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COUNTRY BRIEFS


OVERVIEW

Australia-Portugal relations, earlier overshadowed by disagreements on East Timor policy, improved after 1999 when the two countries began working together to assist East Timor's transition to independence. Close cooperation remains important following East Timor's independence: the two countries have a strong shared interest in East Timor’s long-term stability and prosperity, and both have major continuing aid programs there.

Political overview

The Portuguese constitution invests legislative power in a 230-seat unicameral Assembly of the Republic, which is elected by the d'Hondt system of proportional voting for a maximum term of four years.

The President of the Republic is directly elected for a maximum of two consecutive terms of five years. The President has no executive power, but has a role in foreign policy (on former colonies such as East Timor) and plays an important role as a political arbiter, while maintaining political neutrality. The President is also Commander-in-Chief of Portugal's armed forces. On 22 January 2006 former Prime Minister, Anibal Cavaco Silva, was elected as President in the first round of voting, obtaining 50.6 per cent of the vote. He was inaugurated as President on 9 March 2006. On 23 January 2011 President Silva was elected for a second term.

In 2009 the Socialist Party was returned to power, however, having failed to secure passage of his austerity budget in March 2011, Prime Minister Socrates resigned. At the subsequent elections in June 2011, the centre-right Social Democrats, led by Pedro Passos Coelho, won enough seats to form a coalition government with the rightist Popular Party. Socrates accepted responsibility for the government's defeat and relinquished his control of the party while retiring from Parliament. Immediately after the election, incoming Prime Minister Coelho stated that Portugal would honour the terms of an EU-IMF bailout package secured by Socrates in May (see below).

Community cultural and educational links

The Portuguese community in Australia is estimated at around 40,000 people, 15,000 of whom identified as being Portugal-born. Portuguese migrants from the island of Madeira settled in Fremantle in Western Australia in the 1950s and established a fishing community. Western Australia now boasts a Portuguese community of over 6,000 people. Portuguese migration to Australia, however, has mostly occurred since the late 1960s. The majority of Portuguese migrants have settled in Sydney, Wollongong, Newcastle, Melbourne, Perth and Fremantle.

The presence of a Portuguese community in Australia has produced a steady flow of family visits and cultural exchanges in recent decades. With the improvement in diplomatic relations, there has been small but steady growth in education links between Australia and Portugal, especially at tertiary level. Figures indicate that there were 947 student visas issued to Portuguese in 2010.

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TRADE AND INVESTMENT

The global economic crisis and the associated downturn in the Portuguese economy has had a dramatic effect on Australia’s trade and investment with Portugal. Two-way trade between Australia and Portugal was A$152 million in 2010. The balance of trade remains in Portugal’s favour, with exports to Australia amounting to A$132 million – principally attributed to exports of passenger motor vehicles (A$28 million), and cork manufactures (A$19 million). Australia rates as Portugal’s 44th principal export destination.

Australian companies have invested in the Portuguese wine industry, real estate, manufacturing, toll ways, highway construction and renewable energy. Portugal is strongly committed to developing its renewable energy sector which presents opportunities for Australian companies with the possibility of future joint ventures. Portuguese companies have invested in plants in Australia to manufacture wine closures from Portuguese cork, as well as in the timber, veterinary, wine, pharmaceutical and biotechnology industries.

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BILATERAL AGREEMENTS

Australia and Portugal signed a bilateral social security agreement in Lisbon on 3 September 2001, which entered into force in 2002, to give improved social security protection to people who have lived and/or worked in both Australia and Portugal. The social security agreement also exempts Australian employers from the need to provide Portuguese social security support for Australian employees sent temporarily to work in Portugal, provided the employee remains covered in Australia by compulsory superannuation arrangements. Further information is available on the Australian Taxation Office website (http://www.ato.gov.au) .

Until October 2008, through a bilateral visa arrangement signed in 2001, Australia's Electronic Travel Authority (ETA) system had been extended to Portuguese citizens wishing to visit Australia for up to three months. With the introduction of the eVisitor online service, EU citizens and other ETA eligible countries (including Portugal) now have access to a simple online visitor visa service to travel to Australia either for tourism or business purposes. Portugal grants Australian citizens visa-free access for visits for tourism, business (other than paid employment), or official purposes of up to ninety days.

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HIGH LEVEL VISITS

In November 2010, Prime Minister Julia Gillard and Defence Minster Stephen Smith attended the NATO Summit and ISAF meeting in Lisbon. The visit to Australia in February 2009 by the Hon Luis Amado was the first by a Portuguese Foreign Minister since 2002 when then Foreign Minister, Antonio Martins da Cruz, accompanied President Jorge Sampaio on his official State Visit to Australia as a guest of the Australian government. The Hon Peter Garrett, then Minister for Environment Protection, Heritage and the Arts, attended the 61st International Whaling Commission meeting in Madeira in June 2009. Other high level visits to Portugal have included former Minister for Defence, the Hon Joel Fitzgibbon, in November 2008 and then President of the Senate, Senator the Hon Alan Ferguson in April 2008.

