PORTUGAL: FROM EMPIRE TO SMALL COUNTRY

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP85T01058R000202700001-5
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 5
• Document Creation Date: December 22, 2016
• Document Release Date: October 30, 2009
• Sequence Number: 1
• Publication Date: April 17, 1985
• Content Type: REPORT

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Central Intelligence Agency
Washington. D.C. 20505
DIRECTORATE OF INTELLIGENCE
17 April 1985
Portutal: From Empire To Small Country
Summary
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Portugal is a poor country with a rich history. It
became a nation state in 1140, when most of the countries of
modern Europe had not yet taken shape. It has failed to
keep pace with its neighbors, however, in its political,
economic, and social development. Today, it is one of the
continent's poorest countries with an annual per capita
income of about $2,000, compared to the West European
average of about $8,000.
History: Seeking Greatness
Over the centuries, Portugal has viewed Spain as the main threat to its
independence. Formerly known as Lusitania, after the tribal people from whom
the modern Portuguese claim descent, Portugal was an independent kingdom
during much of the period from the middle ages until 1910. Sixty years of.
Spanish rule from 1580 to 1640 offer the only exception to this record of
independence. Domination by Spain remains a vivid memory and helps to explain
modern Portugal's suspicions of its larger neighbor. 25X1
This memorandum was prepared byl Ithe Office of European
Analysis. It was requested by Peter Sommer, National Security Council.
Questions and comments may be addressed to John McLaughlin, Chief of the West
European Division, 25X1
EUR M85-10072
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The selection of Lisbon as the capital fixed Portugal's Atlantic
perspective, and it became the first European nation to establish an overseas
empire. The golden age of Portuguese exploration and imperialism came early
in the 15th century as Portuguese sailors traded with and conquered dominions
in Africa, Asia, and South America many times the size of the mother 25X1
country.
The empire brought few lasting benefits as Portugal did not use wealth
acquired overseas to spur domestic economic growth, but instead reinvested it
in the colonies. The perception of greatness that accrued from the empire
permeated society, however, and many Portuguese felt the sense of loss when
the colonies were granted independence. Even some of Portugal's current
leaders -- including President Eanes and Prime Minister Soares -- as ire to
restore a degree of Portugal's influence among its former colonies. 25X1
Modern Portugal has alternated between authoritarian rule and weak,
unstable democracies. The First Republic, which replaced the monarchy in 1910,
set new standards of political instability in Europe. In its nearly 16 years
of existence, it had seven general elections, 45 governments, seven
presidents, three counter-revolutionary dictatorships, and 25 uprisings. The
legislature was fragmented and splintered into 22 parties. Fragmentation led
to frequent votes of no confidence and a failure to deal with the country's
pressing economic and social problems. Few Portuguese mourned when the
Republic was overthrown by the military in May, 1926. 25X1
Salazar's Legacy -- Political And Economic Underdevelopment
Facing an economic collapse in 1928, the military gave absolute control
over government spending to an economics professor from Coimbra University --
Antonio de Oliveira Salazar. Salazar, who was to rule until 1968 restored
order to the economy and gained absolute power after 1932. 25X1
Salazar's Estado Novo (New State) was designed to preserve Portugal's
traditional social and economic structures against the inroads of
modernization, and to retain Portugal's empire. Salazar's dictatorship was
paternalistic; he was certain he knew what was best for the people. In some
ways he did much for the country -- he stabilized the financial situation and
balanced the budget, built roads, and improved railroads. But he left the
people mired in povert,v and acy and used the secret police-to repress
political expression. 25X1
Salazar's authoritarian system eventually crumbled under the burden of
Portugal's overseas commitments. Faced with wars of independence in its
African colonies beginning in the early 1960s, Portugal underwent mass
mobilization, further reducing a labor force already depleted by emigration.
Salazar's need to finance the wars forced him to reverse his long-held
opposition to foreign investment in Portugal. This decision led to increasing
transactions with the rest of the world and a shift in the trade pattern from
Africa to the West. 25X1
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Marcelo Caetano assumed the reins of power afer Salazar's incapacitating
stroke in 1968, but Caetano never gained full control. Inertia kept the
regime going until the military, frustrated by low pay, poor equipment, and
the realization that the African wars could not be won militarily, banded
together to bring the government down in 1974. 25X1
Agreement to overthrow the regime was not followed by agreement on what
should replace it. Widespread nationalizations and expropriations of
agricultural lands were carried out, and initially it seemed the Communists --
with the support of radical military officers -- would take control. A
stalemate among contenders for power developed in the armed forces, however ,
which combined with the emergence of democratic political parties and pressure
from Portugal's allies to allow a liberal democracy to emerge. 25X1
The Domestic Situation
Democratic rule has meant a return to governmental instability and policy
immobility. All of the political parties agree that Portugal must modernize,
but differ sharply on how it should be done. No single party or group holds
enough power to implement its approach to modernization. The result has been
frequent governmental change -- since 1976, there have been four general
elections and 10 governments. This political kaleidoscope has prevented the
development of a coherent approach to dealing with Portugal's economic 25X1
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The Socialist-Social Democratic coalition government of Mario Soares that
took power in June, 1983 was forced to apply an.IMF-mandated stabilization
program after its current account deficit ballooned from $1.3 billion in 1980
to $3.2 billion in 1982 and bankers shied from extending new loans. It was
Portugal's second turn to the IMF in less than a decade. Despite strains
within the coalition, the government has pursued the unpopular austerity
mpaciirac that cut the balance of payments deficit to $600 million last year.
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But the parties cannot agree how to tackle other serious problems.
Inflation and the budget deficit remain high, unemployment is up, and the
already low real wages paid to workers have fallen by about 19 percent during
the past two years. More importantly, Portugal has done little to reform
either public sector enterprises or the agricultural sector. And in this
climate of economic uncertainty, terrorism has grown. The main terrorist
organization, the Popular Forces of the 25th of April (FP-25), claims to
represent the beleaguered working class and lashes out against "foreign
imperialism". 25X1
Accession to the European Community should come next January, and the
Portuguese tend to see it as a panacea that will guarantee democracy,
modernize the country, and bring wealth and stability. In the short term,
however, membership is likely to bring more strains as weak Portuguese
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industries are exposed to foreign competition. Portugal's trade deficit will
likely deteriorate as it shifts to more expensive food imports and reduces its
trade barriers. 25X1
The country faces a presidential election in December that could change
the face of Portuguese politics. President Eanes cannot succeed himself and
Socialist Prime Minister Soares would like to replace him. Parties of the
right and left, including a new one comprised of supporters of President
Eanes, also will offer candidates to contest the election. Even Soares' 25X1
Social Democratic Party coalition partners want to run their own candidate.
If they do so, they will likely bring down the government, forcing either a
new realignment in Parliament or even an early legislative election.
Eanes wants to prevent Soares from winning the presidential election and
is debating whether to support the new party, which will compete largely
against Soares' Socialists. Even if the new party does well in the next
legislative election, it probably will not win a majority. Instead, it is
likely that the addition of another'major player to an already overcrowded
A potentially worrisome development is the openness of some leaders of
the new "Eanista" party to "dialogue" with the Communist Party. They have
ruled out a coalition with the Communists, but might accept informal
arrangements that could lead to.a partial emergence of the Communists from the
political ghetto in which they have resided since failing to take control in
1975. 25X1
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Original -
Peter Sommer, NSC
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