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Portugal The Balance of International Payments
The balance of payments reveals much about how the
residents
of a nation-state earn their livelihood by providing goods
and
services to foreigners in exchange for goods and services
produced abroad. It may also reveal indirectly whether the
country is a net creditor or net debtor in its dealings
with the
rest of the world. The Portuguese international balance
was
characterized by a protracted and large merchandise trade
deficit
that was largely offset (financed) by annual surpluses on
invisibles, mainly emigrant worker remittances and tourism
income. But because of its international debtor position
(including a growing stock of private foreign investment
in the
country), Portugal annually remitted substantial interest
and
dividend payments to foreigners. Portuguese traders relied
predominantly on foreign carriers and insurance firms; as
a
result, the current account registered annual net payments
(debits) for these services.
From 1974 to 1984, Portugal's current external deficits
were
financed by a combination of foreign reserve drawdowns and
official external borrowing, mainly the latter. In the
five-year
period 1985-89, three years of current account surpluses
(for
1985-87, totaling nearly US$2 billion) more than offset
two years
of current deficits (for 1988-89, totaling US$1.6
billion).
Following Portugal's accession to the EC, large and
growing
inflows of private capital--direct investment, portfolio
investment, and repatriation of flight capital--resulted
in
substantial accumulation of foreign reserves by the Bank
of
Portugal.
The 1989 balance of international payments was fairly
representative of Portugal's position in the late 1980s.
The
merchandise trade deficit of US$5.1 billion was more than
covered
by the joint income from tourism (US$2.6 billion) and
emigrant
remittances (US$3.4 billion). The Portuguese paid
exporters and
importers US$832 million (net) for the use of foreign
carrier and
insurance services and remitted US$800 million in net
investment
income of interest and dividends (US$1,323 million in
payments
and US$521 million in receipts). Although unilateral
transfers
(which do not give rise to claims) comprised mainly
emigrant
worker remittances, net public remittances of US$824
million in
favor of Portugal, a recent component of the balance of
payments,
reflected mainly EC assistance to Portugal in support of
economic
restructuring.
The algebraic addition of the current account balance
(-US$551 million) and the medium- and long-term capital
account
(US$2,560 million) netted a "basic balance" of around US$2
billion in 1989.
Data as of January 1993
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