RESTRICTED

Report No. EA-128a

RETURN TO REPOR-ytb o'GK This report was prepared for use within e Bank. VJT It4publishe nor may I Public Disclosure Authorized it be quoted as representing the Bank's iews. Th n res onsibility for the accuracy or completeness of the onte r or .

INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT Public Disclosure Authorized

THE

OF Public Disclosure Authorized

May 24, 1962 Public Disclosure Authorized

Department of Operations Europe CURRENCY EQUIVALENTS

1 U. S. $ = 28. 75 escudos 1 = U.S. cents 3.48 1 million escudos = U.S. $34, 783 1 billion escudos = U. S. $34, 782, 608

OTHER. EQUIVALENTS

1 hectare = 2.471 acres 1 millimeter = 0. 0394 inches 1 meter = 39. 37 inches 1 kilometer = 0. 621 miles 1 kilogram = 2. 205 pounds 1 metric ton = 1. 102 short tons COTTLH!TS

Pape

Basic Data

Summary and Conclusions

I. NATURAL AND HUMN0 RESOURCES 1

II. POLITICAL ECONOMY OF PORTUGAL 2

III. ECONOMIC STRUCTURE AND PERFORMANCE 3

Recent Economic Growth 3 Principal Economic Sectors 5 Agriculture 5 , Fishing, Mining 7 Manufactures Electric Power 9 Transportation 9 Tourism 11

IV. FINANCE AID DEVELOPM-11T PLANNING11

Honey and Banking 1 13 Development Planning 14

V. THE OV]LRSEAS PTROVIN-CES 17

VI. OL 1ZilTJ'CO!NH1i1C RL.iTIONS 19

Balance of P~ayments 19 Trade and Payments Policies 21

VII. PROSPECTS FOR ECONO01i1IC D["EL0P1,MNT 23

Growth of National Output 23 Public Finance 24 Balance of Payments 24

VIII. CONCLUSIONS 25

Statistical Tables 1 to 25

Chart on Organization of Government

Maps - 1.. General Ma~p 2. Precipitation 3. Land Use 4. Electric Power BASIC DATA

Area and Population (June 1%1):

Area Population Hetropole 35,400 square miles 9.2 million of which: and 1,200 "0.6 Overseas Provinces 804,000 I " 14-15 "

Net National Income Per Head (1961): U.S. !235, increasing 3% p.a.

External Public Debt (May 1. 1962): 5.9 billion escudos (U.S. '204 million)

1.956 1957 1958 1959 1960 1961.1/ (billion escudos) : (factor cost, current prices) 50.9 53.6 54.7 58.3 62.3 66.2 of which, in percentages: Agriculture 29 29 27 27 26 n.a. Manufactures (inc. construction) 35 36 37 36 38 n.a. Industrial Production (1953 = 100) 130 137 147 155 172 180a/ Real GDP (1950 = 100) 127 133 135 143 149 159 Gross Fixed Investment (%GDP) 15 15 16 17 17 17

Money Supply (year end): 25.8 27.2 29.3 31.5 34.0 34.4

Retail Prices (1948 =-100): 104 106 108 1.09 11.1 11,11

Factory Wage Rates (1948 = 100): 11.8 1.23 125 130 132 138 Farm Vage Rates (1948 = 100): 103 104 109 1.15 125 130

Balance of Payrents: ftrmplle (with foreign countries): Exports (f.o.b.) 6.6 6.3 6.2 6.1 7.1 7.3 ImportC (f .o.b.) 10.1 11.L10.6 107 12.1 115.0 Balance of Trade -3.5 -5.1 -/...4 -!,.6 -5.0 -7.7 Current Account Balance -2.2 -3.2 -2.2 -2.5 -3.1. n.a. Overall Balance -1.1 -2.1 -1.8 -1.7 -2.8 n.a.

Overseas Provinces (with foreign countries): Balance of Trade 1,.5 1.4 1.9 2.1 1.9 n.a. Overall Balance 2.3 2.2 3.0 2.8 2.7 n.a.

Escudo Area Balance 1.2 0.1 1.2 1.1 -0.1. -2.6

Escudo Area External Reserves (year end): 21.7 21.6 22.3 23.2 22.8 20.0

1/ Preliminary. Q/ January - October average: 9% above same period of 1960.

Continued 1956 1957 1958 1959 1960 19,61 (est.) (billion escudos) Government Finances: Zxpenditures - Current 5.6 5.6 5.9 6.9 7.4 n.a. i - Capital 2.1 2.6 2.8 2.9 a,9 n.a, I - Total 7.6 8.2 8.7 9.8 11.3 12.8 Revenues Total 7.4 8.0 8.5 8.9 10.1. 10.4 Palance -0.2 -0.2 -0.2 -0.9 -1.2 -2.4 financed by: internal loans: 0.2 0.2 0.2 0.8 1.1 2.4 Treasury reserves: 0.0 0.0 0.0 0.1. 0.1 0.0 j/ Budget estimate: 3.5 billion escudos.

Note: All series refer to Metropolitan Portugal, unless otherwise specified. SU1MARY AND CONCLUSIOWS

1. In Metropolitan Portugal, almost half the 9 million people live on the land, and the standard of living is one of the lowest in Europe. There is substantial migration to the Overseas Provinces and South America, and population increase is only 0.8% per year.

2. Economic growth averaged 4% per annum during the 'fifties. Poor soil, low rainfall and hilly terrain combined with problems of land tenure and farm management to make for a virtual stagnation of agriculture. On the other hand, with government assistance and low labor costs, manufactures expanded rapidly, and the infrastructure was greatly improved. The govern- ment pursued conservative fiscal and financial policies. The budget was balanced, and overall economic policy was strongly anti-inflationary. The rise in prices over the last decade was moderate, and substantial inter- national reserves were accumulated.

3. A sign of change in official policy was the Six-Year Development Plan launched in 1953. The Second Development Plan, 1959-1964, is a list of high-priority investments in both private and public sectors for which the government is prepared to help mobilize funds if necessary. Considerable reliance is placed on external sources of finance. The plan covers only one-third of total investment, and less than half of government investment: it is not meant to be a blueprint for over-all development.

4. Three major economic problems confront Portugal. One is the stagnation in agriculture. Another is the shortage of investment funds, and the need to generate more public savings through fiscal measures. Finally, Portugal's foreign trade position is not strong. The deficit on the balance of trade is large and is growing, and the overall balance of the escudo area rests on the current account surplus of the Overseas Provinces with foreign countries. At present, Portugal has a large favorable service account with the Provinces, which also provide raw materials and markets for Portuguese manufactures.

5. The economic and political life of Portugal is closely entwined with that of the Overseas Provinces, which constitutionally are an integral part of the Republic. The evolution of the relations between Portugal and the Overseas Provinces could therefore have economic implications of considerable significance, which it is not at the present time possible to discern.

6. Apart from uncertainties which are essentially political in origin, there are good prospects for increased investment and for income growth at 4 to 5% per year in Metropolitan Portugal. Manufacturing may be expected to continue its rapid growth, and forestry and fishing should expand steadily. The government should be able to increase its revenues and its -ii- development outlays without inflationary pressure being generated. Finally, export income should grow some 41 per year, principally through increasing exports of fish and forest products and textiles; and the service account should be strengthened by rising receipts from tourism and emigrants.

7. At the end of 1961, Metropolitan Portugal had a low external public debt (P76 million), a small debt service ratio (1.4% of exports to foreign countries), and large international reserves (;P692 million). Greater development effort will for some time place a strain on the balance of payments, and while there is some scope for increasing local savings, the low level of incomes means that any substantial advance will require external capital in addition to local resources. Even taking into account the additional $1.27 million borrowed abroad since the beginning of 1962 (including $90 million for the Tagus bridge), Portugal's external debt position, financial structure and growth prospects indicate a satisfactory margin for increased foreign borrowing. THE ECOJOMY OF PORTUGAL

I. NATURAL AND HIMAN RESOURCES

1. Constitutionally, the Republic of Portugal consists of the mainland on the Iberian Peninsula of southwest Europe, the adjacent Madeira and Azores Islands, and the Overseas Provinces, principally in Africa, an area amounting to some 840,000 sq. miles with a population of 23 million people, mostly African. This report is primarily concerned with Netropolitan Portugal which, including Madeira and the Azores, has an area of 35,400 sq. miles and a population of 9.2 million.

2. Portugal is a predominantly agricultural country, and yet much of the land is ill-suited to farming. The scarcity of good agricultural land is in part due to low rainfall and annual summer droughts, in part to poor soil and the hilly nature of much of the countryside (see maps). On the other hand, the mountains of the north-central part of Portugal and of nearby provide abundant water for the generation of electricity. Lxtensive forests and good deep-sea fishing are other important economic assets. There is also a wide variety of minerals, but they are often found in deposits too small or inaccessible for economic exploitation.

3. About one-third of the mainland population lives in the principal cities of and Oporto, and there is also a substantial urban popula- tion in industrial towns nearby. Almost half the population lives on farms or in rural villages in the north or center of the country, the remainder of the farm population being tenant farmers and laborers on large estates in the south.

4. The population has grown slowly - by about 0.8' per year over the last decade (Table 3). Although the rate of natural increase is close to 1.2%, a steady flow of migrants to the Overseas Provinces and to South America has drained off about one-third of the annual increase. This emigration has eased the pressure of increasing population in the farm areas. So, too, has the drift to the cities. With the industrious habits common to most Portuguese, ex-farm workers have adapted well to city work and have acquired industrial discipline and skill.

5. The standard of living is low by general 'est European standards, per capita income being equivalent to about ,235 per year. Registrations of motor vehicles (1 for 50 persons), the number of telephones (1 for 25) and the supply of durable consumer goods all indicate limited purchasing power. Illiteracy, while less than the 40% recorded in the 1950 census, is still wide-spread among adults. Of those married in 1960, 20% were illiterate; in the 1920ts, the proportion was 500. Hith improved medical care, the death rate has been halved in the last generation and is now about 10 per 1,000. The agrarian half of the population, with one-fourth of the national income, is clearly the poorest. On the other hand, the citizens of Lisbon and Oporto, including a growing number of industrial workers, probably receive 60% of national income. The concentration of property, whether agricultural, industrial, or commercial, in relatively few families also indicates a very uneven distribution of income, which the present tax structure does little to change. -2-

II. POLITICAL LCONOI OF PORTUGAL

6. From the 12th Century until early in the 20th Century, Portugal was a monarchy, successfully preserving its independence except for a short period of Spanish occupation. In the 15th Century, under the leadership of Henry the Navigator, the Portuguese pioneered the exploration of the coast of Africa and Asia and parts of South America, and in so doing acquired an extensive empire. Subsequently, Portugal developed very close links with and Mozambique, both being important as sources of raw materials, as export markets and as outlets for surplus population. Portugal kept tight control over the of these areas and profited substantially from its economic relations with them.

7. In 1910, the monarchy was overthrown and a republic established. There followed some eighteen years of instability and financial chaos as rival groups competed for power. Then, in 1928, Dr. Antonio de Oliveira Salazar accepted the post of Minister of Finance, and in 1932 he became Premier. His first measures were to restore financial stability by a series of balanced budgets and by control of the monetary system. Then, in 1933, a new constitution was introduced to ensure political stability and continuity.

8. Under the constitution, Portugal is a corporative state headed by a President whose acts are subject to veto by a National Assembly elected each four years. In addition, there is a Corporative Chamber to advise the Assembly on draft laws submitted to it. Executive authority is effectively concentrated in the hands of the Chief of the Council of Ministers, the position occupied since 1933 by Dr. Salazar. There is one official party, the National Union Party. However, with the approval of the Supreme Court, opposition candidates may contest the Presidency in the seven-yearly elections and may stand for election to the Assembly. Hitherto, the official candidate for the Presidency has invariably been elected, and just before the November 1961 elections for the Assembly the opposition candidates withdrew from the contest.

9. Portugal is still in the process of creating the structure of a corpora- tive state. Corporations are now being established for each sector of the economy, their membership being drawn from associations of employers (gremios) and of workers (sindicatos). The complexity of government organization is indicated in Chart I.

10. The government established a large number of bodies to regulate almost every branch of economic life. Banking is strictly controlled; capital movements to and from the Metropole and most domestic capital issues are subject to license; agricultural prices are regulated; working conditions are prescribed by law, strikes and independent trade unions being illegal; regulations limit freedom to enter or expand production in many lines of industry, and monopoly concessions may be granted for a period of years. W1hile the immediate purpose of these measures has been to safeguard financial and fiscal stability, the corollary has been a tendency to preserve at the same time the existing pattern of production and wealth. -3-

11. The primary aims of Dr. Salazar's economic policy are the maintenance of budgetary balance, accumulation of international reserves and avoidance of debt. Monetary policy has relied on both quantitative measures and powers of persuasion to restrain the growth of bank , while maintaining in effect comparatively low rates both for the government's own borrowings and for loans to those private enterprises which have obtained official designation as being of national importance.

12. Over the last decade, at least three important changes occurred in government economic policies. One was a clear recognition of the economic importance of the Overseas Provinces to the ietropole. Grants and loans were made to hasten their , and Portugal is now mcrking towards the establishment of free trade throughout the escudo area (see Para. 78 below).

13. Secondly, the government recognized that, while stability might be its prime economic objective, there was a need for more rapid economic growth if living standards were to be raised appreciably and the economy diversified. Accordingly, in 1953, a first attempt at development planning was made with the introduction of a Six-Year Plan designed to increase public and private investment and national income more rapidly than in the past.

14. Finally, following its accession to OEC, the government has recently joined a number of other international economic institutions - EFTA, the Fund, the Bank and GATT. This action appears to follow from the other policy changes, for membership of these international bodies reflects the need to secure access to foreign investment funds and to expand export earnings.

