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Portugal - Country Commercial GuideMainland Portugal, along with the autonomous island regions of the Azores and Madeira, offers American exporters a market of approximately 10.3 million people in a country roughly the size of the State of Indiana. As a member of the European Union (EU) and the eurozone, Portugal is fully integrated within the EU, uses the euro currency, and follows most directives from the European Commission (E.C.) in Brussels. As with all EU countries, Portugal’s borders and ports are open to the free flow of trade with other EU member countries. Portugal has strong democratic institutions, a robust media environment, civil society and trade unions. However, Portugal’s policy towards procurement and foreign business and investment lacks screening for national security criteria. In addition, the lack of structural reforms since 2011 have led to a severe shortage in affordable housing and discontent among medical and other professionals, who are leaving Portugal in droves. The government is focused on tourism, renewable energy and critical minerals, high-quality industrial components, technology and service delivery, and value-added agricultural products.
Many Portuguese companies, some in critical infrastructure, have significant ownership by People’s Republic of China (PRC)-based state-owned-enterprises. Portugal passed an investment screening law in 2013 but is difficult to practically implement it. As a result, the Portuguese government operates under heavy PRC economic influence, which has consequences in the selection of vendors in sectors from port scanning equipment to electric battery production. The U.S. government and the EU have been raising awareness about the risks of using untrusted 5G vendors in telecom networks. Recently in May 2023, Portugal effectively outlawed equpment from Chinese suppiers of 5G. Similar concerns exist in other sectors such as critical minerals and AI. Any changes in the government’s posture would represent new market opportunities for U.S. companies.
Portugal’s economy rebounded post-pandemic on the backs of travel, tourism, and personal consumption, with its GDP increased by 6.8% GDP increase in 2022. According to the Bank of Portugal, 2023 GDP is expected to grow by 2.7%, which is triple the expected EU average (0.9%). It is ranked in the top three countries with the highest growth, just below Ireland (5.5%), Malta (3.9%), and tied with Greece. The external sector was the principal growth driver in 2023 Q1, with the recovery in global supply chains and increased tourism visits.
According to the U.S. Bureau of Economic Analysis (BEA), bilateral trade in goods and services reached approximately to $15 billion in 2022, which is close to a 50% increase 2021 - primarily driven by increased U.S. LNG exports. Regarding trade balance (goods only), the U.S. imported a total of $6.15 billion, whereas it exported a total of $2.92 billion.
The top five U.S. exports to Portugal in 2022 were mineral fuels, oil and gas (1.44B$), transportation equipment (564M$), chemicals (216M$), agricultural and related products (244M$), and computer and electronic products (99M$). The top U.S. states exporting to Portugal were Texas, Louisiana, Pennsylvania, California, Indiana, and Ohio.
The top five categories of U.S. imports from Portugal in 2022 were petroleum and coal products (1,154M$), chemicals (849M$), plastics and rubber products (428M$), computer and electronic products (420M$), and apparel and accessories (419M$). The top U.S. states importing from Portugal were New Jersey, California, South Carolina, Texas, and New York.
Portugal is also making impressive strides in renewable energy. For example, the mix of electricity generated from renewable energy is expected to grow from the current 60% to 80% by 2026. With virtually no indigenous fossil fuel production, renewables are seen as an imperative way to achieve energy security. Portugal reportedly also has the 8th largest reserves of lithium in the world and the second largest in Europe. The more significant opportunity may be in lithium conversion/refining and further up the battery value chain. There are additional opportunities in all areas of the renewable energy sector, from offshore wind and green hydrogen to sustainable aviation fuels. There is also a need for energy transition equipment and solutions, including electrolyzers, solar panels, turbines, port upgrades, grid equipment, and cables connecting offshore wind to the onshore electric grid.
The U.S. is Portugal’s fourth-largest export market for goods and services and the largest trading partner outside Europe, representing around 7% of all Portuguese exports in 2023. The total amount of U.S. goods sold into Portugal is likely 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 resale. 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 distributed by ground transport to neighboring member state markets.
Regarding foreign direct investment (FDI), Portugal registered 200 projects in 2021, 70% from Europe and 30% from the rest of the world, representing a 30% increase compared to 2020, with 154 projects mainly from the ICT sector. 2021 marks a record-breaking year, with the United States being Portugal’s largest source of FDI, representing around 15-18% of all FDI projects in Portugal. In 2022, the U.S. again was the largest source of FDI to Portugal, contributing to 19% of the total foreign investment. According to Banco de Portugal’s latest report on FDI in 2023, the first trimester of FDI in 2023 generated 630 million euros. Between 2008 and 2023, the stock of FDI in Portugal has more than doubled. In 2023, the FDI in Portugal is double the amount of foreign investment Portugal does internationally.
Integrated into the Next Generation EU, the Portuguese government’s portion of the EU’s Recovery and Resilience Plan (RRP) will reach €17 billion, where €14 billion are in subventions, and €3 billion are in loans to be fully implemented through 2026. The RRP is divided into three main pillars, Resilience, Climate, and Technological Transition, with assigned budgets and reforming objectives. The Resilience pillar aims to cover the expansion and digitalization of the health care system, social responses such as affordable housing, and training incentives for the Portuguese talent pool. The Climate transition pillar relies on sustainable mobility and the decarbonization of industry. The Digital transition aims to invest not only in companies and their digital transformation but also in public administration capacitation, digitalization, and interoperability.
Portugal’s Public Finance Council (CFP) stated in its “Fiscal Risks and Public Finance Sustainability” report that productivity growth is the main macroeconomic risk in the long term. Low productivity translates into low wages across the Portuguese economy. The report highlighted the successful implementation of the RRP as crucial to long-term macroeconomic health. Like other European countries, Portugal also faces a “demographic winter” with a low birth rate and a growing number of elderly citizens, which has longer-term consequences on pensions and public finances.
The United States continues to work closely with Portugal to find ways to expand and deepen two-way trade and investment, thereby augmenting the already 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 is strong.
