Portugal’s economic recovery and positive pro-business policies increased market attractiveness in 2019. The country’s notable recovery since concluding an EU/IMF bailout adjustment program in 2014 culminated in a first-ever budget surplus in 2019. Following the crisis, Portugal recovered its investment-grade sovereign bond ratings and saw its Finance Minister, Mário Centeno, become head of Eurogroup Finance Ministers. While Portugal continues to hold strong potential for U.S. investors, the Covid-19 pandemic has had a serious impact on the economy. The depth of Portugal’s economic downturn and the resulting effect on the banking and tourism sectors depend on the length of global travel restrictions and retail closures.
In 2019, Portugal attracted €9.2 billion in FDI inflows, including €122 million from the United States. Unemployment dropped to 6.5 percent and GDP growth was 2.2 percent, falling from 2.6 percent in 2018. Despite slowing growth, Portugal has continued to reduce its public debt, which fell to 117.7 percent of GDP in 2019, compared to 121.5 percent the year before. Nonetheless, the country’s high debt-to-GDP ratio remains a weak point.
The services sector, particularly Portugal’s tourism industry, served as an engine of economic recovery, while textiles, footwear, and agriculture moved up the value chain and became more export-oriented over the last decade. The auto sector, together with heavy industry, technology, agriculture, construction and energy remain influential clusters. In 2019, Portugal also unveiled a package of urban mobility and transport infrastructure tenders, privileging railway, as it attempts to ramp up public investment.
The banking sector faced considerable challenges in recent years, including the costly central bank-led resolution of Banco Espírito Santo in 2014 and Banif in 2015. Even so, banks regained momentum during 2019, restructuring and strengthening capital structures to address the lingering stock of non-performing loans. They will now be in the frontline of the Covid-19 economic shock, with a likely rise in foreclosures, bad loans and bankruptcies.
Portugal’s economy is fully integrated in the European Union (EU). Portugal’s primary trading partners are Spain, France, Germany, the United Kingdom and the United States. Portugal complies with EU law for equal treatment of foreign and domestic investors. Portugal has reduced the bureaucratic hurdles to establishing a business over the last few years, even introducing a website named Simplex, designed to help ‘cut the red tape.’
Beyond Europe, Portugal maintains significant links with former colonies including Brazil, Angola, Mozambique, Cape Verde and Guinea-Bissau. Portugal is one of 19 Eurozone members; the European Central Bank (ECB) acts as central bank for the euro (EUR) and determines monetary policy.
1. Openness To, and Restrictions Upon, Foreign Investment
Policies Toward Foreign Direct Investment
The Government of Portugal recognizes the importance of foreign investment and sees it as a driver of economic growth, with an overall positive attitude towards FDI. Portuguese law is based on a principle of non-discrimination, meaning foreign and domestic investors are subject to the same rules. Foreign investment is not subject to any special registration or notification to any authority, with exceptions for a few specific activities.
The Portuguese Agency for Foreign Investment and Commerce (AICEP) is the lead for promotion of trade and investment. AICEP is responsible for the attraction of foreign direct investment (FDI), global promotion of Portuguese brands, and export of goods and services. It is the primary point of contact for investors with projects over EUR 25 million or companies with a consolidated turnover of more than EUR 75 million. For foreign investments not meeting these thresholds, AICEP will make a preliminary analysis and direct the investor to assistance agencies such as the Institute of Support to Small- and Medium- Sized Enterprises and Innovation (IAPMEI), a public agency within the Ministry of Economy that provides technical support, or to AICEP Capital Global, which offers technology transfer, incubator programs, and venture capital support. AICEP does not favor specific sectors for investment promotion. It does, however, provide a “Prominent Clusters” guide on its website where it advocates investment in Portuguese companies by sector.
The Portuguese government maintains regular contact with investors through the Confederation of Portuguese Business (CIP), the Portuguese Chamber of Commerce and Industry, among other industry associations.
Limits on Foreign Control and Right to Private Ownership and Establishment
There are no legal restrictions in Portugal on foreign investment. To establish a new business, foreign investors must follow the same rules as domestic investors, including mandatory registration and compliance with regulatory obligations for specific activities. There are no nationality requirements and no limitations on the repatriation of profits or dividends.
Non-resident shareholders must obtain a Portuguese taxpayer number for tax purposes. EU residents may obtain this number directly with the tax administration (in person or by means of an appointed proxy); non-EU residents must appoint a Portuguese resident representative to handle matters with tax authorities.
There are national security limitations on both foreign and domestic investments with regard to certain economic activities. Portuguese government approval is required in the following sectors: defense, water management, public telecommunications, railways, maritime transportation, and air transport. Any economic activity that involves the exercise of public authority also requires government approval; private sector companies can operate in these areas only through a concession contract.