III. ECONOMIC STRUCTURE AND PERFORMANCE

Recent economic arowth

15. During the '50's, output rose by almost 50% (Table 4). This implies average annual growth in real output of about 4% and in per capita income of 3%. In the last three years, 1959-1961, the pace of development appears to have accelerated, output rising more than 5% annually.l/ This accelera- tion was9 however, accompanied by a marked deterioration in the balance of payments of the Metropole (Table 24). An appreciable increase in real income therefore occurred, but from a level which was the lowest in Western Europe. Indeed, with 4-5i annual growth, it would take Portugal almost a half century to obtain the living standards now prevailing in Northwest Europe. i/ In the absence of regular census and income tax data, Portugal's national income statistics are based on inadequate surveys of the various sectors of production. Other series on the volume of output make it clear that marked growth has occurred, except in agriculture; but it may have been at a somewhat slower rate than indicated above. -4-

16. The largest contribution to the increased product was made by manu- factures which accounted for more than one-third of the total increase and which by the late 1950's had become the largest sector of the economy. A considerable improvement in the infra-structure of the country was reflected in improved transportation and in the threefold increase in electric power output, Only in primary production was there virtually no increase.

17. Gross fixed investment absorbed some 15' of GDP, with the proportion rising to 16-17% towards the end of the 1950's when the government was increasing its development efforts (Table 5). Net investment ranged between 1.OJ and 12% of national income. Over half the investment went into manufactures, power and transportation, as compared with some 10% devoted to agriculture (Table 6). For its part, the government emphasized invest- ment in transport, and public . Apart from its financial assistance to private investment, the government and its autonomous enter- prises together accounted for 15-20% of total gross investment.

18. Of gross investment, about two-thirds was financed by domestic savings, and about one-third from abroad. There was a large and growing surplus of imports of goods and services over exports (Table 24), financed not by an inflow of capital but by emigrant remittances and substantial earnings from the Overseas Provinces.

Estimated Sources of Investment Funds (as percentage of GDP, late 'fifties)

Source of Funds Government surplus 3 Private savings a Net Domestic Savings 6 Depreciation 5 Foreign balance-1 6

Total 117

119. Net domestic savings rose over the decade from about 5% to 7% of national income. In general, the government provided about half of these savings from its sarplus of revenues over current expenditures. During 1.959 and 1960, however, the government contribution declined in both absolute and relative terms, a growing proportion of savings being pro- vided by re-investment of profits and other private sources. The government is concerned about the proportion of savings being devoted to real estate

1/ Principally service account receipts from Overseas Provinces (4%) and emigrant remittances (2%). -5- and other speculative investments, and it is now trying to check this tendency../ At the same time, it is accelerating its program, begun in 1959, of mobilizing private savings through government bond issues, the receipts being made available for public jorks or loaned to private business making high priority investments. Even with Portugal's relatively low income, the savings effort is poor compared with that of many other countries in a similar position.&/

20. No marked change in the composition of employment is reported to have occurred during the 1950's (Table 7). There was a slow movement of people from the land to industrial work in the towns, as well as a steady migra- tion to the Overseas Provinces and to countries in the Western Hemisphere. Nevertheless, there was apparently an increase in the number of farm workers, and widespread evidence of low productivity and muchi under- employment. Unemployment was estimated at 31 in the 1950 ceno:us.

21. By European standards wages are low, both in rural work and in industry. Factory wage rates are about one-third of 'est European rates, and the rise in real wages since 1948 has been slow (Table 15). After a decade of virtual stagnation, rural wages rose by 25% in the last four years, but they are still only 30-40% of industrial wages.

22. The slow rise in manufacturing employment, while output was increasing quite rapidly, points to improved managerial efficiency and labor organiza- tion and the introduction of modern techniques. Portuguese labor is hard-working and has proven itself adaptable. Despite low standards of education and limited facilities for technical training, productivity is sufficiently high for the low money wages to give a cost advantage to several branches of industry in export markets as well as in displacing imports. This is particularly true of textiles and of other labor-intensive industries, for example, small electrical apparatus. The strict control over wages and conditions of work and over the activities of the sindicatos which is exercised by the Ministry of Corporations also makes for a docile work force which is continually being reinforced by new recruits from the countryside. The Statute of Labor grants certain fringe benefits in terms of holidays, sick leave, medical attention, etc., but these benefits are substantially less than in other Western European countries.

Principal economic sectors

23. Agriculture. Agriculture, including forestry and fishing, produces about one-quarter of the GNP and provides employment for almost half the population (Table 8). Moreover, agricultuxal products, whether in their natural form or processed, account for over 60; of total exports, the principal items being fish, wine, and other timber products (Table 23).

1/ E.g., the July, 1961 tax law includes higher taxes on property transfers and new regulations on real estate transactions. 2/ See United Nations: Vorld Economic Survey, 1960, Chapter 2. -6-

24. The principal agricultural activity is the raising of subsistence crops for domestic consumption: cereals (wheat, rye, maize and rice), pulses and potatoes occupy half the cultivated area (Table 9). A major part of the output of , wine and fruits is consumed locally. The 10% of cultivated land which benefits from irrigation is used to raise rice, corn and certain fruits and vegetables. Feed crops (barley, oats and broad beans) are of minor importance, and there is virtually no cultivation of fodder crops.

25. Agricultural production has been stagnant for almost a decade. From the early 1930's to the early 1950's, the cultivated area increased by more than 20% and output by 30%. Uith no more land available and with yields static, there has been no further rise in output. Recently, how- ever, there has been some success in expanding commercial fruit and vegetable production, particularly tomatoes for canning. Livestock production has suffered from the lack of adequate feed, and meat output (mostly, beef and pork) did not increase during the 1950's. The poor performance of Portuguese agriculture compared with that of other Western European countries is indicated in Table 10.

26. Over large parts of Portugal, natural conditions are unfavorable to agriculture. Soils are poor, rainfall is low and, in the north, the terrain does not favor rechanization (Nap 2). About one-fourth to one-half of the presently cultivated area is unsuited to sustained agriculture. Nevertheless, with the lack of alternative employment, large areas suited to forestry or pasture are under crops (Map 3). Methods of cultivation are primitive, too little fertilizer is used and the traditional crop rotation is ineffective in maintaining soil fertility. Little use is made even of animal power. In general, there is a shortage of technical know- ledge and advice. Inadequate marketing arrangements, except for cereals, and the large number of middle men hinder the development of commercial agriculture.

27. These adverse conditions are accentuated by the system of land tenure. In the north, peasant proprietorship is widespread, and farms have been fragmented over generations. Half the farms have less than one hectare under cultivation, and most farms consist of several scattered tracts. On the other hand, in the south, large estates predominate. For Portugal as a whole, 1% of the 850,000 farms have 50% of the cultivated area, while half of the farms have less than 5% of the area. Finally, about one- fifth of the farms are held under lease, mostly on terms which do not encourage the maintenance of soil fertility.

28. Much could be done to change this situation. Until now, the government has placed little emphasis on agricultural investment in its current Develop- ment Plan, only 17% of the 6-year total being for agriculture, and ex- penditures have so far lagged well behind the planned rate. There are plans for extensive irrigation in the south, but the government has still to secure the passage of the land tenure legislation which is a prerequisite for an effective program. The large farmers resist attempts to reduce -7-

their land holdings and to force them into producing new crops with which they are unfamiliar and which they believe would be less profitable than those presently sold at subsidized prices (see Para. 30). In addition, the government has apparently been hesitant to press its draft bills for consolidation of farms in the north and for reform of the farm rental system.

29. While the government subsidizes the prices of seed and fertilizers, these are still too expensive for most farmers. Moroever, the ratio of extension workers to farms. (1 to 3,000) is still too low to support a large-scale program for encouraging better crop practices. There is little demand for agricultural credit for improvements from farmers of any size. Credit for the financing of annual crops is secured through money lenders, local credit cooperatives and commodity boards. Some development are extended by the State Savings Bank and the Junta for Land Settlement.

30. The principal form of intervention and assistance by the state is through a number of boards (juntas) established to supervise the production and marketing of various crops. These boards regulate prices and have sufficient resources to purchase either the whole crop or any unsold portion of it. Thus, there is a fixed producers' price for wheat and guaranteed minimum producers' prices for maize, rice, barley, rye, beef, pork, wine, oil, milk for processing and wool. Except for and wine, the fixed prices exceed world market levels by from 30" to 100%. Imports are controlled by the government, usually, in consultation with the appropriate board.

31. Forestry. About one-third of Portugal is forest, mainly of pine or oak. Forest products contribute less than 5% of GDP, but they form the largest export sector, accounting for some 25% of export earnings. The most important items are cork (half of forest exports) and box board, exports of which doubled during the 1950ts. Pulp production and exports are expanding rapidly, but the markets for pit props and for naval store products (pitch and resin) are no longer growing.

32. Fishin . Only 1% of the GDP is attributed to fishing, but fish, chiefly-cod and sardines, form a basic part of the diet and contribute almost 15% of export earnings. Hith government help, the fishing fleet was modernized and expanded during the 1950's, the total catch rose by 50o, and export of sardines doubled.

33. Mining. Mining employs less than 1% of the work force and makes an equally small contribution to the GDP. A wide variety of minerals is found in Portugal, but mining has suffered from the scattered nature of deposits and from the decline in world prices since the early 1950's (Table 11;). At that time, exports of wolfram, tin and pyrites provided 7% of exports: now they provide about 31% Sulphur is extracted from iron pyrites, and the iron oxide is used in the recently established steel mill. Substantial deposits of low-grade coalf6und their chief market in a network of standby thermal power plants. -8.-

34. Manufactures. The difficulties which confront Fortuguese agriculture serve to point up the importance of manufactures as a source of increasing employment and income. Following a period of stability in 1950-53, manufacturing output increased by some 7-8' per year. During the 'fifties, factory employment rose 20, as compared with a 7 increase in the work force, and some 20% of investment was devoted to increasing manufacturing output. Much of this investment was used to widen the range of production. A 250,000-ton steel works, chemical fertilizers, pulp and paper, electrical machinery and apparatus, rubber and petroleum products head the list of new industries. In addition, substantial growth occurred in such estab- lished industries as textiles, cement, fish canning and sugar refining. About half of the volume of output still represents food, textiles and timber processing: the other half is supplied by the new and fast-growing chemical and metal products industries (Table 12).

35. Most establishments are small, having less than 15 workers, and an industry often consists of a large number of small units operating inefficiently and with antiquated methods. On the other hand, especially in the newer industries, there are large well-run establishments using modern techniques. Moreover, with good management and low labor costs, these firms are often able to compete in export markets (e.g., fertilizers, textiles, electrical and telephone apparatus) as well as to supply the Overseas Provinces. It is common for these firms to earn 10-20% on funds employed, and there is a widespread practice of financing further growth by re-investing profits.

36. The government has adopted many measures to foster industrial develop- ment. To reduce inefficiency and to increase competitiveness in export markets and against imports, the government is now trying to reorganize and merge compulsorily a large number of the small firms operating in old-established indtstries. Commissions of inquiry are reporting on twenty industries,- and the government plans to enforce closures after a transition period and to help finance new establishments for the merged groups. There are, however, many practical difficulties in bringing about such a reorganization on an appreciable scale.

37. For new industrial undertakings, the government may offer several forms of support. A firm may be accorded priority in the development program and therefore entitled to apply for government funds (by loan or by stock purchase), to make a large public issue of stocks or deben- tures, or to borrow abroad with the guarantee of the government. In some instances, as in the recently completed steel mill, the government may grant the enterprise a monopoly for a number of years. Tariff protection and tax exemptions may also be provided. i/ For example: glass, kitchen ware, sugar refining, shoes, salt, tanning, resinous products, woolens, fish canning and saw milling. -9-

38. On the other hand, this detailed regulation of industry lessens flexibility and competitiveness. larkets tend to be shared among existing firms, and dependence on government decisions on a wide range of issues does not encourage an enterprising attitude. Sources of business initiative are few, and the government's system of regulation tends to favor present producers at the expense of newcomers. There is little foreign capital in industry but the government is now modifying its regulations to encourage capital inflow, particularly when it is to be associated with locally- owned enterprises6

39. Electric Power. The increase of industrial output has been accompanied by even more rapid growth in the use of electricity. Power consumption by manufacturing industries quadrupled during the 1950's and is now about 2 billion KWh per year. Capacity rose from 350 M1 to 1,400 NJ, and annual production now exceeds 3 billion KUh. The annual load factor of the system, 59%, reflects the high degree of industrial consumption. Almost all power is supplied by hydro-electric stations completed over the last decade (Map 4). Thermal stations, now chiefly used as stand-by plants, particularly in the dry summer period, provide only 20' of capacity as against 50% in 1950, and 3% instead of 54b of actual production. Despite this recent growth, per capita consumption is still one of the lowest in Europe. At 330 K1h per year, it is only 10-20> of that of the or West , and about half that of Spain.

40. The government has accorded high priority to investment in the pro- duction and distribution of electricity. Electrical undertakings are organized in the form of share corporations with varying degrees of private ownership. The government or government institutions have provided directly at least one-third of the capital requirements for the generation and transmission companies. Some of these funds were direct loans, others were share participations. 1hile the government seldom has a majority of the shares, it exercises a strong influence on the management of the industry. Moreover, all important electrical installations of the country are con- sidered to be part of an integrated system irrespective of their ownership, and planning and dispatching are entrusted to a government office. The government also sets tariffs.

41. Transportation. In general, transport facilities in Portugal meet requirements (Map 1). An indication of traffic volume is given in Table 13a. There is, however, a serious lack of coordination in the planning and operation of the railroads, highways and road transport, and the Directorate of Land Transport in the Ministry of Communications is not adequately constituted to carry out its function of regulating rail and road services and rates (see, for example, Para. 49 below).

42. The railroad system comprises 2,811 kms of broad gauge ( 5 t 6") and 764 kms of meter gauge track. The permanent way is generally in good condition and a steady renewal program is in progress. Most of the rolling stock and the shops are over-age; but the property as a whole, whatever its -10- age, is well maintained. New shops are under construction, and electrifica- tion of the Lisbon-Oporto line and dieselization of most of the remainder of the system are in progress, completion being planned for 1964. Some 600 million escudos (U.S. p21 million) was spent on capital works during the First Development Plan. The Second Plan, 1959-64, envisages an expenditure of 1,500 million escudos (U.S. $52 million) of which 420 million ($15 million) was spent in 1959 and 1960.

