Economic history of Portugal

Economic history of Portugal

This article covers the economic history of Portugal.

Portugal was once one of the largest and most powerful political and economic powers in the world. Since the 16th century to the end of the Estado Novo regime in 1974, Portugal's dominions were transcontinental, included diverse territories and a wide range of varied natural resources. It lost its last overseas provinces in 1975, following the Carnation Revolution (the military coup d'état of April 25, 1974) in Lisbon, and since then has redefined its role in the world as a member state of the European Union.

Portugal experienced a strong recovery in a few decades after the Carnation Revolution's turmoil, the ultimate loss of its 5-century long overseas empire, and the adhesion to the European Union, then the European Economic Community, in 1986. The European Union's structural and cohesion funds and the growth of many of Portugal's main exporting companies which were leading forces in a number of economic sectors worldwide, such as engineered wood, injection molding, plastics, specialized software, ceramics, textiles, footwear, paper, cork, fine wine, among others, has improved the external image of the country and was a major factor on the development of the Portuguese economy, standard of living and quality of life. Similarly, for several years, the Portuguese subsidiaries of large multinational companies, such as Siemens Portugal, Volkswagen Autoeuropa, Qimonda Portugal, IKEA, Nestlé Portugal, Microsoft Portugal, [ [ Microsoft Portugal novamente eleita melhor Subsidiária mundial da Microsoft International em 2008] ] Unilever/Jerónimo Martins and Danone Portugal, rank among its most productive in the world for its continued high productivity records. [ A Siemens executive, Carlos de Melo Ribeiro, pointed to labor costs and productivity as major reasons why shipping semiconductors to Portugal for final production is more advantageous than retaining the work in Germany or Britain - Siemens Builds on Long History in Portugal, to the Benefit of Both, By Karen E. Thuermer, October, 1997, in Keller Publishing [] ] [ [ "The investment made in Portugal by the VW group has enabled “this plant to become one of the best in the VW Group and indeed in the whole automotive industry in terms of quality, productivity, absenteeism, safety, and many other decisive criteria”, Gerd Heuss upon the manufacturing of car nº 1 million in Palmela", June 2003.] , AICEP - Business Development Agency]

The beginnings of Portugal's empire: 15th - 16th c. AD

The Portuguese, in their bold exploration along the coasts of Africa, have an underlying purpose - to sail round the continent to the spice markets of the east. But in the process they develop a trading interest and a lasting presence in Africa itself. On the west coast their interest is in gold, and later on slaves for use in the largely underdeveloped and scarcely populated newly-discovered territories of South America, resulting in Portuguese settlements in both Guinea and Angola. On the east coast of Africa they are drawn to Mozambique and the Zambezi river by news of a local ruler, the Munhumutapa, who has fabulous wealth in gold. In their efforts to reach the Munhumutapa, the Portuguese establish in 1531 two settlements far up the Zambezi - one of them, at Tete, some 260 miles from the sea. The Munhumutapa Kingdom and his gold mines remain autonomous and mostly isolated from the Portuguese. But in this region of east Africa - as in Guinea and Angola in the west - Portuguese involvement became sufficiently strong to survive into the 20th century. Throughout the 16th century the Portuguese had no European rivals on the long sea route round Africa. The situation changed in the early 17th century, when both the Dutch and the English created East India companies. The Dutch, in particular, damaged Portugal's eastern trade.

15th century

After consolidating its territory in the 13th century through the Portuguese Reconquista against the Muslims states of Western Iberia, the Kingdom of Portugal started to expand overseas. In 1415, Islamic Ceuta was occupied by the Portuguese during the reign of John I of Portugal. The Portuguese expansion on North Africa was the beginning of a larger process eventually called the Portuguese Overseas Expansion. Concerning the characterization of Portuguese political strategies in North Africa in the context of local and international conjunctures and of the process of Portuguese empire-building in the 15th and 16th centuries, Kingdom of Portugal's goals included the expansion of Christianity into Muslim lands and the desire of nobility for epic acts of war and conquest with the avail of the Pope. In North West Africa, Portugal would dominate several towns, including Ceuta, Alcácer-Ceguer, Tangiers, Arzila, Azomor, Santa Cruz, Mogador, Safi, and Mazagão that become the first important Portuguese strongholds in Africa. When the Portuguese first sailed down the Atlantic coast of Africa in the 1430s, they were interested in gold. Ever since Mansa Musa, the king of Mali, made his pilgrimage to Mecca in 1325, with 500 slaves and 100 camels (each carrying gold) the region had become synonymous with such wealth. The trade from sub-Saharan Africa was controlled by the Islamic Empire which stretched along Africa's northern coast. Muslim trade routes across the Sahara, which had existed for centuries, involved salt, kola, textiles, fish, grain, and slaves. [A.L. Epstein, Urban Communities in Africa - Closed Systems and Open Minds, 1964] As the Portuguese extended their influence around the coast, Mauritania, Senegambia (by 1445) and Guinea, they created trading posts. Rather than becoming direct competitors to the Muslim merchants, the expanding market opportunities in Europe and the Mediterranean resulted in increased trade across the Sahara. [B.W. Hodder, Some Comments on the Origins of Traditional Markets in Africa South of the Sahara - Transactions of the Institute of British Geographers, 1965 - JSTOR] In addition, the Portuguese merchants gained access to the interior via the Senegal and Gambia rivers which bisected long-standing trans-Saharan routes. The Portuguese brought in copper ware, cloth, tools, wine and horses. Trade goods soon also included arms and ammunition. In exchange, the Portuguese received gold (transported from mines of the Akan deposits), pepper (a trade which lasted until Vasco da Gama reached India in 1498) and ivory. There was a very small market for African slaves as domestic workers in Europe, and as workers on the sugar plantations of the Mediterranean. However, the Portuguese found they could make considerable amounts of gold transporting slaves from one trading post to another, along the Atlantic coast of Africa. Muslim merchants had a high demand for slaves, which were used as porters on the trans-Saharan routes, and for sale in the Islamic Empire. The Portuguese found Muslim merchants entrenched along the African coast as far as the Bight of Benin. [H. Miner, The City in Modern Africa - 1967] The slave coast, as the Bight of Benin was known, was reached by the Portuguese at the start of the 1470s. It was not until they reached the Kingdom of Kongo coast in the 1480s that they outdistanced Muslim trading territory. The first of the major European trading forts, Elmina, was founded on the Gold Coast in 1482. Elmina Castle (originally known as São Jorge da Mina Castle) was modelled on the Castelo de São Jorge, one of the first Portuguese Royal residences in Lisbon. Elmina, which means "the mine", became a major trading centre for slaves purchased to local African peoples along the slave rivers of Benin. By the beginning of the colonial era there were forty such forts operating along the coast. Rather than being icons of colonial domination, the forts acted as trading posts - they rarely saw military action - the fortifications were important, however, when arms and ammunition were being stored prior to trade. [H. Kuper, Urbanization and Migration in West Africa - 1965 - Berkeley, Calif., U. of California] The end of the 15th century was marked (for Europe) by Vasco da Gama's successful voyage to India and the establishment of sugar plantations on Madeira, Canary, and Cape Verde Islands. Rather than trading slaves back to Muslim merchants, there was an emerging market for agricultural workers on the plantations. By 1500 the Portuguese had transported approximately 81,000 slaves to these various markets. [Transformations in Slavery by Paul E. Lovejoy - Cambridge University Press, 2000] Christopher Columbus had discovered the New World and Pedro Álvares Cabral had reached the coast of Brazil.

