Geert Bekaert and Campbell R. Harvey's
Chronology of Economic, Political and Financial Events in Emerging Markets
Major Political and Economic Events
Foreign Investment Code bans acquisition of existing domestic enterprises as well as new foreign investment in key public sectors.
Austerity measures in the wake of US$1.5 billion IMF credit.a Lisbon Stock exchange was opened for trading of all shares and securities.a
Portugal formally applies to join the EEC.a
Agreement reached with IMF on a long-delayed standby credit, thus unblocking other foreign loans.a
The Bank of Portugal ceased to apply phasing requirements for transfer of profits and dividends in individual amounts exceeding US$250,000. a3(first entry)
The limit above which private external capital transactions requires the approval of the Minister of Finance was raised to Esc 200 million.a3
The limits on foreign exchange allowances for tourist travel were raised.a3
The special clearing arrangement with Greece was terminated and transactions were required to be settled in the currencies quoted by the Bank of Portugal.a3
All transactions by foreigners regulated by Instituto do Comercio Externo de Portugal, set up by decree-Law 115/82.q
The transfer abroad of the proceeds from the liquidation of foreign investment, which hitherto was authorized after five years of the initial investment, would henceforth be freely permitted, on condition of compliance with the conditions established under the investment authorization.a3
Council of the Revolution dissolved.a
New Constitution signed into law that curtailed Presidential powers in favor of Parliament, provided for civilian supreme court and placed the armed forces under a civilian defense minister.a
The maximum amount of individual private capital transactions that could be effected without approval was raised from Esc 200 million to Esc 500 million.a3
IMF grants Portugal US$55.7 million loan. Exchange rate controls eased slightly.a
Portugal enters EC and agrees to eliminate all barriers to trade.e The introduction of the Insider Trading Laws.a4
Most capital transactions with residents of EC member countries are, or will be free of restrictions.a3
Buckberg Liberalization date.d
Market performance attributed to "Portuguese entry in the EC and the deregulation and reform of the financial and public sectors."e
A new regulation governing the acquisition of land in Portugal by foreign residents was introduced.a3
All restrictions on foreign investment removed except for arms sector investments.a
New direct investment projections in Portugal by nonresidents were subject to prior declaration to the Foreign Investment Institute. In the absence of a reply from the institute within 60 days, the project would be considered to have been approved.a3
Bekaert/Harvey Official Liberalization date. [Final version].
Kim and Singal Liberalization date.
Corporation Law passed. Governs trading, investor protection.q
Portugal Fund Ltd launched on the London Stock Exchange with net asset value of $20.4 million as of December 1991.aa
IFC Liberalization date.i
Bekaert/Harvey Official Liberalization date. [NBER version].
Controls on purchases of foreign securities were relaxed. Mehrez and Kaufmann Liberalization date. a1
The limit above which medium- and long-term capital transactions would require the approval of the Minister of Finance was increased from Esc 800 million to Esc 5 billion.
Foreign exchange swap operations ceased to enjoy special treatment under the regulations on the banking credit ceiling.a3
The functions of the Foreign Investment Institute were transferred to the Portuguese Foreign Trade Institute. The limits applicable to investments in EC and OECD countries that are allowed freely were increased to Esc 50 million.a3
Regulations governing investment in foreign securities were liberalized, whereby the limits for institutional and individual investors were increased to Esc 4 million.a3
New privatization laws are adopted that permit 100% privatizations called for limit on foreign ownership on a case by case basis depending on industry, eliminating the earlier limit of 10% on the foreign holding of privatized shares.
Portfolio investments by residents in foreign currency securities that are officially listed in recognized stock exchanges abroad were fully liberalized. Enterprises drawing financial credits from abroad were required to deposit the equivalent of 40% of these credits in a nonremunerated account with the Bank of Portugal.a3
All FDI and investments in real estate abroad by residents were liberalized, as was the acquisition of foreign shares not quoted in stock exchange. However, residents must channel such investments through a resident bank by establishing custody accounts. Banks were required to withhold taxes as necessary and to verify payment of all taxes.a3
New legal framework for the stock exchange becomes law - called Sapateiro Law. It is designed to bring the Portuguese system in line with the European Community rules. It established an independent SEC and rules against insider trading and disclosure.
