Portugal: Discovered Again
by LINDA LISTON and KELLY MARRIOTT

In the 15th century, Vasco da Gama's discovery of the trade route to India permanently stamped Portugal onto the global economy. Now, 500 years later, Portugal is once again staking its claim.

It may be small in size -- it occupies only a fifth of the Iberian Peninsula -- but Portugal is quietly making big noises as one of Europe's most dynamic economies. Once known as Spain's sleepy little neighbor, the country has made huge economic strides in the past 10 years: wholesale restructuring of its economy, a sustained period of high economic growth, low European-style inflation, a rising GDP and political and social stability.

A massive privatization program has reinvigorated Portuguese companies, and major foreign companies are eyeing Portugal as a stable site for foreign investment.

One of Europe's oldest nations, it is making great strides in cementing its position as a member of the new Europe. It was entry into the European Union (EU) in 1986 that paved the way for the country's economic turnaround.

The Turnaround
When Portugal first joined the EU in 1986, some observers wondered how it could survive and compete with other, more sophisticated EU member countries.

Yet, survive it did. From 1986 to 1996, Portugal's per-capita income rose from US$3,000 to more than $11,000. In 1996, GDP grew 2.8 percent, compared to the EU average of 1.6 percent. Since then, Portugal's economy has continued to grow faster than the EU average, slowly closing the gap in wealth that separates it from other member countries.

Experts predict this economic surge will hold until at least the turn of the century. Economic growth was at 3.5 percent in 1997 and is expected to top that figure this year. Disposable income is up, and real wages and productivity are on the rise at an even faster pace. Job prospects are abundant and home purchases are soaring, with loans more affordable than ever. Consumption, exports and building investments are all performing at peak levels.

Political stability is another plus: Prime Minister António Guterres' government is on a steady course. The government has been able to keep up with the high rate of public spending, in just two years cutting in half the budget deficit: It's now below 2.5 percent of GDP. Inflation has been falling even faster than expected, with an annual average rate of 1.9 percent in 1997, about half of 1995's. Long-term interest rates are now about a third of 1991 levels.