Spain and Portugal Reenter European Fold

Article excerpt

IN several towns that Paula Mota Alvez crosses every day, the young entrepreneur observes a telltale sign of change in the way Portugal does business.

"What you see are the cafes occupying the best locations in town closing up and being renovated into banks," she says. "And they aren't just Portuguese banks, but from Spain and elsewhere in the {European} Community," adds Ms. Mota, a mechanical engineer by training. "That tells me something."

The native of Portugal's northern Porto region is herself an example of how Portugal, and indeed the whole of the Iberian Peninsula, is evolving in its quest to economically and socially integrate and "catch up" with the prosperous EC.

A few years ago, if a young Portuguese woman chose a career in engineering at all, she would very likely have worked in the country's dominant nationalized industrial sector. Or, before the wave of nationalizations in the mid-'70s, she might have worked for a company owned by one of the hundred or so families that held Portugal's economic strings in their hands.

But Mota had a different dream. Today she employs 12 people in the cut-flower and ornamental plant business she runs from 35 acres of land just south of Porto.

As a young business owner, she is taking part in Portugal's shift to a modern European economy where small and medium-size companies have more weight. These firms now account for half of the country's exports. Meanwhile, traditional industries such as textiles and shoes must either make great strides in quality and productivity or close as markets are increasingly opened to participation and competition from the EC and elsewhere abroad.

A similar transition is taking place in neighboring Spain, although a different history and a larger, less centralized economy make its experience different. Historically a collection of kingdoms that evolved into today's assertive regions, Spain never experienced the concentration of its productive power in a few private hands to the extent Portugal did.

Moreover, Spain was more thoroughly removed from the outside world economy than Portugal. Spain lost most of its colonial empire centuries ago. Then it was subjected to nearly a half-century of General Francisco Franco's highly protectionist nationalism until 1975.

For centuries, and even well before Christopher Colombus set his foot down in the sands of America in 1492, Portugal has been an outward-looking country - though with its back to the continent on which it sits. As recently as the 1960s, much of Portugal's economic activity related to colonies in Africa.

"Business people didn't bother to look outside the world of Portugal and its overseas interests," says Joaquim Caeiro, an analyst in Portugal's now very active real estate market. "Mozambique was rich, Angola was rich." Even though Portugal was a founding member of the European Free Trade Association, "the colonies and the kind of protected internal economy they allowed retained people's focus," Mr. Caeiro says.

The colonies were lost in the early 1970s, however. After an economically disastrous decade, Portugal entered the EC in 1986. And from that point, when Portugal redirected its gaze to Europe, the country's economy has seen strong, steady growth - recently the highest annual rates in the Community.

"The single greatest factor in Portugal's economic evolution has been EC membership and an opening to Europe in general," says Rui Madaleno, economic director of the Association of Portuguese Industries. To make his point, Mr. Madaleno cites striking statistics on Portuguese foreign trade: In 1970, the EC accounted for 44 percent of Portugal's exports, while the country's colonies received 25 percent. In 1989 the EC's share of Portuguese exports had jumped to 72 percent, while the former colonies had dropped to barely 3 percent.

Another important result of EC membership, says Madaleno, is that Portugal is developing "a very natural economic partnership" with Spain. …