New system for continuous automatic trading was implemented for some stocks.
Prime Minister Cavaco Silva and the Social Democrat Party were re-elected for four more years with an overall Parliamentary majority.
The contracting of medium- and long-term financial credits from abroad was liberalized. The existing balances maintained at the Banco de Portugal were released.a3
Bank of Portugal no longer requires 25% of foreign borrowing to be deposited into non-interest bearing accounts if used for non-trade or non-commercial purposes.
Ban on foreign investment in floating-rate treasury notes ends.
Government devalues the escudo by 6% in response to a 6% devaluation of the Spanish peseta.
The remaining exchange restrictions on capital transactions were lifted.a3
The contracting of short-term financial credits from abroad was liberalized.a3
Bank removed remaining restrictions on capital flows moving into and out of the country. Foreigners can now operate in the short-term money market and domestic banks can lend escudos to non-residents. Maastricht Treaty is ratified by President Soares. Regulations on exchange control were lifted. Mehrez and Kaufmann's second Liberalization date. a1
First exchange-traded overseas listing.a9
Capital movements between Portugal and abroad were liberalized.a3
Prime Minister Anibal Cavaco Silva announced a major reshuffling in his cabinet. New convergence program presented to the EU monetary committee.
Oporto Stock Exchange closed as part of a plan to base Portugal's spot trading in Libson and to develop the Oporto Exchange as a national options and futures exchange. Elimination of 20% withholding tax and creation of a screen based trading system.
ADR effective date. (Company=PORTUGAL TELECOM, Exchange=NYSE)a11
Liberalization of FDI.a3
Oporto Derivative Exchange opens.
Government awards 65% stake in Banco de Fomento & Exterior to Banco Portuguese de Investimento.
The Securities Market Commission said it may allow short-selling in Portuguese stocks for institutional investors.
(Provisions specific to institutional investors) The maximum limits on securities issued by nonresidents and on portfolio invested abroad by institutional investors were redefined.a3
19 Portuguese stocks joined the Dow Jones global indexes.
The addition of Portugal to the Morgan Stanley Capital International developed world indexed. The European Commission took Portugal to court over investment laws that discriminate against foreigners.
(Provisions specific to institutional investors) The maximum limits on securities issued by nonresidents and on portfolio invested abroad by pension funds and insurance companies were redefined on Jan. 30 and Feb.4 respectively.a3
(Provisions specific to institutional investors) The maximum limits on securities issued by nonresidents and on portfolio invested abroad by pension funds were redefined.a3
The central bank lowered interest rates to German levels in preparation for the common European currency in January 1999.
(Provisions specific to institutional investors) The maximum limits on securities issued by nonresidents and on portfolio invested abroad by insurance companies were redefined.a3
The European Commission endorsed Portugal's bid to adopt Europe single currency.
Portugal Telecom's bid for a stake in Brazil's Telebras.
            9812 The new currency replaced the Portuguese escudo in transactions starting January 1. 
           9903 A new trading system “List” was  launched on March 1.
          990430 (Provisions specific to institutional investors) A minimum limit of 50% investment in Portuguese public debt securities with maturity of over one year was allowed. A minimum limit of 10% on nonresident stocks quoted in stock markets of EU member countries was allowed.a3
             9904 The IFC graduated Portugal from its index series on April 1, 1999 due to its economic  progress, level of financial market development, and entry into the European Monetary Union.
