Market Overview
Mainland Portugal, along with its semi-autonomous island regions of the Azores and Madeira, offer American exporters a market of approximately 10.6 million people in a country roughly the size of the State of Indiana. As one of the charter members of the European Union (EU), it is fully integrated with the EU, uses the Euro currency, and follows directives from the EU Commission in Brussels. As with all EU countries, Portugal’s borders and ports are completely open to the free flow of trade with other EU member countries. It is a politically stable environment with a democratically elected parliamentary government and is relatively welcoming of foreign business and investment.
U.S. Census data indicates Portuguese consumers bought approximately $1.1 billion dollars worth of U.S. goods and services in 2005. However, the total amount of U.S. goods being brought into Portugal is undoubtedly larger, due to the fact that these statistics do not account for U.S. products landed in any other EU country then sold into Portugal. It is common that goods are shipped to one EU location and then distributed by ground transport to member state markets. In 2005, the U.S. states exporting the most to Portugal were Kansas, Louisiana, Arkansas, Georgia, California, and Indiana. The top U.S. exports to Portugal in 2005 were aircraft & parts, electrical machinery, miscellaneous grains, seeds, and fruits, optical/medical equipment, and wood products. The United States is working closely with Portugal to find ways to strengthen and deepen two-way trade and investment levels. The United States welcomes Portugal's contributions to the world economy and hopes to raise the U.S.-Portuguese trade and economic relationship to the strong levels that have been hallmarks of the historical, close political, geo-strategic, and security ties between the two countries.
Under the leadership of Ambassador Thomas F. Stephenson, the United States is helping to strengthen bilateral trade and economic relations. Ambassador Stephenson has hosted numerous initiatives on both sides of the Atlantic to promote a greater awareness of the untapped economic potential in the U.S.-Portuguese commercial relationship. The Portuguese Government under Prime Minister Jose Socrates is playing a critical role in strengthening Portugal as an investment destination for U.S. capital. It also is raising global awareness of sectors in which Portuguese firms, products, and entrepreneurs offer comparative advantages. For example, the Portuguese Government is seeking to increase exports of textiles and footwear to the United States, and is encouraging greater bilateral investment in other ways.
U.S. firms are playing increasingly significant roles in Portugal’s economic expansion, particularly in the automotive, pharmaceutical, computer, and retailing sectors. Portugal’s assumption of the EU Presidency in the second half of 2007 brought additional exposure to the opportunities U.S. firms have in Portugal, as well as opportunities Portuguese entrepreneurs and companies have in the U.S. market.
Market Challenges
Elected in 2005 under a strong reform mandate, Prime Minister Jose Socrates is undertaking ambitious measures to lower Portugal’s deficit and strengthen other facets of the Portuguese economy. The budget tightening has targeted the large public sector. The economy is estimated to have grown by just 0.3% in 2005. Estimated growth in 2006 was 0.7% and for 2007, it is expected to increase by 1.5%.
American exporters face competition in Portugal from savvy European competitors. European companies are already familiar with aspects of the business culture, financing, regulations, standards, etc. In addition, they do not face import tariffs that U.S. companies have to pay in getting their products into Portugal. Some U.S. companies have reported that they are now encountering Chinese competitors in Portugal.
Market Opportunities
The current Dollar/Euro exchange rate continues to represent an advantage for U.S. exporters to Portugal and all European countries. A commonly held belief in Portugal is that U.S. products are high quality but uncompetitive on price. All U.S. firms are advised to press their price advantage to break into the market and/or to increase market share. The U.S. Commercial Service in Portugal is seeing renewed interest by Portuguese industry looking for material and component suppliers from the U.S.
The market for U.S. architectural, construction and engineering company services is set to be an interesting one in Portugal in the near future. Public works construction is expected to grow at a rate of 5 to 7% in the next five years. Beginning now, and continuing to 2012, there are four major projects, which have the full attention of the Government and are considered priorities to move ahead. They are the new Lisbon Airport, high-speed rail lines, renewable energy and new port infrastructure.
As part of the country’s economic plan, Portugal will invest 10 billion Euros in infrastructure in the next 5 years, therefore, making use of the European Union’s structural and cohesion funds that are still available to Portugal. There may be great short and long-term opportunities for U.S. firms in these four major project areas. The Portuguese market is larger than it may initially appear. There may only be 10.6 million people in Portugal, but there are well over 200 million people speaking Portuguese worldwide. In fact, it is the 5th most widely spoken language in the world. Former Portuguese colonies including, Macau, Mozambique, Angola and, of course Brazil, have close business ties with Portugal. U.S. companies can readily find avenues to these other markets through Portugal.
Portugal is an excellent entry point or first test-market for a U.S. firm looking to get into the EU. English is widely spoken and the populace is generally very friendly towards Americans. Both physical and IT Infrastructure are well developed and Portugal is still one of the lower commercial cost environments in Europe.
Market Entry Strategy
First time exporters are urged to get in contact with the nearest of over 100 stateside U.S. Export Assistance Centers (USEAC). These USEACs are part of the worldwide network of U.S. Department of Commerce offices to support U.S. exporting. The U.S. Commercial Service in Portugal recommends that U.S. firms get acquainted with the Portuguese market through the standard market research reports we have published and which are all available through the USEACs and the Internet. Companies that have already penetrated one EU country will have met the requirements for Portugal as well. The quickest and best way to enter the Portuguese market is to work with a local partner. Both small and large U.S. exporters can benefit from finding the right person or group in Portugal who can provide advice and contacts. Commercial Service offices, located in the U.S. Embassy in Lisbon, have a variety of services to help U.S. firms get the information they need about the market and find an agent, distributor or representative for their product or service.
