The Industrial Sector
The growth of Portugal's industrial sector since the revolution was less dynamic than in the 1960-73 period. In this later period, growth was strongly affected by a number of major events, both domestic and external: the two oil price hikes, the nationalizations of 1975-76, and the country's accession to the EC. Nevertheless, Portugal's industrial production grew at a respectable 4.8 percent annual rate during the 1980-89 decade, leading GDP growth (2.7 percent annually). The overall industrial index advanced 43 percent between 1980 and 1989, with significant divergence in the growth rates among the subsectors of manufacturing (39 percent); electricity, gas, and water (74 percent); and mining (74 percent). Mining output was stagnant from 1980 to 1988, but in the following year it surged by 74 percent as the Neves Castro copper mine went into operation. Manufacturing, the largest component of the industrial sector, also showed marked growth differences among the several branches. Lumber and cork products, a traditional rural-based industry, declined by 26 percent during the decade; on the other hand, paper (75 percent), chemicals and plastics products (97 percent), and nonmetallic mineral products (65 percent) led the advance in manufacturing.
Manufacturing was concentrated in two major industrial regions: Lisbon-Setúbal in the south-central region and Porto-Aveiro-Braga in the north. Together they accounted for about three-fourths of Portugal's net industrial output. The Lisbon area included such major industries as iron and steel; ship building and repair; oil refining, machinery, chemicals, cement, and electronics; and food and beverages. Setúbal, about eighty kilometers to the southeast of Lisbon, also had a large shipyard and automobile assembly and machine industry plants, as well as cement, woodpulp, cork, and fish processing. Sines, located about 140 kilometers south of Lisbon, was the site of a major deepwater port and heavy industrial complex. Begun during the Caetano administration, Sines included an oil refinery, petrochemical plants, and a 1,200-megawatt coal-fired power plant.
Porto was primarily a center of light industry, including textiles, footwear, furniture, wine, and food processing. Porto was also the location of the nation's largest petroleum refinery; the other was located at Lisbon. Portimão was a center for fishing. Aveiro specialized in woodpulp and other wood products but also produced footwear and machinery. Braga specialized in textiles and clothing, cutlery, furniture, and electronics. Covilha was also an active textiles area.
The two premier industrial regions offered the greatest concentrations of population, thereby stimulating market-oriented manufacturing operations. Furthermore, because of the dependence of modern industry on imports of raw materials, machinery, and fuel, the location of processing plants near the two major ports minimized their operating costs.
Industrial organization in Portugal reflected three major ownership patterns: private domestic firms were concentrated in traditional, light industries and in construction; public enterprises dominated mining and major heavy industries, mainly iron and steel, petrochemicals, shipbuilding, petroleum refining, and electricity; and subsidiaries of multinational corporations dominated the technically more advanced electronics, automotive, pharmaceutical, and electrical machinery industries. The foreign investor presence was also important in the pulp and paper, chemical, food products, and clothing industries.
In general, the traditional light industries--textiles, clothing and footwear, food and beverages, cork products, and furniture--were labor intensive and technologically backward. Within this group, however, the medium-sized establishments (between 100 and 200 employees) enjoyed superior management capabilities and higher levels of productivity.
The Portuguese construction industry, which was largely unaffected by the 1975 nationalizations, emerged in the late 1980s from several years of recession. Since the mid-1980s, EC and local counterpart funds have financed a variety of infrastructure projects, including roads, bridges, and sewage and water treatment plants. Commercial building and house construction was also on an upward trend after that time.
According to the Economist Intelligence Unit, of the twenty-five largest industrial firms ranked by sales in 1986, ten were public enterprises (including nine of the largest ten), and nine were subsidiaries of foreign-owned firms. Significantly, by the mid-1980s, over one-fifth of Portuguese manufacturing sales were by subsidiaries of multinational firms, with their export share even higher. Seven of the ten largest manufacturing export-oriented firms were controlled by foreign investors.