991011 Prime Minister Antonio Guterres´ Socialists won a convincing victory in yesterday´s general election. Whilst this is a remarkable achievement for a government that has survived four years in a minority, Guterres has failed to achieve an absolute majority once again. His party´s share of the vote fell just short of 44%, at the bottom end of predictions, probably due to voter fatigue and apathy. The Socialists have won 113 seats of the 230 available, with their nearest rivals, the PSD, languishing on 83 seats. Investors should be reassured by Guterres´ victory, as he has proved a wise manager of the economy in his first term: he is very much in the ´Third Way´ mould of Socialist leaders. The Socialists´ victory has been assured by the steadily improving economy, public appreciation for the charismatic Guterres and the disarray of the opposition. Nevertheless, with the challenge of meeting EMU criteria behind Portugal, relations between the Socialists and the opposition are set to be less consensual. This will add to the challenge that the government faces to push through further crucial social and public-sector reforms
000119 Two leading banks, Banco Espirito Santo and Banco Portugues de Investimento, have agreed to merge through a share swap, it was announced today. The new body will be called BES.BPI, and will control up to a 25% share of the domestic market. The ease with which the deal has been achieved stands in marked contrast to difficulties encountered over the sale of financial group Champlaimaud to Spain´s BSCH. The protectionist attitude of the government regarding the merger required EU intervention to allow it to be completed
000810 Over 1,400 hectares of forest have been destroyed in the biggest fires in Portugal so far this year, mostly centred around the region surrounding the capital, Lisbon. Seven firemen have been wounded as over 1,000 firefighters struggled to contain blazes in the tourist areas around Sintra and Cascais. Some tourist campsites and residential areas have been evacuated as a precaution. The fires - which occurred as a result of unusually high temperatures combined with strong winds - are now mostly under control, although they have not yet been fully extinguished.
000907 Compounding the government´s worries before it even returns to parliament after the summer recess, the head of the privatisation programme and Treasury and Finance Secretary Antonio Nogueira Leite has announced his resignation. Nogueira Leite, the number two in the Economics Ministry, behind Minister Joaquim Pino Moura, said that he was leaving for personal reasons, but it is more likely that a dispute over economic policy with Pino Moura, particularly over the much-hyped budget for next year, is the real cause of his departure. The head of the opposition, Jose Manuel Durao Barroso, who yesterday announced a vote of no confidence against the government
001024 The government has raised 1.6bn euros (US$1.33bn) from the sale of an 18% stake in electricity utility Electricidade de Portugal (EdP). The total was slightly less than expected, attributed to poor market conditions over the last few months. However, the sale has given the government much-needed restructuring funds, and emphasises its commitment to its on-going privatisation programme, touted as a major part of next year´s budget planning
001215 Prime Minister Antonio Guterres, who is already in the midst of his trickiest political period since he first came to power in 1995, has been hit by another embarrassment he could have done without, this time concerning a private foundation financed with public money. Guterres' Sports Minister and Deputy Interior Minister have been accused of misusing public funds, and the opposition has predictably called for their heads and for the foundation to be dissolved. Guterres has launched an investigation into the affair, although he contests that any errors made by the ministers were not made in bad faith. The row became a serious concern for the Prime Minister when he was accused of knowing about the funding for the foundation - which was set up to promote road safety - for several months without doing anything about it. Guterres met President Jorge Sampaio to discuss a way out of the turmoil yesterday, although arguably the damage to his already failing credibility has already been done
010115 The incumbent President, Jorge Sampaio, was voted back into office yesterday in the presidential elections without much fuss. Although the turnout was very poor, with 49.3% of the electorate abstaining, Sampaio romped to victory with 55.9% of those turning out voting to reinstall him as President for a second five-year term
010411 The Portuguese economy has been turning in impressive growth figures in recent years, but progress in many areas is being undermined by failures to cut government spending. The Organisation for Economic Cooperation and Development (OECD) warned yesterday that unless the government amends its fiscal stance and carries out reforms the country will struggle to meet eurozone stability criteria
010709 Central Bank Not To Print High Denomination Euro Notes
010807 Finance Minister Guiherme Oliveira Martins has ruled out any government plans to privatise state enterprises before the second half of 2002. In an interview with the daily 'Diario Economico', the minister blamed the sinking of capital markets' transactions for forcing the government to sideline privatisations. However, he insisted that the next planned privatisation will take place in energy-holding company Galpenergia in the second half of 2002.
