Environmental Technologies Industries
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Environmental Technologies Industries
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| Portugal Environmental Export Market Plan |
Chapter 1 - Observations
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Politics and Geography
Portugal is a republic, with a popularly elected president as head of state and commander-in-chief of the armed forces. The national government is divided into executive, legislative, and judicial branches. The executive branch is composed of a prime minister, who is the chief administrative officer, and a cabinet of 15 ministers. Portugal's legislative branch of government is the single-chamber Assembly of the Republic, with 230 seats.
In addition to the national government, Portugal has 18 districts that enjoy administrative autonomy. Each of the autonomous districts has a unicameral elected legislative assembly and council, presided over by a district governor. Each district government is divided into parishes. There are also 305 municipalities in the country.
Portugal is located in the southwest of Europe and occupies about 15 percent of the Iberian Peninsula, which it shares with Spain. In addition, the Azores and Madeira Islands in the Atlantic Ocean, off the west coast of Europe, are part of Portugal; they are classified as autonomous regions. Portugal also manages the territory of Macao, near Hong Kong. Including the islands, Portugal has an area of 902 square miles, or 2,335 square kilometers. Portugal enjoys a temperate climate in summer and winter. Rainfall in Portugal can be heavy, particularly in the north. The heavy rainfall has contributed to the building of a considerable infrastructure to produce electricity by hydroelectric power. Portugal has approximately 10 million people. The population density is approximately 292 people per square mile, or 113 per square kilometer.
Lisbon, the capital of Portugal, has a metropolitan population of over 813,000 people. Oporto is the second largest city, with 329,000, and Coimbra is the third largest with about 57,000 people. Faro, in the Algarve tourism resort area in the south, has about 20,000 inhabitants.
Table 1: Origins of Gross Domestic Product in 1995 and 1996
(Real percentage change)
| 1995 | 1996 |
| Agriculture, forestry, and fishing | 0.9 | 7.2 |
| Manufacturing | 2.6 | 4.6 |
| Energy | 5.8 | 6.0 |
| Construction | 4.8 | 6.5 |
| Services | 2.0 | 2.4 |
| GDP at market prices | 2.3 | 3.3 |
Sources: IMF, Bank of Portugal, and National Institute of Statistics
The Economy
Although Portugal is the least developed nation in Western Europe, there has been considerable economic development coupled with macroeconomic stability in the 1990s. Inflation has been contained; the budget deficit has been reduced; and the economy has been growing at a moderate rate. In 1997, inflation was 1.6 percent and interest rates dropped to 6.4 percent. The public deficit has been at 2.9 percent of gross domestic product (GDP). Public debt is at 64.1 percent of GDP. Maastricht Treaty targets are inflation 2.5 percent, interest rates 8 percent, public deficit 3 percent, and national debt at 60 percent of GDP. Unemployment in Portugal is low compared with other European countries (about 6.5 percent). The favorable evolution of the Portuguese economy will make it possible for the country to enter the European Monetary Union (EMU) with the first group of countries.
Compliance with the convergence criteria laid down in the Treaty on European Union is the primary dynamic force behind Portugal's economic policy. The Portuguese economy is without a doubt reaping the benefits of the consistent pursuit of stability-oriented policies, including noninflationary growth.
Another important EU economic policy is to privatize state-owned companies, as well as services that in the past had been performed by government at all levels. In the environmental policy area, many services have been contracted out to the private sector. For example, some municipal governments in the larger cities have privatized waste collection, recycling programs, operation of sanitary landfills, sewage treatment plants, etc. The new trend is to build major projects, from dams to highways, by long-term concessions to the private sector.
The Portuguese economy has strong agricultural and agro-industrial sectors, which produce a wide variety of foodstuffs. In 1996, agriculture, forestry, and fishing accounted for 7.2 percent of GDP and about 20 percent of employment (table 1). Manufacturing was responsible for about 23 percent of the employment and 4.6 percent of GDP. Tourism is also an important segment of the Portuguese economy, with receipts exceeding $4.69 billion in 1996, when approximately 23 million tourists visited Portugal.
