Located in southwestern Europe in the western part of the Iberian Peninsula, Portugal borders Spain to the north and east and the Atlantic Ocean to the south and west. The total area of the country—including the overseas territories of Azores (2,247 square kilometers/868 square miles) and the Madeira Islands (794 square kilometers/307 square miles), both autonomous regions of Portugal—is 92,345 square kilometers (35,655 square miles). The area of Portugal is thus slightly smaller than the U.S. state of Indiana. The capital and largest city is Lisbon, a major seaport situated in the west-central part of Portugal at the mouth of the Tejo (Tajo) River. Other major cities include Oporto (Porto) situated in the northwest at the mouth of the Douro (Duero) River; Coimbra, an industrial and university city on the Mondego River in central Portugal; and Faro, located in the renowned Algarve beach resort area in the south.
The population of Portugal numbered 10,048,232 in July 2000. The population growth rate was estimated at a rather low 0.18 percent in 2000, and the net migration rate was 0.5 immigrants per 1,000 population in the same year. The Portuguese population declined slightly in the late 1980s due to a rapid reduction of the birth rate and steady emigration . The figures somewhat stabilized during the 1990s, and in 1999 the population was 1 percent higher than it was in 1991. Portugal still has one of the lowest fertility rates in Western Europe with approximately 1.4 children born per woman. In 1999, the number of births rose by 2.3 percent, but this increase was still insufficient to ensure long-term population growth. According to Portuguese demographic projections (assuming a recovery in the fertility rate to 1.66 per woman in 2020), the Portuguese population is expected to peak in 2015 at 10.18 million and then again begin to decline. As in many other European countries, Portugal has an aging population with 15.2 percent over 65 years of age in 1998 (up from 13.8 percent in 1991) and only 16.8 percent aged 14 years or younger (compared with 19.4 percent in 1991). Life expectancy was 72.24 years for men and 79.49 years for women in 2000. Aging will inevitably increase the strain on Portugal's already over-stretched health-care and social security systems.
The Portuguese population has been strongly influenced by migration processes. Many nationals emigrated in the 1960s, 1970s, and to a lesser extent in the 1980s in search of higher living standards in the more affluent economies of Western Europe and elsewhere. About 4.5 million Portuguese now live abroad, or almost one-half of the domestic population, but better domestic economic conditions in recent years—particularly since the country joined the European Union (EU) in 1986—have changed this. By 2000, Portugal experienced a net immigration
The Portuguese are primarily of Mediterranean descent, as their ancestry can be traced to ancient Iberians, Romans, Visigoths, and Moors (Arabs). Black African citizens who immigrated to the mainland during the de-colonization in the 1970s are fewer than 100,000 in number. Portuguese is the official language. Roman Catholicism is the religion of about 94 percent of the population, although a number of Protestants and followers of other denominations also live in the country. The main urban centers are concentrated around the Lisbon and Tejo Valley area on the Atlantic coast and in the vicinity of the city of Oporto. These 2 conurbations (zones) are home to nearly 69 percent of the population. The shift from inland rural areas to the cities was fueled by the agricultural crisis and the post-World War II industrial boom, which again gained momentum in the 1970s. The nation is still experiencing heavy migration to urban centers, along with the gradual depopulation of villages in Portugal's rural provinces.
As Portugal's economy moved towards a focus on services, particularly on banking and finance, this sector gained importance in the 1990s. Following the gradual but thorough privatization of state banks begun in the late 1980s, the Caixa Geral de Depositos (CGD) remained the only state-controlled financial services firm in 2000 (the government has ruled out its privatization for the time being).