43. The Companhia dos Caminhos de Ferro Portugueses (Portuguese Railway Company) is an autonomous organization in which the government owns 49 of the stock, the balance being helf by the stockholders of the four former private companies which were merged into the present one in 1927. Since 1947, the Company has been operating at a loss which the government has assumed. Between 1956 and 1960, revenues averaged 770 million escudos annually. This was insufficient even for working expenses, some 880 million escudos annually. Taking into account capital costs, the annual deficit was 200 million escudos (Table 13b). The Company's position is somewhat anomalous: on the one hand, it has operational freedom; on the other, it is financially dependent on the government which, however, appears to have given the Company a substantial degree of autonomy in its investment program.

44. Portugal's highway system totals some 27,000 kms of which 17,500 are "national" roads and 9,500 kms are "municipal." The national roads, except in the vicinity of the big cities, where relocation is necessary, are in fair to good condition and are being gradually improved. During 1956-60, the national road authority (Junta Autonoma de Lstradas) spent some 2 billion escudos, and it is authorized to continue spending at the rate of 400 million escudos (U.S. $14 million) a year until 1970. Municipal roads are administered by the municipalities with some technical help from the Ministry of Public Works. The government provides about 75' of the cost of construction and maintenance of these roads, and contributed about 450 million escudos (U.S. $1.6 million) in the period 1956-1960.

45. There are some 200,000 motor vehicles of which 50,000 are trucks. Bus services are closely controlled, whereas long-distance private trucking is virtually unregulated.

46. The Second Development Plan includes the construction of a toll suspension bridge over the River Tagus at Lisbon. In A'ril 1962, the Export-Import Bank made a 25-year loan of $67 million (including capitalized interest) to cover the foreign exchange costs of the bridge, and a 13-year $23 million loan was secured from a French group to meet the local costs of the project. Traffic, at present approximately one million vehicles per annum by ferry, is forecast to reach 10 to 12 million a year by 1980, and it is estimated that tolls would pay for the bridge in 17 to 20 years after its opening in 1965. Agreement on the need for the bridge is by no means unanimous, particularly in view of the size of the foreign exchange commit- ment involved. -11-

47. The two main ports of Lisbon and /Leixoes (for Oporto) and several secondary ports are autonomous. The port of Leixoes is well and profitably operated and is now being extended. Foreign consultants are at present advising on the operation and management of the port of Lisbon.

48. Domestic air services exist only between Lisbon and Oporto, and the traffic is small. Lisbon is one of the busiest international airports in Lurope, and Portugal has a small international airline subsidized by the government.

49. Between Lisbon and Oporto, three developments are under way: electri- fication of the railway, improvement of the existing highway, and construction of a toll highway. However, no coordinated study has been made of the traffic expected to be generated and served on these routes. This exem- plifies the need for transport coordination, and the Minister of Communications is now setting up a committee to survey the matter.

50. Tourism. Throughout the 1950's, Portugal attracted an increasing number of tourists. In 1960, over 350,000 foreigners entered Portugal, as compared with 75,000 in 1950. Over the decade, gross tourist receipts rose from 250 million escudos to about 700 million in 1.960, and the tourist trade now constitutes as large an earner of foreign exchange as the long-established wine industry. In recent years, the government erected a chain of wayside inns (pousadas) especially for tourists and helped finance a number of large hotels in Lisbon, Lstoril, and other tourist areas.

IV. FINAN-CE AND DEVLOPMENT PLANNING

Money and banking

51. The is the government and the issue bank for metropolitan Portugal. It is required by law to hold gold bullion and certain specified foreign currencies equivalent to at least 50% of its note circulation and other sight liabilities. At the end of 1961, total holdings of gold and foreign exchange, almost all in convertible currencies, were equivalent to 75% of sight liabilities. There are also two banks of issue for the Overseas Provinces, but the Banco de Portugal controls the foreign exchange transactions of the whole escudo area. There are twenty commercial banks, and two of these are predominant, having 50% of the reserves and capital. The central bank regulates their credit policy, setting the discount and re-discount rates and prescribing the minimum reserve ratios which they are to maintain. Other important financial institutions are the Social Security Fund, the State Savings Bank and the recently established National Development Bank.

52. The use of credit is not highly developed in Portugal. In part, this reflects a widespread lack of banking experience; in part, it is a matter of the laws and customs which govern banking practice. The commercial banks maintain a high liquidity ratio, about 25-. By law, their cash, -12-

deposits with the central bank and holdings of development promissory notes (see Para. 55 below) must together be equal to at least 15 of demand deposits; and there must also be a 5% reserve against time deposits. The banks are clearly preserving a wide margin of safety. In addition, almost 80% of their loans are in the form of short-term commercial bills, fully secured by tangible assets (Table 14).

53. Despite this conservative banking system, there was a substantial expansion of both currency and credit over the last few years. Total money supply is about 40% above the 1955 level, which is a more rapid increase than that of GHP. Between 1955 and 1960, the principal increase was in demand deposits (up almost 50%). In 1961, the absence of any increase in advances in the face of the severely adverse balance of payments, resulted in a contraction of bank deposits which was, however, more than offset by an increase in the note circulation (Table 14). Even with this increase in money supply, retail and whlesa2e prices rose but slowly (8-100) over the last six years (Table 15). However, with the large incrD,se in imports, to which the expansion in moneIy inccnes contributed, the balance of trade deteriorated substantially (Table 24).

54. There are several signs that the financial structure is becoming more developed, and that the government is able to raise more money in the capital market. During the last six years, there has been a decline in the liquidity ratio of the commercial banks from one-third to one-quarter, a larger structure of credit being built on existing reserves. An increase in savings is suggested by the threefold rise in time deposits during 1955-60, which also indicates a growing public preference for investment through the banking system. Finally, the government took steps to broaden the public capital market, which has long been restricted to supplying the requirements of a few leading corporations and to small issues of govern- ment bonds. To encourage acceptance of new issues and to draw more private savings from the banks into the market, the government may take up a portion, or may make a simultaneous loan to the borrower. This may be done directly or through the leading government financial institutions - the Social Security Fund and the State Savings Bank. Secondly, to help finance the Development Plan, the government is now resorting more to the capital market (Para. 61). In all, the government and private borrowers approved by the Ministry of Finance are now raising some 2 billion escudos through the market annually..!/ However, the government makes a larger part of its borrowings directly from commercial banks and other financial institutions, and private enterprise secures the bulk of its requirements from re-investment and other non-market sources.

55. One of the most important new financial techniques is the issue of development promissory notes. During 1959-64, the government plans to issue 3 billion escudos of these notes. Part of the proceeds will be used to provide finance for the National Development Bank, a government agency established in 1.960 to lend to private and public enterprises in Metropolitan Portugal and in the Overseas Provinces. These notes, of which the first 500 million escudos were issued in 1960, are for periods of from one to five years, with 1.5% interest per annum, and may be taken up only by the commercial

1/ In 1961, the government paid 3-4' interest on its issues, and private .li rowers 4-5'. -13-

banks and other credit institutions. They may be cashed at the central bank at any time, or they may be renewed. They may form up to one-third of the legal reserves of the credit institutions, and thus provide a more renumerative way of holdinZ these reserves. For the economy as a whole, their use to finance government development and other expenditures has the same expansionary effect as a liberalization of reserve requirements. However, so long as their volume is relatively limited and the commercial banks maintain a high degree of liquidity, this monetary expansion cannot be regarded as a strong inflationary factor.

56. ihile the Portuguese financial structure is markedly conservative, and while there has developed over the last three years an apparent shortage of savings relative to investment needs, the government has long sponsored the maintenance of interest rates which are low by world standards (Table 16). Uith Portugal's evident desire to borrow abroad, this dif- ference may make for some complications. Government bonds yield little more than 3 and private bonds about 4/. However, partly under the pressure of events in Angola, there has recently been a tendency for these interest rates to rise. While mortgages from private sources may cost 7%, they are available from government credit institutions at 4 to 4-1/2%. Commercial banks discount bills and make guaranteed loans at from 3 to 4%, the legal maximum being 4-1/2%.

Public finance

57. As part of Dr. Salazar's program for maintaining economic stability, the government consistently presented budgets in which there was a surplus of revenues over current expenditures. Development was financed by these surpluses, together with small amounts of domestic borrowing. However, in the last few years, and again in estimates for 1962, revenues were increasing less rapidly than expenditures, and it was necessary to increase borrowing from the private sector (Table 17). Over the last 12 months, the government's aversion to and its strong financial management have also been reflected in two rounds of tax increases.

58. Government revenues are derived from a wide variety of taxes, the most important being indirect: more than half the tax receipts come from import duties and other indirect levies (Table 18). There is no general equivalent of a progressive income tax or of the corporate profits tax. While some personal incomes are subject to a low progressive tax,1/ pro- fessional incomes above 60,000 escudos (?2,000) are subject to a flat percentage tax of 3%. Corporations are taxed on the basis of an imputed income which they might have earned, given their capital stock, or else on the amount of dividends distributed. A Special Committee has recently recommended that the tax system be brought up to date and, despite strong opposition, the government is now introducing legislation to revise each tax, beginning with those on property.

1/ The average rate is 5% on a taxable income equivalent to '.;2,000 to 4,000 per year; 8' on .p10,000; 14, on §20,000; and 28% on 440,000. -14-

59. Revenues increased some 7% per annum between 1956 and 1961, and the proportion of GNP absorbed by the government rose from 13% to 16%. This tax effort is achieved despite the favorable treatment which the present system affords to certain individual and corporate income earners. There is,therefore, ah undefined, but substantial, "taxable capacity" on which the government can still draw. An indication of the government's willingness to tax the higher incomes was given in July last when property taxes and income taxes on high income groups were raised, as were sales taxes on automobiles, gasoline and liquor. A new 15' purchase tax on luxuries was introduced and a special tax imposed on hotel expenditures. These taxes were intended to last only for the duration of the Angola crisis. In the 1962 budget, all except the hotel tax have been continued for another year, and further taxes have been imposed on real estate and industrial profits.

60. The growth of expenditures was even more rapid than that of revenues. They rose from 14% of GNP in 1956 to 18% in 1960, and it appears that they now absorb about one-fifth of the country's production. Current costs of government operation increased with the rise in salaries in 1959 and with the debt service entailed by borrowing for development and defense (Table 18). With the increased efforts of the Second Plan, investment outlays rose 80% between 1956 and 1960. Finally, with the operations in Angola, provisions for expenditures were greatly increased in 1961. Defense appropriations in 1962 are 15% above 1961, whereas the development budget has not been increased. The military effort is now absorbing some LO% of government revenues, compared with 30% in 1956, and it accounts for one- third or more of total expenditures.

61. With the marked increase in expenditures on current operations, de- velopment and defense since 1958, government borrowing rose substantially. In 1958, loans were 0.71 billion escudoe; in 1960, they reached 1.7 billion escudos. For 1961, internal public borrowing of 2.6 billion escudos was planned, though, in fact, only 1.7 billion was sought. In this way, the government is drawing on private savings for projects of national develop- ment and defense. The government originally intended to borrow l billion escudos during the Second Plan, 1959-64, but it is already clear that this figure will be exceeded: the 4 billion mark was reached by the end of 1961. This experience indicates that the market for government bonds, whether by direct placement in private hands on the open market or through subscrip- tions made by savings institutions, was wider than expected.

62. at the end of 1961 was about 16.2 billion escudos, of which 14 billion was domestic and 2.2 billion ($76 million) external. Debt service of almost 1 billion escudos a year requires some 9% of government revenues. Over the last few years, the Treasury'.s year-end cash reserves were about 1 billion escudos, the December 1960 total being 1.1 billion escudos.

Development Planning

63. In the early 'fifties, the government became concerned with the slow rate of growth of the economy (2.8/ per annum during 1938-1952), the low standard of living, the shortage of employment opportunities, and the need -15-

to expand exports. To improve the performance of the economy, Portugal embarked on its First-Six-year Development Plan in 1953, and a Second Plan was begun in 1959.

64. The essence of the plans is the government's decision to give prior- ity to public and selected private investment in certain sectors of the economy. These were agriculture, basic manufacturing industry, electric power, transportation (excluding non-farm roads) and technical education. Projects are selected in each of these fields and. their execution and financing programmed over the six-year period. The plans, therefore, con- sist of a list of certain key investments in a number of fields, together with estimates of the sources of finance and schedules of construction. The list of projects and the amounts to be spent are revised annually by the Economic Council of Ministers. Certain projects in the Overseas Provinces are also included.

65. Both plans refer to little more than half of government investment: projects in the social sector - education, health and housing - are omitted, and highway investment is made from.,a special fund of 6 billion escudos, financed by regular budget and loan operations and to be spent during 1956- 1970. Social investments are made on an annual basis and are financed from the ordinary receipts of the budget. Nor do the plans cover more than se- lected key projects in the private sector. The Second Plan, with an esti- mated total expenditure of 22 billion e:cudos in Metropolitan Portugal during 1959-64, will probably account for about one-third of total gross fixed in- vestment.

66. The Second Six-Year Plan is twice the size of the First, and its emphasis is on basic manufactures, whereas the First Plan gave priority tc electrification. Transportation remains a key sector, and both plans allocate only a small proportion of resources to agriculture (Tables 19 and 20).

67. The government and government institutions are the principal sources cf financo, but the Second Plan is marked by a reliance on external borrowing for about one-fourth of total plan resources. This would mean a capital in- flow of 6-7 billion escudos during 1959-196h, a rate of foreign investment far in excess of that attained in the past. Of this inflow, about 1.5 bil- lion is intended for the bridge over the River Tagus. The foreign lcans recently negotiated for the bridge were equivalent to more than 2.5 billion escudos, including some 420 million escudos of capitalized interest, So far, 3.7 billion escudos of long-term external financing have been secured for the plan, and there are large supplier credits arranged for various basic indus- tries. The government's own contribution of funds would also include the proceeds of substantial internal loans.