Portugal additionally limits foreign investment with respect to the production, transmission, and distribution of electricity, the production of gas, the pipeline transportation of fuels, wholesale services of electricity, retailing services of electricity and non-bottled gas, and services incidental to electricity and natural gas distribution. Concessions in the electricity and gas sectors are assigned only to companies with headquarters and effective management in Portugal.
Investors wishing to establish new credit institutions or finance companies, acquire a controlling interest in such financial firms, and/or establish a subsidiary must have authorization from the Bank of Portugal (for EU firms) or the Ministry of Finance (for non-EU firms). Non-EU insurance companies seeking to establish an agency in Portugal must post a special deposit and financial guarantee and must have been authorized for such activity by the Ministry of Finance for at least five years.
Portugal enacted a national security investment review framework in 2014, giving the Council of Ministers authority to block specific foreign investment transactions that would compromise national security. Reviews can be triggered on national security grounds in strategic industries like energy, transportation and communication. Investment reviews can be conducted in cases where the purchaser acquiring control is an individual or entity not belonging to the European Union. In such instances, the review process is overseen by the relevant Portuguese ministry according to the assets in question.
Other Investment Policy Reviews
In February 2019, the OECD presented its latest Economic Survey of Portugal, including an updated macro overview and a set of policy recommendations.
To combat the perception of a cumbersome regulatory environment, the Government has created a ‘cutting red tape’ website branded ‘Simplex that details measures taken since 2005 to reduce bureaucracy, and the Empresa na Hora (“Business in an Hour”) program that facilitates company incorporation by citizens and non-citizens in less than 60 minutes. More information is available at Empresa na Hora.
In 2007, the Government established AICEP, a promotion agency for investment and foreign trade that also manages industrial parks and provides business location solutions for investors through its subsidiary AICEP Global Parques.
Established in 2012, Portugal’s “Golden Visa” program gives fast-track residence permits to foreign investors meeting certain conditions, including making capital transfers, job creation or real estate acquisitions. Other measures implemented to help attract foreign investment include the easing of some labor regulations to increase workplace flexibility and EU-funded programs.
Portuguese citizens can alternatively register a business online through the “Citizen’s Portal” available at Portal do Cidadão. Companies must also register with the Directorate General for Economic Activity (DGAE), the Tax Authority (AT), and with the Social Security administration. The government’s standard for online business registration is a two to three day turnaround but the online registration process can take as little as one day.
Portugal defines an enterprise as micro-, small-, and medium-sized based on its headcount, annual turnover, or the size of its balance sheet. To qualify as a micro-enterprise, a company must have less than 10 employees and no more than EUR 2 million in revenues or EUR 2 million in assets. Small enterprises must have less than 50 employees and no more than EUR 10 million in revenues or EUR 10 million in assets. Medium-sized enterprises must have less than 250 employees and no more than EUR 50 million in revenues or EUR 43 million in assets. The Small- and Medium-Sized Enterprise (SME) Support Institute (IAPMEI) offers financing, training, and other services for SMEs based in Portugal.
More information on laws, procedures, registration requirements, and investment incentives for foreign investors in Portugal is available at AICEP’s website.
The Portuguese government does not restrict domestic investors from investing abroad. On the contrary, it promotes outward investment through AICEP’s customer managers, export stores and its external commercial network that, in cooperation with the diplomatic and consular network, are operating in about 80 markets. AICEP provides support and advisory services on the best way of approaching foreign markets, identifying international business opportunities of Portuguese companies, particularly SMEs.
2. Bilateral Investment and Taxation Treaties
Portugal does not have a bilateral investment agreement with the United States. However, it has investment agreements with over 100 countries. For a complete list of investment agreements currently in force, please see the UNCTAD Navigator.
Portugal signed an Income Tax Treaty with the United States in 1994 to prevent double taxation and tax evasion. In 2015, Portugal signed an agreement with the United States to improve international tax compliance and implement the U.S. Foreign Account Tax Compliance Act (FATCA).
3. Legal Regime
Transparency of the Regulatory System
The Government of Portugal employs transparent policies and effective laws to foster competition, and the legal system welcomes FDI on a non-discriminatory basis, establishing clear rules of the game. Legal, regulatory, and accounting systems are consistent with international norms. Public finances and debt obligations are transparent, with data regularly published by the Bank of Portugal, the IGCP debt management agency, and the Ministry of Finance. Regulations drafted by ministries or agencies must be approved by Parliament, and, in some cases, by European authorities. All proposed regulations are subject to a 20 to 30 day public consultation period during which the proposed measure is published on the relevant ministry or regulator’s website. Only after ministries or regulatory agencies have conducted an impact assessment of the proposed regulation, can the text be enacted and published. The process can be monitored and consulted at the official websites of Parliament and of the Official Portuguese Republic Journal. Ministries or regulatory agencies report the results of the consultations through a consolidated response published on the website of the relevant ministry or regulator.
