Portugal's target is to become a full-fledged member of the European Community (EC) by about 1983. Despite heavy recurring budget deficits and a sagging economy, the government is confident that partnership with its European neighbors will in the long run help to develop the country's economic potential.
One agency that is playing a key role in strengthening many of Portugal's badly battered industries is the government's Foreign Investment Institute. It was set up several years ago to encourage, guide, and monitor foreign investments within the country. It has sole power to admit or deter foreign organizations from operating in Portugal. But its main function is to provide a clearinghouse for investment by actively searching for and inviting overseas technology.
Of the many investment forms available, joint ventures and part-ownership have so far been the most popular. In general, United States interests have been slow to respond; but British, French, West German -- and now Japanese -- are ever-broadening investors here.
Some trade experts are wary of the country's ability, as a ''poor relation,'' to thrive inside the EC because of intense and better-established competition. Backers of Portugal's EC entry, on the other hand, believe many of its old-line industries can survive without prop-ups. For example, its tomato paste industry - one of the world's best -- now operates quite satisfactorily without subsidies.
The Japanese have already tripled their modest investments in Portugal from two years ago. They anticipate the opportunity to share in the possible industrial and commercial upsurge when Portugal enters the EC. The main attraction for Japan would be the selling of goods throughout EC member countries while enjoying the lack of customs and trade barriers which affect outsiders.
Prominent, main-line Japanese companies now hold ownership percentages varying from 6 to 70 percent in Portuguese organizations dealing in resins, fibers, steel products, automotive items, textiles, chemicals, fasteners, heaters, and digital clocks.
Portugal's industrial climate -- notwithstanding its strong leftist union movements -- boasts advantages. These include a dependable, low-cost, and industrious labor force; the comparatively easy entry for foreign investment and technology; the definite room for expansion of many industries, both locally and for export; Portugal's undeveloped natural resources, especially minerals; and an ever-steadying government bent on favoring the private sector.
Japanese investment in Portugal, while low-key and small by international standards, is continuing to grow. Japanese banks have been leaders in Portugal's loan syndications in Euromarkets. And the Japanese appear to be becoming more familiar with growth opportunities in the region. Also, Japanese investment probes are reaching into new areas such as machine tools, electric appliances, and mineral development.