68. During the first half of the plan period, 1959-61, performance was behind schedule. A principal shortfall was in agriculture, nntably in irrigation and land reform. In the second half of 1960, expenditures were well above the planned annual rate, particularly for the completion of the steel mill, and the total outlay of 4.4 billion escudos in 1960 was 50', above 1959. There was, however, a decline in the rate of expenditures during 1961. -16-

69. The existence of a plan and its stated purposes may help galvanize the Portuguese economy, stimulate its businessmen and workers to achieve more rapid growth, and harness private savings to key undertakings, whether public or private. However, there is no long-term policy regarding the volume of public investment, and no detailed blueprint for achieving the stated overall goals of a 4.2O per annum increase in GNP and the creation of 20,000 new jobs each year. The fact that the volume of investment re- quired by the projects selected in 1959 tapers off after 1961 indicates the tentative nature of the plan. Moreover, with its limited scope, the plan is not designed to coordinate various kinds of public and private investment. -17-

V. THE OVElISEAS iRhOVTNCES

70. Of the 14 to 15 million people in the Overseas Provinces, 80% live in Mozambique and Angola. Illiteracy is widespread and voting rights have until recently been limited to whites and lassimilados'. In July 1961, however, the franchisewas extended to literate Africans, and the system of requiring six months compulsory labor each year from native African men was abolished. Incomes are very low, even for many of the one-half million whites living there, and the average may be as little as .jP40-50 per capita, compared with Portugal's $235. The provincial economies depend on overseas trade, principally with Portugal. Annual exports are 7 billion escudos, as compared with Portugal's 9.5 billion, and govern- ment revenues (all raised locally) are 7 billion escudos, compared with 10 billion for Portugal itself.

71. Apart from subsistence farming, the Overseas Provinces are principally producers of primary products for export. The main products and exports are coffee, cotton, sugar, sisal, tea, cocoa, maize, copra, iron ore and .

72. The Portuguese Government and private investors and settlers organized this export trade and provided the infrastructure on which it is based. In addition, part of the Development Plans is devoted to priority investments in the Provinces, designed to increase the volume and diversify the range of exports. Angola and iozambique may have great economic potential. The government is creating a large electric power capacity on the Cuanza River in Angola, where it hopes to develop aluminum and other industries with cheap power. Again, for Nozambique, an extensive 5-year study is now being made of the possibilities of the Zambezi River basin for power generation, irrigation, navigation and mining.

73. The Lanco de Angola and the danco Ultramario are the central banks and the chief commercial banks of the Overseas Provinces. Their policies are subject to the control of the Banco de Portugal and of the metropolitan government working through the provincial governors. At present, the currency issued by these central banks is not convertible into metropolitan currency at par or without the consent of the Banco de Portugal. The inflow of foreign capital is strictly controlled by the Metropole, and has in fact been negligible except for railroads and mining. The princi- pal financial assistance from the Metropole is through the inclusion of overseas projects in the Development Plans, with part of the outlays being financed by loans or grants from the central government. For 1959-64, investments of 9 billion escudos are planned, of which 5 billion are to be provided by Portugal. However, the normal costs of operation of the Provinces, including substantial development expenditures outside the plan, have been financed by revenues raised internally.

74. Portugal has benefited from the supply of raw materials at prices regulated by the government, from preferential access to export markets and above all from the substantial contribution which the Provinces make to the balance of payments of the escudo area. Balance of Trade and Payments of the Overseas Provinces, 1960 (billion escudos)

Services & Current Trading Trade Capital Overall Balance of Partner Exports Imports Balance Balance Balance Metropole

Metropole 2.2 2.4 -0.2 n.a. n.a. - Third Countries 1.8 2.9 +1.9 +0.7 +2.6 -3.1

Total 7.0 5.3 +1.7 n.a. n.a. -

Source: Table 24

75. Especially for cotton, coffee, sugar and fibers, the Overseas Provinces have a protected market in mainland Portugal. However, as indicated in the above table, the principal part of their export trade is with third countries. On the other hand, Portugal supplies a much larger proportion of provincial imports, especially for Angola, and several Portuguese industries are dependent on these markets. About 4% of textile exports go to the Provinces, which are also responsible for the increased export of Portugal's ordinary wines during the 'fifties. Some 75% of exports of these wines - and 40% of all wine exports, including port - are marketed in the Provinces. For textiles, various food and drink products, and building materials, quotas are fixed, establishing ratios between the import of these products from foreign countries and imports from the Metropcle. In some cases, the ratio of imports to domestic production is also prescribed. Preferential duties on imports from Portugal are usually 50% of the general rate.

76. The Provinces earn a large surplus in their trade with third countries, thereby contributing substantially to the strength of the escudo area. They normally incur a small deficit in their balance of trade with the Metropole, but there are no data on the service account between the Provinces and the Metropole (Table 24). However, Portugal itself consistently runs a large deficit with the outside world, while the escudo area as a whole was in balance or surplus (except for a slight deficit in 1960 and a large deficit in 1961). There is presumably, therefore, a large net payment on service account from the Provinces to the Metropole, probably at least 2 billion escudos per year.

77. The external reserves of the Provinces remained around 5 billion escudos in recent years, or about one-fifth of the reserves of the escudo area. The Provinces have a public debt of some 4.3 billion, of which two- thirds is held in the 1ectropole. External debt cannot be incurred directly; the Metropolitan Government itself undertakes any external obligation, as it did for the Export-Import Bank loan to the Hozambique railroad (Table 1). Apart from the general regulation of foreign exchange transactions with respect to third countries, there are controls on the movement of capital between the Provinces and the mainland. The loverseas' escudo is not freely convertible into the Metropolitan currency, and Portuguese investors in A.-qola have recently had difficulty in repatriating funds. -19-

78. As part of its policy of completin, the integration of the Provinces and the Metropole, the government is working towards a full free trade area for the Portuguese world. This would entail not only a single currency throughout the escudo area but also a review of customs duties and quotas now existing between the No,itro,ole and the Provinces. As a first step, the government has recently announced its intention to abolish metropolitan import duties by the end of 1963 and those of the Overseas Provinces by 1971.

79. To help develop the provincial economies and to strengthen ties with the Metropole, the government encourages emigration, particularly to An-ola. At the same time, this population movement eases the demographic pressure in the stagnant rural areas of Portugal. Over the last six years, net migration to the Overseas Provinces exceeded 75,000, of whom 70% settled in Angola. This outflow absorbed over 12"' of the natural increase of the Metropole, thereby easing the problems of unemployment and under-employment.

80. The immediate crisis in Angola does not appear to have done permanent damage to its economy. 1!hile economic life has been somewhat disorganized in the north, the decline in coffee production has been no more than 25%. Coffee stocks represent more than one year's production, and exports have in fact increased substantially over 1960. Rather, the burden has fallen on the budget of the Metropole. In the longer run, there may arise the problem of adjusting to fundamental changes in the political and economic position in Africa which would adversely affect the marketing of Portuguese products and would substantially weaken the balance of payments of Portugal.

VI. INTTLRNATICNAL -COilC RELATTO\JS

The balance_of jayments

81. !ietropolitan Portugal is essentially an exporter of primary products, and e:-Portu come in large part from a limited range of industries - forestry, fish ig and viniculture. The other major export is cotton textiles. Small quantities of minerals (tin, wolfram and pyrites) cand a small but growing volume of manufactured products are also sold abroad. Partly on account of declining prices, export receipts grew only 10% during 1956-60 (Table 22). However, for the decade as a whole, export receipts rose almost 80%. Allowing for rising import prices, the capacity to import rose 50%, or an average of more than 4/ a year, which is somewhat greater than the growth of GNP. Certain timber products (boxwood and pulp) and canned fish were the leading growth exports, and substantial increases occurrad for textiles, ordinary wines and cork products (Table 23). Lxports of port ine, minerals and some timber products grew very slowly. In 1960 and 1961., about 30% of exports to third countries went to EEC members, and a similar proportion to EFTA, with the U.K. taking 1.9%. Some 25% of all metropolitan exports were to the Overseas Provinces.

82. Inports more than doubled in value during the 'fifties, their volume rising some 75%. Aiart from meat, sugar and coffee, imports of foodstuffs -20-

(10' of the total) showed no rising tendency; rather, they fluctuated with crop conditions. On the other hand, the increase in imports was uniformly rapid in primary materials and in machinery and other manufactures. Almost half of imports come from the LEC, particularly Germany, and 25% from the EFTA countries.

83. Portugal began the 'fifties with a substantial adverse balance of trade, imports being 50% above exports. With the slight decline in the terms of trade in the late 'fifties (5,) and the greater increase in imports than exports, the trade deficit with third countries reached 5 billion escudos in 1960 and 7.7 billion last year. Exports were 12% of GI in both 1960 and 1961, but imports rose from 20% to 24%. This deficit position was virtually unchanged by the slight favorable trade balance with the Over- seas Provinces in 1960 or the slightly adverse balance in 1961 (Table 24).

84. ifith increasing receipts from tourism and the remittances of emigrants, Portugal maintained its traditional position of having a strong favorable balance on invisible account. Together, these two items made a net contri- bution of 2 billion escudos to the 1960 balance of payments, compared with 350 million escudos in 1950. Wet investment income is negligible, and transport costs are an appreciable negative item.

85. In view of the small net inflow of private capital during the 'fifties (on average, less than 100 million escudos per year) and the absence of long-term international borrowing between 1952 and 1961, transactions on capital account with third countries did not meet significantly the deficit on current account, which rose from about 1 billion escudos in 1950 to 3 billion escudos in 1960. Rather, this gap in Portugal's payments position was bridged almost entirely by the surplus on current account which the Overseas Provinces earned in their commodity and services transactions with foreign countries. This surplus rose almost eari passu with the current account deficit of the Metropole. On this basis, the escudo area has on a whole achieved a favorable balance in most years, and foreign exchange reserves rose from 7497 million to >808 million between 1950 and 1959. !ith a marked rise in Portugal's imports in 1960, a slight decline in reserves occurred (Table 25).

36. During 1961, Portugal's imports rose some 25%. There were increased purchases of metals, machinery, wheat and raw cotton: and one-third of the increase was accounted for by the delivery of two large liners by U.K. shipyards. Exports rose only 4%, and so the trade gap widened by more than 2.5 billion escudos compared with 1960. As a result of this deficit and of a relatively small outflow of private capital, external assets declined by $1.02 million during 1961. The year-end reserves of $692 million were equal to some 14 months of escudo area imports. To strengthen its balance of payments, the Government began a series of external loan operations in 1961. Since November last, some $140 million has been borrowed abroad, including a $13.2 million 10-year credit under the U.S. P.L. 480 program, a $37.5 million long-term loan from the est German Government and 390 million (including capitalized interest) from the Export-Import Bank and a French Group for the Tagus bridge (Table 1). In addition, the government is -21- reported to be concluding a $20 million short-term loan with private banks in New York. External debt and prospective debt payments have therefore risen appreciably in recent months, although much of the new debt requires no amortization or interest payments over the next 5 years (Table 2).

Trade and payments policies

87. Because of the generally favorable balance of payments of the escudo area and the accompanying accumulation of reserves during the postwar period, the escudo came to be regarded as a strong currency. Pith minor exceptions, foreigners were allowed to buy and sell escudos freely, whether for current or capital purposes. Actually, all foreign exchange transactions are subject to regulation by the Bank of Portugal. For imports and for payments for invisibles, licenses are freely granted with respect to OECD countries and to North America, except for certain agricultural products and raw materials. Payments to other countries depend in part on the provisions of various payments agreements. Foreign exchange receipts for invisible items must be surrendered to the central bank. Capital movements between Portugal and other OECD countries are generally subject to prior authori- zation by the Minister of Finance, for example, for repatriation of invest- ment, Portuguese investment abroad or direct investment by foreigners in Portugal. In July 1960, control of capital movements was tightened, and it now covers amounts of less than 10 million escudos which were previously uncontrolled. Capital movements from the Overseas Provinces to third countries are similarly controlled, and prior approval is also required for the transfer of funds between the Provinces and the Metropole. Current account transactions are, therefore, virtually free, while a substantial degree of control is exercised over capital movements by Portuguese residents and over the investment of funds in Portugal by non-residents.

88. The Portuguese tariff is designed to encourage industrial development, and protection has been extended readily to new undertakings. The ratio of the average rate of duty to the value of imports was about 25% during the 'fifties. The tariff is also a principal source of government revenues, providing some 30j of the total. Traditionally imposed on a specific duty basis, the tariff is being converted to an ad valorem one. As part of the procedure of adopting the Brussels nomenclature and ad valorem duties, tariffs were revised in 1.958, and the rate of duty on many products is now higher than before. Quantitative restrictions provided further protection to industry and agriculture.

89. In recent years, Portugal has taken some steps to liberalize its commercial relations with other countries. Through the OELC, Portugal liberalized its quantitative restrictions to the extent that some 85% of trade is now freed, and in 1959, Portugal joined in forming the EFTA. While accepting the general aim of freer trade in industrial products, Portugal secured a special provision (Appendix G) in the Stockholm Conven.- tion which allows it twice the time of other countries for the elimination of duties and abandonment of quantitative restrictions. Portugal joined in the first round of reductions in July 1960, when import duties were cut 20%. However, for Portugal, these changes were largely nominal in view of the revision of tariff rates. Then, under the special provision, the -22- second and third rounds of reductions (each of 10) in July 1961 and March 1962 were confined to a list of products which contribute less than one-fourth of Portugal's imports from ITA. The normal schedule of future reductions, with complete abolition of tariffs by 1970, applies only to goods not now made in Portugal or to goods for which exports constitute more than 15% of total output or to other goods specifically notified by Portugal by July 1, 1960. Portugal obtained two further concessions: duties may be raised on new industrial products until 1972; and the general elimination of tariffs will not have to be completed until 1980, with only a 50 reduction by 1970.

90. By joining EFTA, Metropolitan Portugal sought to preserve access to markets in the U.K., its principal customer, and to increase exports, for example, of textiles and sardines, to Scandinavia. Portugal also saw itself in a favorable position in trade between the ELC and EFTA, hoping that its low labor costs and cheap power would lead German and other ELC indus- trialists to choose Portugal as their production center in the EFTA area. Now, however, Portugal is disturbed at the uncertain future of EFTA. If the U.K. joins the EEC, Portugal would lose the favorable investment posi- tion it envisages, and markets in the U.K. would be threatened unless Portugal also joined the Community. However, Portugal is opposed to those aspects of the LC which involve a sacrifice of sovereignty or standardiza- tion of conditions of labor and social services.

