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Portugal Defense Industry

Portugal has had a small defense industry since the eighteenth century, consisting originally of a naval arsenal, a gunpowder plant, a cannon foundry, and an arms factory. Beginning in the mid-nineteenth century, the military's food, supplies and, later, fuels were provided by a government agency, the Manutenção Militar. At the beginning of the twentieth century, a factory for supplying military uniforms and equipment was established. During the 1960s, the defense industry expanded to meet the specialized requirements of the antiguerrilla operations in Africa.

The US was openly hostile to the Portuguese presence in Africa during the decade of the 1960s. On the African issue, Portugal was criticised by most of the international community, and Portugal had allies only in South Africa and Rhodesia, and in Europe counted only with France, Germany and Spain. These last three accepted breaking the 1961 UN embargo on arms sales to Portugal, and the Germans and French become the main suppliers of military equipment (although, in many cases, at "embargo prices"). In contrast, the US (which had decreed a unilateral embargo on Portugal) and the UK, allies in NATO, agreed only to provide equipment that was not destined for Africa.

This caused serious limitations, specialy to the Air Force, since they could not use aircraft they had, in some models, in large quantity. Overall, the countries that accepted to sell equipment to Portugal (Germany and especially France; In smaller quantities Spain, South Africa and Israel) produced material in variety and quality, but there were equipment and sub-systems that were only possible get from the US and UK (such as missiles), and whose absence was increasingly important. The small Portuguese defense industry was developed itself to achieving self-sufficiency in support of infantry ground troops, and the supply of dozens of coastal and river boat to the Navy (in the case of ocean vessels, it was necessary to import guns). But it was little compared to the needs.

However, since the end of the fighting in 1974 and the subsequent scaling back of the armed forces, production capabilities have exceeded the country's needs. A modest level of sales abroad have helped the Ministry of Defense keep production lines open for artillery, mortar, and small arms ammunition.

Under Portuguese law, private companies were not permitted to engage in research, planning, testing, manufacturing or overhaul of equipment exclusively intended for military purposes. These laws have been interpreted to restrict to government-owned enterprises the production of bombs, missiles, torpedoes, mines, hand grenades, propellant powders, and other explosives. The construction of combat aircraft, helicopters, and warships was also limited to nationally owned companies, although component manufacture could be subcontracted to private firms.

In addition to Manutenção Militar, the principal government enterprises included Oficinas Gerais de Fardamento e Equipamento (OGFE) for production of uniforms and equipment; Oficinas Gerais de Material de Engenharia (OGME) for the overhaul of military vehicles; and Oficinas Gerais de Material Aeronautico (OGMA) for maintenance and repair of all aircraft, avionics, engines, communications, and radar equipment of the Portuguese air force. OGMA also had maintenance contracts for United States air force and navy equipment and to supply parts and components to several European aircraft manufacturers. The main ordnance factory was Industrias Nacionais de Defesa E.P. (INDEP), a producer of 60mm and 81mm mortars, artillery and mortar munitions, small arms ammunition, machine guns, and, under a German license, the Heckler and Koch 7.62mm G-3 rifle used by the Portuguese army. Arsenal do Alfeite near the Lisbon naval base had facilities for building patrol craft, auxiliary ships, and corvettes, but all of its larger modern vessels had been constructed abroad, and its activities were confined to maintenance and overhaul. Bravia, a private company, produced a range of wheeled armored personnel carriers, reconnaissance vehicles, and military trucks.

According to the ACDA, Portugal's arms exports reached a peak of US$220 million in 1986, falling off to US$40 million in 1989. In the latter year, arms exports accounted for only 0.3 percent of total Portuguese exports. In 1989 the minister of defense said that the defense industry, employing 3,000 to 4,000 people, faced contraction because fewer countries were in the market for arms.

In all European national defense-sector industries, organizational efficiency forms a vital component of the operations that improves competitiveness in the market. The Portuguese government subsidizes companies that are active in this sector in its mission for the companies to achieve improved operational competitiveness, thereby increasing exports and, consequently, become profitable. The policy of subsidization is intended to provide incentives for increasing productive efficiency, which, in the long run, would contribute to the defense industry sharing in the social gains in the form of greater employment and local development. The issue is whether government subsidies have, in fact, resulted in an increase in the technical efficiency and allocative efficiency of the Portuguese defense-sector companies. The results are, at best, mixed, leading to the conclusion that the incentive regulation carried out by the Ministry of Defense is not achieving its aims.

Trading military goods and technologies in Portugal requires authority by the Portuguese Ministry of Defence, who holds a list of authorised companies. British companies may look at partnering with these aiming at gaining business in the market. One of the major players is EMPORDEF, a Portuguese defence industry holding responsible for managing State holdings in firms directly or indirectly involved in defence activities. They represent a worldwide Portuguese presence with customers and partners in Europe, Asia, North and South America and Africa. Relevant capabilities embrace naval, aeronautics, space, ammunition and explosives, training and simulation.

There are opportunities arising, for instance, from the creation of an aerospace cluster, or the implementation of an integrated management system within the Portuguese MoD and Armed Forces. As for the civil side, in Portugal the UK is regarded as a supplier of security products and services of excellence. Companies often seek technology that may add value to the projects they aim at delivering in Portugal and abroad, namely Angola and other Portuguese speaking countries. Electronic surveillance offers opportunities in a wide range of areas, including system integration, some Municipalities looking at urban surveillance / cctv systems, and a project for traffic control radars, including number plate recognition. There are other niche opportunities referring to projects by the Portuguese Home office equivalent MAI and the Portuguese Ministry of Justice. MAI has been investing in integrating emergency and security networks across the country, and also purchasing border control technologies.

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