Following its heyday as a world power during the 15th and 16th centuries, Portugal lost much of its wealth and status with the destruction of Lisbon in a 1755 earthquake, occupation during the Napoleonic Wars, and the independence in 1822 of Brazil as a colony. A 1910 revolution deposed the monarchy; for most of the next six decades repressive governments ran the country. In 1974, a left-wing military coup installed broad democratic reforms. The following year Portugal granted independence to all of its African colonies. Portugal entered the EC (now the EU) in 1985.

GOVERNMENT
Portugal moved from authoritarian rule to parliamentary democracy following the 1974 military coup against dictator Marcello Caetano, himself a continuation of the long-running dictatorship of Antonio Salazar. After a period of instability and communist agitation, Portugal ratified a new constitution in 1976. Subsequent revisions of the constitution placed the military under strict civilian control, trimmed the powers of the president, and laid the groundwork for a stable, pluralistic liberal democracy, as well as privatization of nationalized firms and the government-owned communications media. Portugal joined the European Union in 1986, and has moved toward greater political and economic integration with Europe ever since.

The four main branches of the national government are the presidency, the prime minister and Council of Ministers (the government), the Assembly of the Republic (the parliament), and the judiciary. The president, elected to a 5-year term by direct, universal suffrage, also is commander in chief of the armed forces. Presidential powers include appointing the prime minister and Council of Ministers; dismissing the prime minister; dissolving the assembly to call early elections; vetoing legislation, which may be overridden by the assembly; and declaring a state of war or siege.

ECONOMY
Membership in the European Union (EU) contributed to stable economic growth, largely through increased trade ties and an inflow of funds to improve the country's infrastructure. After a recession in 1993, the economy grew at an average annual rate of 3.3%, well above EU averages. In order to qualify for the European Monetary Union (EMU), Portugal agreed to cut its fiscal deficit and undertake structural reforms. The EMU brought to Portugal exchange rate stability, falling inflation, and falling interest rates. Falling interest rates, in turn, lowered the cost of public debt and helped the country achieve its fiscal targets.

Portugal's economy is based on traditional industries such as textiles, clothing, footwear, cork and wood products, beverages (wine), porcelain and earthenware, and glass and glassware. In addition, the country has increased its role in Europe's automotive sector. Services, particularly tourism, are playing an increasingly important role in the economy.

Portugal has made significant progress in raising its standard of living to that of its EU partners. GDP per capita on a purchasing power parity basis rose from 51% of the EU average in 1985 to 78% in early 2002. Unemployment stood at 4.1% at the end of 2001, which is low compared to the EU average. Real wages are flexible, but high social costs and severance packages raise fixed labor costs and make new job creation difficult.

FOREIGN RELATIONS
Portugal has been a significant beneficiary of the European Union and is a proponent of European integration. Portugal held the presidency of the European Union for the second time during the first half of 2000. Portugal used its term to launch a dialogue between the EU and Africa and to begin to take steps to make the European economy dynamic and competitive. In 2002, the Euro began to circulate as Portugal's currency.

Portugal was a founding member of NATO; it is an active member of the alliance by, for example, contributing proportionally large contingents in Balkans peacekeeping forces. Portugal proposed the creation of the Community of Portuguese Language Countries (CPLP) to improve its ties with other Portuguese-speaking countries. Additionally, Portugal has participated, along with Spain, in a series of Ibero-American summits. Portugal was a strong advocate of independence for East Timor, a former Portuguese colony, and has committed troops and money to East Timor, in close cooperation with the United States, Asian allies, and the United Nations.

U.S.-PORTUGUESE RELATIONS
Bilateral ties date from the earliest years of the United States. Following the Revolutionary War, Portugal was the first neutral country to recognize the United States. On February 21, 1791, President George Washington opened formal diplomatic relations, naming Col. David Humphreys as U.S. minister.

Contributing to the strong ties between the U.S. and Portugal are the sizable Portuguese communities in Massachusetts, Rhode Island, New Jersey, California, and Hawaii. The latest census estimates that 1.3 million individuals living in the United States are of Portuguese ancestry, with a large percentage coming from the Azores. There are about 16,000 Americans living in Portugal.

Portugal defines itself as "Atlanticist," emphasizing its support for strong European ties with the United States, particularly on defense and security issues. Portugal sees its role as host of NATO's Southern Regional Command (Southlant), located near Lisbon, as an important sign of alliance interest in transatlantic security issues. As a staunch NATO ally since the founding of the organization, Portugal is a participant in NATO peacekeeping. It has used its chairmanship of the OSCE to advance U.S. and European security objectives.

U.S.-Portuguese trade is relatively small, with the U.S. exporting $1.25 billion worth of goods in 2001 and importing an estimated $1.62 billion. While total Portuguese trade has increased dramatically over the last 10 years, the U.S. percentage of it--both exports and imports--has declined. The Portuguese Government is seeking to increase exports of textiles and footwear to the United States and is encouraging greater bilateral investment. U.S. firms play a significant role in the automotive, pharmaceutical, computer, and retailing sectors in Portugal. The advent of a more pro-business government after the March 2002 elections offers increased possibilities for U.S. trade and investment, especially in services and high technology.

Full country name: Portugal
Area: 35,672 sq mi (92,389 sq km)
Population: 10.3 million
Capital city: Lisbon (pop 564,700)
People: 99% Portuguese, 1% African
Language: Portuguese,
Religion: 97% Roman Catholic, 2% Protestant, 1% other
Government: Parliamentary democracy
President: Jorge Fernando Branco de Sampaio
Prime Minister: José Manuel Durão Barroso
GDP: US$105.8 billion
GDP per head: US$10,600
Annual growth: 3.3%
Inflation: 3.6%
Major industries: Textiles, footwear, wood products, metalworking, oil refining, chemicals, fish canning, wine, tourism and agriculture
Major trading partners: EU (esp. Spain, Germany, France, Italy, the Netherlands & the UK), US
Member of EU: Yes
Euro zone participant: yes