91. Portugal has recently joined the GATT. For this purpose, the Metropole and the Overseas Provinces are regarded as a unit, subject to two reserva- tions. Negotiations regarding the Provinces will not take place until they have adopted the Brussels Tariff Nomenclature later in 1962. Secondly, consistent with the exception allowed in Article 24 of the GATT, Portugal is working by stages towards a free trade area for the Portuguese world (Para. 78), tariff adjustments being made within the time limits allowed Portugal under the Stockholm Convention of EFTA (Para. 89). Although no formal approach has been made, Portugal has also decided. to seek membership in the 1uropean Economic Community. The form of accession to be sought is not known,but it is unlikely that the Overseas Provinces will be included in the application, at least until the integration of the escudo area is achieved. -23-

VII, PROSPECTS FOR ECONOMIC DEVELOPMENT Growth of National Output

92. Conditions for growth are least favorable in agriculture, where soil is poor, climate difficult, standards of technical education low and market- ing inefficient. In the absence of rapid progress on such major problems as land reform, irrigation, improved crop rotation and livestock betterment and feeding, little growth in output can be expected. In forestry and fishing, however, the situation is much better. Portugal is well placed for a steady development of its forests. While the output of such products as cork, naval stores, and mining timber may be expected to grow only slowly, if at all, there is a growing demand both at home and abroad for paper pulp and boxwood. Given the limits of the annual allowable cut, output of forest products is expected to grow some 2% p.a. over the next several years. With the reequip- ment of the fishing fleet and expanding world demand, the catch and marketing of fish is expected to increase by some 4% p.a.

93. With the Government's emphasis on basic industries and the extension of financial help and tariff protection, growth in manufacturing least match should at the 7.5% p.a. rate achieved since the First Development Plan began in 1953. Few results can be expected from the Government's industrial program of reorganization for some years; and there are few industries in which capable business leadership can be expected to make substantial in- creases in output. Steel, pulp and paper, chemicals and fertilizers, and electrical goods are the principal instances of large and rapidly growing industries. Skilled labor is short, but the Government is giving priority to technical education, and the availability of low-cost, adaptable labor should encourage industrial expansion by both domestic and foreign enter- prises.

9h. Production of electric power is expected to continue its rapid growth as existing capacity is more fully used and new hydroelectric stations are built. The Government is planning for an increase in output of 11% p.a., somewhat less than in the first stage of Portugal's electrification, 1951-60. Such an expansion would allow power consumption to be raised substantially from the present low level of less than 2 kw. per worker. It is assumed that the other services which comprise the remainder of the GNP will grow at about the average rate of the commodity-producing sectors.

95. Over the next several years then, the economy should be capable of growing at a rate slightly higher than the 4% p.a. of the 'fifties. Assuming continued substantial net emigration, this would imply per capita incomes rising by some 4% annually. A basic assumption for this estimate is that, together with whatever capital inflow may be achieved, the government and private sectors of the economy together save enough to finance the investment on which this increase depends. The Government's financial position is strong and it should even be able to increase its revenue surplus over current ex- penitures; and private savings could be increased and better directed through borrowing by the Government and private industry. -24-

Public Finance

96. While no estimate can be made of the future trend of defense expendi- tures, there appear to be reasonable prospects for strengthening the basic budgetary situation. A substantial increase in government revenues is expected to follow from several favorable elements in the economy. Non-farm income is estimated to rise by 6% per annum, With better tax administration, this should allow a rise of direct taxes by 6-7% annually. The increase in imports which will accompany rising incomes and investment should entail a related rise in receipts from customs duties, for Portugalfs commitments for freer trade will have little impact on revenues for some years. Finally, with total tax re- ceipts absorbing 16% of GNP and with only a slightly progressive income tax, there is scope for increased taxes on personal and corporate incomes, prefer- ably through revision of the tax system to bring it in line with modern prac- tice. The July 1961 tax increase could also be incorporated into the present tax system. Total revenues may increase from their present level of about 10 billion escudos (Table 17) by 7% or more--or at least 700 million escudos-- per annum,

97. Current expenditures, excluding defense, have been increasing by some 8% per annum and now total some 5 billion escudos annually. This would appear to be a sufficiently rapid rate of growth for a country with a less than 1% per annum increase in population, especially as the Government does not intend to embark on large social service undertakings. The surplus of revenues over current expenditures could therefore increase by-300 million escudos per annum.

98. Finally, the Government is expected to continue borrowing for develop- ment purposes on the capital market and through savings institutions, as well as borrowing abroad. The Government should be able to raise an average of 1.5 billion escudos per annum in Portugal, thereby directly harnessing some 20% of private savings to the development effort. Portugal's national debt is only one-fourth of the national product, and debt service is less than 10% of revenues. A net increase in indebtedness of say 1 billion escudos per annum would entail a rise of less than 100 million escudos in current expenditures each year. 'Moreover, a large part of borrowed funds is likely to be re-lent to public and private enterprises which would subsequently make debt service payments to the Government. Provided military outlays do not increase progressively, the Government should be able to meet the current demands on its resources and also to increase its contribution to development significantly on the basis of rising revenues, a sustained program of domestic borrowing and some resort to external financing,

Balance of Payments

99. From the point of view of development, the most important weakness in the economic structure of metropolitan Portugal lies in its balance of trade. For some years, export receipts have fallen short of import payments by 4-5 billion escudos and in 1961 the shortfall exceeded 7 billion escudos. There is no reasonable prospect of this gap being closed by an expansion of exports, Moreover, after allowing for emigrant remittances, the gap is largely filled by the current account surplus of the Overseas Provinces, and in the long run this is an uncertain source of strength.,

100. It is estimated that Portugal's commodity exports will increase froal present levels of 9-10 billion escudos by 4% per annum, or at about the rate -25- achieved during the 'fifties. Exports of textiles are expected to grow 5% per annum. Portugal is one of the world's low-cost producers, and it in- creased its cotton textile exports by 30% in 1960. However, last year the principal importing and producing countries reached a tentative agreement for a slower and more orderly expansion of the cotton textile trade, and this should allow Portugal a modest increase in exports. With favorable timber supplies and cheap labor, Portugal has good prospects for exporting the paper pulp which it will be producing in two additional plants to be completed in 1962-63; and box board exports are also expanding. Timber exports, other than cork, may, therefore, increase some 7% per annum. Market prospects should allow a 4% increase in fish exports, especially canned sardines, and a 5% increase for fruits and vegetables, particularly canned tomatoes. Exports of electrical products and other labor-intensive manufactures should increase rapidly, though from a small base. On the other hand, market conditions are unfavorable for any appreciable rise in the export of wines and cork, and there is only a modest potential for in- creasing exports of tin and wolfram.

101. With rising investment and with the expected increase in incomes, the demand for imports, over 14 billion escudos in 1960, is expected to rise substantially, though the 25% increase in 1961 is clearly exceptional, To some extent, this tendency may be slowed by import substitution, notably for steel products, fertilizers, paper and certain types of machinery. In any event, imports may be expected to rise faster than exports, and this would mean a continued increase in the trade deficit.

102. On the service account, Portugal should find its net receipts in- creased by an appreciable growth of tourist expenditures and emiigrant remit- tance.. With its historic and scenic , modern hotels and good transportation, Portugal could increase its tourist trade substantit!ly. As economic conditions become more favorable in North America. Bra .l and Vene-ela, and as recent migrants establish themselves abroad, remittances should resume their upward trend. These developments could inreasE net invisible earnings, thereby partially offsetting the expected rise in the trade deficit.

103. Finally, it is expected that part of the payments gap generated by rising demand for consumer and investment goods will be bridged by a larger volume of capital imports. Private investment by European and U.S. firms is lik--ly to increase as Portugal is recognized as a profitable base for certiaii manufacturing operations, and the Government is actively secing medium and long-term loans and supplier credits abroad to help fince important investment undertakings. Even so, the basic deficit on current account (3 billion in 1960 and even more in 1961) would remain to be filled in large part by the Overseas Provinces.

VIII. CONCLUSIONS lo. The major uncertainties that underlie an appraisal of the economic prospects of Portugal are essentially political in origin, in particular the evolution of the relationships between Portugal and the Overseas Provinces and their impact on both the budget and the balance of payments. -26-

The weakest facet of the economy itself lies in the adverse balance of trade and dependence on a limited range of exports; and there is little prospect of reducing this deficit or of diversifying exports over the next several years. Internally, the stagnation of agriculture is a continuing drag on the economy, and growth generally has been limited by the amount and composi- tion of investment and by the shortage of entrepreneurial talent.

105. Portugal has, nevertheless, good opportunities for a higher rate of investment and income growth. On the basis of an abundant supply of low-cost labor and an adequate infrastructure in terms of transport and power, industry should develop rapidly. Hitherto, metropolitan Portugal and the Provinces have been able to finance investment almost entirely from their own resources: indeed, the escudo area has accumulated substantial exchange reserves. Now, for the first time, the increased investment effort is beginning to put a strain on the Portuguese economy, a strain which events in Angola have inten- sified. While, as has been suggested, there is some margin for increasing domestic savings, average incomes are low by European standards. To support the present investment program without endangering financial stability and to cushion the probable continued decline in exchange reserves, Portugal would be justified in seeking foreign capital.

106. There is in fact a substantial margin for increased foreign borrowing. Portugal is in the strong position of having large foreign exchange reserves and a moderate external public debt. At the end of 1961, external reserves were $692 million, and external public debt $76 million. In 1961, debt service was $3.5 million, which was equivalent to 1.4% of the merchandise exports of metropolitan Portugal to third countries, or less than 1% of those for the escudo area as a whole. Recent borrowing has increased these figures substantially, although most of the new indebtedness calls for little repayment over the years immediately ahead. Annual debt service requirements up until 1966 do not exceed 2 to 3% of 1961 merchandise exports. Thereafter, as service payments increase, the percentage will more than double (Table 2). List of Tables

Number

External Public Debt Outstanding, April 30, 1962...... 1

Estimated Contractual Service Payments on External Debt...... 2

Population Growth of Metropolitan Portugal, 1950-1961...... 3

Gross Domestic Product by Major Sectors, 1950 and 1955-60 ...... s ...... 4

Gross Domestic Expenditured 1952 & 1955-61...... 5

Gross Capital Formation, 1952 and 1955-61.9...... 6

Estimated Distribution of 1ork Force, 1950 and 1959...... 7

Composition of Output and Employment...... 8

Area and Output of Principal Agricultural Products, 1.934-1960...... ,,...... 9

Selected Western European Agricultural Statistics...... 10

Output of Selected Industrial Products, 1950 and 1959-1961...... 11

Index of Industrial Production, 1954-61......

Railroad and Road Traffic, 1956-61.,...... 13a Railroad Revenues and Expenditures, 1956-60...... 13b

Honey Supply & Commercial Banking Operations, 1955-61...... 14

Price and '!age Indices, 1948-1961 ...... * ...... -15

Interest Rates, 1955-61...... 16

Government Revenues and Expenditures, 1956-62...... 17

Composition of Revenues and Expenditures, 1956-62...... 18

First and Second Development Plans, 1953-1964...... 19

Composition of Investment in First and Second Plans...... 20

Financing of Development Program, 1959-1960...... ,...*21

Composition of Imports and Exportsi 1950,1955-60...... *...... 22

Principal Exports and Imports, 1950, 15-1...... 2

Balance of Payments, 1950, 1955-61...... * ..... 24

Official Gold and Foreign Exchange Reserves, 1950-1962...... 25 Table 1

Estimated External Public Debt Outstanding Including Undisbursed as of Alril 30, 1962 (In millions of U.S. dollar equivalents)

Item Total

TOTAL LUTERNAL PUBLIC DEBT 201.5

Publicly-issued bonds 1/ 20.1 ;20,863,580 Portuguese Ext. Series I, 3', 1902-2002 10.5 A 1,200,408 Portuguese Ext. Series II, 3%, 1902-2002 1.4 T'9,502,588 Portuguese Ext. Series III, 3, 1902-2002 5.3 1 3,167,529 Portuguese Ext. Series III non- interest bearing, 1902-2002 2.9

Privately-placed debt 23.3 $23,340,000 from Seligman et Cie & Compadec, , 5%, 1962-1975 23.3

U.S. Government loans 122.5 Export-Import Bank 79.0 p12 ,45 2 ,208 Republic of Fortugal, 4%, 1952-1977 11.7 067,359,000 Republic of Portugal, 5-3/%, 1962-1987 67.4 International Cooperation Administration/ 30.3 4.i27,500,000 Republic of Portugal, 2-1/2%, 1950-1983 23.1 $ 8,851,000 Republic of Portugal, 2-1/2/, 1951-1983 7.2 Department of Agriculture 13.2 '13,200,000 Republic of Portugal, 3-7/8%, 1961-1972 13.2

Loan from -Test Germany 37.5 ri37,500,000 from Kreditanstalt fur "iederaufbau, March, 1962 (terms unavailable) 37.5 j1/ In 1924, portions of each series were stamped for repayment in pounds sterling, the remainder being payable in Portuguese escudos. The portions stamped in sterling were as follows:

3/ Series I E11,255,660 31 Series II & 727,703 3% Series III - 4,030,904 Non-interest bearing Series III 1,050,455

(see footnotes on following page) Table 1 (Continued)

Estimated External Public Deht Dutstandina Tn(-udinp Undisbursed as of A ril 3O, 1962

i/ (Continued)

In 1940, holders of Series I, II and III bonds were offered the right of conversion into new internal 4% consolidated loan. The amounts of 3% 1902 bonds so converted including portions payable in Portuguese escudos were as follows:

3% Series I &13,632,740 3% Series II 472,048 3% Series III & 5,535,015

2/ Does not include e3,400,000 3%, 1956-1997, to Republic of Portugal for which Portugal has the option to repay in U.S. dollars or local currency (as of December 31, 1961 the amount outstanding was :,3,353,424.48).

