Portugal Country brief
Overview
Australia-Portugal relations, earlier overshadowed by disagreements on East Timor policy, improved after 1999 when the two countries began working together to assist East Timor's transition to independence. Close cooperation remains important following East Timor's independence: the two countries have a strong shared interest in East Timor’s long-term stability and prosperity, and both have major continuing aid programs there.
Political Overview
The Portuguese constitution invests legislative power in a 230-seat unicameral Assembly of the Republic, which is elected by the d'Hondt system of proportional voting for a maximum term of four years.
The President of the Republic is directly elected for a maximum of two consecutive terms of five years. The President has no executive power, but has a role in foreign policy (on former colonies such as East Timor) and plays an important role as a political arbiter, while maintaining political neutrality. The President is also Commander-in-Chief of Portugal's armed forces. On 22 January 2006 former Prime Minister, Anibal Cavaco Silva, was elected as President in the first round of voting, obtaining 50.6 per cent of the vote. He was inaugurated as President on 9 March 2006.
Elections in February 2005 saw the return of a Socialist government. José Socrates of the Socialist Party became Prime Minister on 12 March 2005. TheSocialist Party also has an absolute majority in parliament. The next national elections will be in late 2009. The elections in February 2005 were held following the resignation of Prime Minister Jose Manuel Durão Barroso in July 2004, to take up the position of President of the European Commission in November 2004.
Community Cultural and Educational Links
The Portuguese community in Australia is estimated at around 15,000 people. Portuguese migrants from the islands of Madeira settled in Fremantle in Western Australia in the 1950s and established a fishing community which, by the mid-1980s, had grown to about 6,000 people, including their descendants. Portuguese migration to Australia, however, has mostly occurred since the late 1960s. The majority of Portuguese migrants have settled in Sydney, Wollongong, Newcastle, Melbourne, Perth and Fremantle.
The presence of a Portuguese community in Australia has produced a steady flow of family visits and cultural exchanges in recent decades. With the improvement in diplomatic relations, there has been small but steady growth in education links between Australia and Portugal, especially at tertiary level. There were 584 enrolments by Portuguese nationals in Australian education institutions during 2007, up slightly from 516 in 2006.
Trade and Investment
The global financial crisis and the associated downturn in the Portuguese economy has had a dramatic effect on Australia’s trade and investment with Portugal. Two-way trade between Australia and Portugal was A$218 million in 2008. The balance of trade remains in Portugal’s favour, with exports to Australia amounting to $187 million – principally attributed to exports of passenger motor vehicles (A$73 million) and cork (A$36 million). Although Australia’s exports to Portugal have always been low, the decline in the value of exports from A$54 million in 2006-07 to $A31 million in 2007-08 was precipitous (a reduction of 42.5 percent). Australia rates as Portugal’s 40th largest export destination.
Australian companies have invested in the Portuguese wine industry, real estate, manufacturing, toll ways, highway construction and renewable energy. Long-term demand for energy continues to grow in Portugal and opportunities exist for Australian companies to invest in alternative energy supply systems such as bio-fuels and clean-coal technology. Portuguese companies have invested in plants in Australia to manufacture wine closures from Portuguese cork, as well as in the timber, veterinary, wine, pharmaceutical and biotechnology industries.
Bilateral Agreements
Australia and Portugal signed a bilateral social security agreement in Lisbon on 3 September 2001, which entered into force in 2002, to give improved social security protection to people who have lived and/or worked in both Australia and Portugal. The social security agreement also exempts Australian employers from the need to provide Portuguese social security support for Australian employees sent temporarily to work in Portugal, provided the employee remains covered in Australia, by compulsory superannuation arrangements. Further information is available on the Australian Taxation Office website.
Until October 2008, through a bilateral visa arrangement signed in 2001, Australia's Electronic Travel Authority (ETA) system had been extended to Portuguese citizens wishing to visit Australia for up to three months. With the introduction of the eVisitor online service, EU citizens and other ETA eligible countries (including Portugal) now have access to a simple online visitor visa service to travel to Australia either for tourism or business purposes. Portugal grants Australian citizens visa-free access for visits for tourism, business (other than paid employment) or official purposes of up to ninety days.
High Level Visits
The visit to Australia in February 2009 by the Hon Luis Amado was the first by a Portuguese Foreign Minister since 2002 when the then Foreign Minister, Antonio Martins da Cruz, accompanied President Jorge Sampaio on his official State Visit to Australia as a guest of the Australian government. The most recent visit to Portugal was by the Minister for Defence, the Hon Joel Fitzgibbon, in November 2008. Other high level visits to Portugal have included the then President of the Senate, Senator The Hon Alan Ferguson in April 2008; an Australian parliamentary delegation led by the Hon Judith Moylan MP in October 2006; the visit of former Commander of INTERFET in East Timor, General Peter Cosgrove in April 2002; the then President of the Senate, Senator the Hon Margaret Reid in January 2002; and a visit by the former Minister for the Environment, Senator Hill in 1999. The last visits by an Australian Foreign Minister were by Alexander Downer in 1999 and 2000.
