Portugal, with its long Atlantic coast, lies on the western side of the Iberian peninsula. The river Tagus divides the more mountainous north from the lower, undulating terrain to the south. In 1974, a bloodless military coup overthrew a long-standing conservative dictatorship. A constituent assembly was elected in 1975 and the armed forces withdrew from politics thereafter. Portugal then began a substantial program of economic modernization and accompanying social change. Membership of the EU has helped underpin this process.

Portuguese society, once regarded as rather inward-looking, has become much more egalitarian since the 1974 revolution. It is increasingly integrated into the rest of western Europe.

The Roman Catholic Church has lost some of its social influence, as shown by falling birthrates and more liberal attitudes to abortion, divorce, and unmarried mothers (almost one in five children are born outside marriage). Apart from large urban areas, the north is still devoutly Catholic.

Ethnic and religious tensions are limited. Immigration increased after 1974, and foreigners now constitute nearly 2% of the population. Early arrivals came from the former African colonies, but recently there has been an influx of east European workers.

Family ties remain all-important. Women got the vote only in 1976; now 60% of university students are women, and 63% of women of working age have jobs.

Strengths

Relatively low, if rapidly rising, labor costs. Flexible labor market. High domestic and direct foreign investment. Strong banking sector. Potential for growth of tourism, now earning 6% of GDP – highest ratio in EU. Clothing and shoe manufacturing now joined by cars (notably Volkswagens) and machinery as major exports. Fast-track improvement of transportation infrastructure. Good deepwater port at Lisbon. Wine, especially port. Tomatoes, citrus fruit, cork, sardines.

Weaknesses

High dependence on imported oil. Reliance on public works to drive economic growth. Large agricultural sector (4% of GDP, 13% of workforce) is most inefficient in EU. Outdated farming methods, small landholdings, low crop yields; product prices undercut by Spain.

Profile

EU membership in 1986 brought a sharp increase in foreign investment to largely rural Portugal. Exports rose dramatically. The economy recorded growth of over 3% a year in the second half of the 1990s. Maintaining growth thereafter required a big emphasis on raising labor productivity.

At one time participation in EU monetary union seemed a distant prospect. In the event the socialist government of António Guterres (1995–2001) was able to meet the required economic criteria with relative ease, and in January 2002 Portugal was among the 12 EU countries which fully adopted the euro. While Portuguese wages are about 70% of the EU average, the unemployment rate is among the lowest in the EU.

Portugal is a multiparty democracy.

Profile

A decade of center-right government ended in 1995 when the PSD lost elections to the PS. Having campaigned on a platform of social reform, the PS, under António Guterres, gave priority to fiscal control. Despite a privatization program, however, the size of the public sector actually increased in 1995–1999. The PS was reelected in 1999, but soon lost popularity, and was ousted by the PSD in early elections in March 2002. PSD leader José Manuel Durão Barroso was appointed prime minister. Lacking an overall majority, the PSD allied with the right-wing PP. The new government pledged to cut public spending and accelerate privatization.

Main Political Issues

Transformation

Portugal has been transformed in recent decades. The consolidation of democracy since the 1974 "carnation revolution" and EU membership since 1986 have brought Portugal into the European mainstream. There are high expectations about completing the "catching-up" process. Expo '98 in Lisbon showed off the new confidence. In 2002 Portugal was among the first 12 EU countries fully to adopt the euro.

Presidency and parliament

For ten years up to 1995, the presidency and the government were controlled by opposing parties, a situation which encouraged conflict and obstruction. The relationship has functioned more smoothly since then, with PS presidents and minority governments. Former PS leader Jorge Sampãio, who succeeded Mário Soares as president in 1996, was reelected comfortably in early 2001, only to see a PSD government reclaim power a year later.

Since 1986, Portugal's foreign policy has dealt mainly with the consequences of EU membership. It is a committed NATO member, though its relative strategic importance declined after Spain joined. Relations with its former African colonies, occasionally turbulent, are a high priority, as are those with Brazil. Portugal backed East Timor's long struggle to reverse its annexation by Indonesia. Relations with China were cordial enough to ensure the smooth return of Macao to the latter at the end of 1999.

Portugal has been a member of NATO since 1949. It has a small but relatively modern navy. The army and air force are less efficient. The government announced in 1999 that it planned to abolish compulsory miltary service (currently of four months, with a seven-month civilian alternative) during its current four-year term in office. The USA, which is the major arms supplier, has a strategic air base in the Azores.

Portugal is disadvantaged by a lack of natural resources, including water. Mining has historically been important, notably for tungsten, copper and tin. The last coal mine closed in the mid-1990s. The fish catch, once central to the economy, has been declining in recent years.

The unrestricted development of tourist resorts in the Algarve and major infrastructure projects are having detrimental effects on natural habitats. EU agricultural grants for projects such as draining meadows, and monoculture afforestation, notably of Eucalyptus and Pinus, are degrading biodiversity. Much toxic waste is dumped on any available land, as few official controls or infill sites exist. New waste management regulations are being introduced.

Road links with Spain remain limited, despite modernization schemes and the new southern Guadiana bridge. The Lisbon–Madrid expressway was finally completed in 1999, the year after the 18-km Vasco da Gama bridge in Lisbon opened. Heavy traffic, poor road construction, and dangerous driving mean that Portugal has Europe's highest rate of road deaths. Lisbon's small, efficient metro complements its trams, but Porto's metro remains uncompleted. A high speed rail link with Spain is due for completion in 2008.