The 15th century Portuguese exploration of the African coast, is commonly regarded as the harbinger of European colonialism, and also marked the beginnings of the Atlantic slave trade, Christian missionary evangelization and the first globalization processes which were to become a major element of the European colonialism until the end of the 18th century.

16th century

The Portuguese were the first Europeans to explore the Indian Ocean, Vasco da Gama having visited Mombasa in 1498. Gama's voyage was successful in reaching India and this permitted the Portuguese to trade with the Far East directly by sea, thus challenging older trading networks of mixed land and sea routes, such as the Spice trade routes that utilized the Persian Gulf, Red Sea and caravans to reach the eastern Mediterranean. The Republic of Venice had gained control over much of the trade routes between Europe and Asia. After traditional land routes to India had been closed by the Ottoman Turks, Portugal hoped to use the sea route pioneered by Gama to break the once Venetian trading monopoly. Portugal's main goal in the east coast of Africa was take control of the spice trade from the Arabs and Portugal's actions in the region served the purpose of control trade within the Indian Ocean and secure the sea routes linking Europe to Asia. The construction of forts and trading posts along all the African coast, in the Indian subcontinent and other places in Asia was meant to solidify Portuguese hegemony with regards to its highly profitable transcontinental commercial interests.

Expansion in South America

During the 16th century Portugal also started to colonize its newly-discovered territory of Brazil. Although temporary trading posts were established earlier to collect brazilwood, used as a dye, with permanent settlement came the establishment of the sugar cane industry and its intensive labor. Several early settlements started to be founded across the coast, among them the colonial capital, Salvador, established in 1549 at the Bay of All Saints in the north, and the city of Rio de Janeiro on March 1567, in the south. The Portuguese colonists adopted an economy based on the production of agricultural goods that were exported to Europe. Sugar became by far the most important Brazilian colonial product until the early 18th century, when gold and other minerals assumed an higher importance. [ [ JSTOR: Anglo-Portuguese Trade, 1700-1770] . JSTOR. Retrieved on August 16, 2007.] [Janick, Jules. [ Lecture 34] . Retrieved on August 16, 2007]

The first attempt to establish a Portuguese presence in Brazil is made by John III in 1533. His solution is ingenious but idle. He divides the coastline into fifteen sections, each about 150 miles in length, and grants these strips of land on a hereditary basis to fifteen courtiers - who become known as donatários. Each courtier is told that he and his heirs can found cities, grant land and levy taxes over as much territory as they can colonize inland from their stretch of coast. Only two of the donatários make any success of this venture. In the 1540s John III is forced to change his policy. He brings Brazil under direct royal control (as in Spanish America) and appoints a governor general. The first governor general of Brazil arrives in 1549 and makes his headquarters at Bahia (today known as Salvador). It remains the capital of Portuguese Brazil for more than two centuries, until replaced by Rio de Janeiro in 1763.

The economic strength of Portuguese Brazil derives at first from sugar plantations in the north (established as early as the 1530s by one of the only two successful donatários). But from the late 17th century Brazil benefits at last from the mineral wealth which underpins Spanish America. Gold is found in 1693 in the inland region of Minas Gerais, in the southern part of the colony. The discovery sets off the first great gold rush of the American continent - opening up the interior as the prospectors swarm westwards, and underpinning Brazil's economy for much of the 18th century. Diamonds are also discovered in large quantities in the same region in the 18th century.

Colonists gradually move into the interior. Accompanying the first governor general in 1549 are members of the newly founded order of Jesuits. In their mission to convert the Indians they are often the first European presence in new regions far from the coast. They frequently clash with adventurers also pressing inland (in great expeditions known as bandeiras) to find silver and gold or to capture Indians as slaves. These two groups, with their very different motives, bring a Portuguese presence far beyond the Tordesillas Line. By the late 17th century the territory of Brazil encompasses the entire basin of the Amazon as far west as the Andes. At the same time Portuguese colonists are moving down the coast beyond Rio de Janeiro. A Portuguese town is even established on the river Plate in 1680, provoking a century of Spanish-Portuguese border conflicts in the region which is now Uruguay. Meanwhile the use of the Portuguese language gradually gives the central region of south America an identity different from that of its Spanish neighbours.

Expansion in Asia

The profitable trade in eastern spices is cornered by the Portuguese in the 16th century to the detriment of Venice, which has previously had a virtual monopoly of these valuable commodities - until now brought overland through India and Arabia, and then across the Mediterranean by the Venetians for distribution in western Europe. By establishing the sea route round the Cape of Good Hope, Portugal can undercut the Venetian trade with its profusion of middlemen. The new route is firmly secured for Portugal by the activities of Afonso de Albuquerque, who takes up his duties as the Portuguese viceroy of India in 1508. The early explorers up the east Africa coast have left Portugal with bases in Mozambique and Zanzibar. Albuquerque extends this secure route eastwards by capturing and fortifying Hormuz at the mouth of the Persian Gulf in 1514, Goa on the west coast of India in 1510 (where he massacres the entire Muslim population for the effrontery of resisting him) and Malacca, guarding the narrowest channel of the route east, in 1511. The island of Bombay is ceded to the Portuguese in 1534. An early Portuguese presence in Sri Lanka is steadily increased during the century. And in 1557 Portuguese merchants establish a colony on the island of Macao. Goa functions from the start as the capital of Portuguese India.

