Promise and problems in Portugal

PORTUGAL is one of that gratifying string of nations that have shifted in recent years from the columns of dictatorship to democracy. It deserves United States interest and support. In 1974, Portugal threw off 40 years of dictatorial rule under Ant^onio Salazar, but in the process almost fell to a communist coup. Sturdy Portuguese common sense, and a little right-wing military muscle, prevailed, and the communists were vanquished. Now they are a frustrated minority in a complicated, but legitimate, political process. They also make up the last hard-line Stalinist party in Western Europe.

Today Portugal's delicate democracy seems flourishing, but the country is waging a difficult struggle against political instability and economic stagnation.

Once a major colonial power, with an empire that included Brazil, Angola, Mozambique, Goa, and Timor, Portugal is now left with little Macao, on the Chinese coast near Hong Kong, which the Chinese can take anytime they want.

Though 155 million people outside Portugal speak Portuguese -- some of them in California and New England -- and Portugal broadcasts to them by shortwave radio in a bid to maintain ties, Portugal is basically reliant on its own 10 milllion people, living in a country about the size of Indiana.

From the standpoint of the US, Portugal, although small, is an important ally. The US has the use of Portuguese military facilities in the Azores, some 800 miles west of Lisbon. Portugal is a loyal member of NATO. The defense relationship with the US is excellent.

Despite a few ``Reagan go home'' signs, lingering from President Reagan's visit here in May, Americans are welcome.

When the wife of Portuguese President Eanes campaigned for one of the parties in a recent election here, she showed television clips of herself with Mrs. Reagan. In Portugal, association with the Reagan administration is clearly a political asset, not a liability.

Meanwhile, President Reagan has just appointed as his new ambassador here Frank Shakespeare, a longtime broadcasting executive and White House confidant.

But the fact is that Portugal has been hit by the loss of empire, higher oil prices over the years, and a strong dollar.

It is saddled with a monumental bureaucracy. Some 36 percent of its work force is in government and services, only 27 percent in industry and commerce.

Many Portuguese say the country has been badly run. It is poor. Productivity is low. Particularly in those institutions nationalized during the country's fling with communism, there is massive featherbedding. Nobody gets fired. In some industries, workers have not been paid for several months, but they do not quit because they do not want to lose jobs that may one day pay again.

Capital investment dropped 20 percent last year as frustrated entrepreneurs looked elsewhere for investment opportunities.

Though Portugal is in Europe, it has not really been part of it. The Portuguese are not particularly admiring of neighboring Spain, and they tend to talk about the rest of Europe as a very foreign land.

Attitudes may change with Portugal's entry into the European Community in January. That offers opportunity in the form of credits, loans, markets. There will also be a challenge as some of Portugal's inefficient industries face competition from the more briskly efficient members of the EC.

While Portugal's priority concern should clearly be its lagging economy, the country has been distracted by a number of political upheavals and diversions. Some Portuguese say that preparations for entering the EC are way behind. Others are concerned that to deal with the EC, a new Portuguese bureaucracy will be superimposed on an already unwieldy one.

While tackling all this seems to call for decisive political leadership, the restless voters, participating in a system that seems to encourage fragmentation of parties, have installed a minority government headed by a professional economist.

How will it confront the problems? More in a succeeding column.

John Hughes is a Pulitzer Prize-winning journalist who was assistant secretary of state from 1982 to 1984.

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