011011 The Portuguese government has cut its 2002 GDP growth forecast to between 1.75% and 2.25%, according to Finance Minister Guilherme d'Oliveira Martins. GDP growth of between 2% and 2.75% had previously been assumed in the drafting of the 2002 budget. However, D'Oliveira Martins had said that downward revisions were likely before the draft 2002 budget was presented, following the terrorist attacks in the US. The draft budget for 2002 will be presented to the cabinet later today and to parliament on 15 October. The finance minister said that the 2002 budget would reflect the government's efforts to hold down spending, in line with its belt-tightening programme, and would include measures to boost both private and public investment
011221 The quiet success of budding pan-European stock exchange Euronext continued yesterday with the agreement of financial terms with the Lisbon and Oporto Stock Exchange (BVLP). The deal, which will see the exchange join those of Paris, Amsterdam and Brussels, involves BVLP exchanging its shares for 35m euro (US$31.4m) and 4% of the enlarged capital of Euronext. BVLP shareholders will receive 4.8m new Euronext shares, at a rate of 0.8 new shares and 5.90 euro in cash for each of their old shares. Further European exchanges are set to join the Euronext club, rubbing salt in the wounds of the region's largest exchanges, London and Frankfurt. The latter tried to merge into iX, but the deal fell apart. The pressure is now intensifying for them to rejoin the consolidation bandwagon
020328 The victors in the 17 March legislative elections have gained three more seats after ex-patriate votes were counted. The centre-right Social Democrats (PSD) will now occupy a total of 105 seats in the 230-strong chamber. This is still insufficient for an absolute majority, however, and a coalition will result. The PSD is negotiating with the rightist Popular Party to form a government. The latter party won 14 seats, making their combined potential tally 119. A fourth seat decided by voters abroad was awarded to the out-going Socialists, so that their revised total is now 96
020402 Bank of Portugal governor Vitor Constancio conceded yesterday that the country's 2001 budget deficit remained an 'open' question, but said that the country was not facing an economic crisis. 'We cannot deduce from the budget situation that there is an economic crisis [in Portugal]', he said, following a meeting with President Jorge Sampaio. The Portuguese government has increased its budget deficit estimate for last year from -2.2% of GDP to -2.4% of GDP.
021115 Hundreds of thousands of public-sector workers in Portugal yesterday staged the country's first general strike in 10 years in protest at labour reforms. Proposed budgetary austerity measures were also attacked on a miserable day for the government
030211 Portugal's unemployment rate rose to 6.2% in Q4 from 5.1% in Q3, according to National Statistics Institute (INE) data. This is the highest level of unemployment recorded in Portugal since the first quarter of 1998, when the current statistical series began, the agency said. Labour Minister Antonio Bagao Felix said that he expected unemployment to begin falling at the end of 2003 as the economy picked up. The government plans to launch measures in March to train workers and ease the effects of unemployment, he said. The government has laid off thousands of public-sector workers and has cut back spending in an attempt to narrow its budget deficit, which breached EU limits in 2001. With the economy still struggling, the government has been forced to persist with its austerity measures and, in the absence of stimuli from elsewhere, this is having a negative impact on both growth and unemployment
030430 The Bank of Portugal estimates that the recession-hit economy grew by just 0.4% last year - slightly below the official estimate of 0.5%. The bank also estimates that the country's budget deficit was 2.7% of GDP, which is in line with the official estimate. Earlier this week, the Finance Ministry announced that it had revised its economic growth forecast for 2003 downwards from 1.25-2.25% to 0.25- 0.75%
030625 Yesterday Portugal's Prime Minister José Manuel Durao Barroso unveiled plans to modernise and streamline the country's public sector, putting the government on a collision course with the unions
030715 Portuguese inflation fell sharply from 3.7% in May to 3.3% in June. As recently as February, the rate was 4.2%. The sharp decline in the annual rate is due to the fact that there was a value-added tax (VAT) increase in June 2002, which has now fallen out of the comparison. Month-on-month prices fell 0.1%. Portugal still has the second-highest inflation rate in the eurozone, behind Ireland. According to the harmonised measure, inflation was 3.4% in Portugal in June and 3.8% in Ireland
031008 Foreign Minster Antonio Martins da Cruz yesterday tendered his resignation over the row surrounding the abuse of ministerial privilege, continuing a worrying trend in cabinet departures for the government of Prime Minister José Manuel Durão Barroso
040126 The two main unions in Portugal, the General Workers Union (UGT) and the General Confederation of Portuguese Workers (CGTP), staged a general strike on Friday (23 January) and wreaked havoc on the public sector. Hospitals, council services, airline services and schools were all disrupted by the strike, which union leaders estimated enjoyed 90% participation among the 700,000-strong public sector. The strikes are in protest at a government freeze on public-sector wages, which Prime Minister José Manuel Durao Barroso recently signalled would be upheld this year as part of the government's attempts to reduce the budget deficit.