Expansion in Sub-Saharan Africa

Portugal, after initiating the European slave trade in Sub-Saharan Africa through its involvement on the African slave trade, plays a decreasing role in it over the next few centuries. Similarly the Portuguese, although the first Europeans to establish trading settlements in Sub-Saharan Africa, fail later to consolidate their advantage. Nevertheless they retain a clear presence in those three regions which received their particular attention during the original age of exploration. The closest of these, on the sea journey from Portugal, is Portuguese Guinea - known also, from its main economic activity, as the Slave Coast. The local African rulers in Guinea, who prosper greatly from the slave trade, have no interest in allowing the Europeans any further inland than the fortified coastal settlements where the trading takes place. The Portuguese presence in Guinea is therefore largely limited to the port of Bissau. For a brief period in the 1790s the British attempt to establish a rival foothold on an offshore island, at Bolama. But by the 19th century the Portuguese are sufficiently secure in Bissau to regard the neighbouring coastline as their own special territory. Thousands of miles down the coast, in Angola, the Portuguese find it even harder to consolidate their early advantage against encroachments by Dutch, British and French rivals. Nevertheless the fortified Portuguese towns of Luanda (established in 1587 with 400 Portuguese settlers) and Benguela (a fort from 1587, a town from 1617) remain almost continuously in Portuguese hands. As in Guinea, the slave trade becomes the basis of the local economy - with raids carried ever further inland by local natives to procure captives. More than a million men, women and children are shipped from here across the Atlantic. In this region, unlike Guinea, the trade remains largely in Portuguese hands. Nearly all the slaves are destined for the Portuguese Colony of Brazil. The deepest Portuguese penetration into the continent has been from the east coast, up the Zambezi, with an early settlement as far inland as Tete. But this is a region of strong and rich African kingdoms. The coastal area is also much visited by Arabs pressing south from Oman and Zanzibar. From the 16th to 19th century the Portuguese and their merchants are just one among many rival groups competing for the local trade in gold, ivory and slaves.

Nevertheless, even if the Portuguese hold on these three African regions is tenuous, they are unmistakably the main European presence. It is natural to assert their claim in all three when the scramble for Africa begins much later. Prolonged military campaigns are required to impose Portuguese control over the Africans in these territories in the late 19th century. But the arrangements with rival European powers are more easily resolved. The boundaries of Portuguese Guinea are agreed in two stages from 1886 with France, the colonial power in neighbouring Senegal and Guinea. No other nation makes a challenge for the vast and relatively unprofitable area of Angola. The most likely scene of conflict is Portuguese East Africa, where Portugal's hope of linking up with Angola clashes with Britain's plans for the Rhodesias. There is a diplomatic crisis in 1890. But the borders between British and Portuguese colonies are agreed by treaty in 1891.

Early 20th century

Portugal's First Republic (1910-26) became, in the words of historian Douglas L. Wheeler, "midwife to Europe's longest surviving authoritarian system." Under the sixteen-year parliamentary regime of the republic with its forty-five governments, growing fiscal deficits financed by money creation and foreign borrowing climaxed in hyper-inflation and a moratorium on Portugal's external debt service. The cost of living around 1926 was thirty times what it had been in 1914. Fiscal imprudence and accelerating inflation gave way to massive capital flight, crippling domestic investment. Burgeoning public sector employment during the First Republic was accompanied by a perverse shrinkage in the share of the industrial labor force in total employment. Although some headway was made toward increasing the level of literacy under the parliamentary regime, 68.1 percent of Portugal's population was still classified as illiterate by the 1930 census.

The economy under the Salazar Regime

The First Republic was ended by a military coup in May 1926, but the newly installed government failed to solve the nation's precarious financial situation. Instead, President Óscar Fragoso Carmona invited António de Oliveira Salazar to head the Ministry of Finance, and the latter agreed to accept the position provided he would have veto power over all fiscal expenditures. At the time of his appointment as minister of finance in 1928, Salazar held the Chair of Economics at the Law School of the University of Coimbra and was considered by his peers to be Portugal's most distinguished authority on inflation. For forty years, first as minister of finance (1928-32) and then as prime minister (1932-68), Salazar's political and economic doctrines were to shape the Portuguese destiny.

From the perspective of the financial chaos of the republican period, it was not surprising that Salazar considered the principles of a balanced budget and monetary stability as categorical imperatives. By restoring equilibrium both in the fiscal budget and in the balance of international payments, Salazar succeeded in restoring Portugal's credit worthiness at home and abroad. Because Portugal's fiscal accounts from the 1930s until the early 1960s almost always had a surplus in the current account, the state had the wherewithal to finance public infrastructure projects without resorting either to inflationary financing or to borrowing abroad.

At the bottom of the Great Depression, Premier Salazar laid the foundations for his Estado Novo, the "New State." Neither capitalist nor communist, Portugal's economy was cast into a quasi-traditional mold. The corporative framework within which the Portuguese economy evolved combined two salient characteristics: extensive state regulation and predominantly private ownership of the means of production. Leading financiers and industrialists accepted extensive bureaucratic controls in return for assurances of minimal public ownership of economic enterprises and certain monopolistic (or restricted-competition) privileges.

Within this framework, the state exercised extensive de facto authority regarding private investment decisions and the level of wages. A system of industrial licensing (condicionamento industrial), introduced by law in 1931, required prior authorization from the state for setting up or relocating an industrial plant. Investment in machinery and equipment designed to increase the capacity of an existing firm also required government approval. Although the political system was ostensibly corporatist, as political scientist Howard J. Wiarda makes clear, "In reality both labor and capital--and indeed the entire corporate institutional network--were subordinate to the central state apparatus."

Under the old regime, Portugal's private sector was dominated by some forty great families. These industrial dynasties were allied by marriage with the large, traditional landowning families of the nobility, who held most of the arable land in the southern part of the country in great estates. Many of these dynasties had business interests in Portuguese Africa. Within this elite group, the top ten families owned all the important commercial banks, which in turn controlled a disproportionate share of the national economy. Because bank officials were often members of the boards of directors of borrowing firms in whose stock the banks participated, the influence of the large banks extended to a host of commercial, industrial, and service enterprises.

Portugal's shift toward a moderately outward-looking trade and financial strategy, initiated in the late 1950s, gained momentum during the early 1960s. A growing number of industrialists, as well as government technocrats, favored greater Portuguese integration with the industrial countries to the north as a badly needed stimulus to Portugal's economy. The rising influence of the Europe-oriented technocrats within Salazar's cabinet was confirmed by the substantial increase in the foreign investment component in projected capital formation between the first (1953-58) and second (1959-64) economic development plans. The first plan called for a foreign investment component of less than 6 percent, but the plan for the 1959-64 period envisioned a 25-percent contribution. The newly influential Europe-oriented industrial and technical groups persuaded Salazar that Portugal should become a charter member of the European Free Trade Association (EFTA) when it was organized in 1959. In the following year, Portugal also added its membership in the General Agreement on Tariffs and Trade (GATT), the International Monetary Fund (IMF--see Glossary), and the World Bank.

