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The Portugal business environment, for the short to medium term, remains on shaky ground. In spite of the governments success in privatizing many state controlled firms and liberalizing key areas of the economy (including financial and communications sectors), Portugal’s ability to attract business investment, in recent years, has still lagged. A poor educational system and a rigid labour market have been obstacles to greater productivity and growth. Portugal has also been increasingly overshadowed by lower-cost producers in Central Europe and Asia as a destination for foreign direct investment. As a result, traditional industries such as textiles, clothing, footwear, cork, wood products, food and beverages have slowly diminished in relative size (making way for an increasingly service-based economy). Adding to Portugal’s low competitiveness and business risk, is a high public debt burden that limits the governments ability to intercede and stimulate the economy during recession.

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