The privatization of the sector has been followed by a wave of bank mergers and acquisitions. Coping with a relatively small but increasingly crowded market as a result of the European banking liberalization policies, Portuguese banks took the opportunity to form larger and more efficient groups. In 1995, Banco Comercial Portugues (BCP) and the insurer Imperio jointly bought the country's largest private bank, Banco Portugues do Atlantico (BPA). Industrialist Antonio Champalimaud acquired half of the second largest bank, Banco Totta e Acores, and added it to his Banco Pinto e Sotto Mayor (BPSM). In 1999-2000, the banking sector underwent further consolidation when the major Spanish bank, Banco Santander Central Hispano (BSCH) tried to acquire a controlling stake in the Champalimaud group. Because it was in violation of EU legislation, the deal was banned by the government, but a compromise led to the split of the Champalimaud group and a new reorganization of the sector. BSCH acquired 2 of the splinter Champalimaud banks, Banco Totta e Acores and Credito Pre-dial Portugues; CGD acquired the group's most valued assets, BPSM and the insurance group Mundial Confianca. This reorganization concentrated 70 percent of the country's retail banking market in 4 institutions: CGD, BCP, Banco Portuguese do Investimento (BPI), and Banco Espirito Santo (BES). BSCH of Spain controls 11 percent of the market share. Insurance firms are strongly connected to the banking groups, and 3 of them dominate the market: Mundial Confianca, acquired by CGD; Imperio, controlled by BCP; and Tranquilidade, in which BES has a major stake.
By 2000, banking services in Portugal were modern and mature. Yet as the competition from foreign banks increased with the implementation of the EU banking liberalization policies, profit margins of Portuguese banks began to shrink. Even though the Internet offered the possibilities of cost advantages such as online banking, no Portuguese bank was in a position by 2000 to use fully the Internet for significant cost savings. None had close enough ties to a major foreign bank that would have been able to provide adequate support. Decreasing lending margins in the late 1990s, on the other hand, have prompted most Portuguese retail banks to raise their commissions on customer transactions in order to stay profitable. For example, debit cards in Portugal have an annual charge of US$9.25 a year and credit cards have an even higher annual charge. As a result, commissions vary radically from bank to bank, and it is often the poorer customers who are actually bearing the burden of such dubious banking policies.
Shrinking bank profit margins, increasing bank commissions, and allegations that banks frequently gave misleading information on their charges or applied the charges after the accounts had been opened prompted the government to introduce new voluntary regulations on banking services. These regulations allowed for even the poorest citizen to have a bank account without depositing a minimum amount and to pay only low predictable charges. Only the state-owned CGD, the country's largest financial group, had previously provided a full table of its prices for any visitor to its web page to see. Several major banks adopted the new rules in 2000, but others declined for reasons of commercial secrecy.
Although Internet banking hardly exists in Portugal, its national system of automated teller machines (ATMs), Multibanco, is a leader in Europe. The new Netpin electronic technology, compatible with the system, offers unprecedented security against fraud. Netpin's developer, the Portuguese technology-based company Grupo de Apoio a Industria Nacional (GAIN), manufactures most of the terminals distributed across the SIBS (Sociedade Interbancaria de Servitos) system, parallel to Multibanco. The Netpin system offers the services available at a regular ATM (withdrawals; balance inquiries; payment of tax, water, and energy bills; recharging of electronic "purse cards") and could serve as the basis for development of electronic commerce in Portugal. The company is considering marketing the product in foreign markets, concentrating on those where the Multibanco system already has a foothold, such as Brazil, Colombia, Spain, and Costa Rica.
Between 1994 and 1998, due to very easy and active mortgage financing, household debt (in home mortgages) rose from 28.6 percent to 60.8 percent of the disposable income in the country and from 21.1 percent to 44.1 percent of GDP. While the Portuguese government believes that such levels are not dangerous, the rapid growth of the debt is hardly sustainable. If household income suddenly drops, a banking crisis could be triggered by households unable to make payments. There are thus some worries that these high debt levels could worsen any future recession . Furthermore, household disposable income can be rapidly affected even if no recession occurs, simply due to changes in interest rates by the European Central Bank. Finally, the easy availability of home mortgage loans has contributed to an exaggerated and burdensome increase in real estate prices.