In 1958 when the Portuguese government announced the 1959-64 Six-Year Plan for National Development, a decision had been reached to accelerate the country's rate of economic growth--a decision whose urgency grew with the outbreak of guerrilla warfare in Angola in 1961 and in Portugal's other African territories thereafter. Salazar and his policy advisers recognized that additional claims by the state on national output for military expenditures, as well as for increased transfers of official investment to the "overseas provinces," could only be met by a sharp rise in the country's productive capacity. Salazar's commitment to preserving Portugal's "multiracial, pluricontinental" state led him reluctantly to seek external credits beginning in 1962, an action from which the Portuguese treasury had abstained for several decades.

Beyond military measures, the official Portuguese response to the "winds of change" in the African colonies was to integrate them administratively and economically more closely with Portugal through population and capital transfers, trade liberalization, and the creation of a common currency--the so-called Escudo Area. The integration program established in 1961 provided for the removal of Portugal's duties on imports from its overseas territories by January 1964. The latter, on the other hand, were permitted to continue to levy duties on goods imported from Portugal but at a preferential rate, in most cases 50 percent of the normal duties levied by the territories on goods originating outside the Escudo Area. The effect of this two-tier tariff system was to give Portugal's exports preferential access to its colonial markets.

Despite the opposition of protectionist interests, the Portuguese government succeeded in bringing about some liberalization of the industrial licensing system, as well as in reducing trade barriers to conform with EFTA and GATT agreements. The last years of the Salazar era witnessed the creation of important privately organized ventures, including an integrated iron and steel mill, a modern ship repair and shipbuilding complex, vehicle assembly plants, oil refineries, petrochemical plants, pulp and paper mills, and electronic plants. As economist Valentim Xavier Pintado observed, "Behind the facade of an aged Salazar, Portugal knew deep and lasting changes during the 1960s."

The liberalization of the Portuguese economy continued under Salazar's successor, Prime Minister Marcello José das Neves Caetano (1968-74), whose administration abolished industrial licensing requirements for firms in most sectors and in 1972 signed a free trade agreement with the newly enlarged EC. Under the agreement, which took effect at the beginning of 1973, Portugal was given until 1980 to abolish its restrictions on most community goods and until 1985 on certain sensitive products amounting to some 10 percent of the EC's total exports to Portugal. EFTA membership and a growing foreign investor presence contributed to Portugal's industrial modernization and export diversification between 1960 and 1973.

Notwithstanding the concentration of the means of production in the hands of a small number of family-based financial-industrial groups, Portuguese business culture permitted a surprising upward mobility of university-educated individuals with middle-class backgrounds into professional management careers. Before the revolution, the largest, most technologically advanced (and most recently organized) firms offered the greatest opportunity for management careers based on merit rather than on accident of birth.

After a long period of economic divergence before 1914, the Portuguese economy recovered slightly until 1950, entering thereafter on a path of strong economic convergence. Portuguese economic growth in the period 1950-1973 under the Estado Novo regime (and even with the effects of an expensive war effort in African territories against independence guerrilla groups), created an opportunity for real integration with the developed economies of Western Europe. Through emigration, trade, tourism and foreign investment, individuals and firms changed their patterns of production and consumption, bringing about a structural transformation. Simultaneously, the increasing complexity of a growing economy raised new technical and organizational challenges, stimulating the formation of modern professional and management teams. [ [] , Joaquim da Costa Leite (Aveiro University) - Instituições, Gestão e Crescimento Económico: Portugal, 1950-1973]

Revolutionary change, 1974

The revolution has a devastating impact on the Portuguese economy. The Portuguese economy had changed significantly by 1973 prior to the revolution, compared with its position in 1961 - total output (GDP at factor cost) had grown by 120 percent in real terms. Clearly, the pre-revolutionary period was characterized by robust annual growth rates for GDP (6.9 percent), industrial production (9 percent), private consumption (6.5 percent), and gross fixed capital formation (7.8 percent).

The post revolution period however was characterized by chaos and negative economic growth as industries were nationalised and the effects of the decoupling of Portugal from its former territories were felt. Heavy industry came to an abrupt halt. All sectors of the economy from manufacturing, mining, chemical, defence, finance, agriculture and fishing went into free fall. Portugal found itself overnight going from the country in Western Europe with the highest growth rate to the lowest - in fact it experienced several years of negative growth. This was amplified by the mass emigration of skilled workers due to political intimidation and economic stagnation.

It would only be in 1991 - 16 years later that the GDP as percentage EC-12 average climbed to 54.9 percent (slightly higher level than had existed prior to the revolution). Mainly as a result of Portugal's economic resurgence due to participation in the European Economic Community since 1985. Post revolution Portugal was not able to achieve the same growth rates as it had achieved in the pre revolution period.


The reorganization of the MFA coordinating committee in March 1975 brought into prominence a group of Marxist-oriented officers who, in league with the General Confederation of Portuguese Workers-National Intersindical (Confederação Geral dos Trabalhadores Portugueses-Intersindical Nacional--CGTP-IN), the communist-dominated trade union confederation known as Intersindical prior to 1977, sought the radical transformation of the nation's social system and political economy. Abandoning its moderate-reformist posture, the MFA leadership set out on a course of sweeping nationalizations and land expropriations. During the balance of that year, the government nationalized all Portuguese-owned capital in the banking, insurance, petrochemical, fertilizer, tobacco, cement, and wood pulp sectors of the economy, as well as the Portuguese iron and steel company, the major breweries, the large shipping lines, most public transport, two of the three principal shipyards, core companies of the Companhia União Fabril (CUF) conglomerate, the radio and TV networks (except that of the Roman Catholic Church), and important companies in the glass, mining, fishing, and agricultural sectors. Because of the key role of the domestic banks as holders of stock, the government indirectly acquired equity positions in hundreds of other firms. An Institute for State Participation was created to deal with the many disparate (often tiny) enterprises in which the state had thus obtained a majority shareholding. Another 300 small to medium enterprises came under public management as the government "intervened" to rescue them from bankruptcy following their takeover by workers or abandonment by management.

Although foreign direct investment was statutorily exempted from nationalization, many foreign-controlled enterprises curtailed or ceased operation because of costly forced labor settlements or worker takeovers. The combination of revolutionary policies and negative business climate brought about a sharp reversal in the trend of direct investment inflows from abroad.