Source: IBRD - Economic Staff. Table 2

Estimated Contractual Service Payments on External Public Debt Outstanding Including Undisbursed Due in F,oreign Currencies as of April 30, 19621/ (In millions of U.S. dollar equivalents)

Debt out- Debt out- standing Payments during year standing Payments during year Year plus un- Year plus un- disbursed Amorti- In- disbursed Amorti- In- January 1 zation terest Total January 1 zation terest Total Total debt Publicly-issued bonds

1962 75.3 1.8 2.0 3.8 1962 20.1 0.5 0.5 1.1 1963 164.2 3.7 2.2 5.9 1963 19.6 0.6 0.5 1.0 1964 160.4 3.8 2.1 5.8 1964 19.0 0.6 0.5 1.0 1965 156.7 3.8 1.9 5.7 1965 18,4 0.6 0.5 1.1 1966 152.9 3.9 3.0 6.9 1966 17.9 0.6 0.4 1.0 1967 149.0 5.0 4.4 9,5 1967 17.3 0.6 0.4 1.0 1968 144.0 6.3 5.8 12:2 1968 16.6 0.6 0.4 1.1 1969 137.6 7.0 5.6 12.6 169 16.0 0.6 0.4 1.0 1970 130.6 7.7 5.3 13.1 190 15.4 0.7 0.4 1.0 1971 122.9 8.5 5.1 13.5 1c71 14.7 0.7 0.4 1.0 1972 114.4 9.3 4,7 14-0 1'2 14,0 0,7 0.4 1.0 1973 105.1 8,8 4.3 131,1 1973 13M3 07 0.3 1.0 1974 96.3 9.7 4.0 13.7 1974 12.6 07 0,3 1.0 1975 86.6 10.6 3.6 14.2 1975 11.9 0.7 0.3 1.0

Privately-placed debt U.S., Govt Loans - Total

1962 - - - - 1962 55.1 1.2 1.5 2.7 1963 23.3 - - - 1963 121.2 3.2 1.7 4.9 1964 23.3 - - - 1964 118.1 3.2 1.6 4.8 1965 23.3 - - 1965 114.9 3.2 1.5 4.7 1966 23.3 1.2 1.2 1966 111.7 3.2 1.4 4.6 1967 23.3 0.5 1.2 1.6 1967 108.5 3.9 2.8 6.8 1968 22.8 0.9 1.1 2.1 1968 104.5 4.8 4.3 9,0 1969 21.9 1.4 1.1 2.5 1969 99.8 4.9 4.1 9.0 1970 20.4 2,0 1.0 3.0 1970 94.8 5.1 3.9 9.1 1971 18.5 2 5 0.9 3.4 1971 89.7 5.3 3.8 9.1 1972 16.0 3.1 0.8 3.9 1972 84.4 5.5 3.5 9.1 1973 12.9 3.7 0.6 4.3 1973 78.9 4.4 3.4 7.8 1974 9.2 4.3 0.5 4.8 1974 74.5 4.7 3.2 7.9 19,75 4.9 4.9 0.2 5.2 1975 69.8 4.9 3.0 7.9

1/ Includes all debt listed in Table 1 prepared May 21, 1962 except $37,500,000 long-term loan from Kteditanstalt fur Wiederaufbau, March 1962, for which ter.s are not available. 2/ Less than $50,000.

Note: Figures may not add owing to rounding.

Source: IERD - Economic Staff. Table 3

Population Growth of Metrooclitan Portugal

Change From Previous Year Mid-year Natural Increase Net Emigration Total Increase Year estimate L Thousands Total ProvincesY! Thousands ( (millions) (thousands)

1950 8.41 1,2 102 28 10 +76 +0.9

1956 8.84 1.1 95 39 14 +64 +0.7

1957 8.91 1.2 110 44 10 +59 +0.7

1958 8.93 1.3 121 46 13 +85 +0.9

1959 9.05 1.3 115 46 14 +81 +0.9

1960 9.12 1.3 119 40 10 +99 +1.1

Note: Povulation of

1950 Census - 7.86 million. June, 1961 - 3.56 million.

ij Principally Angola

Source: Instituto Nacional de Estatistica - Anuario Demoorafico (1960), and other data from the Instituto. Table 4

Gross Domestic Product by Major Sectors (billion escudos, current prices) Product Sector 1950 1955 195 19 7 19IS 1959 62' 'ealin 1960 (1950=100)

Agriculture 12.40 14.18 15.00 15.35 14.73 15.54 16.05 110

Mining 0.34 0.58 0.63 0.49 0,.39 0.41 0.42 11.0

Manufactures & construction 12.26 16.13 18.03 19.42 20.33 21.12 23.47 172

Power & water 0.47 0.92 1.02 1.04 1.,30 1.42 1.59 322

Commerce n.a. 3.67 3.89 4.21 4.,25 4.32 4.49 n.a.

TransDortation 1.87 2.60 2.72 2.91 3.03 3.18 3.30 1.90

Housing 1.00 1.47 1.60 1,70 1.81 2.02 2.20 140

Government (inc. defense) 1.98 2.45 2.51 2.60 2.72 3.21 3.35 155

Health & education 0.72 0.97 1.01 1.07 1,15 1.66 1.64 208

Other services 6 .14Z 4,17 4.52 4.78 4.99 5.34 5.77 n.a.

Gross Domestic Product (factor cost) 37.14 47.14 50.93 53.57 54.70 58.21. 62.27 149

Net foreign income 0.11 0.08 0.05 0.09 0.05 0.0t 0.08

Gross National Product (factor cost) 37.25 47.23 50.97 53.65 54.74 58.25 62.35 149

Indirect taxes less subsidies 2.92 3.74 3.93 4.14 4.32 4.65 5.05

1.11.P. - Market Prices 40.17 50.97 54.90 57.79 59.06 62.90 67.40

Volume of G.D.P. 1961i (1-950=100) 1.00 122 127 133 135 143 149 159 Growth of G.D.P.3-/ 4.6 4.2 4.4 4.4 1.4 587 4.8 6.8

/ Preliminary. 2 Includes commerce: 1951 commerce = 2.69 billion escudos. 21 Percentage increase per year at constant prices.

Source: Instituto Nacional de Estatistica - 0 Rendimento Nacional Portugues (1:961.), and other data from the Instituto. Table 5

Gross Domestic Expenditures (billion escudos, current prices)

1952 1955 1956 1957 1958 1959 1960 1961

Private consumption 35.24 40.06 43.52 45.68 46.25 48.70 52.13 55.46

Government consumption 4.50 5.95 5.97 6.43 6.63 7.66 8.64 10.35 inc: defense n.a. 2.03 2.08 1.97 2.06 2.37 2.73 4,20

Gross fixed capital formation 6.49 7.23 7.94 8.70 9.75 10.71 11.38 12.51

Increase in stocks 0.54 0.01 -0.06 1.16 -0.20 -0.48 -0.22 0.55

Exports of goods and services! 8.25 9.97 1.0.97 11.02 11-31 10.88 11-95 11.32

Total 55.02 63.22 68.34 72.97 73.75 77.47 83.87 90.69

Less: imports of goods and services 1050 1.2.26 13.44 15.18 14.68 14.57 16.47 _18.83

EXI"ENDITURE ON GROSS DOMESTIC PRODUCT 44.52 50.97 54.90 57.80 59.07 62.90 67.40 71.86

Percentaaes: Private consumption 79 79 79 79 78 77 77 77

Government consumption 1.0 13 11 11 11 12 13 14

Cross fixed capital formation 15 14 15 15 16 17 17 17

Increase in stocks 1 - - 2 - - -

Surplus of exports over imports of goods and services -5 -6 _ -7 - -6 -7 -9

GROSS DOM STIC EXPENDITURE 1:00 1.00 1100 100 100 100 100 1.00

I/ ixcluding remittances from abroad and receipts on service account from the Overseas Provinces.

Source: Instituto Nacional de Estatistica - 0 Rendimento Nacional Portugues (1961), and other data from the Instituto. Table 6

Gross Cauital Formation (billion escudos)

1952_ 1955 1956 15 1958 122 1960 1,96111/

Agriculture 0.89 0.92 0.91 1.01 1.23 1.06 0.91 ..

Mining 0.16 0.1.9 0.16 1.15 0.17 0.16 0.13 .. Manufactures & construction 1.49 1.36 1.69 1.82 2.18 2.71 3.57

Power & water 0.55 0.75 1.01 1.08 1.03 1.1.7 1.05

Transport 1.21 1.39 1.17 1.46 1.68 1.93 1.97

Housing 1.20 1.51; 1.72 1.73 1.90 2.10 2.05

Public administration 0.28 0.34 0.38 0.43 0.47 0.50 0.56

Health & education 0.26 0.26 0.31 0.32 0.39 ) 1.09 1.14 Other 0.45 0.51 0.59 0.70 0.70 )

Total 6.49 7.23 7.94 8.70 9.75 10.71 11.38 12.51

of which: Government / 0.87 0.98 1.09 1.21 1.40 1.35 1.41 1.47 Percenta2es: Agriculture 14 13 11 1.1 12 10 8 8

Manufactures, etc. 23 19 21 21. 22 25 31 32

Power & water 9 10 1:3 13 11 11 9 11

Transport 18 20 15 17 1:7 18 17 16

Housing 18 21 22 20 20 20 13 17

Other 18 17 18 1.8 18 16 17 16

Total 100 100 100 100 100 100 100 1100

of which: GovernmentV -1 14 14 14 14 13 12 12

1/ Exact details of composition not available for 1961. 2/ Excluding autonomous enterprises.

Lote: Depreciation allowance (bill.esc.): 2.5 2.8 2.9 3.0 3.2 3.3 3.7 4.0

Source: Instituto Nacional de Estatistica - 0 Rendimento Nacional Fortugues (1961), and other data from the Instituto. T. le 7

Estimated Distribution of 'ork Force

Sector of -muloyment 1950 1959

Thousands r Thousands e

Agricultule, forestry & fishing 1,453 43.4 1,507 47.3

Nining 25 0.8 29 0.9 hanufactures & construction 714-1/ 23.8 835 26.2

Power & water 10 0.3 13 0.4

Transportation & comunication 102 3.4 116 3.6

Corn.ierce 204 6.8 229 7.2

Public administration 115 3.8 123 3.8

Other service industries 382 12.7 337 10.6

Total 3,005 100.0 3,189 100.0

j/ Of which: manufactures = 570,000 or 19.

Source: Banco de Fo-*tento Nacional-i'elatorio, 1960. Table 8

Composition of Output & Eaploynent (percentages)

1950 15 Sector Output Dvmployment Outlut Employment

Agriculture 33 48 25 47

hanufactures 27 19 30 21

Construction 6 5 6 5

Power & transport 6 4 8 4

Other 28 2L 31 23

100 100 100 100

Employment (millions) 3.0 3.2

Source: 0 Rendim,ento Nacional Portugues, and Tables 4 and 7. Table 9: Area and Output of Principal Agricultural Products in Continental Portugal (Source: Instituto Nacional de Estatistica) S...... Area, 1000 hectares...... Output, 1000 tons......

Product 1934-38 1948-52 1953-57 1958-60 1934-38 1950 1955 1956 . 1957 1958 1959 1960 (av. .a.) Bread Grains Wheat 502 689 788 814 476 575 508 558 797 809 623 4o Rye 141 270 257 265 106 170 155 171 202 209 175 138 Maize 410 489 477 470 314 516 347 481 427 425 L79 L,22 Total 1,053 1,448 1,522 1,549 896 1,261 1,010 1,210 1,1426 1,E42 1,278 1,00

Other Food Crops Rice 19 27 37 36 65 121 183 160 162 149 163 146 Potatoes 32 88 87 87 555 1,131 1,105 1,102 1,196 1,087 860 935 Pulsv 202 04 390 380 50 77 70 63 65 63 74 65 Wine-(million liters) n.a. n.a. n.a. n.a. 788 873 1,134 1,096 958 858 892 1,146 Olive Oil (million liters) n.a. n.a. n.a. n.a. :51 44 75 102 110 67 100 92 Total 253 519 514 503

Feed Crops Barley 68 1U4 155 146 41 111 72 78 101 102 66 49 Oats 230 302 301 303 101 11 82 97 128 113 89 61 Broad Beans 54 57 53 58 36 42 40 37 47 41 46 29 Total 352 503 509 507

Vegetables and Fruits All Vegetables/ n.a. n.a. n.a. n.a. n.a. n.a. 853 873 874 879 891 896 Fruits n.a. n.a. n,a. n.a. 2812 481 624 519 638 528 576 619 Nuts n.a. n.a. n.a. n.a. 581/ 77 100 92 77 n.a. n.a. n.a.

Livestock Products Beef ad Veal 27 30 39 32 33 38 42 10 Pork (including lard) 73' 93 91 90 94 85 87 93 Mutton 11/ 16 17 17 17 18 18 19 Wool n.a. 10 10 10 10 10 10 10 ' /in terms of table wine -- hAl Livestock (thousands) ' vegetables and pulses for h.,man Cattle 77 832- 904 consumption -- 3/1938 -- 4/1934 Pigs 1,13Q- 111775/ 1,419 5/194 -- 6/1952 - 54. Sheep 3,22W 3,89V 3,593 Table 10

Selected European Agricultural Statistics

Farmland/ Agric. Active Males Active Male Output/ Gross No.Farms in Agric. as Farm Land in igric. Active Prod/ Yields: Average 193/57(b) Over 1 % of Total /Person 1955 (d) Male Unit Milk Hectare/ Active Males 1955 (b) (Hectares/ 1955(c) 1955(d) Wheat Barley Potatoes (1000 L. Extension Country (1951) (a) (Hectares) Male) (us $) (US $) (in 100 kg/hectare) /Cow/Yr) Agent,1953(c)

United Kingdom 6 0.38 12.5 2,310 184 31 29 194 3.0 240 /Luxem- bourg 11 0.20 4.8 2,260 467 33 32 244 3.8 510 16 0.21 3.9 1,815 468 38 35 257 3.9 190 iest Germany 16 0.ai 5.7 1,685 294 29 27 222 3.0 440 21 0.44 3.9 1,745 450 29 28 228 3.2 720 21 0.62 9.5 1,905 201 23 23 129 2.8 500 22 0.30 5.0 1,515 303 22 24 206 2.6 410 .ustria 24 0.59 5.7 1,140 201 22 22 183 2.2 730 27 0.70 8.3 2,000 246 39 36 188 3.5 260 France 28 0.77 9.1 1,510 165 22 23 150 2.1 1,600 Finland 35 0.66 7.4 1,310 178 15 15 148 2.6 .. 41 0.43 3.2 820 256 18 12 83 1.7 2,700 Ireland 46 1.61 10.1 1,110 110 29 30 210 2.2 Jreece 47 1.04 4.3 570 133 13 12 112 1.0 900 Spain 52 0.98 5.7 435 76 10 12 112 1.8 6,500

fOITUGJL 52 0.59 3.5 385 109 8 6 125 1.5 6,500

Sources: (a) E.C.E/F.-.O., European Agriculture. (b) F.i.0. (c) 0.E.E.C. (d) Based on F.A.0. (1 hectare arable = 2 hectares permanent pasture = 4 hectares rough grazing). Table 11

Output,of Selected Industrial Products (thousand tons, unless otherwise specified)

Product 192 12} 1960 1961 -anthracite 419 527 434 454 -lignite 94 159 1.56 158 Iron ore 21 (1951) 246 288 242 Pyrites 613 630 655 653 Sulphur 14 16 11 9 Wolfram 2.4 2.1 2.5 2.5 Copper I.1 12,5 8.9 7.8 Tin 11.0 1'4 0.9 0.9

Cement 573 1,031 1,198 1,245 Bricks 333 652 n.a. n.a.

