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Country Commercial Guides for FY 2000: Portugal Report prepared by U.S. Embassy Lisbon, released July 1999 Note*

III. POLITICAL ENVIRONMENT

Nature of Political Relationship with the United States

Bilateral relations between the United States and Portugal are excellent, characterized by shared democratic values and similar foreign policy perspectives. Ties between the two countries are strengthened by the approximately two million Americans who claim Portuguese descent. A charter member of NATO, Portugal is a strong proponent of vigorous bilateral and U.S.- EU transatlantic ties and of active American involvement in European security affairs. The United States has maintained a military presence in the Azores, an autonomous region of Portugal, since World War II.

Major Political Issues Affecting Business Climate

Currently, there are no major political issues which would have a negative effect on Portugal's business climate.

Brief Synopsis of Political System

Portugal is a small country and the oldest nation state in Europe, having essentially established its current borders in the 12th century. As a result, the Portuguese have a strong sense of national identity and regional fragmentation is not a potent political issue here. The country is a stable parliamentary democracy with a directly elected president who wields significant authority, including that of appointing the Prime Minister and the cabinet. The President must be guided by the results of the legislative assembly elections when he appoints the Prime Minister and the Cabinet. The Prime Minister is responsible for managing Portugal's domestic and foreign policy, except in a few issue areas where the constitution gives the president direct responsibility.

In the October 1995 elections, the center-left Socialist Party (PS) won a plurality of 112 out of the 230 seats in Portugal's unicameral legislature, and formed a minority government under Prime Minister Antonio Guterres. Guterres implemented a centrist program of fiscal restraint that continued Portugal's preparation for entry into the European economic and monetary union on January 1, 1999. Guterres increased emphasis on social cohesion, with greater spending on health and education and a nationwide minimum guaranteed income. He also continued his predecessor's program of privatization of major state-owned firms. The next parliamentary elections are scheduled for October 10, 1999.

The Presidential election in January 1996, was won by the Socialist-backed candidate, former Socialist Party leader Jorge Sampaio. For the first time since the 1974 revolution, the presidency and the government are in the hands of a single party. The next Presidential election is due in 2001.

The center-right Social Democratic Party (PSD), was in power from 1985 to 1995, and is expected to be the primary opposition in the upcoming elections. According to current polls the PS could win an outright majority in this year's elections. This limits the PSD's effective margin for parliamentary maneuver. On most crucial issues, PS and PSD policies converge. The old-line Communist Party (PCP), on the left, and the nationalist Popular Party (CDS/PP), on the right, each attract a small part of the electorate (currently less than 10%). All of the opposition parties have at times given tacit or explicit support for policies supported by the PS minority government.