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

IV. MARKETING U.S. PRODUCTS AND SERVICES

In doing business in Portugal, U.S. business should keep the following points in mind.

- Local Representative. You need a local representative who must have good contacts in order to be aware of future contracts and to participate in tenders. Portugal is a small country and knowing people in your industry is important.

- Exclusive Distributor. One distributor appointed on an exclusive basis is the ideal.

- The Iberian Peninsula. Portugal and Spain are not one homogeneous marketing area. Normally your Spanish distributor should not be asked to cover Portugal unless the Spanish company is willing to set up a separate Portuguese entity to handle this. The Portuguese resent the assumption that the Spanish know the Portuguese market and Spanish distributors are largely ineffective in Portugal.

- Impact of the EU. If homework has been done for other EU markets it's basically done for Portugal. Many projects are EU-funded so an EU partner is fundamental when bidding on these.

- Slow Down. Business takes time as compared to northern Europe because personal contacts are important. Your customers want to get to know you before they will trust you.

- Business is Honorable. There are relatively few trade complaints. Because the business community is close knit and many distributors are family run operations, trade disputes are few and are normally resolved out of court. But, if you do have to resort to the courts be prepared to wait and wait. The Portuguese legal system is hopelessly slow and is the biggest single cause of unresolved U.S. company trade complaints.

- English is Common. Although Portugal is a European country it looks to the Atlantic and to trade with others. The U.S. is well respected in the market and companies can usually do business in English.

DISTRIBUTION AND SALES CHANNELS

The Portuguese population is concentrated on the coast. The major distribution centers are Lisbon in the South and Porto in the North, though the regional centers of Braga (north of Porto) and Setubal (South of Lisbon) have come much into their own in recent years. The Lisbon region accounts for 21% of Portugal's population with 63% employed in services and 33% employed in industry. Major industries as well as the head offices of many large corporations are located here. Most financial institutions have also chosen Lisbon to locate their headquarters. The Lisbon area has the highest purchasing power in the country and suffers, like many metropolitan areas, from traffic congestion and rising costs. Porto is the most dynamic industrial development area in Portugal. It accounts for 16% of the Portuguese population and is also an area of high purchasing power. Half of all importers and distributors have offices in Porto and US firms looking to appoint a distributor in Portugal should not overlook this fact. The Commercial Service maintains an office in Porto primarily to locate and to service these distributors. Porto is now connected to Lisbon by a new motorway and a new bridge over the Douro River. The coastal region between these two, and extending into Braga and Setubal, is where the large majority of Portuguese industries are located.

Portugal is a relatively small country and most sales channels cover the entire territory. Distribution centers tend to be located in Lisbon and Porto. However, many large importers and wholesalers have branch sales offices and/or sub-agents or dealers in the principal cities and towns, including those of the Portuguese islands of Madeira and the Azores.

USE OF AGENTS/DISTRIBUTORS; FINDING A PARTNER

American firms interested in selling in Portugal generally start by appointing an agent or distributor. This may be followed by the establishment of local facilities through wholly owned subsidiaries or joint ventures. Most manufacturers/exporters are commonly represented in the market through exclusive importers/distributors who may appoint sub-distributors and dealers.

Generally agent/distributors who operate a sales network that covers the entire country expect exclusive representation agreements. They tend to be quite specialized in their respective market segment. It is often the case that an American firm offering a wide range of products may require representation in the Portuguese market by different local firms depending on the particular product.

Large retail stores and hypermarkets (Jumbo, Continente, Carrefour, Feira Nova, Lidl) are growing very quickly. This may be an alternative sales channel for some products. Some of these organizations buy/import directly and generally do not raise problems of financial/credit reliability.

Portuguese law distinguishes two types of distribution contracts: agency agreements and commercial concession agreements. Generally, relationships established between American and Portuguese companies, with or without a written agreement, meet the requirements of the Portuguese law. However, a good Portuguese agent/distributor respects any informal type of commercial agreement made with his suppliers. As a EU country, Portugal is subject to EU directive 86/653/CEE which protects commercial agents in their relations with the companies for which they work.

