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 Democratic Party became Prime Minister on 12 March 2005. The Socialist Party also has an absolute majority in parliament. The next national elections will be in 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 35,000 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, work has begun on other issues, such as the promotion of Australian education services for Portuguese students, especially at tertiary level, and on encouraging academic links between the two countries.
Trade and Investment
In 2007, two way trade was A$217 million. The balance of trade remains in Portugal’s favour due to passenger vehicles and cork sales which, in 2007, accounted for 33 per cent and 19 per cent respectively of Portugal’s A$175 million exports to Australia. Australian exports to Portugal decreased in 2007 by A$21 million to A$41 million, largely due to decreased sales of oil seeds. There is growing cooperation between our respective wine industries.
The opening of a representative office of the Portuguese foreign trade and investment promotion agency (ICEP) in Sydney in 2002 and of the Australian Embassy in Lisbon in 2000 have assisted in stimulating bilateral trade and investment interest. Australian companies have invested in the Portuguese wine industry, real estate, manufacturing, toll ways, biotechnology (food yeasts), highway construction, solar energy, gold-mining and agriculture. Demand for energy is growing 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 revised Social Security Agreement in Lisbon in 2001 and this entered into force in 2002. Through a bilateral visa arrangement signed in 2001, Australia's Electronic Travel Authority (ETA) system was extended to Portuguese citizens wishing to visit Australia for up to three months, while 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 former Minister for Foreign Affairs, Mr Downer visited Lisbon in 1999 and 2000. The then Minister for the Environment, Senator Hill, visited Lisbon in 1999. The then President of the Senate, Senator the Hon Margaret Reid, visited Lisbon in January 2002. The former Commander of INTERFET in East Timor, General Peter Cosgrove visited Portugal in April 2002. An Australian parliamentary delegation led by the Hon Judith Moylan MP visited Portugal in October 2006.
In May 2002 the then President of Portugal, Dr Jorge Sampaio, undertook the first visit to Australia by a Portuguese Head of State. President Sampaio was a guest of the Australian Government and was accompanied by the Minister for Foreign Affairs and Portuguese Communities Abroad and a senior-level business delegation.
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 and 2000 – and did so 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). Portugal held the Presidency of the EU (July to December 2007) highlight of which was signature of the EU Reform Treaty by all 27 member countries.
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 made considerable economic progress since it joined the EC (now the EU) in 1986. However, living standards in Portugal are still well below leading European countries. 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.
Following the period of recession in 2003 when the Portuguese economy contracted by 1.2 per cent the economy returned to growth of 1.2 per cent in 2004 and 0.4 per cent in 2005. Unemployment is high at around 7.6 per cent. Inflation averaged 2.3 per cent in 2005. Portugal's large current account deficit widened in 2005 from 7.5 to 9.3 per cent of GDP.
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 June 2005, the Socialist government announced a series of austerity policies and measures including VAT increase (to 21 per cent, one of the highest in the EU) and a restructuring of the public service, health, social security and pension schemes. The government also announced a multi-billion dollar Infrastructure Investment Program intended to boost the economy and reduce the deficit through public-private investments. The main features of this program are the High Speed Rail (TGV) and proposed new airport at Ota (north of Lisbon). The aim of the measures is to reduce the budget deficit from the current level of 6 per cent of GDP to 2.8 cent by the end of 2008.Foreign Trade and Investment
Foreign trade has contributed significantly to Portugal's economic growth. 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 is Portugal's most important non-EU trading partner. Trade with the former African colonies has fallen in relative importance and Brazil ranks well behind many of Portugal's European trading partners.
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 have been attracted by Portugal's low labour costs, however, may now look to the central and eastern European states that have recently joined the EU, as many of these 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.
Last reviewed date: 17/03/2008