Rule-making and regulatory authorities exist across sectors including energy, telecommunications, securities markets, financial and health. Regulations are enforced at the local level through district courts, on the national level through the Court of Auditors, and at the supra-national level through EU mechanisms including the European Court of Justice, the European Commission, and the European Central Bank. The OECD, the European Commission, and the IMF also publish key regulatory actions and analysis. UTAO, the Parliamentary Technical Budget Support Unit, is a nonpartisan body composed of economic and legal experts that supports parliamentary budget deliberations by providing the Budget Committee with quality analytical reports on the executive’s budget proposals. In addition, the Portuguese Public Finance Council conducts an independent assessment of the consistency, compliance with stated objectives, and sustainability of public finances, while promoting fiscal transparency.
The legal, regulatory, and accounting systems are transparent and consistent with international norms. Since 2005, all listed companies have been required to comply with International Financial Reporting Standards as adopted by the European Union (“IFRS”), which closely parallels the U.S. GAAP-Generally Accepted Accounting Principles. Portugal’s Competition Authority enforces adherence to domestic competition and public procurement rules. The European Commission further ensures adhesion to EU administrative processes among its member states.
Public finances are generally deemed transparent, closely scrutinized by Eurostat and monitored by an independent technical budget support unit, UTAO, and the Supreme Audit Institution ‘Tribunal de Contas.’ Over the last decades, Portugal has also consolidated within the State accounts many state-owned enterprises, making budget analysis more accurate.
International Regulatory Considerations
Portugal has been a member of the EU since 1986, a member of the Schengen area since 1995, and joined the Eurozone in 1999. With the Treaty of Lisbon’s entry into force in 2009, trade policy and rules on foreign direct investment became exclusive EU competencies, as part of the bloc’s common commercial policy. The European Central Bank is the central bank for the euro and determines monetary policy for the 19 Eurozone member states, including Portugal. Portugal complies with EU directives regarding equal treatment of foreign and domestic investors. Portugal has been a member of the World Trade Organization since 1995.
Legal System and Judicial Independence
The Portuguese legal system is a civil law system, based on Roman law. The hierarchy among various sources of law is as follows: (i) Constitutional laws and amendments; (ii) the rules and principles of general or common international law and international agreements; (iii) ordinary laws enacted by Parliament; (iv) instruments having an effective equivalent to that of laws, including approved international conventions or decisions of the Constitutional Court; (v) regulations used to supplement and implement laws. The country’s Commercial Company Law and Civil Code define Portugal’s legal treatment of corporations and contracts. Portugal has specialized family courts, labor courts, commercial courts, maritime courts, intellectual property courts, and competition courts. The judicial system is independent of the executive branch.
Regulations or enforcement actions are appealable, and are adjudicated in national Appellate Courts, with the possibility to appeal to the European Court of Justice. The judicial system is independent of the executive branch and the judicial process procedurally competent, fair, and reliable. Regulations and enforcement actions are appealable.
Laws and Regulations on Foreign Direct Investment
The Bank of Portugal defines FDI as “an act or contract that obtains or increases enduring economic links with an existing Portuguese institution or one to be formed.” A non-resident who invests in at least 10 percent of a resident company’s equity and participates in the company’s decision-making is considered a foreign direct investor. The Embassy is not aware of any new laws over the last 12 months that regulate FDI, or significant decisions that have changed how foreign investors or their investments are treated. Current information on laws, procedures, registration requirements, and investment incentives for foreign investors in Portugal is available at AICEP’s website.
Competition and Anti-Trust Laws
The domestic agency that reviews transactions for competition-related concerns is the Portuguese Competition Authority and the international agency is the European Commission’s Directorate General for Competition. Portuguese law specifically prohibits collusion between companies to fix prices, limit supplies, share markets or sources of supply, discriminate in transactions, or force unrelated obligations on other parties. Similar prohibitions apply to any company or group with a dominant market position. The law also requires prior government notification of mergers or acquisitions that would give a company more than 30 percent market share in a sector, or mergers or acquisitions among entities that had total sales in excess of €150 million in the preceding financial year. The Competition Authority has 60 days to determine if the merger or acquisition can proceed. The European Commission may claim authority on cross-border competition issues or those involving entities large enough to have a significant EU market share.
Expropriation and Compensation
There have been no recent cases of expropriation of foreign assets or companies in Portugal.
Under Portugal’s Expropriation Code, the government may expropriate property and its associated rights if it is deemed to support the public interest, and upon payment of prompt, adequate, and effective compensation. The code outlines criteria for calculating fair compensation based on market values. The decision to expropriate as well as the fairness of compensation can be challenged in national courts.
ICSID Convention and New York Convention
Portugal has been a member of the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (ICSID Convention – also known as the Washington Convention) since 1965. Portugal has been a party to the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards since January 1995. Portugal’s national arbitration law No. 63-2011 of December 14, 2011 enforces awards under the 1958 New York Convention and the ICSID Convention.