A study by the economists Maria Belmira Martins and José Chaves Rosa showed that a total of 244 private enterprises were directly nationalized during the sixteen-month interval from March 14, 1975 to July 29, 1976. Nationalization was followed by the consolidation of the several private firms in each industry into state monopolies. As an example, Quimigal, the chemical and fertilizer entity, represented a merger of five firms. Four large companies were integrated to form the national oil company, Petroleos de Portugal (Petrogal). Portucel brought together five pulp and paper companies. The fourteen private electric power enterprises were joined into a single power generation and transmission monopoly, Electricidade de Portugal (EDP). With the nationalization and amalgamation of the three tobacco firms under Tabaqueira, the state gained complete control of this industry. The several breweries and beer distribution companies were integrated into two state firms, Central de Cervejas (Centralcer) and Unicer; and a single state enterprise, Rodoviaria, was created by joining the ninety-three nationalized trucking and bus lines. The forty-seven cement plants, formerly controlled by the Champalimaud interests, were integrated into Cimentos de Portugal (Cimpor). The government also acquired a dominant position in the export-oriented shipbuilding and ship repair industry. Former private monopolies retained their company designations following nationalization. Included among these were the iron and steel company, Siderurgia Nacional; the railway, Caminhos de Ferro Portugueses (CP); and the national airline, Transportes Aéreos Portugueses (TAP).

Unlike other sectors, where existing private firms were typically consolidated into state monopolies, the commercial banking system and insurance industry were left with a degree of competition. By 1979 the number of domestic commercial banks was reduced from fifteen to nine. Notwithstanding their public status, the remaining banks competed with each other and retained their individual identities and certain differences in their activities.

Before the revolution, private enterprise ownership dominated the Portuguese economy to a degree unmatched in other West European countries. Only a handful of wholly owned or majority owned state entities existed; these included the post office (CTT), two of three telecommunications companies (CTT and TLP), the armaments industry, and the ports, as well as the National Development Bank and Caixa Geral de Depósitos, the largest savings bank. The Portuguese government held minority interests in TAP, the national airline; in Siderurgia Nacional, the integrated steel mill; Radio Marconi, the third telecommunications company; and in oil refining and oil marketing firms. The railroads, two colonial banks (Banco de Angola and BNU), and the Bank of Portugal were majority privately owned but publicly administered. Finally, although privately owned, the tobacco companies were operated under government concessions.

Two years after the military coup, the enlarged public sector accounted for 47 percent of the country's gross fixed capital formation (GFCF), 30 percent of total value added (VA), and 24 percent of employment. These shares should be compared with 10 percent of GFCF, 9 percent of VA, and 13 percent of employment for the traditional public sector of 1973. Expansion of the public sector since the revolution is particularly noteworthy in heavy manufacturing; in public services, including electricity, gas, transport and communications; and in banking and insurance. Further, according to the Institute for State Participation, these figures did not include private enterprises under temporary state intervention, private enterprises with minority state participation (less than 50 percent of the common stock), or worker-managed firms and agricultural collectives.

Land reform

In the agricultural sector, the collective farms set up in Alentejo after the 1974-75 expropriations due to the leftist military coup of 25th April 1974, proved incapable of modernizing, and their efficiency declined. According to government estimates, about 900,000 hectares (2,200,000 acres) of agricultural land were occupied between April 1974 and December 1975 in the name of land reform ("reforma agrária"); about 32% of the occupations were ruled illegal. In January 1976, the government pledged to restore the illegally occupied land to its owners, and in 1977, it promulgated the Land Reform Review Law. Restoration of illegally occupied land began in 1978.

The brain drain

Compounding the problem of massive nationalizations was the brain drain of managerial and technical expertise away from the public enterprises. The income-leveling measures of the MFA revolutionary regime, together with the "antifascist" purges in factories, offices, and large agricultural estates, induced an exodus of human capital, mainly to Brazil. This loss of managers, technicians, and business people inspired a popular Lisbon saying, "Portugal used to send its legs to Brazil, but now we are sending our heads."

Notwithstanding the concentration of the means of production in the hands of a small number of family-based financial-industrial groups, Portuguese business culture permitted a surprising upward mobility of educated individuals with middle-class backgrounds into professional management careers. Before the Revolution of 1974, the largest, most technologically advanced (and most recently organized) firms offered the greatest opportunity for management careers based on merit rather than on accident of birth.

A detailed analysis of Portugal's loss of managerial resources is contained in Harry M. Makler's follow-up surveys of 306 enterprises, conducted in July 1976, and again in June 1977. His study makes clear that nationalization was greater in the modern, large, technically advanced industries than in the traditional industries such as textiles, apparel, and construction. In small enterprises (fifty to ninety-nine employees), only 15 percent of the industrialists had quit as compared with 43 percent in the larger. In the giant firms (1,000 or more employees), more than half had quit. Makler's calculations show that the higher the socioeconomic class origin, the greater the likelihood that the industrialist had left the firm. He also notes that "the more upwardly mobile also were more likely to have quit than those who were downwardly socially mobile." Significantly, a much larger percentage of professional managers (52 percent) compared with owners of production (i.e., founders--18 percent, heirs--21 percent, and owner-managers--32 percent) had left their enterprises.

The constitution of 1976 confirmed the large and interventionist role of the state in the economy. Its Marxist character before the 1989 revisions was revealed in a number of its articles, which pointed to a "classless society" and the "socialization of the means of production" and proclaimed all nationalizations made after April 25, 1974 as "irreversible conquests of the working classes." The constitution also defined new power relationships between labor and management, with a strong bias in labor's favor. All regulations with reference to layoffs, including collective redundancy, were circumscribed by Article 53.

Role of the new public sector

After the revolution, the Portuguese economy experienced a rapid, and often uncontrollable, expansion of public expenditures--both in the general government and in public enterprises. The lag in public sector receipts resulted in large public enterprise and general government deficits. In 1982 the borrowing requirement of the consolidated public sector reached 24 percent of GDP, its peak level; it was subsequently reduced to 9 percent of GDP in 1990.

To rein in domestic demand growth, the Portuguese government was obliged to pursue IMF-monitored stabilization programs in 1977-78 and 1983-85. The large negative savings of the public sector (including the state-owned enterprises) became a structural feature of Portugal's political economy after the revolution. Other official impediments to rapid economic growth after 1974 included all-pervasive price regulation, as well as heavy-handed intervention in factor markets and the distribution of income.