Sulphuric acid 226 408 424 385 Sulphate of ammonia 43 (1952) 190 180 1811 Superphosphate 314 416 446 456

Plywood .(coo m 3) 2.6 10.4 12.7 12.0 Cork - prepared 152 163 114 112 - manufactured 61 63 74 n.a. Paper pulp 6 69 84 91 Newsprint 2.4 14.3 16.1 19.3 Other paper & board 39 70 87 95

Preserved fish 37 64 73 81 Beer (thousand liters) 13 33 38 41 Cigarettes 3 5 6.3 5.6 Refined sugar 65 144 152 154

Cotton yarn 36 39 51 56 !oolen yarn 5.4 10.2 11.6 11.4 Synthetic yarn 0.3 3.7 3.0 3.1 Paints & varnishes 2.8 8.1 9.6 8.9 Soap 53 65 68 66

Tires & tubes 260 920 1,140 1,450

Electric cables 1.2 (11952) 8.2 7.7 9.6 Electric lamps (million) 3.6 7.7 8.7 9.0

Petroleum products .. n.a. 1.2 1.3 Electricity (billion K.H) 0.9 3.0 3.25 3.61 - of which: hydro 0.4 2.9 3.1 3.4

Sourcet Banco de Portugal - Relatorio, 1952 and 1960. Instituto Nacional de Estatistica Boletim Mensal 1961 and 1962 issues. Table 12

Index of Industrial Production (1953 = 100)

Percentage of total 1.954 1955 1956 1957 1958 1959 1960 10611/ output,1953

Food and drink 111 107 123 125 135 143 156 141. 18

Textiles, clothing and footwear 108 120 121 127 133 132 145 162 18

Wood, cork, furniture 98 114 118 124 127 136 160 210 9

Chemical products and oil 110 118 126 130 142 150 170 177 18

Non-metallic mineral products 99 110 128 125 135 143 154 174 6

Metallurgy, engineering, electrical equipment 116 124 143 163 182 189 200 200 16

Other (inc. pulp and paper, rubber) 130 147 162 176 175 194 227 220 7

Total Mfanufactures 111 119 130 138 147 155 171 179 92

Mining and quarrying 87 79 81 91 78 78 84 75 3

Electricity 120 137 158 157 193 217 236 262 5

Total Industry 111 119 130 137 147 155 172 180 100

1/ January - October average.

Source: Associacao Industrial Portuguesa. Table 13a

Railroad and Road Traffic, 1956-1961 (millions)

1956 1159 1960 19611

Railwavs Tons 3.97 3.95 3.74 3.73 3.70 3.67

Ton/kms 761 772 738 751 762 736

Passengers 55 60 65 71 77 n.a.

Passenger/kms 1,496 1,604 1,677 1,765 1,870 n.a.

Road Transport Ton/kms 164 175 190 192 199 n.a. Passenger/kms 784 850 946 954 975 n.a.

Table 13b

Railroad Revenues and Expenditures 1956-1960 (million escudos)

Operating loss before depreci- Operating Revenues Working ation and finan- Year PassenFer Freight Other Total expenses cial charges

1956 344 365 48 757 846 89

1957 364 362 50 776 888 112

1958 373 346 41 760 878 11.8

1959 389 346 46 781 852 71 1960 411 351 48 810 884 74

Source: iinistry of Communications and the Portuguese Railways Company Table 14

Money Suo.ly & Commercial Banking Operations (billion escudos)

Money Money Supply Commercial Bank Operations supply At Notes in Demand ; Total Advances iquidi as % of end of: circulation deposits- Total deposits Total Bil1s rati GNP

1955 10.2 14.2 24.4 16.2 12.2 9.1[ 31.7 48 1956 10.6 15.2 25.3 17.7 13.4 10.3 33.0 47

1957 11.3 15.9 27.2 19.0 15.0 11.7 28.4 7

1958 11.8 17.5 29.3 21.3 17.0 13.5 27.6 49

19)9 12.5 19.0 31.5 23.8 19.0 15.0 26.1 50

1960 13.2 20.8 314.0 26.8 20.6 16.2 24.1 53

19& 1.5.2 19.2 34.4 25.6 20.5 15.9 26.6 n.a.

1/ Of commercial b-nks. 2/ 30 to 180-day commercial bills issued against full security. / Cash, deposits with Central Bank, Development Promissory Notes as a percentage of Demand Deposits. Table 15

Price & Wage Indices (1948=100)

Wage Rates Prices Year Factory worker Male farm worker Wholesale Retail (Lisbon) (Lisbon)

1953 .. .. 115 102.2

1954 .. .. 110 101.1

1955 113.1 101 110 101.1 1956 117.6 103 114 104.3

1957 123.5 104 116 105.8

1958 125.0 109 116 107.5

1959 130.1 115 115 108.6

1960 132.4 125 118 110.8

1961 138.0 130 118 111.5 (Nov.)

3ource: 3anoo de Portu,gal - .,elatorio, 19j0 aad 1961. Table 16

Interest Rates (rates of actual yield) 195 1956 1957 1958 1959 1960 1%i6

Internal Public Debt 3.18 3.05 3.o 3.03 3.03 n.a. n.a,

Bonds 3.56 3.48 3.72 3.82 3.84 n.a. n.a.

Railroad 4.42 4.33 o404.32 4.23 n.a. n.a.

Other 3.51 3.-8 3.69 3.80 3.83 n.a. n.a.

Mortgages (average rates)

Credit institutions 4.34 4.35 h.29 4.34 4.38 4.38 4.26 Private 6.90 6.75 6.77 6.59 6.79 6.83. 6.91

Source: Banco de Portugal - Relatorio, 1960 and 1961. Table 17

Government Revenues & Exrenditures (billion escudos)

11961 1962 1956 1957 11958 1959 1.960 Badget Estimate Budget

Ordinary Revenues 7.30 7.93 8.38 8.84 9.59 8.24 9.8 9.48

Special Revenues 0.06 0.09 0.09 0.06 0.53 0.61 0.6 0.90

Total Revenues 7.36 8.02 8.47 8.90 10.112 8.85 10.4 10.38

Current Expenditures (inc. defense) 5.46 5.65 5.90 6.81 7.4& 8.1,3 n.a. 9.05

Ordinary Surplus 1.90 2.37 2.57 2.09 2.68 0.72 n.a. 11.33

Capital Expenditures 2.14 2.58 2.79 2.94 3.90 3.45 n.a. 3.41

Total Expenditures 7.60 8.23 8.69 9.75 11.31 11.78 12.8 12.4.6

Cash Deficit 0.24 0.21 0.22 0.85 1.22 2.93 2.4 2.03

Financed by: loans 0.27 0.24 0.27 0.75 1.17?/ 2.66 (2.4) 1.76 Treasury reserves ...... 0.13 0.15 0.27 .. 0.32

Final Net Balance +0.03 +0.03 +0.05 +0.03 +0.10 .. .o iI By Ministry of Finance, July 1.961; excludes any estimate of revenues from taxes imposed July 1:,19611. 2/ Excluding 500 million escudos raised for use in the Overseas Provinces.

Source: Ministry of Finance - Budget documents for 1953-1962 (Proposta de Lei: Contas Gerals) Table 18

ComDosition of Revenues & Expenditures (billion escudos)

Actual Revenues Budget 15 6 1957 1958 1959 1960 1960 1961 162

Direct taxes 2.28 2.41 2.73 2.37 3.06 2.56 2.67 2.4

Indirect taxes 2.78 2.96 3.07 3.27 3.67 2.55 2.68 .1

Special industry taxes 0.41 0.43 0.47 0.52 0.55 0.45 0.48 0.71

Miscellaneous taxes 0.38 0.41 0.42 0.38 0.41 0.36 0.37 0.42

Profits on state enterprises 0.43 0.49 0.49 0.58 0.51 0.56 0.58 0.75

Share in profits of private enterprises 0.12 0.12 0.11 0.12 0.12 0.11 0.12 0.1i

Reapayments & sundry 0.96 1.20 1.18 1.16 1.79 1.58 1.95 2.2;

Total revenues 7.36 8.02 8.47 8.90 10.12 8.17 8.85 10.

Actual Expenditures Budget Public debt 0.69 0.72 0.76 0.78 0.85 0.86 0.93 0.98

Defense 2.36 2.39 2.49 2.89 3.26 2.98 3.92 4-5C

Current administration 2.41 2.54 2.65 3.14 3.33 3.32 3.4:3 3.5'

Investment 2.1L 2.58 2.79 2.94 3.90 3.32 4:

Total expenditures 7.60 8.23 8.69 9.75 11.34 10.49 11.78 12.46

% o \GTP: As 'Z of GNP

Debt 1 1 1 1 1 1

Defense 4 4 4 5 5 5 (6)

Total expenditures 14 14 15 16 18 17 (20 )

Total revenues 13 14 14 15 16 13 (16 )

j/ ( ) means relation between revised 1961 budget estimate (Table 17) and 1960 GNP.

8ource: Ministry of Finance - Budget Documents; and Table 17. Table 19

First &: Second Develon:ent Plans

!i2centae Percentaoe in Plan Source in Plan Sector of Investment 1953/58:1959/6 of funds 1954/5S:1959/6A (actual) (plan) (actual) (plan)

Agriculture 11 17 Public

Manufactures & mining 16 29 Current revenue 12 15

Electricity 44 21 Internal loans 10 10

Transport & co.municationsi/ 26 30 Welfare institutions 19 6

Technical education _ 2 Special funds 16 3

100 100 Re-investm!ent 7 _1

Total outlays (bill. esc.) 10.3I 22.02/ 64 41

Private

Credit institutions a private savings 26 26

Re-investrwent 6 7 32 33 Lxternal 26

Total 100 100

.*/ Lxcludes highways. 2/ Lxcludes 1.7 billion escudos spent in Overseas Provinces. / Excludes 9 billion escudos planned to be spent in Overseas Provinces: of this, 4 billion would be provided byFrovinces themselves and 5 billion by Portugal, half as a grant and half as a loan.

Source: Presidencia do Conselho - helatorio Final da Nxecucao do I Plan do Fomento (1959),Plano do Fonento, 1959-64 (1959), other data from the hinistry of the Presidency. Table 20

Composition of Investment in First & Second Plans (billion escudosT

Plan I Plan II Plan II Sector 1953-58 1959-64 1959-60 actual)

Agriculture

Irrigation 0.66 0.89 0.11 Forestry 0.39 0.74 0.23 Land settlement 0.04 Other . 2.18/ 0.0

1.09 3.81 0.84

Industry

Steel 0.43 2.92 ) Oil refining 0.74 0.22 ) Fertilizers 0.38 1.01 ) 2.20 Pulp & paper 0.06 0.3 ) Other ., 1 7 6 j 0,21

1.61 6.34 2.41

Electricity 4.55 4.60 1.84

Transport

Ports 0.61 0.78 0.16 Civil aviation 0.38 0.33 0.22 Railroads 0.60 1.50 0.42 Shipping 0.40 1.74 0.82 Communications 0.76 0.77 0.22 Tagus Bridge .. 1.50 .

2.75 6.62 1.84

Technical Education 0.33 0.63 0.21

Total 12.09 22.00 7.14

1/ Rural roads and water supply: farm reorganization: storage. 7/ Mining, fishing and unspecified "heavy manufactures".

Source: P-esidencia do Conselho - Relato-ric Final da Execuce- or P.an d' y ke'lt(1959), Plano do Fomento, .?5?-t,4 (19"), cther data from the 'inijtry of tte P-esidency, Table 21

Financing of Development Prcgr 1959-1960

Source Bill. Lsc.

Government budget (inc. loans) 1.56 24

Special funds 0.28 4

Welfare institutions 0.72 11

Development Bank 0.62 9

Savings institutions 0.35 5

Re-investment 0.22 3

Total Public 3.75 57

Insurance Companies 0.01

Commercial banks and private savings 1.58 24

Re-investment 1.23 18

Total Private 2.82 42

External 0.08 1

Total 6.65 100

Source: Data from the hinistry of the Presidency. Table 22

Comgosition of ImDorts & 7:xports (billion escudos)

A. Exports-

1950 !HL5 1956 1957 19,58 1129 1960

Primary materials 1.59 2.66 2.76 2.41 2.12 2.26 2.62

Fibers & textiles 1.01 1.08 1.17 1.32 1.31 1.29 1.67

Foodstuffs 1.62 2.47 2.52 2.39 2.65 2.43 2.34 iachinery 0.17 0.24 0.23 0.30 0.31 0.38 0.41

Other manufactures 0.95 1.72 1.89 1.86 1.92 1.95 2.09

Total 5.33 3.17 S.62 8.29 8.30 3.35 9.41

B. mnorts2/

1250 1955 1956 1957 1960

Primary materials 3.18 5.73 6.39 8.00 6.92 6.87 7.76

Fibers & textiles 0.20 0.35 0.37 0.39 0.39 0.44 0.44

Foodstuffs 1.97 1.16 1.76 1.38 1.27 1.29 1.56 liachinery & vehicles 1.53 3.09 2.91 3.27 3.88 3.67 4.23

of which, vehicles (0.67) (1.44) (1.11) (1.14) (1.52) (1.27) (1.51)

Other manufacturos 0.69 1.12 1.29 1.38 1.34 1.42 1.36 total 7.88 11.45 12.72 14.42 13.81 13.68 15.68

1/ To foreign countries and to Overseas Provinces. 2/ From foreign countries and from Overseas Provinces.