Investor-State Dispute Settlement
Portugal ratified the 1927 Geneva Convention on the Execution of Foreign Arbitral Awards, and in 2002 ratified the 1975 Inter-American Convention on International Commercial Arbitration.
Portugal’s Voluntary Arbitration Law, enacted in 2011, is based on the UNCITRAL Model Law, and applies to all arbitration proceedings based in Portugal. The leading commercial arbitration institution is the Arbitration Center of the Portuguese Chamber of Commerce and Industry.
The government promotes non-judicial dispute resolution through the Ministry of Justice’s Office for Alternative Dispute Resolution (GRAL), including conciliation, mediation, or arbitration. Portugal has no bilateral investment or free trade agreements containing investor-state dispute settlement provisions with the United States. The World Bank’s International Center for Settlement of Investment Disputes (ICSID) database shows no cases of investment disputes, pending or concluded, between foreign investors and Portugal. Portuguese courts recognize and enforce foreign arbitral awards issued against the government. There have been no recent extrajudicial actions against foreign investors.
International Commercial Arbitration and Foreign Courts
Arbitration is the preferred alternative dispute resolution mechanism in Portugal. The country has a long-standing tradition of arbitration in administrative and contract disputes. It has also become the standard mechanism for resolving tax disputes between private citizens or companies and tax authorities, as well as in pharmaceutical patent disputes.
Portugal has four domestic arbitration bodies: 1) The Arbitration Center of the Portuguese Chamber of Commerce and Industry (CAC); 2) CONCORDIA (Centro de Conciliacao, Mediacao, de Conflictos de Arbritragem); 3) Arbitrare (Centro de Arbitragem para a Propriedade Industrial, Nomes de Dominio, Firmas e Denominacoes); and 4) the Instituto de Arbitragem Commercial do Porto. Each arbitration body has its own regulations, but all of them comply with the Portuguese Arbitration Law 63/11, which came into force in March 2012. The Arbitration Council of the Centre for Commercial Arbitration also follows New York Convention, Washington Convention, and Panama Convention guidelines. Arbitration Law 63/11 follows the standard established by the UNCITRAL Model Law, but is not an exact copy of that text.
Under the Portuguese Constitution, the Civil Code of Procedure (CCP) and the New York Convention, applied in Portugal since 1995, awards rendered in a foreign country must be recognized by the Portuguese courts before they can be enforced in Portugal. There is no legal authority in Portugal on the enforceability of foreign awards set aside at the seat of the arbitration. The CCP sets forth the legal regime applicable to all judicial procedures related to arbitration, including appointment of arbitrators, determination of arbitrators’ fees, challenge of arbitrators, appeal (where admissible), setting aside, enforcement (and opposition to enforcement) and recognition of foreign arbitral awards.
While Portugal’s judicial system has historically been considered inefficient, the country has taken several important steps, including simplifying land registry procedures and increasing the portfolio of online services.
Portugal’s Insolvency and Corporate Recovery Code defines insolvency as a debtor’s inability to meet his commitments as they fall due. Corporations are also considered insolvent when their liabilities clearly exceed their assets. A debtor, creditor, or any person responsible for the debtor’s liabilities can initiate insolvency proceedings in a commercial court. The court assumes the key role of ensuring compliance with legal rules governing insolvency proceedings, with particular responsibility for ruling on the legality of insolvency and payment plans approved by creditors. After declaration of insolvency, creditors may submit their claims to the court-appointed insolvency administrator for a specific term set for this purpose, typically up to 30 days. Creditors must submit details regarding the amount, maturity, guarantees, and nature of their claims. Claims are ranked as follows: (i) claims over the insolvent’s estate, i.e. court fees related to insolvency proceedings; (ii) secured claims; (iii) privileged claims; (iv) common, unsecured claims; (v) subordinated claims, including those of shareholders. Portugal ranks highly – 15th of 190 countries – in the World Bank’s Doing Business Index “Resolving Insolvency” measure.
4. Industrial Policies
The Portuguese government offers investment incentives that can be tailored to individual investors’ needs and capital, based on industry, investment size, and project sustainability, including grants, tax credits and deferrals, access to loans and reduced cost of land. Investment agency AICEP actively recruits investors across the globe, intermediating the terms on a case-by-case basis for the larger investments. The Autonomous Regions of Madeira and the Azores also offer investment incentives. Since Portugal is an EU Member, potential investors may be able to access European aid programs providing further incentives to invest in Portugal. Such funds have been used by Portugal to co-finance key investments in the areas of research and development, information and communications technology, transport, water, solid waste, energy efficiency and renewable energy, urban regeneration, health, education, and culture. Through Portugal Ventures, a state-financed private equity company, the government has a risk capital arm that finances the growth of the Portuguese entrepreneurship ecosystem. This entity is part of the public business sector, operating under the same terms and conditions that apply to private companies and subject to the general domestic and community competition rules. As a venture capital firm, its funds are under the supervision of the Portuguese Securities Market Commission, CMVM.