In 1989 Prime Minister Aníbal Cavaco Silva succeeded in mobilizing the required two-thirds vote in the National Assembly to amend the constitution, thereby permitting the denationalisation of the state-owned banks and other public enterprises. Privatization, economic deregulation, and tax reform became the salient concerns of public policy as Portugal prepared itself for the challenges and opportunities of membership in the EC's single market in the 1990s.

The nonfinancial public enterprises

Following the sweeping nationalizations of the mid-1970s, public enterprises became a major component of Portugal's consolidated public sector. Portugal's nationalized sector in 1980 included a core of fifty nonfinancial enterprises, entirely government owned. This so-called public nonfinancial enterprise group included the Institute of State Participation, a holding company with investments in some seventy subsidiary enterprises; a number of state-owned entities manufacturing or selling goods and services grouped with nationalized enterprises for national accounts purposes (arms, agriculture, and public infrastructure, such as ports); and a large number of over 50-percent EPNF-owned subsidiaries operating under private law. Altogether these public enterprises accounted for 25 percent of VA in GDP, 52 percent of GFCF, and 12 percent of Portugal's total employment. In terms of VA and GFCF, the relative scale of Portugal's public entities exceeded that of the other West European economies, including the EC member countries.

Although the nationalizations broke up the concentration of economic power in the hands of the financial-industrial groups, the subsequent merger of several private firms into single publicly owned enterprises left domestic markets even more subject to monopoly. Apart from special cases, as in iron and steel, where the economies of scale are optimal for very large firms, there was some question as to the desirability of establishing national monopolies. The elimination of competition following the official takeover of such industries as cement, chemicals, and trucking probably reduced managerial incentives for cost reduction and technical advance.

As hybrid institutions, public enterprises find it difficult to separate market choices from political considerations. Their poorer economic performance may partially be explained by public management's frustration at attempting to reconcile impossible goals: on the one side, a concern for the "bottom line"; on the other, coping with the distributional struggles of interest groups. Special interest groups that shape the policies of state-owned firms include "elite" public enterprise unions aspiring to guarantee employment and above-market wages; consumer groups desiring goods and services at below user cost or market price; oversight ministries intent upon expanding their authority; and politicians, including chiefs of state, seeking to expand patronage opportunities. As a vehicle for redistribution, public enterprise often becomes the servant of special interest groups--those who are politically connected--rather than a guardian of the public or general interest.

It was not surprising that numerous nationalized enterprises experienced severe operating and financial difficulties. State operations faced considerable uncertainty as to the goals of public enterprises, with negative implications for decision making, often at odds with market criteria. In many instances, managers of public firms were less able than their private-sector counterparts to resist strong wage demands from militant unions. Further, public firm managers were required for reasons of political expediency to maintain a redundant labor force and freeze prices or utility rates for long periods in the face of rising costs. Overstaffing was particularly flagrant at Petrogal, the national petroleum monopoly, and Estaleiros Navais de Setúbal (Setenave), the wholly state-owned shipbuilding and repairing enterprise. The failure of the public transportation firms to raise fares during a time of accelerating inflation resulted in substantial operating losses and even obsolescence of the sector's capital stock.

As a group, the public enterprises performed poorly financially and relied excessively on debt financing from both domestic and foreign commercial banks. The operating and financial problems of the public enterprise sector were revealed in a study by the Bank of Portugal covering the years 1978-80. Based upon a survey of fifty-one enterprises, which represented 92 percent of the sector's VA, the analysis confirmed the debilitated financial condition of the public enterprises, i.e., their inadequate equity and liquidity ratios. The consolidated losses of the firms included in the survey increased from 18.3 million contos (for value of the contos--see Glossary) in 1978 to 40.3 million contos in 1980, or 4.6 percent to 6.1 percent of net worth, respectively. Losses were concentrated in transportation and to a lesser extent in transport equipment and materials (principally shipbuilding and ship repair). The budgetary burden of the public enterprises as a result of their overall weak performance was substantial: enterprise transfers to the Portuguese government (mainly taxes) fell short of government receipts in the forms of subsidies and capital transfers. The largest nonfinancial state enterprises recorded (inflation-discounted) losses in the seven-year period from 1977 to 1983 equivalent to 11 percent on capital employed. Notwithstanding their substantial operating losses and weak capital structure, these large enterprises financed 86 percent of their capital investments from 1977 to 1983 through increases in debt, of which two-thirds was foreign. The rapid buildup of Portugal's external debt from 1978 to 1985 was largely associated with the public enterprises.

General government

The share of general government expenditure (including capital outlays) in GDP rose from 23 percent in 1973 to 46 percent in 1990 (see table 5, Appendix). On the revenue side, the upward trend was less pronounced: the share increased from nearly 23 percent in 1973 to 39.2 percent in 1990. From a modest surplus before the revolution in 1973, the government balance swung to a wide deficit of 12 percent of GDP in 1984, declining thereafter to around 5.4 percent of GDP in 1990. Significantly, both current expenditures and capital expenditures roughly doubled their shares of GDP between 1973 and 1990: government current outlays rose from 19.5 percent to 40.2 percent, capital outlays from 3.2 percent to 5.7 percent.

Apart from the growing investment effort, which included capital transfers to the public enterprises, government expenditure patterns since the revolution reflected rapid expansion in the number of civil servants and pressure to redistribute income, mainly through current transfers and subsidies, as well as burgeoning interest obligations. The category "current transfers" nearly tripled its share of GDP between 1973 and 1990, from under 5 percent to 13.4 percent, reflecting the explosive growth of the social security system, both with respect to the number of persons covered and the upgrading of benefits. Escalating interest payments on the public debt from less than half a percent of GDP in 1973 to 8.2 percent of GDP in 1990 were the result of both a rise in the debt itself and higher real effective interest rates.

The narrowing of the government deficit since the mid-1980s and the associated easing of the borrowing requirement was caused both by a small increase in the share of receipts (by two percentage points) and the relatively sharper contraction of current subsidies, from 7.6 percent of GDP in 1984 to 1.5 percent of GDP in 1990. This reduction was a direct consequence of the gradual abandonment by the government of its policy of curbs on rises in public utility rates and food prices, against which it paid subsidies to public enterprises.

Tax reform--comprising both direct and indirect taxation--was a major element in a more comprehensive effort to modernize the economy in the late 1980s. The key objective of these reforms was to promote more efficient and market-oriented economic performance. Beyond considerations of efficiency, a good tax system also should be simple (i.e., easy to administer), fair, and transparent.

