in response to growing demand from investors, a political environment favourable to further consolidation in the European capital market and a desire to capitalize on the greater liquidity and lower costs resulting from the introduction of the euro.

Euronext-Lisbon lists several types of securities, including public and private bonds, shares, convertible bonds, futures, options and warrants. The spot market of the exchange continues to be located in Lisbon, while the derivative market is located in Oporto. The spot market consists of the following three sections: the official market; the secondary market; and the unlisted market.

All stock exchange transactions must be executed by brokers or dealers, who supervise compliance with the relevant laws.

In 1993, the unlisted market was established to prevent the proliferation of trading in unofficial markets. This market covers transactions that may be conducted on the stock exchange but do not fulfill all the requirements for admittance to the official quotation market. For example, the issuer of the securities may have insufficient share capital or too few shares owned by the public.

To be listed on the stock exchange, companies must satisfy the following requirements:

• The company must have a minimum share capital of €2.5 million; and
• At least 25% of the company’s shares must be available for public quotation.

A company intending to quote its shares must file a petition (admission request) with the Portuguese Securities Market Commission (Comissão do Mercado de Valores Mobiliários, or CMVM).

An issuing company must publish a prospectus prepared in accordance with the law. The prospectus, which must be approved by the CMVM, provides detailed information about the share issue and the issuing company.

Repo and securities lending transactions are made outside a regulated market. However, Euronext-Lisbon provides several services with respect to such transactions, including clearing, the providing of bid-offer quotations and the guaranteeing of the performance of certain aspects of the transactions.

Securities Regulating Authority

Decree Law 142-A/91 of 10 April 1991 established the CMVM as the authority in charge of the supervision and regulation of securities and other financial instruments markets in Portugal.
To carry out its supervisory functions, the CMVM engages in several types of activities, including the following:

• Monitoring the activities of entities under its supervision, including securities issuers, financial intermediaries, investment funds, and risk rating companies;
• Monitoring compliance with laws and regulations;
• Maintaining registries of certain transactions, including public offers of securities and takeover bids;
• Disseminating information about companies with shares listed on the Portuguese Stock Exchange; and
• Issuing of ordinances and specific recommendations.

The CMVM also regulates the functioning of securities markets, public offers of securities and the activities of financial market operators by issuing guidance, such as regulations and recommendations.

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Economy Indicators

GDP
GDP: purchasing power parity - $204.4 billion (2005 est.)
GDP - real growth rate: 0.3% (2005 est.)
GDP - per capita: purchasing power parity - $19,300 (2001 est.)
GDP - composition by sector:
Agriculture: 5.2%
Industry: 28.9%
Services: 65.9%
(2005 est.)

Population below poverty line: <22% (2005 est.)
Household income or consumption by percentage share:
Lowest 10%: 3.1%
Highest 10%: 28.4%
(1995 est.)
Inflation rate (consumer prices): 2.4% (2005 est.)
Labour force: 5.1 million (2000 est.)
Labour force - by occupation:
Services: 60%
Industry: 30%
Agriculture: 10%
(1999 est.)

Unemployment rate: 4.7% (2002 est.)
Budget:
Revenues: $78.84 billion
Expenditures: $90.27 billion, including capital expenditures of $NA billion (2005 est.)
Industries: textiles and footwear; wood pulp, paper, and cork; metalworking; oil refining; chemicals; ceramics; electronics and communications equipment; rail transportation equipment; aerospace equipment; ship construction and refurbishment; fish canning; wine; tourism.
Industrial production growth rate: 1.5% (2002)

Electricity - production: 40.753 GWh (2001)
Electricity - production by source (2001):
Fossil fuel: 59%
Hydro: 34%
Nuclear: 0%
Other: 7%