Foreign Trade Zones/Free Ports/Trade Facilitation
Portugal has one foreign trade zone (FTZ)/free port in the Autonomous Region of Madeira, established in 1987. Continued operation of the International Business Centre of Madeira’s corporate tax regime is authorized by EU rules on incentives granted to member states. Industrial and commercial activities, international service activities, trust and trust management companies, and offshore financial branches are all eligible. Companies established in the foreign trade zone/free port enjoy import- and export-related benefits, financial incentives, tax incentives for investors and companies. In March 2019, the EU Commission expressed concern that Portuguese authorities are not providing proper oversight of tax breaks offered in the Madeira FTZ to ensure they comply with EU regulations. Under EU rules, company profits benefitting from income tax reductions must originate exclusively from activities carried out in Madeira and these companies must create and maintain jobs in Madeira, conditions the Commission is concerned Portuguese authorities may have failed to respect.
Performance and Data Localization Requirements
Portugal does not impose performance requirements or mandate specific local employment conditions for foreign investors. Qualification standards for investment incentives are applied uniformly to domestic and foreign investors. There is a high level of labor mobility between Portugal and other EU member states. To work in Portugal, non-EU foreign nationals must be sponsored for a work permit by a Portuguese employer. There are no nationality-related restrictions that affect a foreign national’s ability to serve in senior management or on a board of directors. Foreign or expatriate workers with appropriate work authorizations are entitled to the same rights and subject to the same laws as employees with Portuguese citizenship.
While Portugal does not force data localization, according to the Portuguese Data Protection Law (pursuant to the EU’s 1995 Data Protection Directive) “data controllers,” i.e., people or corporations that process personal data, must register with the National Commission for Data Protection (CNPD). Data transfers outside of the EU are only allowed if the recipient country or company ensures an adequate level of protection. Portugal is subject to new rules stipulated in the EU’s General Data Protection Regulation.
There are no requirements for foreign IT providers to turn over source code and/or provide access to encryption; the same rules apply to foreign IT providers as apply to national providers.
Data transfers to other countries within the EU do not require prior authorization from the CNPD. Data transfers to countries outside the EU can only take place in compliance with the Data Protection Law, meaning the receiving state must also provide an adequate level of protection to personal data. If the receiving state does not ensure an adequate level of protection, the CNPD can authorize the transfer under specific conditions, as outlined in Act 67/98. CNPD can also authorize a transfer or a set of transfers of personal data to a receiving state that does not provide an adequate level of protection only if the controller provides adequate safeguards to protect the privacy and fundamental rights and freedoms of individuals. This can be through appropriate contractual clauses or if a transfer to the United States, through adherence to the U.S.-EU Privacy Shield principles. The CNPD is responsible for overseeing all enforcement of local data storage rules.
Generally, there are no excessively onerous visa, residence, work permit, or similar requirements inhibiting mobility of foreign investors and their employees. Portugal does not follow ‘forced localization’, the policy in which foreign investors must use domestic content in goods or technology.
5. Protection of Property Rights
Portugal reliably enforces property rights and interests. The Portuguese Constitution ensures the right to private property and grants Parliament the power to establish rules on the renting of property, the determination of property in the public domain, and the rules of land management and urban planning. The Civil Code of 1967 provides the right to absolute and full ownership, which can be restricted by mortgage, liens, or other security interests. Additional laws have established or modified rules on time-sharing, condominiums, and land registration.
Property registration can be done online at Predial Online. According to the World Bank’s 2020 Doing Business Index, the number of days to process registration stood at 10 in 2019. Portugal ranked 35 out of 190 countries in the World Bank’s 2020 ease of registering property ranking. The cost to register a property remains slightly higher than average, at 7.3 percent of the property value. Foreign investors can directly own/purchase property freehold or leasehold, to build industrial and commercial premises or can purchase through a real estate company.
If legally purchased property is unoccupied, Portuguese law allows ownership to revert to other owners, including squatters, through an adverse domain process set out in Chapter VI of the Portuguese Civil Code (CCP), Article 1287.
Intellectual Property Rights
Intellectual property rights (IPR) infringement and theft are not common in Portugal. It is fairly easy for investors to register copyrights, industrial property, patents, and designs with Portugal’s Institute of Industrial Property (INPI) and the Inspectorate-General of Cultural Activities (IGAC). IPR can be registered online for a small fee. The Portuguese government adopted the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) and provisions of the General Agreement on Tariffs and Trade (GATT) in 2003. Portugal is a member of the World Intellectual Property Organization (WIPO) and party to many of its treaties, including the Berne Convention, the Paris Convention, the WIPO Copyright Treaty, and the WIPO Performances and Phonograms Treaty.