Among the leading goods manufactured in Portugal are textiles, apparel, vehicles, processed foods, machinery, glass, pottery, refined petroleum products, and fertilizers. Investment incentives are leading to rapid growth in the automotive and electronic industries. About 46 percent of the 6.9 million kilowatt electric generating capacity of Portugal is from hydroelectric power.
Legal and Regulatory Structure
Government is responsible for environmental protection, not only as the enforcer of environmental protection rules and regulations but also as a prime provider of services to the public. The Assembly of the Republic and the executive branch of the Government of Portugal have the power to legislate environmental laws and regulations by either the enactment of laws or the issuance of decrees. The Ministry of the Environment (MA) and the Ministry of Economy are the two cabinet-level organizations primarily responsible for environmental concerns. The Ministerio do Ambiente (MA) was formerly known as Ministerio do Ambiente e Recursos Naturais (MARN), or the Ministry of the Environment and Natural Resources.
District, regional, and municipal authorities have the primary responsibility for delivering environmental services to the public, from potable water and wastewater treatment to the collection and treatment of urban solid waste. National, district, regional, and municipal authorities coordinate their efforts to develop and implement new legislation in the environmental area. Nevertheless, some tensions have surfaced between national, district, and municipal authorities over jurisdiction on environmental areas in the recent past. EU environmental directives are generally the basis of all new legislation in Portugal, as well as in the rest of the Union. As in other sectors of the economy, the transition to EU-wide rules and regulations will naturally trigger some debate as new ways of operating come about.
In the past, government at all levels contributed to environmental disasters by not adequately assessing the impact of such things as improper handling of wastes and improper operation of sanitary landfills. It will be easier to introduce new environmentally friendly practices than to correct costly past mistakes.
Understanding government procurement mechanisms in Portugal is of primary importance for successful bidding on environmental projects. Government procurement practices are regulated by Portuguese legislation as well as by EU directives. However, Portugal has not implemented some aspects of the EU directive to the GATT Procurement Code in some sectors of the economy, including areas that are linked to the environmental sector. Local companies have a competitive edge and enjoy some degree of protectionism.
National tenders are published in the Diario da Republica-Series III, or Official Journal, as well as in the two largest daily newspapers in Portugal. Tenders that qualify on the basis of their estimated procurement size are also published in the EU procurement system. All invitations to bid on government contracts have to be published at least 45 calendar days before the due date of bids. In addition, all contracts above approximately $4.5 million have to be published at least 40 calendar days before the due date of bids in the European Community Bulletin.
Government agencies can also prequalify companies and invite them for a restricted procurement. Although prequalification is a practice that governments use for military procurement and procurement in other sensitive areas, it can also be applied in the environmental technology field.
American firms seeking to sell to the Portuguese Government or to state-controlled companies must have a formal agency agreement, a distributor, and a branch office or subsidiary in Portugal before bidding on contracts. All foreign firms must have a legal entity or legal presence in Portugal, according to local law.
Key Portuguese legislation related to the environmental market includes the following:
Decreto-Lei #187/93 of 05/24/93, which established the Ministério do Ambiente e Recursos Naturais (Ministry of Environment and Natural Resources). The name was changed later to Ministerio do Ambiente.
Decreto-Lei #188/93 of 05/24/93, which established the Secretaria-Geral (General Secretariat) and organization of the Ministry of Environment and Natural Resources.
Decreto-Lei #191/93 of 05/24/93, which established the Instituto da Agua (Water Institute).
Decreto-Lei #218/94 of 08/20/94, which amended the legislation that regulates coastal zones and water.
Decreto-Lei #310/95 of 10/11/95, which established the regulations for collection and treatment of urban wastes, hazardous wastes, hospital wastes, and industrial wastes.
Decreto-Lei #162/96 of 09/04/96, which established the rules for participation by private companies in the handling of environmental services by way of concessions.
Trade Relations with the United States
Bilateral relations between the United States and Portugal are excellent. The top categories of manufactured U.S. exports to Portugal include medical, scientific, and laboratory equipment; office and telecommunications equipment; and aircraft and parts. The total size of the Portuguese market for direct U.S. exports in 1997 was approximately $1.1 billion, and it has been growing at a rate of about 3 percent per year in the recent past. The U.S. share of the import market is 4 percent. Indirect U.S. exports entering Portugal through other EU countries probably double the total value of American goods in the market.
