International Trade in Portugal

News Related to International Trade in Portugal

Business outline for Portugal

Main Industry Sectors

The agricultural sector is not so productive because it is less mechanized; it represents a little over 2% of Portugal's GDP and employs 11.5% of the population. The main productions are cereals, fruits, vegetables and wine. The exports of  Port wine represent 1.4% of total exports. Portugal has many natural resources. The mining sector (copper, tin) represents 6% of the GDP and Portugal is one of the main exporters of marble. The forests of Portugal provide a large portion of the world's cork supply.
The manufacturing industry is modern and it is made up of small and medium-sized companies. Its main sectors of activity are metallurgy, mechanical engineering, textiles and construction. Moreover, the country has increased its role in the European automobile sector and has a world class mold manufacturing industry.
Services, particularly tourism, play an important role which is rapidly increasing. The tertiary sector contributes to more than 70% of the GDP.

Economic Overview

From the beginning of 2009, Portugal is in the core of a deep recession, caused by the collapse of foreign demand and the restrictive financial conditions that have affected all the sectors of the economy, such as exports and investments in particular.  After it was contracted to 2.7% in 2009, the Portuguese economy has experienced a moderate growth again in 2010, estimated at 1.1% of the GDP. 

Due to the increase in public expenditure aimed to support the economy, the budgetary situation was highly deteriorated, the deficit reached more than 7% of the GDP.  The public debt has also experienced an important increase, surpassing 90% of the GDP for the first quarter 2011. Facing this situation, the government established a severe plan intended to control and to reduce expenditures through a fiscal tax increase.  A large plan of privatization has also been launched in order to increase revenues. Structural measures were also announced, including a labor code reform that allows more flexibility. The country should receive a financial assistance from the EU and IMF, which could reach 80 billion EUR.

With an unemployment rate that has risen to around 10%, an increase of differences between the north and the south, and the erosion of the purchasing power, the social tensions have become evident in Portugal.

FDI in Figures

After several years of steady growth, the flow of foreign direct investments (FDI) started to decline since 2007, and they contracted more due to the global recession in 2009. Despite a slight recovery in 2010, foreign investments have decreased since the beginning of 2011, following the deterioration of public accounts. Investors fear a scenario similar to that of Greece.

The FDI in Portugal is considered as a priority to the government. The country has recently embarked on the development of renewable energies, specifically solar energy (the country has the second largest solar power station in the world) and wave energy (obtained from wave movements), sectors that could provide new opportunities to foreign investors. Portugal offers a diversified economy and benefits from its membership to the European Union; however, the bureaucratic and legal burdens can be a hindrance to FDI.

FDI Government Measures

Government policies have followed the priority established by the Prime Minister, to promote the country's appeal to foreign investors. In order to do this, simple taxation procedures have been put in place, effective warehousing and transport logistics have been set up (especially the Sines terminal in the South-West of the country), as well as improvements in telecommunication infrastructures, etc. An agency for investment and foreign trade has been established: the AICEP.
Other measures have been implemented, including making the labor law more lenient in order to increase the workforce flexibility, and setting up a special aid regime for large projects (over 25 million EUR).

Country Strong Points

Portugal's strong points are:
- The low labor costs;
- Its geographical situation. Portugal act as a bridge between 3 continents: Europe, Africa, America;
- its temperate climate;
- its socio-political stability and the non-existence of terrorism; and
- the stability of its currency.
You can consult the Ministry of the Economy website.

Country Weak Points

Portugal's weak points are its weak demography and a certain rigidity in the labor law.

Foreign Trade Overview

Portugal's economy is open to foreign investment, trade represents more than 70% of  the GDP (during the period 2007-2009). Becoming a member of the European Union changed the structure of the Portuguese imports and exports.  The country exports more and more technological equipment instead of the traditional agricultural products or products from the textile and clothing industry.

The European Union is Portugal's main customer, followed by the United States. Other commercial partners of Portugal are China, Nigeria and Brazil.

The trade balance of Portugal is structurally in deficit, however its balance experienced an improvement during the crisis, due to the fall of imports which was much higher than the drop on exports. Since the beginning of 2011, Portugal has experienced a decline in its trade deficit over the same period in 2010, thanks to higher exports.