By the mid-1980s, the large industrial public enterprises faced extremely difficult financial problems associated with earlier errors in investment and pricing policies. After the second oil shock, many of these enterprises borrowed heavily abroad to finance investment projects, which often were poorly conceived and poorly managed. In 1986 operating losses of Quimigal (chemicals), Siderurgia Nacional (steel), and the shipbuilding company Estaleiros Navais de Setúbal (Setenave) totaled 29 billion escudos, or 30 percent of total public enterprise losses.
As a result of their excessive dependence on debt financing, Quimigal and Setenave, as well as Companhia Nacional de Petroquímica (CNP), a state-owned petrochemical enterprise, had a negative equity or net worth position (i.e., their debts exceeded their assets). Many of these firms in the mid-1980s were overstaffed and had concluded wage settlements that were generally higher than in the private sector.
The major state-owned industrial enterprises were candidates for ultimate privatization. In anticipation of their divestiture, they underwent financial and managerial restructuring in the late 1980s. As an example, loss-making enterprises such as CNP and Setenave had been operating under private management contracts to make them viable for privatization. Two major privatizations were announced at the end of 1990: Siderurgia Nacional and Petrogal (the largest state-owned petrochemical firm). To assure that the national steel company could operate successfully within the EC's single market, the Portuguese government was considering selling Siderurgia Nacional to a leading European steelmaker, preferably linked to a Portuguese minority partner.
Energy and Mineral Resources
Portugal produced less than a quarter of its primary energy requirements and depended heavily on imported hydrocarbon fuels, mainly petroleum. Although efforts were made to locate domestic petroleum deposits in the early 1970s, none were found. Coal accounted for less than 5 percent of Portugal's primary energy use. Apparent consumption in 1988 was around 2.9 million tons, of which 240,000 tons were mined domestically. Portugal's low-grade anthracite coal, the production of which had stagnated since the mid-1970s, was mined near Porto. The United States had emerged as Portugal's main supplier of metallurgical and steam coal. A 5-million-ton-per-year capacity coal terminal, capable of handling 150,000 deadweight-ton vessels, was scheduled to be completed at Sines early in the 1990s. Because Portugal had no known natural gas reserves, the government as of mid-1988 was planning to build a liquified natural gas terminal at Setúbal and a gas distribution network. Portugal's hydroelectric potential was well developed and provided nearly half of the economy's electricity requirements.
As a result of Portugal's accession to the EC, the country's energy sector was rapidly being deregulated and diversified. The state electric power company, Electricidade de Portugal (EDP), planned to invest US$700 million between 1990 and 1995 on dams and hydroelectric equipment. In 1990 EDP completed its second coal-burning power plant station to reduce its dependency on imported oil. In addition, coal consumption in the cement industry was forecast to grow as more facilities converted to coal from fuel oil.
Portugal's metallic mineral resources were more impressive for their variety than for their contribution to GDP. The most important mines were in the north, in the mountains of Beira, where tungsten, tin, chromium, and other alloy minerals were mined in commercial quantities. Iron ore was mined in Moncorvo in the upper Douro Valley; formerly exported in its entirety, the Moncorvo mine production came to supply the government's integrated iron and steel works at Seixal near Lisbon and its Maia electric steel plant near Porto. Portugal was a significant world source of tungsten concentrate, most of which was exported. The mine had an annual production capacity of 1,400 tons of tungsten concentrate.
Portugal's metallic mineral production was greatly enhanced upon the completion of the US$200 million Neves Corvo copper mine near Castro Verde in southern Portugal--the largest non-coal mining development project in Western Europe. An estimated 33 million tons of 7.8 percent copper were proven at the site as of 1986. The concentrator initially would process one million tons of ore annually, yielding 400,000 tons of concentrate containing nearly 150,000 tons of copper. The Neves Corvo operating company was owned 51 percent by the government and 49 percent by RTZ Metals Group of Britain.
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