U.S. goods assisting export industries will fare well - Portugal

Portugal is the doldrums of a self-administered recession that is having the expected--and desired--dampening effect on imports. There should be good opportunities throughout 1984, however, for American firms offering products, technologies, and services tht will contribute to building strong Portuguese export industries.

Portuguese imports from the world were down about 18 percent in the first quarter of 1984, measured in dollar terms, while exports rose about 11 percent. If this trend continues, it should help prevent Portugal's GDP from falling more than 2 percent for the entire year. The escudo was trading in July at about 140 to the dollar, a decline in value of nearly 60 percent since 1982. In spite of the high dollar, however, U.S. exports have held up well.

In the first five months, U.S. exports were valued at $525 million, only slightly lower than in the same period a year earlier. Moreover, the overall U.S. share of Portuguese imports is 18 percent, up from 14 percent last year. U.S. shipments of computers and peripherals, telecommunications equipment, electronic components, and chemicals did particularly well in the first four months. Computers and peripherals, for example, jumped 65 percent to $17 million.

The present government appears to be meeting the requirements imposed by the International Monetary Fund (IMF) for continued access to the $480 million stand-by agreement. The IMF recently obtained the government's agreement to raise controlled prices of basic consumer commodities an average of 18 to 20 percent. This could aggravate inflation, which is already at a 30 percent rate, and effectively dampen consumer income, but it will reduce the drain on the public treasury and pave the way for boosting the economy in 1985.

One of the government's prime and most difficult objectives is to revise Portuguese labor laws which require a 21 percent-social security contribution from employers and virtually guarantee employees a job for life. Thus, for those firms attempting to expand--and there are many--the logical choice is to purchase automated machinery, while seeking financing outside Portugal. Short-term interest rates are now 30 to 35 percent.

Therefore, demand is expected to grow for equipment that might otherwise seem to be inappropriate for the Portuguese market. For example, a market is beginning to emerge for numerically controlled machine tools, for computer-aided design and computeraided manufacturing equipment systems, and for high-volume food processing equipment. U.S. firms in a position to finance their sales should do particularly well.

For additional information, contact the Portugal desk officer on (202) 377-4509.

COPYRIGHT 1984 U.S. Government Printing Office
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