Source: Banco de Portugal - Relatorio, 1951, 1957 ard 1960. Table 23

Principal Exports & Imports (billion escudos)

A. Exportsl/ 22o 12a 1.)5 1957 19J8 123 196C0 13961,

Textiles - all 1.01 1.08 1.17 1.32 1.31 1.29 1.67 1.63 - cotton (0.76) (0.76) (0.81) (0.94) (0.91) (0.86) (1.39) (1.30)

Cork & products 0.89 1.74 11.60 1.37 1.31 1.33 1.47 1.38

Canned fish - all 0.52 0.93 1.07 1.00 1.04 1.14 1.06 1.26 -sardines (0.33) (0.72) (0.78) (0.68) (0.73) (0.83) (0.83) (11.00)

'Hine -all 0.56 0.65 0.71 0.71. 0.94 0.74 0.69 0.67 - port (0.33) (0.31) (0,34) (0.35) (0.32) (0.35) (0.32) (0.37)

Timber & products 0.21 0.54 0.60 0.57 0.58 0.53 0.55 0.54

Resin 0.33 0.24 0.30 0.35 0.26 0.36 0.50 0.29

Minerals - all 0.26 0.54 0.56 0.39 0.29 0.30 0.31 0.22 -pyrites (0.16) (0.25) (0.27) (0.24) (0.21) (0.21.) (0.20) (0.13)

Pulp & paper - 0.09 0.10 0.11 0.11 0.10 0.20 0.1.9 H, lmartsv/

Cotton 0.46 0.88 0.72 0.89 0.87 0.88 1.04 1.25

Petroleum 0.52 0.83 0.93 1.34 1.;,00 1.19 1.22 1.22

Iron & steel ) 0.74 0.94 1.1.6 0.94 0.92 n,a. n.a. 0.40 Tinplate ) 0.19 0.14 0.24 0.15 0.19 0.22 0.21

Fertilizers 0.30 0.33 0.34 0.43 0.40 0.36 n.a. n.a.

',,heat 0.67 0.17 0.38 0.18 0.07 0.07 0.23 0.53

Cod 0.21 0.17 0.29 0.22 0.22 0.16 0.16 0.23

Sugar 0.31 0.34 0.39 0.44 0.43 0.44 0.45 0.48

Cfee 0.10 0.22 0.14 0.16 0.21 0.18 0.15 0.1,6

Trucks 0.16 0.27 0.32 0.311 0.31 0.30 0.36 0.41

Automobiles 0.15 0.38 0.38 0.AO 0.47 0.56 0.49 0.56 1/ To foreign countries & to Overseas Provinces. 2,' From foreign countries & from Overseas Provinces.

ource: Banco de Portugal - Relatorio, 1.952 & 1961 and other data from the Banco. Table 24

Balance ofPayments (billion escudos)

A. Balance of Payments of Fortural ketrouolitanwith Forei,n Countries 19505o 1) 1957 5j3 1252 1960 1 Exports (f.o.b.) 3 . 99 6.22 6.64 6.27 6.18 6.10 7.13 . Imports (f.o.b.) -5.89 -8.95 -10.18 -11.35 -10.57 -10.67 -12.10 1

Balance of Trade -1.90 -2.73 -3.54 -5.08 -4.39 -4.57 - 4.97 -7.

Transport (net) -0.19 -0.21 -0.25 -0.54 -0.4:.. -0.36 -0.47

Foreign travel (net) 0.14 0.17 0.29 0.40 0.35 0.36 0.31

Investment incoTAe (net)i/ 0.11 0.08 0.05 0.09 0.05 0.04 0.08

Private transfers (net) 0.70 0.53 0.'8 1.40 1.42 1.64 1.57

Other services (net) 0.02 0.03 0,38 0.49 0.82 0.38 0.39

Net Invisibles 0.73 0.65 1.35 1.84 2.20 2.04 1.37

Current account balance -1.12 -2.08 -2.19 -3.24 -2.19 -2.53 -3.10

Public capital (net) 0.672/ 0.40 0.55 0.35 0.35 0.72 -0.04

Private capital (net) -short ten 0.12 0.52 0.40 0.56 -0.05 0.13 0.06 -long term/ 0.06 0.10 .02 0.05 0.06 0.04 0.13

Errors & omissions 0.53 0.11 0.17 0.22 0.05 -0.02 0.13

Capital account balance 1.38 1.13 1.14 1.18 0.41 0.37 0.23

Surplus or deficit in balance of pVrments 0.26 -0.95 -1.05 -2,06 -1.78 -1.66 -2.32

B. Balance of Payments of Overseas Provinces with Foreian Counitries Exports (f.o.b.) 2.54 3.64 4.06 4.29 4.84 4.85 4.83

I,ports (f.o.b.) -2.22 -2.34 -2.57 -2.87 -2.91 -2.79 -2.90

Balance of trade 0.32 1.30 1.49 1.42 1.93 2.06 1.93

Services, capital & errors 0.55 0.66 0.80 0.82 1.03 0.75 0.72

Surplus or deficit in balance of payments 0.37 1.96 2.29 2.24 2.96 2.81 2.65

C. Change in L'scudo Area Reserves Balance of A. & B, 1.13 1.01 1.24 0.18 1.10 1.15 -0.17 i/ Excludes reinvested profits. hJharshall Plan funds. Table 2L (continued)

Balance of Trade of 7etronolitan Fortucal with Overseas Provinces (billion escudos)

"Ietropolitan Portu2al 1950 1955 1956 5 195 1959 1960 c1

Exports to provinces 1.35 1.97 2.13 2.17 2.29 2.41 2.41 2.2

Imports from provinces -1.28 -1.57 -1.52 -1.69 -2.04 -1.94 -2.25 -2.3E

Balance of Trade 0.07 0.40 0.61 0.L8 0.25 0.L7 0.16 -0.1

Source: Banco de Portugal - Relatorio, 1953 & 1960,and later data from the Banco. Table 25

Official Gold & Foreign Exchange Reserves of the Escudo Area (3 millions)

End of- Total Of which: Z0Ld

1950 497 1,92

1951 592 264

1952 603 286

1953 665 361i

1954 714 429

1955 730 428

1956 754 448

11957 750 461i

1958 776 493 1.959 803 548 1960 794 552

1961: October 664 438

December 692 443

1962: March 676 446

Source: Banco de Portugal - Relatorio, 1960 and International Financial Statistics, May 1.962. PORTUGAL ORGANIZATION OF GOVERNMENT

PRESIDENCY of the COUNCIL OF MINISTERS

D,pept t for Coodintion of PlOnning Ministerial PlanniRg Committec Depa rtment for Information ond Toris Junto for Nucle- r Energy Technical Committee for Eoternal Economc Cooperation Central Statistical Office

Finance Interior Justice Army Marine Foreign Affoir Economy Public Works Educatfion Overses Communications Corporains and eth~tt. to • Social Welfore Asstonce

Public Credit Junta Departmnt of Dep- tr-et of Department f Poblic Works for the Establishment and ln- Concil for Lond Council for Soci. Public Treasury and Government Mrchant NavY Economic and District of Hort tera 1 Admnistration Transport Welfare Property Department Dep.rtment of Consular Mattert Public Works Council Ecoomic Dep, rtment Speci.l Fund for Land Departrent of Laboorand Public Account& Department Fishing Departmnt of Hydraulic Services Publi, Works and Com- Transport Corportions lajnd Revnue Depa rtment of Junt. for Ma-n Highways municatios Dep- rtmnt Deprtment of Civil Departrent of Social Wel- CuotomoDepa rtmenrt Hydrography Depo rtment of Urban Developmn t Overs r Administrtion Aviätion fr r d Housing Dep.rtment of Finance and N-ng.tion Dep. rtmnt of Poblic Boildiogs ond Overseao Customs Port of Li.bon Dep.rtment of Credit and Monumet. Devrlopment Couocil Ports of Douro and .on.uracef Leo"es Geogr-phic and Surovey Institute Centrl Junta for ______Ports Junta for Smll Port

Secretary of Stat Secretary of Stft Seretary of State for Agricultre for Commerce for Industry

Secretary of State'o Office Socretary of State's Offic Scretary of State' Office Cooncil for Agricultore Econmic Coordination Indostri.l Council Departmnt of Agricolturf Comission Depa rtmnt for tho Control of Servire- EUort Devlopment Fund Agriulturl ad Industrial Dop.rtmnt of Livesotck DepartentofComnerc Product

Dep-rtment of Foretry Mines .nd GeologIcal Services Srvi Electrica1 Services Junta for Lond Settlement Fuel Dep.rtment Corn-ion for Expl-oives National Institote for Industriol ECONOMIC COORDINATION ORGANIZATIONS Rae rch

Ministry of Econory RegulatinE Committoo for R.w Cotton Ministry of Overseao Jonta for Cotton Eop.rto Rico Coffe " Dried Crdfish SCtrealsof Anore" " Cereal" ...... Vgetable Oils Checical: And Ministry of M rine Phr-actical Products National Junta for M,rch,ot Navy Natiooal Junto for Olive Oil CORPORATIVE ORGANIZATIONS

" "Fruit Associtions of Producers aLivestork Product" Trader Roi Prodoct. Mnufcturer- " Wine Nationl Syndicrtes " " "Wine (Madtir-) PeopWe' Housing National Institute of Bred Fishermn' H.ousiog Portogotse Institute for Fisb C-nning Federation Institute for Port Witt Unoons

OCTOBER 1961 IBRD-906 MAP I

Viana doC Casleto

GREALEA

Leixaes OPORTO curd

CoP h1

Figueiro da Foz

CAST BRANCO

rmc bron es .

aldus da Roinh SANTARý orta egre

'/c0

Estremnoz In PORTUGAL LISBON GENERAL MAP VORA

,f0 25 50

MILES" 0 25 50,

KILOMETERS

EJA Sjnes

øøý Broad gauge railways Meter gauge railways Mvain roads

over 400 meters

Sdyves Ovr Lagos

SEPTEMBER 1964 18BRD-892 MAP 2

MONTALEGRE O27n) A-109 ý- PORTUGAL AAT-9 9 mmSVT-14 l PR ECIPIT A TION 120 - 100 2° Columns:Monthly ranfal1 in milli- - - 80 2-

m et rs -- - -..--.. 0 12 AR: Annual rairfall in millimeters - Curve: Arerge mronthly ntmperatur, - TRASOS MONTE$ o- Cen Ii ,rad - -M l N:H 0,-''''° A AT: Av-r,-e an-lu,! temperatr. E Cn;rd, - PINHAO030mn) SVT:nso-r'To6' riot of tempe ALTO DOURO - AR-664 9mm ture Genorade- -... _._-)sT s Fi tures in prentheses: Elvaions 2 abov sea . -ee ote-- n 10 20 r--DOURO -

--- LITORAL 4 4 180 0 160

-0 " 0

-14AAT-0 4 4

Å2R - -S

.m SV 6 ., .. - -0. V -1

20EM0R(14ERAL

80 - - _ -2

_ SV-l 140 2 0B 201 ------

60 oo]iIh/ 2 JI' ___BEIRA BAXA 0 24 - - STEO- BRANCO4m)

A80 BO L - ,LI if 1420 -0ST 65 2°

R0-TTATE: O CAMPO -sTEMAIOR(288mr) LISBON (95a) s AR-G62m -28° SVT-ll 24' .0 24 20.. 020 6 ALTO ALEN"T'EJ

20 rJJ.) 4 40

60 00 EVORA(32 1mr) AR-633mm

SVT-14 3 ... ~m ..-. 24ý 100-- 2

60 20-12 6:::Y EARLY0 PRECIPITATION~ ~ '-o 1' - 4002 IN MILLIMETERS 2000mm o,cj ver o. IOondover

Lsthn500 -Mm(4 20") 50-00 nm c ZO"- 39") 60

1000-150C, mm, (c9"- 59") 00-2000 mm ( 59"- 79") BA XO 2000-Z500 rrn,-(c.7 ) - . ' - FÅ RO(014m 50 -800 m (c93"ArtOrBn'¯196- 110') AR-363 2mm AAT-17 3 Z800mm k,nd oe (c110"and e r)SVT-12 5 -2B°

SOURC ES: 40 20 4 Manuel de T-ran and Orlando Ribeira a Gecografia d, España, v Portu,r al VoL. V,...... Montaner y S-mó, S.A., Bar-lona, 1955

**-Dan Stamslawki, The Indnvid-lity n1 f Portu,?al, Umversity of Tesas Pr--', Au,Slin, 1959

SEPTEMBER 1961 [8RO-e56R MAP3

化SEPTEMSER1961 IBRD一897 MAP A

I MO 50

v-. d. B'.Q-Q. C-telo S111.04DF 0 CANICADA 'Lto'msAcxio

B,.g...... la.

I E, 30 ý01 P,,, I F v'11. Re...... OP0,1.

G-d.

. 5 SE, Co-b Kq,ewo ------d. F-

Le.,i. Castelo BýronCo

TA

S.. o,tolege

-0 .L

,c 10 5, LISSON

Set .1 PORTUGAL ELECTRIC POWER 25 50 MILES d. 2.5 50 KILOMETERS

Tra,smission lines 150 .. d 60. 40. 22OKV 130KV 30KV Existi'ýg U,d- ~~1-cli~ ------P-j- týd ......

SEPTEMBER 196ý 899