The Commercial Service (CS) at the American Embassy in Lisbon can help American exporters find a partner in Portugal. The services offered in Lisbon include all the export assistance core programs of the United States Department of Commerce. They are targeted at the development of sales leads or finding potential partners and have a low cost.

FRANCHISING

The Portuguese franchising market has grown steadily over the past decade and enjoys an annual growth rate of 20-25%. Even though the most developed segment of franchising in Portugal is clothing, the fast-food sector represents about 15% of the total market. Services is currently the fastest growing segment. However, other sectors should be considered, since Portugal offers many opportunities for expansion and the market has considerable room for new, internationally known franchising concepts.

DIRECT MARKETING

Since 1989 mail order and TV-sales have become effective direct marketing methods and have grown rapidly. Between 1996 and 1997 sales growth was estimated at 15% and presently there are 50 direct marketing firms in the market. The most popular direct marketing sectors are cultural, instruction/training and amusement materials (33% of sales) and apparel and clothing (17% of sales). Other successful areas are housewares, perfumes and cosmetics and art/collectible products.

The expansion of this type of marketing has not been greater because Portuguese mailing expenses are still high and consumer confidence in direct marketing methods is low. Portuguese consumer protection regulations and laws are considered adequate, however authorities implementing controls and conducting inspections often fail to do so effectively.

Direct marketing is increasing in importance as a sales method and is expanding every year to new areas of activity including "on-line/Internet" shopping for office supplies and computer accessories and groceries.

JOINT VENTURES/LICENSING

Joint ventures and licensing are alternative ways to enter the Portuguese market. Joint ventures between American and Portuguese firms are treated under Portuguese law as a foreign investment operation which may take the form of any type of business firm. In regards to tax treatment and incentives, both domestic and foreign owned are treated equally and in the same manner.

Special regulations apply to investment in government-owned or jointly-owned companies. State-owned monopolies are being eliminated. Certain sectors will continue to be government-controlled such as mail, water distribution, sewage, rail service, airport and port authorities, and armaments. Telecommunications, except for fixed telephony has been largely privatized and is set for complete liberalization on January 1, 2000.

Licensing is a contractual arrangement in which the licensor makes available or sells its know-how, patents, trademarks or copyrights to a licensee for compensation. Franchising could be considered as an important form of know-how licensing and one which is expanding in Portugal.

American firms should perhaps be reminded of the obvious: as a fully-integrated member of the EU, Portugal abides by the foreign trade and investment rules that govern the rest of the EU. Whatever applies in other EU countries applies to Portugal. If an American firm is mastering EU regulations prior to exporting or investing in the EU, it has already done its homework for Portugal. However, enforcement of some intellectual property rights laws is still weak.

STEPS TO ESTABLISH AN OFFICE

In 1995, the Portuguese Government liberalized foreign investment in Portugal. To establish an office in Portugal, that is, to create a new Portuguese company recognized as such under Portuguese law, may be a process that offers some difficulties to a foreigner. However, it is not so difficult if some simple steps are followed. Any US entity interested in establishing a company in Portugal should visit and discuss the project with both the CS of the American Embassy in Lisbon and ICEP-Portuguese Institute of Foreign Commerce.

Generally, CS-Lisbon recommends that the following steps be taken to establish a company in Portugal with the assistance of a documentation agent (an individual or company specialized in handling administrative procedures to obtain legal documents) or a lawyer:

- Apply for a name (which may be the parent company name in the United States), a certificate of approval and a provisional I.D. card at the RNPC-Registo Nacional de Pessoas Colectivas (National Companies Registry Office).

- Deposit a copy of the company's contract (memorandum and articles of association) at a Notary Public for evaluation.

- Open a bank account in the name of the new company being created and deposit its initial capital (registered capital) in one of the local banks.

- Sign the company's contract at a Notary Public.

- Have the company's contract published in the Official Bulletin (Diario da Republica) and also in a local newspaper.

- File a declaration of activity commencement at the local revenue office.