Prior to the reform, about 90 percent of the personal tax base consisted of labor income. Statutory marginal tax rates on labor income were very high, even at relatively low income levels, especially after the revolution. The large number of tax exemptions and fiscal benefits, together with high marginal tax rates, entailed the progressive erosion of the tax base through tax avoidance and evasion. Furthermore, Portuguese membership in the EC created the imperative for a number of changes in the tax system, especially the introduction of the value-added tax.

Reform proceeded in two major installments: the VAT was introduced in 1986; the income tax reform, for both personal and corporate income, became effective in 1989. The VAT, whose normal rate was 17 percent, replaced all indirect taxes, such as the transactions tax, railroad tax, and tourism tax. Marginal tax rates on both personal and corporate income were substantially cut, and in the case of individual taxes, the number of brackets was reduced to five. The basic rate of corporate tax was 36.5 percent, and the top marginal tax rate on personal income was cut from 80 percent to 40 percent. A 25-percent capital gains tax was levied on direct and portfolio investment. Business proceeds invested in development projects were exempt from capital gains tax if the assets were retained for at least two years.

Preliminary estimates indicated that part of the observed increase in direct tax revenue in 1989-90 was of a permanent nature, the consequence of a redefinition of taxable income, a reduction in allowed deductions, and the termination of most fiscal benefits for corporations. The resulting broadening of the income tax base permitted a lowering of marginal tax rates, greatly reducing the disincentive effects to labor and saving.

Macroeconomic disequilibria and public debt

Between 1973 and 1988, the general government debt/GDP ratio quadrupled, reaching a peak of 74 percent in 1988. This growth in the absolute and relative debt was only partially attributable to the accumulation of government deficits. It also reflected the reorganization of various public funds and enterprises, the separation of their accounts from those of the government, and their fiscal consolidation. The rising trend of the general government debt/GDP ratio was reversed in 1989, as a surge in tax revenues linked to the tax reform and the shrinking public enterprise deficits reduced the public sector borrowing requirement (PSBR) relative to GDP. After falling to 67 percent in 1990, the general government debt/GDP ratio was expected to continue to decline, reflecting fiscal restraint and increased proceeds from privatisation.

The financing structure of the public deficits had changed since the mid-1980s under the effect of two factors. First, the easing of the PSBR and the government's determination to reduce the foreign debt/GDP ratio led to a sharp reduction in borrowing abroad. Second, since 1985 the share of nonmonetary financing had increased steeply, not only in the form of public issues of Treasury bills but also, since 1987-88, in the form of medium-term Treasury bonds.

The magnitude of the public sector deficit (including that of the public enterprises) had a crowding-out effect on private investment. The nationalized banks were obliged by law to increase their holding of government paper bearing negative real interest rates. This massive absorption of funds by the public sector was largely at the expense of private enterprises whose financing was often constrained by quantitative credit controls.

Portugal's membership in the EC resulted in substantial net transfers averaging 1.5 percent of annual GDP during 1987-90. The bulk of these transfers was "structural" funds that were used for infrastructure developments and professional training. Additional EC funds, also allocated through the public sector, were designed for the development of Portugal's agricultural and industrial sectors.

After 1985 the PSBR began to show a substantial decline, largely as a result of the improved financial position of public enterprises. Favorable exogenous factors (lower oil prices, lower interest rates, and depreciation of the dollar) helped to moderate operating costs. More important, however, was the shift in government policy. Public enterprise managers were given greater autonomy with respect to investment, labor, and product pricing. Significantly, the combined deficit of the nonfinancial public enterprises fell to below 2 percent of GDP on average in 1987-88 from 8 percent of GDP in 1985-86. In 1989 the borrowing requirements of those enterprises fell further to 1 percent of GDP.

In April 1990, legislation concerning privatization was enacted following an amendment to the constitution in June 1989 that provided the basis for complete (100 percent) divestiture of nationalized enterprises. Among the stated objectives of privatization were to modernize economic units, increase their competitiveness, and contribute to sectoral restructuring; to reduce the role of the state in the economy; to contribute to the development of capital markets; and to widen the participation of Portuguese citizens in the ownership of enterprises, giving particular attention to the workers of the enterprises and to small shareholders.

The Portuguese government was concerned about the strength of foreign investment in privatizations and wanted to reserve the right to veto some transactions. But as a member of the EC, Portugal eventually would have to accept investment from other member countries on an equal footing with investment of its nationals. Significantly, government proceeds from privatization of nationalized enterprises would primarily be used to reduce public debt; and to the extent that profits would rise after privatization, tax revenues would expand. In 1991 proceeds from privatization were expected to amount to 2.5 percent of GDP.

Changing structure of the economy

The Portuguese economy had changed significantly by 1973, compared with its position in 1961. Total output (GDP at factor cost) grew by 120 percent in real terms. The industrial sector was three times greater, and the size of the services sector doubled; but agriculture, forestry, and fishing advanced by only 16 percent. Manufacturing, the major component of the secondary sector, was three times as large at the end of the period. Industrial expansion was concentrated in large-scale enterprises using modern technology.

The composition of GDP also changed markedly from 1961 to 1973. The share of the primary sector (agriculture, forestry, and fishing) in GDP shrank from 23 percent in 1961 to 16.8 percent in 1973, and the contribution of the secondary (or industrial) sector (manufacturing, construction, mining, and electricity, gas and water) increased from 37 percent to 44 percent during the period. The services sector's share in GDP remained constant at 39.4 percent between 1961 and 1973. Within the industrial sector, the contribution of manufacturing advanced from 30 percent to 35 percent and that of construction from 4.6 percent to 6.4 percent.

The progressive "opening" of Portugal to the world economy was reflected in the growing shares of exports and imports (both visible and invisible) in national output and income. Further, the composition of Portugal's balance of international payments altered substantially. From 1960 to 1973, the merchandise trade deficit widened, but owing to a growing surplus on invisibles--including tourist receipts and emigrant worker remittances--the deficit in the current account gave way to a surplus from 1965 onward. Beginning with that year, the long-term capital account typically registered a deficit, the counterpart of the current account surplus. Even though the nation attracted a rising level of capital from abroad (both direct investments and loans), official and private Portuguese investments in the "overseas territories" were greater still--hence the net outflow on the long-term capital account.

The growth rate of Portuguese merchandise exports during the period 1959 to 1973 was 11 percent per annum. In 1960 the bulk of exports was accounted for by a few products--canned fish, raw and manufactured cork, cotton textiles, and wine. By contrast, in the early 1970s, Portugal's export list reflected significant product diversification, including both consumer and capital goods. Several branches of Portuguese industry became export-oriented, and in 1973 over one-fifth of Portuguese manufactured output was exported.