040430 Data released by the central bank have shown a contraction of gross domestic product of 1.2% in 2003, which has been pinned on sluggish domestic demand. However, the bank reported that H2 results were slightly better as exports and private consumption grew. The contraction was slightly smaller than expected, and the bank maintained a growth forecast for 0.75% in 2004. The bank advised the government to keep to its spending cuts policy, but this has proved unpopular, as have measures to cut corporate tax to stimulate the business environment - and the bank's report urged the government to hold out on further tax reform until public finances stabilised
040610 The death of a top politician has led to the halting of final campaigning in Portugal for the upcoming European Parliament elections. Former Finance Minister Antonio Sousa Franco, the head of the opposition Socialist Party's (PS) list, died in hospital yesterday after suffering a heart attack on the campaign trail. The five-party campaign, which had become highly personalised, notably between Franco and the ruling, right-wing Popular Party (PP), was suspended following the news. Franco was known for his role in preparing the country's public finances, through tight spending restrictions, for entry into the single European currency in 1999, and had been touted as a possible presidential candidate. He replaced popular ex-President Mario Soares, who stepped down from the campaign recently, and whose departure from the socialist camp was already responsible for a declining interest in the vote. However, the governing coalition of the Popular Party and the Social Democratic Party (PSD) can still expect to suffer at the hands of a public feeling the pinch of austerity reforms implemented by the coalition in 2002.
040630 Prime Minister José Manuel Durão Barroso has agreed to become the new president of the European Commission, sparking debate over his replacement and raising the possibility of early elections, in which the ruling Social Democratic Party would likely be punished for two years of austerity
040712 The newly-elected head of the ruling Social Democratic Party has been charged with forming a new government, after President Jorge Sampaio ruled out calling early elections in response to the departure of José Manuel Durão Barroso.
Regulations on Foreign Investors

Restrictions: Foreign investors must open a non-resident account in foreign currency or Portuguese escudos in accordance with Banco de Portugal regulations. Transactions by foreign investors must be reported monthly by their bank to the Banco de Portugal.

Taxation: 15% dividend tax rate (subject to an additional 5% of gift and inheritance tax) and 10% tax on capital gains (0 if securities held over 12 months).a5(first entry)


Restrictions: No change.

Taxation: 12.5% dividend tax rate (subject to an additional 5% of gift and inheritance tax, 6.25% on dividends of listed privatized companies) and 10% tax on capital gains (0 if securities held over 12 months).a5


No change through 2001.a5


The Portuguese Investment Agency, or API (Agência Portuguesa para o Investimento), was created in 2002 and is responsible for investment promotion and large-scale investor support in Portugal, and will provide information on setting up businesses and contacts within the country. It can also structure incentive packages and identify investment opportunities. There are a number of other bodies that deal with specific forms of investment incentive packages, for example those related to research and development (R&D) and innovation.
="-1" color="#008000">2002 The Portuguese Investment Agency, or API (Agência Portuguesa para o Investimento), was created in 2002 and is responsible for investment promotion and large-scale investor support in Portugal, and will provide information on setting up businesses and contacts within the country. It can also structure incentive packages and identify investment opportunities. There are a number of other bodies that deal with specific forms of investment incentive packages, for example those related to research and development (R&D) and innovation.