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FOREIGN POLICY ISSUES

Membership of the European Union (EU) is at the heart of Portuguese foreign and economic policies. Portugal acceded to the European Communities (EC) on 1 January 1986 and was one of the Contracting States that established the EU in 1994. It has held the rotating six-monthly EU Presidency on three occasions: in 1992, 2000, and again in the second half of 2007. Portugal participates in the EU foreign policy agenda, particularly in relation to its former colonies in Africa, Latin America and Asia (East Timor and Macau). The highlight of Portugal's most recent Presidency was the signature of the EU Reform Treaty (the "Lisbon Treaty") by all 27 member countries in December 2007 and the holding of an EU-Africa Summit in Lisbon in 2007, the first such Summit in ten years. Former Prime Minister Jose Manuel Durão Barroso has held the position of President of the European Commission since November 2004.

Portugal is a founding member of NATO and places a high priority on a strong transatlantic relationship. The United States has an air-force base at Terceira in the Azores islands and NATO has a command centre near Lisbon.

Portugal is a signatory to the 1990 Convention applying the Schengen Agreement; a European inter-governmental arrangement on the elimination of border controls between signatory countries.

The former colony of East Timor remains an important foreign policy focus for Portugal. Portugal did not recognise the 1975 annexation of East Timor by Indonesia and pursued the cause of East Timorese independence in international forums for many years. In the subsequent period of the UN Transitional Authority, Portugal was engaged in helping East Timor in its transition to independence and the Portuguese Armed Forces have participated in UN Security Council-endorsed activities in East Timor. It currently deploys around 146 paramilitary police to the UN peacekeeping operation in East Timor plus three military officials.

The United Nations Police (UNPOL) makes up a major component of the United Nations Integrated Mission in Timor-Leste (UNMIT) and is currently headed by Police Commissioner Luis Carrilho, a Portuguese national. As of June 2010, Portugal is the second largest contributor to policing operations in East Timor. In addition to officers deployed through UNPOL, Portugal provides a 140-strong Formed Police Unit (FPU). The four FPUs undertake special operations assignments throughout the country. The Portuguese FPU also provides close protection for East Timorese government leaders, as well water rescue and a SWAT team.

Portugal will continue to be a significant bilateral aid donor to East Timor over the longer term and has been active in pursuing continued EU assistance for the country. In addition to East Timor, Portugal is a major contributor to peacekeeping operations in Africa, and has troops deployed in Afghanistan, Lebanon, Kosovo and Bosnia. In per capita terms Portugal is one of the most significant European contributors to international peacekeeping operations around the world.

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ECONOMIC OVERVIEW

Portugal has become a diversified and increasingly service-based economy since joining the European Community in 1986. The country qualified for the European Monetary Union (EMU) in 1998 and began circulating the Euro on 1 January 2002 along with 11 other EU member economies.

Economic growth had been above the EU average for much of the last decade, but fell back in 2008 and 2009 before growing 1.4 per cent 2010. Portugal has been increasingly overshadowed by lower-cost producers in Central Europe and Asia as a target for foreign direct investment. Living standards in Portugal are still well below the rest of Western Europe. It continues to receive structural funding from the EU to help it meet the EU convergence criteria. This has helped it to upgrade its infrastructure, but modernisation of its industry, including through training of the workforce, has been slow.

Portugal's financial sector has been relatively insulated from the global financial crisis and the government has not spent much on shoring up banks. Nonetheless, the government faces tough choices in its attempts to stimulate the economy, while trying to keep the budget deficit within the euro-zone 3 per cent-of-GDP ceiling. Despite the efforts of recent governments to balance the government budget to comply with the EU's Stability and Growth Pact (through spending cuts and a significant privatisation program), the deficit remained at just under 10 per cent of GDP in 2010. At the same time unemployment reached 10.7 per cent.

In May 2011, former Prime Minister Socrates secured an EU-IMF bailout package valued at just under €80 billion to address international concerns about Portugal's national debt. In return for the loan, Portugal is expected to reduce its deficit to the EU mandated 3 per cent-of-GDP ceiling by 2013. Measures to reduce the deficit over the next few years are expected to cause further contractions to an economy which is already in recession.

Foreign trade and investment

Foreign trade has contributed significantly to Portugal's economic growth in recent years. Portugal's most important trading partners remain other EU Member States, with Spain, Germany, France, Italy and the United Kingdom its principal trading partners. The United States, Brazil and Angola are Portugal's most important non-EU trading partners. With the collapse in exports during the final quarter of 2008 and only a sluggish recovery in Europe since, Portuguese exporters are facing challenging times.

Portugal received significant foreign direct investment (FDI) in the past decade. EU Member States are the main sources of FDI, particularly Spain, Germany, the United Kingdom, France and the Netherlands. The impact of FDI has been largely focused in the Lisbon and Tagus Valley region. Foreign investors who had been attracted by Portugal's low labour costs now look to central and eastern European states, as many of the new Member States have lower wage rates, higher skill levels and are located closer to northern European markets. Investment promotion remains a high priority for the government. Faced with competition from Eastern Europe and Asia, it has established the AICEP (Agência Para o Investimento e Commercio Externo Portuguesa) to attract investment involving technology transfer in sectors like information and communications technologies (ICT), biotechnology and renewable sources of energy.

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Last Updated: June 2011

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