The beach at Nazaré
Courtesy Alan J. Savada

Amoreiras shopping and office complex in Lisbon
Courtesy Alan J. Savada

After becoming a charter member of EFTA in 1959, Portugal became increasingly open to the rest of the world through international trade and other payment flows. In 1990 exports of goods and services accounted for about 37 percent of Portugal's GDP, and imports of goods and services represented about 47 percent of GDP. The accession of Portugal to the EC on January 1, 1986 required fundamental changes in the country's commercial and foreign investment policies. A seven-year transition period ending in 1993 would eliminate most barriers to trade, capital flows, and labor mobility among the twelve EC member countries. During this period, Portugal was a net recipient of EC financial transfers to help modernize its agricultural and industrial sectors for competition in the single market.

To rein in domestic demand growth--mainly the result of the public sector deficits after 1973--the Portuguese government was obliged to pursue IMF-monitored stabilization programs in 1977-78 and 1983-84 to help achieve a return to current account equilibrium in the balance of international payments. Building on the 1983-85 stabilization program and in the context of Portugal's accession to the EC, the Council of Ministers introduced in March 1987 the Program for the Structural Adjustment of the Foreign Deficit and Unemployment (Plano de Correcção Estrutural do Déficit Externo e Desemprêgo--PCEDED), a medium-term program aimed at a lasting correction of structural imbalances--inflation, fiscal deficit, external deficit, and unemployment. The program's macroeconomic approach included a set of articulated measures involving fiscal, monetary, exchange, and incomes policy. As an instrument of the government's "controlled development strategy," this program was to be implemented in two stages covering the periods 1987-90 and 1991-94 and was designed to reduce Portugal's susceptibility to external shocks by strengthening especially the energy and agricultural sectors.

Data as of January 1993