Portuguese legislation for the protection of IPR has been consistent with World Trade Organization (WTO) rules and EU directives since 2004. The Arbitration Centre for Industrial Property, Domain Names, and Company Names (ARBITRARE) was established in 2009 to facilitate voluntary arbitration of IPR disputes in English or Portuguese, and in 2012 the government created an IPR court with two judges. Portugal is a participant in the eMAGE and eMARKS projects, which provide multilingual access to databases of trademarks and industrial designs. Portugal’s Food and Economic Security Authority (ASAE), in partnership with other national law enforcement agencies, provides statistics on seizures of counterfeit goods here. Authorities actively prosecute IPR violations.
Portugal is not included in the U. S. Trade Representative (USTR) Special 301 Report or the Notorious Markets List.
For additional information about national laws and points of contact at local IP offices, please see WIPO’s country profiles.
6. Financial Sector
Capital Markets and Portfolio Investment
Portugal has a generally positive attitude toward foreign portfolio investment. The Portuguese stock exchange is managed by Euronext Lisbon, part of the NYSE Euronext Group, which allows a listed company access to a global and diversified pool of investors. The Portuguese Stock Index-20, PSI20, is Portugal’s benchmark index representing the largest and most liquid companies listed on the exchange. The Portuguese stock exchange offers a diverse product portfolio: shares, funds, exchange traded funds, bonds, and structured products, including warrants and futures.
The Portuguese Securities Market Commission (CMVM) supervises and regulates securities markets, and is a member of the Committee of European Securities Regulators and the International Organization of Securities Commissions. Portugal has an effective regulatory system that encourages and facilitates portfolio investment and tries to promote liquidity in the markets for investors to effectively enter and exit sizeable positions.
Portugal respects IMF Article VIII by refraining from placing restrictions on payments and transfers for current international transactions. Credit is allocated on market terms, and foreign investors are eligible for local market financing. Private sector companies have access to a variety of credit instruments, including bonds.
Money and Banking System
Portugal has 151 credit institutions, of which 62 are banks, with a wide penetration of banking services across the country. Portugal’s banking assets totaled €398 billion at the end of the third quarter of 2019, compared to €489 billion in 2014.
Portuguese banks sharply reduced non-performing loan portfolios since the eurozone debt crisis, leaving them in a healthier position to withstand future shocks. Total loans stood at just above €200 billion at the end of the third quarter of 2019, with a non-performing loan ratio of 8.3 percent ratio, compared to over 17% in 2016. Banks’ return on equity and on assets remained in positive territory in 2019. In terms of capital buffers, the Common Equity Tier 1 ratio improved to 13.9 percent as of June 2019, from 13.2% in June 2017.
Foreign banks are allowed to establish operations in Portugal. In terms of decision-making policy, a general ‘four-eyes policy’ with two individuals approving actions must be in place at all banks and branches operating in the country, irrespective of whether they qualify as international subsidiaries of foreign banks or local banks. Foreign branches operating in Portugal are required to have such decision-making powers that enable them to operate in the country, but this requirement generally does not prevent them from having internal control and rules governing risk exposure and decision-making processes, as customary in international financial groups.
No restrictions exist on a foreigner’s ability to establish a bank account and both residents and non-residents may hold bank accounts in any currency. However, any transfers of €10,000 or more must be declared to Portuguese customs authorities.
Foreign Exchange and Remittances
Portugal has no exchange controls and there are no restrictions on the import or export of capital. Funds associated with any form of investment can be freely converted into any world currency.
Portugal is a member of the European Monetary Union (Eurozone) and uses the euro, a floating exchange rate currency controlled by the European Central Bank (ECB). The Bank of Portugal is the country’s central bank; the Governor of the Bank of Portugal participates on the board of the ECB.
There are no limitations on the repatriation of profits or dividends. There are no time limitations on remittances.
Sovereign Wealth Funds
The Ministry of Labor, Solidarity, and Social Security manages Portugal’s Social Security Financial Stabilization Fund (FEFSS), with total assets of around €20 billion. It is not a Sovereign Wealth Fund (SWF) and does not subscribe to the voluntary code of good practices (Santiago Principles), or participate in the IMF-hosted International Working Group on SWFs. Among other restrictions, Portuguese law requires that at least 50 percent of the fund’s assets be invested in Portuguese public debt, and limits FEFSS investment in equity instruments to that of EU or OECD members. FEFSS acts as a passive investor and does not take an active role in the management of portfolio companies.
7. State-Owned Enterprises
There are currently over 40 major state-owned enterprises (SOEs) operating in Portugal in the banking, health care, transportation, water, and agriculture sectors. Portugal’s only SOE with revenues greater than one percent of GDP is the Caixa Geral de Depositos (CGD) Bank. CGD has the largest market share in customer deposits, commercial loans, mortgages, and many other banking services in the Portuguese market.