The Portuguese Government, as well as the private sector, welcomes foreign investment and sees it as an important avenue to develop the country's economy. Nevertheless, there are restrictions placed on non-EU members in some sectors, such as transportation and telecommunications. Non-EU members cannot obtain benefits under national treatment for their investments in Portugal. As the government completes its program to privatize state-owned companies, some of these restrictions could be reduced or may disappear altogether in the future, but this will take some time.
Portugal accepts binding arbitration of investment disputes between foreign investors and the Portuguese state. Portuguese legislation offers trademark and patent protection to foreign and domestic companies. The United States and Portugal signed a bilateral tax treaty, which took effect on January 1, 1996. There are no restrictions on capital outflows.
Among the largest American investors in Portugal, in alphabetical order, are:
3M Kodak
Allied Signal Mobil Oil
Andersen Consulting NCR Portugal
Bristol Myers-Squibb Pepsico
Colgate Palmolive Pfizer Laboratories
Compaq Computer Portugal Rank Xerox
Dow Chemical Schering Plough
Ford Texas Instruments
General Motors Unisys
Hewlett-Packard United Technologies
IBM Automotive
Johnson & Johnson Whirlpool Portugal
About 70 percent of all foreign investment in Portugal is of European origin. Some of the European investment is from European subsidiaries of U.S. companies. The United Kingdom is the leading investor, followed by France, Germany, Switzerland, and Spain.
There are no American companies in the environmental services area known to have offices in Portugal, with the exception of temporary offices for project management. American environmental technology companies cover Portugal from offices in other European countries or through Portuguese distributors, agents, or representatives.
The perception that U.S. firms cannot win Portuguese environmental projects because their feasibility is dependent on EU funding is not accurate. For instance, Foster Wheeler was successful recently in selling its incineration technology for an EU-funded project in Lisbon, proving that it is indeed possible. However, the bulk of the approximately $270 million incinerator will be supplied from European subsidiaries of the company, with only about $14 million supplied directly from the United States. Most of the equipment will be manufactured by the Foster Wheeler subsidiary in France. By using European subsidiaries and/or by bidding for subcontracts with European contractors, American companies can compete successfully in Portugal.
Privatization of Government-Owned Companies
The Portuguese Government has carried out a major program to privatize state-owned companies since 1989. So far, the government has sold several banks, the telephone company (Portugal Telecom), portions of the electric utility, cement manufacturing plants, pulp and paper companies, breweries, the state tobacco monopoly, insurance companies, iron and steel plants, and portions of the petroleum industry.
Scheduled privatizations include the sale of BFE (bank), 35 percent of BRISA (highway management company), Quimigal (chemical company), and SETENAVE (shipbuilding company). During 1998, the government plans to continue its sale of state-owned companies with the privatization of EDP (electric utility), CIMPOR (cement company), ANA (airport management company), PETROGAL (oil company), another 20 percent of BRISA (highway management company), PORTUCEL (pulp and paper company), and TAP (national airline).
The privatization of many of these companies creates a significant change in the Portuguese environmental market. As long as the government owned many of these companies, which can be highly polluting, there was no incentive to invest in pollution control equipment. Pulp and paper mills, cement plants, electric utilities, etc., produced hazardous discharges. Now that these industries are in private hands, government enforcement of installation of pollution control and pollution prevention technologies is possible. Private capital also becomes available to carry out major industrial renovation that could not be done while the companies were in government hands.
Trade Flows
There are considerable challenges in conciliating trade flows on a cash and transaction basis because of the elimination of customs controls in Europe within the European Community in 1992. Further, the liberalization of capital flows or movements and tax-induced capital transactions have made it very difficult to interpret balance-of-payment flows.
These statistical weaknesses make the analysis of current trends very problematic after the opening and liberalization of the economy in the wake of EU accession in 1986. In addition to the challenge of defining the total size of the Portuguese import market, there are additional problems associated with defining specific subsectors of the market. For example, defining the size of the environmental market is complicated by the fact that items of equipment such as membranes, pumps, valves, and compressors have multiple uses, which may or may not be related to environmental operations.