Of total government expenditure nearly 10% is spent on health.

Portugal has had a publicly funded, free national health service since 1979. Spending on health has increased markedly in recent years, but care remains below the EU average. There are strong regional differences in facilities. Larger urban hospitals are modern and well equipped. Private health care schemes, which are allowed to coexist, are both affordable and good value for money; over 40% of the population use the private system.

Portuguese is the seventh most widely spoken language in the world.

Free state education is available to all pupils between the ages of three and 15. Nursery provision has been greatly expanded, although the preschool stage is not compulsory. Middle-class parents rely heavily on the private sector. State universities have been expanded to ease the pressure on places. There are several prestigious private universities.

Portugal enjoys a low crime rate. Consumption and possession of small quantities of narcotics were decriminalized in mid-2000 and legalized a year later.

Wealth differentials in Portugal are smaller than in most EU countries. The 1976 constitution committed Portugal to making the transition to socialism, and since then governments have introduced limited wealth redistribution measures.

Internal investment is directed chiefly through the property market, and there was a surge of purchases in the late 1990s. External investment goes to the EU and Brazil. In 2000, 14.5% of the population held shares directly. Average incomes, which were just over half the EU average in 1986, are now three-quarters of the EU average. Mobile phones, mainly on prepayment systems, pioneered in Portugal, are very widespread.

From the 1960s, Portugal's popularity as a tourist destination has been linked in part to qualities which reflected its relatively poor economic development, such as low prices and little crime. Thus some of the consequences of its substantial economic growth may have eroded some of the country's appeal, but since Portugal now has more than 12 million visitors a year, tourism remains a major income-earner. The most popular destination is the Algarve, the southernmost province, followed by the western resorts of Figueira da Foz and the Tróia Peninsula. Visitors are also attracted by Portugal's architecture, notably that dating from the Manueline period (1490–1520), and by its handicrafts, such as ceramics, lace, and tapestries. In addition, Portugal is noted for being the location of some of Europe's finest golf courses.

Portugal has existed as a nation state since the 11th century, although it was frequently challenged by Spain. It reached its zenith in the 16th century.

• 1755 Earthquake destroys Lisbon.
• 1793 Joins coalition against revolutionary France.
• 1807 France invades; royal family flees to Brazil.
• 1808 British troops arrive under Wellington. Start of Peninsular War.
• 1810 French leave Portugal.
• 1820 Liberal revolution.
• 1822 King John VI returns and accepts first Portuguese constitution. His son Dom Pedro declares independence of Brazil.
• 1834 Dom Pedro returns to Portugal to end civil war and installs his daughter as Queen Mary II.
• 1875–1876 Republican and Socialist parties founded.
• 1890 Land connection between Angola and Mozambique ended.
• 1891 Republican uprising in Porto.
• 1908 Assassination of King Carlos I and heir to the throne.
• 1910 Abdication of Manuel II and proclamation of the Republic. Church and state separated.
• 1916 Portugal joins Allied side in World War I.
• 1917–1918 New Republic led by Sidónio Pais.
• 1926 Army overturns republic.
• 1928 António Salazar joins government as finance minister. Economy improves significantly.
• 1932 Salazar prime minister.
• 1933 Promulgation of the constitution of the "New State," instituting right-wing dictatorship.
• 1936–1939 Salazar assists Franco in Spanish Civil War.
• 1939–1945 Portugal neutral during World War II, but lets UK use air bases in Azores.
• 1949 Founder member of NATO.
• 1955 Joins UN.
• 1958 Américo Thómas appointed president, following the fraudulent defeat of Gen. Humberto Delgado.
• 1961 India annexes Goa. Guerrilla warfare breaks out in Angola, Mozambique, and Guinea.
• 1970 Death of Salazar, incapacitated since 1968. Marcelo Caetano succeeds.
• 1971 Caetano attempts liberalization.
• 1974 Carnation Revolution – left-wing Armed Forces Movement overthrows Caetano.
• 1974–1975 Portuguese possessions in Africa attain independence. Some 750,000 Portuguese expatriates return to Portugal.
• 1975 Communist takeover foiled by moderates and Mário Soares' PS.
• 1975–1976 Indonesia seizes former Portuguese East Timor unopposed.
• 1976 Gen. António Eanes elected president. Adoption of new constitution. Soares appointed prime minister.
• 1978 Period of nonparty technocratic government instituted.
• 1980 Center-right wins elections. Gen. Eanes reelected.
• 1982 Full civilian government formally restored.
• 1983 Soares becomes caretaker prime minister; PS is majority party.
• 1985 Anibal Cavaco Silva becomes prime minister. Minority PSD government.
• 1986 Soares elected president. Portugal joins EU, which funds major infrastructure and construction projects.
• 1987 Cavaco Silva wins absolute majority in parliament.
• 1991 Soares reelected president.
• 1995 PS wins elections; António Guterres becomes prime minister.
• 1996 Former PS leader Jorge Sampãio elected president.
• 1999 October, general election: PS strengthens its position. December, Macao returned to China.
• 2001 December, Guterres resigns.
• 2002 Euro fully adopted. PSD wins elections and forms coalition with the PP. José Manuel Durão Barroso becomes prime minister.