- Apply to register the company at the RNPC and request a definitive I.D. Card. Register the company also at the Commercial Register (CRC-Conservatoria do Registo Comercial)

- Industrial activities must be licensed by any delegation of the Ministry of Industry co-located at one of the five Regional Coordinating Committees of the national government. Commercial activities generally do not require licensing. For commercial activities related to public health or security a license must be issued by the DGC-Direccao Geral do Comercio (General Directorate for Commerce).

- Register the company at the local Social Security Regional Center.

- Have the company's work schedule approved at the Ministry of Employment and Social Security.

- Register the company's accounts records at the local Revenue Office, at the Court and at the Bankruptcy Office.

- Additional requirements may apply: mandatory insurance, registration of employees at Social Security and the registration of any foreign workers at the Ministry of Employment and Social Security.

- Register investment of foreign capital in Portugal with the Foreign Trade, Tourism and Investment Promotion Agency (ICEP) within 30 days of the date of making investment.

SELLING FACTORS/TECHNIQUES

In Portugal modern techniques still coexist with some traditional practices. Modern sales techniques are generally accepted and effective but traditional values continue to be respected. Many businessmen still consider a personal contact and a handshake stronger than a contract but they will not be offended if a formal contract is asked.

Portuguese consumers have seen their purchasing power increase every year and increasingly buy on impulse. Direct sales, large hypermarkets and shopping malls are becoming common. For consumer goods the decisive selling factors may be price, quality, brand name or the product's innovative features. However, the institutional buyer is quality conscious and very sensitive to pricing. Most tenders consider price first and quality second. These characteristics and its market size sometimes make Portugal a difficult market for some American exporters. A good understanding of market needs and the demand for new opportunities should lead to very profitable niches for the American exporter.

ADVERTISING AND TRADE PROMOTION

As in all Western countries some of the preferred techniques to reach Portuguese buyers effectively are advertising and trade promotions. Portugal offers a reasonably priced market in which to advertise. Advertising media is the same as in the majority of developed Western countries. Newspapers, magazines, TV and more recently advertising in automatic bank teller machines are the most popular.

In Portugal there are a number of specialized international trade shows.

Following are some of the major newspapers and business journals:

- PUBLICO (daily)
Comunicacao Social, SA
Direccao Editorial e Administrativa
Rua Amilcar Cabral, lt. 1
1750 Lisbon, Portugal
Tel: (351-1) 750 10 75
Fax: (351-1) 758 71 38

- DIARIO DE NOTICIAS, SA (daily)
Av. da Liberdade, 266
1250 Lisbon, Portugal
Tel: (351-1) 318 75 00
Fax: (351-1) 318 75 08

- JORNAL CORREIO DA MANHA (daily)
Av. Joao Crisostomo 72
1050 Lisbon, Portugal
Tel: (351-1) 318 52 00
Fax: (351-1) 354 03 82

- JORNAL DE NOTICIAS (daily)
Av. Boavista, 1588-2.
4000 Porto, Portugal
Tel: (351-2) 606 6065
Fax: (351-2) 200 7762

- JORNAL EXPRESSO (weekly)
R Duque de Palmela, 37
1250 Lisbon, Portugal
Tel: (351-1) 311 4000
Fax: (351-1) 354 3858

- JORNAL O INDEPENDENTE (weekly)
R. Antonio Pedro, 111-2.
1150 Lisbon, Portugal
Tel: (351-1) 311 85 01
Fax: (351-1) 316 02 00

- JORNAL SEMANARIO (weekly)
Rua Sacadura Cabral, 26
1495 Dafundo (Lisbon), Portugal
Tel: (351-1) 414 29 44
Fax: (351-1) 414 33 36

- JORNAL VIDA ECONOMICA
Cp. Pequeno, 50 - 5 Esq.
1000 Lisbon, Portugal
Tel: (351-1) 793 77 47
Fax: (351-1) 793 77 48

- SEMANARIO ECONOMICO (weekly)
Avenida Almirante Reis, 113-8o.
1150 Lisbon, Portugal
Tel: (351-1) 352 85 25
Fax: (351-1) 314 8847