Tourism is one of the most important sectors of the Portuguese economy, with foreign currency earnings accounting for an estimated 4.8 percent of GDP in 1999 and employing 6 percent of the active population. Foreign exchange revenue from tourism amounted to US$2.4 billion in 1997. Nearly 25 million foreigners visit Portugal every year, and about half of them are tourists. Most of the visitors are Central and Northern Europeans attracted by the sun and beaches of the southern Algarve region and Madeira. In the mid-1990s, as mass beach tourism declined worldwide, the sector went through a sluggish period, in contrast to the tourist boom in neighboring Spain. The authorities launched a program to diversify attractions by promoting sports, culture, and conference facilities, and public investment in the late 1990s was directed into providing facilities in undeveloped areas to encourage investment by the private sector . The government is restoring historical and cultural assets such as castles and monasteries, with the EU meeting one-third of the costs. A renewed tourism promotional campaign helped increase revenue in 1997 and 1998. The favorable exchange rate for visitors from Britain (Portugal's most important tourist market) and the celebration of the World Fair Expo '98 in Lisbon brought in additional visitors as well. The World Fair alone contributed a 20 percent increase in foreign visitors in 1998 and a 17 percent increase in tourist revenue.
Portugal is slowly following general European retail trends, with a proliferation of hypermarkets and shopping malls gradually replacing small traditional retailers. These new forms of retailing thrived during the consumer boom of the late 1990s. Both foreign and domestic investors have participated in the retailing revolution, with principal domestic investors being the Oporto-based group Sonae Investimentos and Lisbon's Jeronimo Martins.
Portugal's franchise retail market, after the boom period of the 1990s, entered a phase of consolidation in 1999. At that time, 357 franchisers were already operating in the market. Of the total number of brands, 35 percent were Portuguese and 42 percent were Spanish. Banks specializing in small and medium-sized businesses, like the state-owned Banco Nacional Ultramarino, help franchises get started. Famous franchise names include Printemps and Carrefour (French supermarket chains); McDonald's, Pizza Hut and Baskin-Robbins (U.S. fast-food chains); Goody's, a Greek fast-food chain claiming to be the third largest in Europe; and Italian and French apparel stores like Massimo Dutti and Faconnable. Ready-to-wear clothes account for more than one-third of all franchised outlets. A series of new retail centers, such as the large Colombo Center in Lisbon that opened in 1997, have provided excellent opportunities for retail licensing and franchising. The company Sonae Imobiliaria, a unit of Sonae Investimentos, accounts for more than half the market for new retail centers. The next phase of retail development will most likely be the emergence of retail parks or factory outlets, and Sonae Imobiliaria, as well as its rival Mundicenter, are preparing to develop this market.
Since the late 1980s, mail order and TV sales have become popular direct marketing methods. Between 1996 and 1997, sales growth was calculated at 15 percent, and there are presently around 50 direct marketing firms. The most popular sectors are cultural, instruction and training, and amusement materials (33 percent of sales) and apparel and clothing (17 percent of sales). Other strong areas are housewares, perfumes, cosmetics, art, and collectibles. The success of direct marketing is more impressive given that Portuguese mailing expenses are considered high.
E-commerce is still lagging behind most of Europe, but several companies have emerged in the late 1990s that offer online shopping for office supplies, computer accessories, and groceries. Consumer protection regulations and laws in Portugal are considered generally adequate for online shopping, although inspections often are ineffective.
|Trade (expressed in billions of US$): Portugal|
|SOURCE: International Monetary Fund. International Financial Statistics Yearbook 1999.|
Portugal has no territories or colonies.
Economist Intelligence Unit. Country Profile: Portugal. London: EIU, 2001.
Solsten, Eric. Portugal: A Country Study. Washington, DC: Library of Congress, 1993.
U.S. Central Intelligence Agency. World Factbook 2000. <http://www.odci.gov/cia/publications/factbook/index.html> . Accessed August 2001.
U.S. Department of State. FY 2000 Country Commercial Guide: Portugal. <http://www.state.gov/www/about_state/business/com_guides/index.html> . Accessed January 2001.
Escudo (Esc). One Portuguese escudo equals 100 centavos. There are banknotes in denominations of 10,000, 5,000, 2,000, 1,000, and 500 escudos. Coins come in denominations of 200, 100, 50, 20, 10 and 5 escudos. The escudo will remain in circulation until February 28, 2002, when it will be completely be replaced by the new European currency, the euro.
Clothing and footwear, machinery, chemicals, cork and paper products, food and beverages, and hides.
Machinery and transport equipment, chemicals, petroleum, textiles, and agricultural products.
US$151.4 billion (1999 est.).
Exports: US$25 billion (1998 est.). Imports: US$34.9 billion (1998 est.).