Foreign Policy Issues
Membership of the European Union (EU) is at the heart of Portuguese foreign and economic policies. Portugal acceded to the European Communities (EC) on 1 January 1986 and was one of the Contracting States that established the EU in 1994. It has thrice held the EC/EU six-monthly Presidency: in 1992, 2000, and again in the second half of 2007. Portugal participates in the EU foreign policy agenda, particularly in promoting the interests of its former colonies in Africa, Latin America and Asia (East Timor and Macau). The highlight of Portugal’s Presidency was the signature of the EU Reform Treaty (the "Lisbon Treaty") by all 27 member countries in December 2007.
Portugal is a founding member of NATO and places a high priority on a strong transatlantic relationship. The United States has an air-force base at Terceira in the Azores islands and NATO has a command centre near Lisbon.
Portugal, together with 14 other European countries, is a signatory to the 1990 Convention applying the Schengen Agreement; a European inter-governmental arrangement on the elimination of border controls between signatory countries.
The former colony of East Timor remains an important foreign policy focus for Portugal. Portugal did not recognise the 1975 annexation of East Timor by Indonesia and pursued the cause of East Timorese independence in international forums for many years. In the subsequent period of the UN Transitional Authority, Portugal was engaged in helping East Timor in its transition to independence and the Portuguese Armed Forces have participated in UN Security Council-endorsed activities in East Timor. It currently deploys around 130 paramilitary police to the UN peacekeeping operation in East Timor.
Portugal will continue to be a significant bilateral aid donor to East Timor over the longer term and has been active in pursuing continued EU assistance for the country. In addition to East Timor, Portugal is a major contributor to peacekeeping operations in Africa, and has troops deployed in Afghanistan, Lebanon and Bosnia. In per capita terms Portugal is one of the most significant European contributors to international peacekeeping operations around the world.
Economic Overview
Portugal has become a diversified and increasingly service-based economy since joining the European Community in 1986. The country qualified for the European Monetary Union (EMU) in 1998 and began circulating the Euro on 1 January 2002 along with 11 other EU member economies. Economic growth had been above the EU average for much of the last decade, but fell back in 2008. A poor educational system, in particular, has been an obstacle to greater productivity and growth. Portugal has been increasingly overshadowed by lower-cost producers in Central Europe and Asia as a target for foreign direct investment. Living standards in Portugal are still well below the rest of Western Europe. Portugal continues to receive structural funding from the EU to help it meet the EU convergence criteria. This has helped it to upgrade its infrastructure, but modernisation of its industry, including through training of the workforce, has been slow.
In 2007, Portugal's economic growth rate witnessed a five year high of 1.9 per cent of GDP. In 2008, however, GDP growth was zero following a severe contraction in the final quarter (-1.8 per cent) which wiped out the gains made in the first three quarters. Unemployment was high at around 7.6 per cent in 2008. Inflation was at 2.6 per cent but was trending sharply down in the final months of 2008. Portugal’s exports collapsed in the final quarter of 2008, contracting by 11 per cent.
A trend in the policies of recent governments has been to balance the government budget and contain spending to comply with the EU's Stability and Growth Pact. The main tools have been spending cuts and a significant privatisation program, including for the health, utilities and transport sectors. Priority has also been given to reform of labour legislation to raise Portugal's productivity and competitiveness, as well as reforms in the Public Administration sector. In response to the decline in economic growth experienced during late 2008 and early 2009, Portugal’s Government has increased spending to generate stimulus and this may result in the budget deficit as a percentage of GDP rising above the EC’s three per cent target once again. According to a January 2009 report by the Bank of Portugal, the economic stagnation being experienced in Portugal means that 2009 is likely to see the country’s worst economic performance since 1975.
Foreign Trade and Investment
Foreign trade has contributed significantly to Portugal's economic growth in recent years. Portugal's most important trading partners remain other EU Member States, with Spain, Germany, France, Italy and the United Kingdom its principal trading partners. The United States, Brazil and Angola are Portugal's most important non-EU trading partner. With the collapse in exports during the final quarter of 2008, however, and expectations that the ongoing global economic crisis will continue to reduce demand for Portuguese products in 2009, Portuguese exporters are facing challenging times.
Portugal received significant foreign direct investment (FDI) in the past decade. EU Member States are the main sources of FDI, particularly Spain, Germany, the United Kingdom and France. The impact of FDI has been largely focused in the Lisbon and Tagus Valley region. Foreign investors who had been attracted by Portugal's low labour costs, however, now look to central and eastern European states, as many of the new Member States have lower wage rates, higher skill levels and are located closer to northern European markets. Investment promotion remains a high priority for the government which has established a body, the API (Agência Portuguesa de Investimento), to attract investment involving technology transfer in sectors like information and communications technologies (ICT), biotechnology and renewable sources of energy. A worrying development has been the speed of disinvestment since early 2008, with key German companies, in particular, withdrawing €700 million in 2008, making it the worst year for German investment in Portugal since 1996.
Last reviewed date: 25/04/2008