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Portugal Industrial Organization
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.
Data as of January 1993
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