Portugal Country Analysis

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The political and legal systems of a country are two key factors that should be considered when deciding to invest in a country such as Portugal. These factors are important because they can influence the benefits, costs, and risks associated with doing business.(Hill, p.62) In regards to Portugal’s political system, it has experienced a significant transformation since the Revolution of 1974. Today Portugal is a strong and stable democracy that offers opportunities for international businesses. In fact, “the Portuguese Government offers investment incentives which can be tailored to investors’ needs and capital based on industry, proposed size of investment, and project sustainability.” (US Department of State, 2013) Portugal has an established system of government that is both democratic and parliamentary. The system of government functions with a President that is elected as head of state, and a Prime Minister, appointed by the President, acts as the head of government. Accordingly, Portugal poses minimal political risk for foreign direct investment (FDI). However, Portugal’s collectivist political ideology makes it less attractive for investments. Since collective goals are given priority, the state could interfere with enterprises causing the market to be more restricted than free. This could make FDI a little riskier. Differences in the structure of law between countries can also have important implications for FDI. (Hill, p.63) For an investor to benefit from investing in Portugal it is important that their legal system is efficient and reliable. Portugal has a civil legal system. A civil legal system is based on a detailed set of laws organized into codes. (Hill, p.54) In Portugal, powers are separated among branches of government with the judicial branch being independent. It is favorable for FDI that Portugal’s judicial branch is independent.

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