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21
earnings from real estate, trade, and invested
been seriously restricted by a non-converti-
capital. There is also a special tax on salaries
bility of most currencies into dollars.
of those employed in commerce and the pro-
The accumulation of foreign exchange
fessions. Other revenue is provided by profits
from wartime exports put Portugal temporar-
of State industries and services, and from
ily into a strong foreign payments position,
trade concessions leased to private enterprise.
but because of the need for replacement of
The tax system in Portugal is inequitable
equipment and replenishment of stocks fol-
since the incidence of taxes on the lower in-
lowing the war period, imports, particularly
come groups is disproportionately heavy. The
from the US, rose to unprecedented heights.
new tax rates imposed in 1946 somewhat alle-
Furthermore, considerable imports of food-
viated this situation by forcing those with the
stuffs have been required because of several
greater taxable capacity to pay heavier taxes.
very poor crop years, which caused a further
Laxity in the administration of tax collec-
drain on dollar exchange. Exports, however,
tions, however, adds to the inequities of the
have not expanded comparably; it has become
system.
increasingly difficult to locate foreign markets
The Bank of Portugal, founded in 1864,
for Portuguese products, which are largely
serves as the bank of issue and government
non-essential or available elsewhere at lower
depository. It operates as a joint stock com-
prices.
pany under state control. All credit trans-
Cork sales have declined sharply in the face
actions by or for the account of the State in
of curtailed world demand and competition
favor of agriculture and industry, and all pen-
from Spain and North Africa. The wine
sion charges, are centralized in the National
trade, which depends principally upon export
Credit Institute and the National Welfare In-
trade for its existence, has stagnated because
stitute, which are departments of the General
of economic austerity programs in Europe. A
Bank of Savings, Credit, and Welfare. The
failure of the sardine run in 1948 and 1949
General Bank also finances the corporative
has resulted in a crisis in the fish export
organizations.
trade, and unemployment in one of the prin-
cipal Portuguese industries.
3. Economic Stability.
In recent months this weakening of the
The prosperity of the war and postwar
national economy has become more apparent,
periods has come to an end and the traditional
and has been accelerated by a prolonged
problem of maintaining tolerable living con-
drought. Scarcities have again become evi-
ditions in the face of a steadily increasing
dent in foodstuffs and other items, accom-
population in a country poor in national re-
panied by a considerable increase in black
sources again confronts the government.
market activities. The gap between living
Unless Portugal meets its long-term problem
costs and wages has widened to the disadvan-
of greater productivity of land, labor and capi-
tage of workers. Private capital is demon-
tal, with a resulting appreciable increase in
strating a notable reluctance to invest in new
purchasing power, its economy will never en-
ventures.
joy the resiliency important to true economic
The economic deterioration will become
stability. The immediate economic difficulties
more pronounced as the effects of the foreign
which confront the country should be viewed
trade unbalance spread throughout the whole
in light of this most pressing need of greater
economic structure. Although the escudo is a
productivity and expanded purchasing power.
sound currency at the present time, the steady
The economic difficulties which now beset
decrease in foreign exchange reserves will
Portugal stem from the nation's inability
probably affect its future position in interna-
to export enough to pay for essential im-
tional markets. The present low standards
ports. Prior to World War II, the import
of living will probably drop still lower without
surplus was compensated for by invisible
a great increase in foreign assistance, which
receipts from such sources as emigrant re-
is not in prospect. The aggravation of eco-
mittances and tourist trade. Since the
nomic problems may be expected to lead to
war, however, this invisible income has
political instability in the future.
SECRET
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"ocrText": "SECRET\n21\nearnings from real estate, trade, and invested\nbeen seriously restricted by a non-converti-\ncapital. There is also a special tax on salaries\nbility of most currencies into dollars.\nof those employed in commerce and the pro-\nThe accumulation of foreign exchange\nfessions. Other revenue is provided by profits\nfrom wartime exports put Portugal temporar-\nof State industries and services, and from\nily into a strong foreign payments position,\ntrade concessions leased to private enterprise.\nbut because of the need for replacement of\nThe tax system in Portugal is inequitable\nequipment and replenishment of stocks fol-\nsince the incidence of taxes on the lower in-\nlowing the war period, imports, particularly\ncome groups is disproportionately heavy. The\nfrom the US, rose to unprecedented heights.\nnew tax rates imposed in 1946 somewhat alle-\nFurthermore, considerable imports of food-\nviated this situation by forcing those with the\nstuffs have been required because of several\ngreater taxable capacity to pay heavier taxes.\nvery poor crop years, which caused a further\nLaxity in the administration of tax collec-\ndrain on dollar exchange. Exports, however,\ntions, however, adds to the inequities of the\nhave not expanded comparably; it has become\nsystem.\nincreasingly difficult to locate foreign markets\nThe Bank of Portugal, founded in 1864,\nfor Portuguese products, which are largely\nserves as the bank of issue and government\nnon-essential or available elsewhere at lower\ndepository. It operates as a joint stock com-\nprices.\npany under state control. All credit trans-\nCork sales have declined sharply in the face\nactions by or for the account of the State in\nof curtailed world demand and competition\nfavor of agriculture and industry, and all pen-\nfrom Spain and North Africa. The wine\nsion charges, are centralized in the National\ntrade, which depends principally upon export\nCredit Institute and the National Welfare In-\ntrade for its existence, has stagnated because\nstitute, which are departments of the General\nof economic austerity programs in Europe. A\nBank of Savings, Credit, and Welfare. The\nfailure of the sardine run in 1948 and 1949\nGeneral Bank also finances the corporative\nhas resulted in a crisis in the fish export\norganizations.\ntrade, and unemployment in one of the prin-\ncipal Portuguese industries.\n3. Economic Stability.\nIn recent months this weakening of the\nThe prosperity of the war and postwar\nnational economy has become more apparent,\nperiods has come to an end and the traditional\nand has been accelerated by a prolonged\nproblem of maintaining tolerable living con-\ndrought. Scarcities have again become evi-\nditions in the face of a steadily increasing\ndent in foodstuffs and other items, accom-\npopulation in a country poor in national re-\npanied by a considerable increase in black\nsources again confronts the government.\nmarket activities. The gap between living\nUnless Portugal meets its long-term problem\ncosts and wages has widened to the disadvan-\nof greater productivity of land, labor and capi-\ntage of workers. Private capital is demon-\ntal, with a resulting appreciable increase in\nstrating a notable reluctance to invest in new\npurchasing power, its economy will never en-\nventures.\njoy the resiliency important to true economic\nThe economic deterioration will become\nstability. The immediate economic difficulties\nmore pronounced as the effects of the foreign\nwhich confront the country should be viewed\ntrade unbalance spread throughout the whole\nin light of this most pressing need of greater\neconomic structure. Although the escudo is a\nproductivity and expanded purchasing power.\nsound currency at the present time, the steady\nThe economic difficulties which now beset\ndecrease in foreign exchange reserves will\nPortugal stem from the nation's inability\nprobably affect its future position in interna-\nto export enough to pay for essential im-\ntional markets. The present low standards\nports. Prior to World War II, the import\nof living will probably drop still lower without\nsurplus was compensated for by invisible\na great increase in foreign assistance, which\nreceipts from such sources as emigrant re-\nis not in prospect. The aggravation of eco-\nmittances and tourist trade. Since the\nnomic problems may be expected to lead to\nwar, however, this invisible income has\npolitical instability in the future.\nSECRET"
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