About 75.6 percent of Portuguese imports in 1996 came via the original EU 12 countries. The largest share of Portuguese exports also goes to other EU members. Tables 2-4 show the composition and flow of Portuguese trade during 1996.
Commercial relations between Portugal and Spain since 1985 are so special that they merit analysis. Despite sharing the Iberian peninsula, the two countries did not have significant trade before they entered the EU. Relations in general, particularly trade relations, had been a very delicate subject. Although some of the old fears and reservations about doing business with each other remain, trade between the two neighbors has increased dramatically since 1985, when protectionism on both sides of the border came to an end. Portugal's trade with Spain has increased much more than its trade with other EU members. Spain is now the principal foreign supplier and the second largest market for Portuguese products.
Table 2: Composition of Imports into Portugal during 1996
| Products | Percentage |
| Machinery | 21.3 |
| Transport equipment | 14.9 |
| Agricultural products | 13.8 |
| Products of chemical industry | 12.8 |
| Textiles. clothing & footwear | 10.4 |
| Metal and mineral products | 7.8 |
| Energy products | 7.7 |
| Hides, skins, wood, cork, paper | 5.8 |
| Other | 5.5 |
Source: IMF
Table 3: Source of Portuguese Imports in 1996 by Country
| Products | Percentage |
| Spain | 22.4 |
| Germany | 15.5 |
| France | 11.1 |
| Italy | 8.3 |
| United Kingdom | 6.7 |
| Netherlands | 4.4 |
| United States | 3.2 |
| Japan | 2.2 |
Source: IMF
Table 4: Portuguese Export Market Share in 1996
| Products | Percentage |
| Spain | 21.2 |
| Germany | 14.2 |
| France | 14.1 |
| United Kingdom | 10.8 |
| Italy | 3.7 |
| Netherlands | 4.9 |
| United States | 0.8 |
| Japan | 0.6 |
Source: IMF
At least four Spanish companies are active in the Portuguese market for environmental services and equipment, for the most part in municipal solid waste collection and treatment and in water treatment and supply. At least one Portuguese company has also invested in the purchase of a minority position in a Spanish environmental services company: Teixeira Duarte, one of the largest Portuguese companies, bought participation in Pridesa, a Spanish environmental services company with operations in the Iberian peninsula as well as in other parts of the world.
European companies with interests in the Portuguese environmental market are:
SUMA, owned by the DRAGADOS/ FCC consortium and the Portuguese group MOTA. SUMA has about 50 percent of the municipal solid waste market in Portugal. It has contracts for waste collection and street cleaning in Aveiro, Cascais (including beach cleaning), Vale de Sousa (three municipalities), Batalha, and part of Sintra. FCC Medio Ambiente SA-This is the largest Spanish construction company, currently handling municipal solid waste collection and recycling programs as well as industrial waste for several municipalities in Spain and other countries. The company is a subsidiary of Fomento de Construcción y Contratos (FCC), a large Spanish construction company. In January 1998, this group was awarded the contract for environmental services for the 1998 Lisbon World's Fair.
TECMED, owned by the Spanish construction company Grupo Gil Navarro. The company has contracts for waste collection in two municipalities in the north of Portugal.
CESTA, owned by the French group Lyonnaise des Eaux and its Spanish partners. CESTA has the contract for maintenance of the grounds of the 1998 World Trade Exhibition.
Aguas de Barcelona, composed of the French group Lyonnaise des Eaux and the Spanish banking group La Caixa. Aguas de Barcelona has the contract for water treatment and distribution in the Aveiro area.
Among the largest Spanish investors in Portugal are Cepsa Petroleos, Seat, and Repsol. Large Spanish utilities that have been recently privatized in Spain are now bidding for Portuguese companies that are in the process of privatization. ENDESA, the largest Spanish and European electric utility company, with investments in many Latin American countries, is also aggressively pursuing business opportunities in Portugal.
Spanish companies in the environmental services area, together with French and British firms, are the prime international competitors for American companies in Portugal. German equipment suppliers in the environmental field are the prime competitors in hardware.
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