The radical nationalization-expropriation measures in the mid-1970s were initially accompanied by a policy-induced redistribution of national income from property owners, entrepreneurs, and private managers and professionals to industrial and agricultural workers. This wage explosion favoring workers with a high propensity to consume had a dramatic impact on the nation's economic growth and pattern of expenditures. Private and public consumption combined rose from 81 percent of domestic expenditure in 1973 to nearly 102 percent in 1975. The counterpart of overconsumption in the face of declining national output was a contraction in both savings and fixed capital formation, depletion of stocks, and a huge balance-of-payments deficit. The rapid increase in production costs associated with the surge in unit labor costs between 1973 and 1975 contributed significantly to the decline in Portugal's ability to compete in foreign markets. Real exports fell between 1973 and 1976, and their share in total expenditures declined from nearly 26 percent to 16.5 percent.

The economic dislocations of metropolitan Portugal associated with the income leveling and nationalization-expropriation measures were exacerbated by the sudden loss of the nation's African colonies in 1974 and 1975 and the reabsorption of overseas settlers (the so-called retornados), the global recession, and, as well, the international energy crisis.

Over the longer period, 1973-90, the composition of Portugal's GDP at factor cost changed significantly. The contribution of agriculture, forestry, and fishing as a share of total production continued its inexorable decline, to 6.1 percent in 1990 from 12.2 percent in 1973. In contrast to the prerevolutionary period, 1961-73, when the industrial sector grew by 9 percent annually and its contribution to GDP expanded, industry's share narrowed to 38.4 percent of GDP in 1990 from 44 percent in 1973. Manufacturing, the major component of the industrial sector, contributed relatively less to GDP in 1990 (28 percent) than in 1973 (35 percent). Most striking was the 16- percentage-point increase in the participation of the services sector from 39 percent of GDP in 1973 to 55.5 percent in 1990. Most of this growth reflected the proliferation of civil service employment and the associated cost of public administration, together with the dynamic contribution of tourism services during the 1980s.

Economic growth, 1960-73 and 1981-90

There was a striking contrast between the economic growth and levels of capital formation in the 1960-73 period and in the 1980s decade. Clearly, the pre-revolutionary period was characterized by robust annual growth rates for GDP (6.9 percent), industrial production (9 percent), private consumption (6.5 percent), and gross fixed capital formation (7.8 percent). By way of contrast, the 1980s exhibited a pattern of slow-to-moderate annual growth rates for GDP (2.7 percent), industrial production (4.8 percent), private consumption (2.7 percent), and fixed capital formation (3.1 percent). As a result of worker emigration and the military draft, employment declined during the earlier period (by a half percent annually), but increased by 1.4 percent annually during the 1980s. Significantly, labor productivity (GDP growth/employment growth) grew by a sluggish rate of 1.3 percent annually in the recent period compared with the extremely rapid annual growth rate of 7.4 percent earlier. Inflation, as measured by the GDP deflator, averaged a modest 4 percent a year before the revolution compared with nearly 18 percent annually during the 1980s.

Although the investment coefficients were roughly similar (24 percent of GDP allocated to fixed capital formation in the earlier period; 26.7 percent during the 1980s), the overall investment productivity or efficiency (GDP growth rate/investment coefficient) was nearly three times greater (28.6 percent) before the revolution than in the 1980s (10.1 percent).

How does Portugal's GDP per capita compare with the average of the twelve members of the EC in the early 1990s, the European Twelve (EC-12), during the past three decades? In 1960, at the initiation of Salazar's more outward-looking economic policy, Portugal's per capita GDP was only 38 percent of the EC-12 average; by the end of the Salazar period, in 1968, it had risen to 48 percent; and in 1973, on the eve of the revolution, Portugal's per capita GDP had reached 56.4 percent of the EC-12 average. In 1975, the year of maximum revolutionary turmoil, Portugal's per capita GDP declined to 52.3 percent of the EC-12 average.

Convergence of real GDP growth toward the EC average occurred as a result of Portugal's economic resurgence since 1985. In 1991 Portugal's GDP per capita climbed to 54.9 percent of the EC average, exceeding by a fraction the level attained just before the Revolution of 1974.

European Union integration - the 1990s and 2000s

Portugal experienced a strong recovery in a few decades after the Carnation Revolution's turmoil of 1974, the ultimate loss of its overseas empire in 1975, and the adhesion to the European Union, then the European Economic Community, in 1986. The European Union's structural and cohesion funds and the growth of many of Portugal's main exporting companies which became leading world players in a number of economic sectors, such as engineered wood, injection molding, plastics, specialized software, ceramics, textiles, footwear, paper, cork, fine wine, among others, was a major factor on the development of the Portuguese economy, standard of living and quality of life. Similarly, for several years, the Portuguese subsidiaries of large multinational companies, such as Siemens Portugal, Volkswagen Autoeuropa, Qimonda Portugal, IKEA, Nestlé Portugal, Microsoft Portugal, [ [ Microsoft Portugal novamente eleita melhor Subsidiária mundial da Microsoft International em 2008] ] Unilever/Jerónimo Martins and Danone Portugal, rank among its most productive in the world for its continued high productivity records. [ A Siemens executive, Carlos de Melo Ribeiro, pointed to labor costs and productivity as major reasons why shipping semiconductors to Portugal for final production is more advantageous than retaining the work in Germany or Britain - Siemens Builds on Long History in Portugal, to the Benefit of Both, By Karen E. Thuermer, October, 1997, in Keller Publishing [] ] [ [ "The investment made in Portugal by the VW group has enabled “this plant to become one of the best in the VW Group and indeed in the whole automotive industry in terms of quality, productivity, absenteeism, safety, and many other decisive criteria”, Gerd Heuss upon the manufacturing of car nº 1 million in Palmela", June 2003.] , AICEP - Business Development Agency]

Related to the notable economic development that has been seen in Portugal since the late 1950s (with an abrupt but short-lived halt due to the Carnation Revolution of 1974), the development of tourism, which has allowed a display of the national cultural heritage, particularly in regards to architecture and local cuisine, has further improving and defined its development. The adoption of the euro and the organisation of Expo 98 world fair in Lisbon, the 2001 European Culture Capital in Porto and the Euro 2004 football championship, were also important landmarks in the economic history of the country.

ee also

*Economy of Portugal
*History of Angola
*Economic history of Brazil
*Portuguese real
*Portuguese escudo


* - [ Portugal]

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