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Portugal Agricultural Policy and the European Community
Portuguese agricultural markets, both inputs and
outputs,
were subjected to substantial policy intervention,
particularly
after the revolution. Under the old regime, agricultural
pricing
policy was largely oriented toward the provision of
low-priced
foodstuffs to urban areas, which required extensive
controls over
imports and marketing. Three state marketing enterprises
were
organized after 1974, primarily to manage trade in their
respective commodity groups--cereals, oilseeds, and sugar
and
alcohol--in pursuit of price control objectives. Public
assistance to farmers and ranchers involved subsidizing
intermediate inputs, primarily fuels, fertilizers, and
mixed
feeds. These subsidies, however, were largely removed in
June
1983. After the revolution, de facto credit subsidies for
farmers
(often associated with negative real interest rates)
entailed
very high transaction costs. As a result, only large
farmers had
access to the formal credit system.
As a condition of EC membership, Portugal adopted the
Common
Agricultural Policy (CAP), a basic instrument of the
community's
integration since 1962. The CAP was based on the
principles of
common pricing, EC preference, and joint financing. As
Portugal
adopted the transitional arrangements leading to full
compliance
with the CAP, both the locus of agricultural decision
making and
the level of incentives given by the system of price
supports
shifted from the nation to the EC. Portuguese prices of
some
commodities at the time of entry into the community were
well
above the EC levels. Cereal and dairy sectors would
experience
the most serious declines in real prices because they
benefited
most from price increases in the early 1980s and because
they
produced the commodities in chronic surplus in the EC. The
Alentejo wheat and livestock systems, both based on poor
soils,
would likely become unprofitable during the transition to
EC
price levels. On the other hand, the prospects for rice,
tomatoes, sunflowers, and potatoes, as well as Portugal's
higher
quality wine systems appeared to be favorable under the
CAP
regime.
Data as of January 1993
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