Parpublica is a government holding company for several smaller enterprises that audits and reports on smaller SOEs. The activities and accounts of Parpublica are fully disclosed in budget documents and audited annual reports. In addition, the Ministry of Finance publishes an annual report on SOEs through a specialized monitoring unit, UTAM that presents annual performance data by company and sector. When SOEs are wholly owned, the government appoints the board. However, when SOEs are not majority-owned, the board of executives and non-executives nomination depends on the negotiations between government and the remaining shareholders, and in some cases on negotiations with European Authorities as well.
Portuguese law stipulates that SOEs must compete under the same terms and conditions as private enterprises, subject to Portuguese and EU competition laws.
In 2008, Portugal’s Council of Ministers approved resolution no. 49/2007, which defined the Principles of Good Governance for SOEs according to OECD guidelines. The resolution requires SOEs to have a governance model that ensures the segregation of executive management and supervisory roles, to have their accounts audited by independent entities, to observe the same standards as those for companies publicly listed on stock markets, and to establish an ethics code for employees, customers, suppliers, and the public. The resolution also requires the Ministry of Finance’s Directorate General of the Treasury and Finances to publish annual reports on SOEs’ compliance with the Principles of Good Governance. Credit and equity analysts generally tend to criticize SOEs’ over-indebtedness and inefficiency, rather than any poor governance and ties to government.
Portugal launched an aggressive privatization program in 2011 as part of its EU-IMF-ECB bailout, including state-owned enterprises in the air transportation, land transportation, energy, communications, and insurance sectors. Foreign companies have been among the most successful bidders in these privatizations since the program’s inception. The bidding process was public, transparent, and non-discriminatory to foreign investors.
8. Responsible Business Conduct
There is strong awareness of responsible business conduct in Portugal and broad acceptance of the need to consider the community among the key stakeholders of any company. The Group of Reflection and Support for Business Citizenship (GRACE) was founded in 2000 by a group of companies, primarily multinational enterprises, to expand the role of the Portuguese business community in social development.
The Ministry of Economy and AICEP encourage foreign and local enterprises to observe the OECD Guidelines for Multinational Enterprises, and both agencies jointly comprise the National Contact Point (NCP) for the promotion of these guidelines or facilitation of resolving disputes that may arise regarding the Guidelines. The Portuguese Business Ethics Association (APEE) is dedicated to promoting corporate social responsibility and works in collaboration with the Ministry of Economy’s Directorate-General of Economic Activities. It promotes events like Social Responsibility Week and celebrates protocols and agreements with companies to assure they follow responsible business conduct principles incorporated into the labor code.
Portugal’s Competition Authority both encourages and enforces competition rules, including ethical business practices. The Competition Authority operates a leniency program for companies that self-identify lapses. There have not been any high profile, controversial instances of private sector impact on human rights. The Portuguese government enforces domestic laws effectively and fairly through the domestic courts system, and through the supra-national European Court of Human Rights. Within its constitution, Portugal states that constitutional precepts concerning fundamental rights must be interpreted and completed in harmony with the Universal Declaration of Human Rights.
The Portuguese legal and regulatory framework on corporate governance includes not only regulations and recommendations from the Portuguese Securities Market Commission (CMVM), but also specific legal provisions from the Portuguese Companies Code and the Portuguese Securities Code. CMVM promotes sound corporate governance for listed companies by setting out a group of recommendations and regulations on the standards of corporate governance. CMVM regulations are binding for listed companies.
Non-governmental organizations also promote awareness of environmental and good governance issues in business. These include Quercus Portugal, which publishes guidelines and organizes events to promote environmental responsibility in business practices, and Transparencia e Integridade Associacao Civica (TIAC), which produces reports on corruption on everything from football match-fixing to conflicts of interest in public and private enterprise. TIAC also allows whistle-blowers to anonymously submit reports of corruption through their website.
Portugal does not participate in the Extractive Industries Transparency Initiative (EITI) or the Voluntary Principles on Security and Human Rights. The country’s two main umbrella unions, CGTP-Confederação Geral dos Trabalhadores Portugueses and UGT-União Geral dos Trabalhadores, also regularly denounce and combat non-compliant business practices, particularly when it comes to labor rights violations.
U.S. firms do not identify corruption as an obstacle to foreign direct investment. Portugal has made legislative strides toward further criminalizing corruption. The government’s Council for the Prevention of Corruption, formed in 2008, is an independent administrative body that works closely with the Court of Auditors to prevent corruption in public and private organizations that use public funds. Transparencia e Integridade Associacao Civica, the local affiliate of Transparency International, also actively publishes reports on corruption and supports would-be whistleblowers in Portugal.