- REVISTA VALOR
S.T. & S.F., Sociedade de Publicacoes, Lda
R. Jose Estevao, 87
1100 Lisbon, Portugal
Tel: (351-1) 311 3566
Fax: (351-1) 353 1259

PRICING PRODUCT

Pricing a product is very important since it influences the evaluation of its attractiveness in this market. Pricing is the most common reason why a number of American products offered in Portugal are not competitive. Pricing of American products as now practiced tends to directly reflect the dealer's price in the United States which often includes marketing overhead that: 1) must be recalculated downwards to properly account for actual expenses in the Portuguese market; 2) must not be a "double-counted" expense that is, the adding of Portuguese marketing expenses on top of "built-in" American marketing expenses.

The most appropriate method of pricing a product for the Portuguese market is marginal cost pricing. This would be the marginal unit cost of production in the United States plus Portuguese market-specific costs associated with overseas promotion, labeling and packaging expenses. To this would then be added a profit margin which, when added to the other pricing components, would still render the product competitive.

Portuguese importers currently accept the more common terms of international trade (C.I.F, C,F., F.A.S., F.O.B. or Ex point of origin). They prefer to receive C.I.F. quotations or at least F.O.B. quotations including detailed product descriptions, gross and net shipping weight, volume and time of shipment (from where the delivery is made) and delivery. Proforma invoices with all the above details are not mandatory but are advisable and desirable.

SALES SERVICE/CUSTOMER SUPPORT

In Portugal there are no rules or current practices regarding sales service/customer support. It is the special nature of the American product or service exported that determines the desirability of this support. However, in representation/agency/distributorship agreements, sharing promotion expenses and cooperating in marketing strategies or technical assistance is desirable.

SELLING TO THE GOVERNMENT

Portugal follows the EU directive to the GATT Procurement Code but has a derogation covering utilities such as water, transportation, energy and telecommunications. Portugal also ratified the decisions of the Uruguay Round, regarding government procurement.

Depending on the amount, government procurement may be made by direct consultation, national, or international tenders. National and international tenders are published in the Portuguese Official Journal (Diario da Republica, Series III) and in the two largest daily Portuguese newspapers. International tenders are also published in the EU Official Journal (Series F).

PROTECTING YOUR PRODUCT FROM IPR INFRINGEMENT

Trademark Protection - 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. Portugal's current trademark law entered into force on June 1, 1995 and is consistent with the terms of the trade related intellectual property provisions of GATT (TRIPS).

Copyright Protection - The Government of Portugal is in the process of amending national copyright legislation to conform to EU directives and the copyright provisions of TRIPS. Unauthorized reproduction of software remains a problem, despite modest success in efforts by the Portuguese Association of Software Distributors (ASSOFT) to discourage piracy and improve enforcement. While the piracy rate has decreased over the last two years, it remains one of the highest in Europe.

Patent Protection - As stated above, Portugal is a member and a party to the Madrid Agreement. The Munich Convention on European Patents went into effect on January 1, 1992. To conform to the trademark and patent provisions of the WTO (TRIPS), Portugal passed a new Code of Industrial Property that took effect on June 1, 1995, but this law proved inconsistent with TRIPS in certain regards. Specific legislation was passed in 1996 extending the term of patents applied for or already in force on January 1, 1996, to the TRIPS-consistent 20-year-from-date-of-filing term. The existing code, however, still does not include provisions to protect test data unless submitted as part of a patent application. Portugal is already engaged in a review of this code and hopes to implement this and other revisions by the end of 1998.

NEED FOR A LOCAL ATTORNEY

Using an attorney is not mandatory to do business in Portugal. Most transactions can be accomplished without an attorney, including the establishment of small non-complex businesses. However, attorneys are recommended to solve some types of trade disputes and for the establishment of local offices such as joint ventures with local entities or as 100% subsidiaries. For some complex types of licensing, representation/distribution and franchising, an attorney is also recommended to assure compliance with local law.