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Doing Business in Portugal

Market Overview

Mainland Portugal, along with the autonomous island regions of the Azores and Madeira, offers American exporters a market of approximately 10.6 million people in a country roughly the size of the State of Indiana. As a member of the European Union (EU) and the euro zone, it is fully integrated with the EU, uses the euro currency, and follows directives from the European 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. Portugal has a politically stable environment with a democratically elected parliamentary government and is welcoming of foreign business and investment.

The government remains committed to attracting FDI, expanding trade with South America, Africa, and Asia, and focusing on niche sectors of the economy such as tourism, renewable energy, high quality industrial components, technology services, and value-added agricultural products. U.S. Census data indicates that Portuguese consumers bought approximately $939 million dollars’ worth of U.S. goods and services in 2015, a decrease of around 20% compared with 2014. During that same period, U.S. imports of Portuguese goods and services remained at a total of over $3.2 billion compared with 2014. The top U.S. states exporting to Portugal were Portugal were Louisiana, Indiana, Texas, California, and New Jersey. Top U.S. exports included aircraft parts, heavy machinery parts, agricultural products and oil products.

The United States is Portugal’s largest trading partner outside the European Union. The total amount of U.S. goods sold into Portugal is undoubtedly higher than the statistics reflect, as census data does not account for U.S. products imported into other EU countries and subsequently transported into Portugal for sale. It is common throughout the European Union for goods to be shipped to one EU location – often to take advantage of lower value added tax rates – and then to be distributed by ground transport to neighboring member state markets.

The United States continues to work closely with Portugal to find ways to expand and deepen two-way trade and investment to better reflect historically strong political, geo- strategic, and security ties between the two countries. Portugal’s continued drive to modernize and diversify its economy will offer possibilities for growth in U.S. trade and investment over the medium and long-term. Demand for high-quality, price-competitive U.S. products in Portugal are strong, and privatization of several large government- owned companies will provide additional opportunities for investment.

Market Challenges

Portugal emerged from an extended economic crisis and successfully completed its European Union-IMF bailout program in 2014, registering moderate growth for 2014 and 2015 and decreasing, but still high, unemployment. The expected real GDP growth is expected to increase 1.5% in 2015.

The structural reforms implemented since 2011 have created an economic and regulatory climate that is very favorable to foreign investment. Portugal’s economy is strongly tied to the European Union (EU). Corporate taxes and unit labor costs have decreased, while new investment incentives have been established. The government has also taken important steps toward improving the efficiency of its judicial system. EU member states are both Portugal’s biggest trading partners and its largest investors.

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 to get their products into Portugal. Some U.S. companies have also reported that they are now encountering Chinese competitors in Portugal.

Market Opportunities

Portuguese tend to perceive American products as being of high quality, but not price competitive. U.S. firms should stress price/quality comparative advantages when trying to enter the Portuguese market.

The Portuguese market is larger than it may initially appear. While there are only 10.6 million people in Portugal, there are well over 230 million people who speak Portuguese worldwide. Former Portuguese colonies, including Macau, Mozambique, Angola and Brazil, have close business ties with Portugal. U.S. companies can often find avenues to these other markets through Portugal and, indeed, the Portuguese Business Promotion Agency (AICEP) actively markets the country as a “gateway” economy into third markets, particularly in Lusophone Africa.

Portugal is an excellent entry point or test market for U.S. firms looking to establish access into the EU. The country is politically stable; the crime rate is relative ly low; the bilateral relationship is strong; English is widely spoken; and the population is very friendly toward Americans. Both physical and IT Infrastructure are

well developed, and the cost of doing business in Portugal is significantly lower as compared to other countries in Western Europe.

Market Entry Strategy

First time exporters are urged to contact the nearest of over 100 U.S. Export Assistance Centers (USEAC). These USEACs are part of the worldwide network of U.S. Department of Commerce offices that support U.S. exporters. 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 publish, and which are publicly 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. The U.S. Commercial Service office in Portugal, located in the U.S. Embassy in Lisbon, offer s a variety of services to help U.S. firms find the information they need about the market and identify an agent, distributor or representative for their products or services.

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