In 2010, the country adopted a law criminalizing violation of urban planning rules and increasing transparency in political party funding. In 2015, Parliament unanimously approved a revision to existing anti-corruption laws that extended the statute of limitations for the crime of trading in influence to 15 years and criminalized embezzlement by employees of state-owned enterprises with a prison term of up to eight years. The laws extend to family members of officials and to political parties.
Still, according to a 2018 report by the Council of Europe’s Group of States against Corruption (GRECO), Portugal should improve efforts to reform its legal framework to prevent corruption from MPs, judges, and prosecutors. The report concluded that Portugal has only satisfactorily implemented one of fifteen previous recommendations. Three have been partly implemented, and eleven have not yet been implemented. The situation is qualified by GRECO as “globally unsatisfactory.” GRECO, however welcomed a reform to bolster integrity, enhance accountability and increase transparency of a wide range of public office holders, including MPs.
Portugal has laws and regulations to counter conflict-of-interest in awarding contracts or government procurement.
The Portuguese government encourages (and in some cases requires) private companies to establish internal codes of conduct that, among other things, prohibit bribery of public officials. Most private companies use internal controls, ethics, and compliance programs to detect and prevent bribery of government officials. As described above, the Competition Authority operates a leniency program for companies that self-identify infringements of competition rules, including ethical lapses.
Portugal has ratified and complies with both the UN Convention against Corruption and the OECD Anti-Bribery Convention.
Resources to Report Corruption
Council for the Prevention of Corruption
Avenida da Republica, 65
1050-189, Lisbon, Portugal
+351 21 794 5138
Contact at “watchdog” organization:
Transparency International – Transparencia e Integridade Associacao Civica
Rua dos Fanqueiros, 65-3º A
1100-226, Lisbon, Portugal
+351 21 8873412
10. Political and Security Environment
Since the 1974 Carnation Revolution, Portugal has had a long history of peaceful social protest. Portugal experienced its largest political rally since its revolution in response to proposed budgetary measures in 2012. Public workers, including nurses, doctors, teachers, aviation professionals, and public transportation workers organized peaceful demonstrations periodically in protest of salary levels and other measures throughout 2018.
11. Labor Policies and Practices
Numerous labor reform packages aimed at improving productivity were implemented after the 2011 bailout, but overall low labor productivity remains a challenge. In January 2020, the annualized monthly minimum wage increased to €741, from €700.
After the difficulties of the eurozone debt crisis, when many Portuguese migrated out of the country along with some resident migrants, net-migration became positive again in 2017 and strengthened since. The number of legal foreign residents in Portugal stands at around 480,000, the highest level since records started in 1976. The largest communities of workers come from Brazil, Cape Verde, Romania, Ukraine, UK, China, France, Italy, Angola and Guinea-Bissau. The employment rate of foreign workers is similar to that of Portuguese nationals at around 75%. In the southern Algarve region, the tourism sector employs most of the migrant workers. Alentejo and the coastal regions of central Portugal, with their intensive agriculture sectors, hosts substantial Asian workers’ communities, namely from Bangladesh.
Employers are allowed to conduct collective dismissals linked to adverse market or economic conditions, or due to technological advancement, but must provide advance notice and severance pay. Depending on the seniority of each employee, an employer must provide between 15 to 75 days of advance notice, and pay severance ranging from 12 days’ to one month’s salary per year worked. Employees may challenge termination decisions before a Labor Court. Labor laws are uniformly applicable and enforced, including in Portugal’s foreign trade zone/free port in the Autonomous Region of Madeira.
Collective bargaining is common in Portugal’s banking, insurance, and public administration sectors. More information is available at the Directorate General for Labor Relations site.
Portugal has labor dispute resolution mechanisms in place through Labor Courts and Arbitration Centers. Labor strikes are more common than in the United States, but are nonviolent and of short duration. Labor laws are not waived in order to attract or retain investment.
Portugal is a member of the International Labor Organization (ILO), and has ratified all eight Fundamental Conventions as well as all four Governance (Priority) Conventions.
The Labor Code caps the work schedule at eight hours per day, and 40 hours per week. The public sector employee workweek, with certain exclusions, was capped at 35 hours in July 2016. Employees are entitled to at least 22 days of annual leave per year. Employers must pay employees a Christmas and vacation bonus, both equivalent to one month’s salary.
12. U.S. International Development Finance Corporation (DFC) and Other Investment Insurance Programs
Portugal is a country with low political risk; there is no active DFC program in Portugal. However, DFC is authorized to operate in Portugal.
13. Foreign Direct Investment and Foreign Portfolio Investment Statistics
Table 2: Key Macroeconomic Data, U.S. FDI in Host Country/Economy
Host Country Statistical source*
USG or international statistical source
USG or International Source of Data:
BEA; IMF; Eurostat; UNCTAD, Other
Host Country Gross Domestic Product (GDP) ($M USD)