Portugal Essay ⋆ Business Essay Examples ⋆ EssayEmpire

Civilization can be traced in Portugal back to neolithic times, through the settlements of the Phoenicians, Carthaginians, and Romans. Later, the Christian “reconquista” halted the Muslim advance and colonization of the country and gave rise to the maritime empire that provided for economic growth in the 15th and 16th centuries. This, in turn, was followed by a period of Spanish domination and occupation during the Napoleonic wars. By this stage, Portugal had lost much of its power and influence.

It was not until the end of the 19th century that poor living standards and inept government precipitated a republican backlash. The monarchy was finally overthrown on October 5, 1910, replaced by a republic. However, the political scene was far from stable. From 1910 to 1946, military intervention became the normal means of governmental change in Portugal. A Catholic monarchist, General António Óscar Carmona, emerged as president and remained in office until 1951. During this period, Portugal had many of the trappings of a fascist state, including secret police and tacit support for Franco during the Spanish Civil War.

It was also during this period that Antonio de Oliveira Salazar first served as prime minister in 1932. Salazar is often credited as being the guiding hand of Portuguese development and its progress to a modern economy. Indeed, from 1950 until Salazar’s death, it is estimated that gross domestic product (GDP) per capita in Portugal rose at an average rate of 5.66 percent per year, well ahead of European counterparts. Salazar remained in power until 1968, when he suffered a stroke. He died in 1970.

The continuing economic and political problems of the right-wing government caused tensions to grow and resulted in an almost bloodless left-wing coup, led by disenchanted army officers on April 25, 1974. However, until November 1975, the situation remained precarious, with various factions vying for power. The summer of 1975 saw elections and victory for the socialist party under the leadership of Mario Soares. This signalled the beginning of a period that has seen gradual strengthening of democratic processes and further integration of Portugal into the European economy. In 1986 Portugal joined the European Community (EC), giving it access to funding and the potential for much-needed economic growth.

For administrative purposes, Portugal is divided into 18 districts and 2 autonomous regions (the Azores and Madeira), and in 2008 the population of Portugal is estimated to be approximately 10.5 million. The president is the head of state, elected by popular vote, with a five-year term. The leader of the majority party or the majority coalition is appointed prime minister and head of government by the president and leads the unicameral Assembly of the Republic. The assembly comprises 230 seats, with members elected to serve a four-year term. In the elections of February 20, 2005, the Portuguese Socialist Party was the biggest winner, with 121 seats.

The Portuguese economy has developed gradually over the last 20 years, and like many Western economies, it has diversified and become increasingly service based. The basis of this change has been policies, similar to the Thatcherite policies dominant in the United Kingdom in the 1980s, which have seen privatization of public sector organizations and liberalization of key markets.

At the turn of the millennium, the economy appeared to falter, with a widening gap in GDP per capita and a corresponding fall in living standards. The budget deficit increased from 4 percent of GDP in 2004 to 6 percent in 2005. In 2005 growth was also a major problem, running at only 0.5 percent of GDP. By 2007 GDP per capita was around two-thirds of the European Union (EU) average. One of the reasons for this could be increased competition for Portuguese business following the accession of lower-cost east European states into the EU. It is also interesting to note that in 1998 Portugal, along with 11 EU partners, joined the European Monetary Union (EMU), and the euro began circulating in January 2002.

A number of problem areas have been identified. These include poor standards of attainment at upper secondary and tertiary education levels; regulatory restraints creating barriers to competition; an inefficient and protected public sector; a complicated tax system; and employment protection legislation that provides too much protection and causes inflexibility in labor markets. The new government of José Sócrates agreed in 2005 with the European Commission to reduce the budget deficit to below the threshold of 3 percent of GDP stipulated by the criteria for EMU by 2009. It recognized that solving these problems was central, and the government endeavored to tackle each one, although the latter one appears to be more problematic.

By 2007 statistics showed that the economy was growing at a higher and sustainable pace of 1.9 percent, driven wholly by the private sector. Export growth in traditional goods, business services, and technology was improving and also moving beyond traditional markets, and unemployment started to decrease in the second quarter of 2007. The budget deficit was reduced to under 3 percent of GDP in 2007, and public spending as a percentage of the GDP had also decreased. While there is more work to do, the government has placed Portugal in a more secure position to withstand the swings in the global economy.

Bibliography:

Rui Baptista, Vitor Escaria, and Paulo Madruga, “Entrepreneurship, Regional Development and Job Creation: The Case of Portugal,” Small Business Economics (v.30/1, 2008);
Herman Z. Bennett, Competitiveness in the Southern Euro Area: France, Greece, Italy, Portugal and Spain (International Monetary Fund, 2008);
Annette Bongardt and Celeste Amorim Varum, Competitiveness Factors: A Portuguese Perspective (Instituto Nacional de Administração, 2007);
CIA, “Portugal,” World Factbook, www.cia.gov (cited March 2009);
Michael Derrick, The Portugal of Salazar (Gates of Vienna Books, 2009);
R. Disney, A History of Portugal and the Portuguese Empire (Cambridge University Press, 2009);
Keiko Honjo, Andréa Lemgruber Viol, and Yuan Xiao, Portugal: Selected Issues (International Monetary Fund, 2007);
M. Magone, “Portugal,” European Journal of Political Research (v.45, 2005);
Organisation for Economic Co-operation and Development, “Progress in Responding to the 2007 Policy Priorities: Country Notes” (OECD, 2008).

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