PORTUGUESE PRESIDENT JORGE SAMPAIO

One of the star economic performers in Europe, Portugal is attracting U.S. investment and like the Portuguese explorers of old, its companies are opening exciting new markets overseas

In 25 years of breathtaking transformation, Portugal has returned to democracy, shed a colonial empire and become an active member of the European Union, with a booming economy. It is also a valued partner in the North Atlantic Treaty Organization and for such a small country, Portugal is now playing a weighty role in helping end conflicts around the world.

"Among the United Nations, we are the 11th ranked according to our contributions to peace-keeping operations, the first in Europe and second among our NATO allies," affirms President Jorge Sampaio.

"And as we´ve continued to develop our traditional relations with the United States and the Atlantic Alliance, we have boosted our ties to Brazil, through the economic investments we´ve made there, and increased our relations with the other Portuguese-speaking nations," he argues.

Hardly a week goes by without a Portuguese company announcing it is to pour millions or billions into some project in Brazil or another ex-colony, and many times it is in a high-tech field such as telecommunications. Portuguese firms are also taking gingerly steps to invest in Europe.

But closer to home, challenges are appearing on the horizon and Mr. Sampaio, who just won another five-year term in office, says there are issues which must be urgently addressed.

"This country has gone through monumental changes: we´ve managed to consolidate democracy and have enjoyed stable growth since joining the European Union," he points out. "But now we have to face some basic structural problems, and in my opinion the main one is public spending, which is becoming excessive."

Indeed, Portugal resembles a construction site, with most of the building involving big-ticket infrastructure projects. New stadiums for the 2004 European soccer championships, a new airport for Lisbon, a third bridge spanning the Tagus River at Lisbon and an urban railway in Oporto are all under way.

Government outlay on education and social programs is also high. The president says that public expenditure is approaching 40 percent of the country´s GDP and while some of it is necessary, he thinks that much seems to be aimed at attracting votes when election time comes around.

"Over the past ten years, public spending has increased for some very good reasons, and especially over the previous five years the rise in social spending was needed," Mr. Sampaio says.

"But if you look at the budgets from these years, every time public expenditure rose significantly it was in an election year. And the problem is that when you raise the budget in an election year, that becomes the new basis because it´s very hard to cut that spending for the next year."

"So we have to address the budget problems in structural terms and not just in electoral terms,"the president explains. And, he warns, Portugal´s good times—prosperity, the steady and stable increase in productitivy and growth, and the total control of inflation—are likely to end soon as economies everywhere cool.

Mr. Sampaio is also urging that extensive political reforms are needed to interest the Portuguese people once again in the political process.

"The problem, as in many countries in Europe, is the diminishing participation in voting which will be a great challenge in the future in Portugal, and perhaps the rest of Europe and the world,"he says.

"But how do we get voters interested again? For one thing, I think we need open-minded administrations and secrecy in the political process has to be eliminated," he argues.

"I should also point out that political parties need to modernize. The problem is that there is an inherent contradiction between the speed, for example, of management in the private sector and the slowness of the political process."

"And this reform has to concentrate on bringing the political decision-making process closer to the people, in other words: decentralize. With regions or municipalities with stronger powers, people will have more effective knowledge of issues which concern them," the president says.

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