Portugal

Originally published: May-22-2007

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Official Name: Portuguese Republic

Internet Domain: .pt
International Dialing Code: +351

Table of Contents

Government

Parliamentary democracy.

Legal System

Civil law system. The Constitutional Tribunal reviews the constitutionality of legislation. Portugal accepts compulsory International Court of Justice jurisdiction, with reservations.

The Portuguese legal system is slow, with cases taking years to be resolved. In 2001, there were close to one million pending legal disputes in the national courts, four times the 1992 level. It takes, for example, an average of 420 days for a bounced check case to wend its way through the court system, double the EU average. The government introduced reforms in litigation procedures and public administration in 2004 that are intended to reduce delays and improve effectiveness. According to the U.S. Department of State, it is still too early to assess the impact of these reforms.

People

• Population: 10,642,836 (July 2007 est.)
• Population growth rate: 0.334% (2007 est.)
• Languages: Portuguese (official), Mirandese (official - but locally used)

Economy

Portugal has become a diversified and increasingly service-based economy since joining the European Community in 1986. Until 2001, Portugal’s average annual growth rates consistently exceeded the European Union average. However, due to slow economic growth, Portugal has lost ground relative to the rest of the EU since 2002. Portugal's per capita GDP dropped from 80% of the EU-25 average in 2001 to 71% in 2006, causing the country to drop three places to 18th in purchasing power parity, behind Greece, the Czech Republic, and Slovenia. Helped in part by a wider EU recovery, the Portuguese economy grew by 1.4% in 2006, up from a 0.3% in 2005. The government predicts the growth rate will accelerate to 1.8% in 2007.

Currency: Euro (EUR)

Leading Markets (2005): Spain 25.9%, France 13.1%, Germany 11.9%, UK 8%, US 5.4%, Italy 4.3%

Leading Exports-commodities: clothing and footwear, machinery, chemicals, cork and paper products, hides

Leading Suppliers (2005): Spain 29%, Germany 13.4%, France 8.5%, Italy 5.2%, Netherlands 4.3%, UK 4.2%

Leading Imports-commodities: machinery and transport equipment, chemicals, petroleum, textiles, agricultural products

Top Industries: textiles and footwear; wood pulp, paper, and cork; metals and metalworking; oil refining; chemicals; fish canning; rubber and plastic products; ceramics; electronics and communications equipment; rail transportation equipment; aerospace equipment; ship construction and refurbishment; wine; tourism

Economic Indicators

(e) estimate (f) forecast

Comparative Economic Indicators - 2006

*July 2007 estimate

Credit and Collections

• Collection Experience: Good-Fair
• Exchange Delays: 3 months
• Preferred Credit Terms: Sight draft
• Minimum Credit Terms: 30-day sight draft

Means of Payment: Promissory notes (notas de débito) are very common in business transactions. Bills of exchange are also widely used, but in order to be valid they are subject to stamp duty4. In the event of default, checks, bills of exchange and promissory notes offer effective guarantees to creditors as they are enforceable instruments in law and entitle holders to initiate executory proceedings. Under this process, creditors may petition the court to issue a writ of execution and notify the debtor of such an order. Where the debtor still fails to pay up, creditors may request the court to issue an attachment order against debtor's property.

Dispute Resolution (information from the U.S. Department of State): Portugal accepts binding arbitration of investment disputes between foreign investors and the state, which is common given the lengthy legal process. Portugal is a member of the International Center for the Settlement of Investment Disputes (ICSID), also known as the Washington Convention and/or the New York Convention of 1958 on the Recognition and Enforcement of Foreign Arbitral Awards.

Risk Assessment

Coface Country Risk Rating: A2 -- Default probability is still weak even in the case when one country's political and economic environment or the payment record of companies is not as good as in A1-rated countries.

Ducroire Delcredere Political Risk Rating: 1 – Lowest Risk
Ducroire Delcredere Commercial Risk Rating: B – Moderate Risk

Business Climate

Transparency of Regulatory System: Decision-making tends to be centralized and obtaining government approvals/permits can be time-consuming and costly. A process of appeals for administrative complaints and litigation was introduced in 2004 that has alleviated many of the requirements for company licensing and reduced the length of time required to incorporate a company.

Patents and Brands: Portugal is a member of the International Union for the Protection of Industrial Property (WIPO) and a party to the Madrid Agreement on International Registration of Trademarks and Prevention of the Use of False Origins. Software piracy remains a problem.

Currency Conversion and Transfer Policies: Portugal maintains no current or capital account restrictions.

Corruption: Corruption is a relatively limited aspect of the business culture in Portugal. In Transparency International's 2005 Corruption Perceptions Index, Portugal ranked 26th out of 158 countries considered, listed from least to most corrupt (the U.S. was ranked 17th). Within the EU-15, Portugal outranked only Italy and Greece.

For more detailed information on these topics, visit the 2006 Investment Climate Statement – Portugal, of the U.S. Department of State.

Business and Cultural Practices

Office Hours: Usually 9.00 am-12.30 pm and 2 pm to 6 pm. The lunch break is sacred and lunch is itself often a key business activity. There is no 'siesta' tradition in Portugal.

Punctuality: Punctuality is not an important cultural trait. It is courteous to arrive five minutes late and definitely bad to arrive before the agreed time. Quarter of an hour late is not usually noticed. Over half an hour begins to be rude. Do not be offended at being kept waiting for up to 20 minutes.

Business Attire: Generally, dress is moderately formal. Conservative attire is the safest.

Names and Titles: It is usual for people to have very long names. Having a college (bachelor’s) degree entitles you to use 'Dr'. Having a Masters Degree theoretically entitles you to the title 'Mestre' but this is only used in the academic world. People with doctorates (Ph.D.) are titled as Professor ('Professor Doutor'). When addressing someone by last name use 'Senhor' (or Doutor etc if applicable) lastname--for a man and--Senhora Dona firstname for a woman without a degree etc or 'Doutora' (etc) lastname.

Conversation: Most Portuguese are tolerant, difficult to offend and used to dealing with people from other cultures.

Gifts: It is common to give a gift to a prospective business partner or customer. Gifts from your own country or region are especially appreciated.

Acceptable Public Conduct: In general, the Portuguese are relaxed about etiquette and public behavior. Some things to avoid: Never stretch in public. Do not eat with your fingers unless everyone else does--which is rare. Do not lick your fingers. Never write anything in red ink, it's offensive.

For more detailed information on these topics, visit Portugal, on the Executive Planet web site.

Sources for further information on doing business in Portugal

Doing Business in Portugal, U.S. Commercial Service: Market overview, challenges, opportunities from a U.S. perspective.

Doing Business in Portugal, UHY: PDF document outlining some of the key issues and information required by someone wishing to come to Portugal to set up a business (current as of September, 2006).

Portugal, Federation of International Trade Associations (FITA): Information on market access, economic indicators, taxes and accounting (last updated January 2007).

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This information is provided by ABC-Amega Inc. Providing international receivable management and debt collection services for exporters to more than 200 countries including Portugal. For further information, contact info@abc-amega.com.

This report represents a compilation of information from a wide variety of reputable sources including: the U.S. Department of State, U.S. Commercial Service, CIA World Factbook, Federation of International Trade Associations, and Economist Country Briefings.

Risk Assessment information: Provided with permission by Coface Country Rating. Also Belgian credit insurance company Ducroire Delcredere

Information on credit terms and the probability of prompt payment are provided, with permission, from Overseas Press and Consultants (OP&C) as published in IOMA's Report on "Managing Credit, Receivables & Collections," June 2007.