VIII. TRADE AND PROJECT FINANCING BRIEF DESCRIPTION OF BANKING SYSTEM After Portugal's accession to the EU in 1986, the Portuguese financial sector underwent dramatic reforms. A majority of the once nationalized financial system is now in private hands. When the privatization process is completed, the government will retain a substantial presence (about 30 percent) in the financial sector through its ownership of the Caixa Geral and BFE groups. The number of banks has doubled from 16 to 37 over the past 10 years. Foreign investment has played an important role in this transformation. Indeed, the financial sector was the largest recipient of foreign investment in the 1986-1993 period. Entry strategies varied from the establishment of branch operations to joint ventures. Over the past 10 years, the number of foreign banks has increased from 3 to 15. FOREIGN EXCHANGE CONTROLS AFFECTING TRADING The opening of the financial sector to private investment has led to increased competition, specialization, and concentration. Additionally, competition has been enhanced by the elimination of all barriers to capital movements and the escudo's incorporation in the exchange rate mechanism of the European Monetary System in 1992. Still, intermediation margins and fees remain high by EU standards. American presence in the retail end of the financial sector is modest. American banks have chosen to operate as majority-owned subsidiaries and to concentrate their activities in various wholesale market niches. Concentration levels have increased noticeably over the past few years. In June 1993, the top five banking groups held a commanding 66 percent of the market, up from 53 percent only three years previous. A strong battle for market share is being waged. GENERAL FINANCING AVAILABILITY Short-term and medium-term financing are readily available. Overdrafts are the most common source of short term finance for corporations. Intercompany borrowing is also common. The issuance of commercial paper began in 1993. The placement of bonds by corporations is small, but growing. EXPORT FINANCE/METHODS OF PAYMENT Bankers acceptances and supplier credit are commonly used to finance international trade. Most international trade is handled by commercial banks. Both Exim-Bank and OPIC programs are available in Portugal, but are little used because commercial credit is widely available and political risks are not perceived to be high. Project financing from multilateral institutions such as the World Bank (IBRD) and the European Investment Bank (EIB) are available. Commercial banks also offer project financing. PROJECT FINANCING Project financing is available for a wide variety of projects ranging from bridges to gas pipeline construction. To our knowledge, a list of local banks with U.S. Correspondent relations does not exist. However, we would be surprised if most, if not all, the 37 local commercial banks do not have correspondent relations with U.S. Banks. Banco de Portugal Rua do COmercio 148 1100 Lisboa Tel: 351-1 346 2931 Fax: 351-1 346 7341 Banco Comercial Portugues, SA Rua Augusta 62/74 1100 Lisboa Tel: 351-1 347 3474 Fax: 351-1 342 1677 Banco Espirito Santo e Comercial de Lisboa Av. da Liberdade 195 1200 Lisboa Tel: 351-1 578 805 Fax: 351-1 532 931 Banco Pinto & Sotto Mayor Rua do Ouro, 28-3o. 1100 Lisboa Tel: 351-1 347 6261 Fax: 351-1 342 7278 Banco Portugues do Atalntico, SA Praca D. Joao I 28 4000 Porto Tel: 351-2 200 3466 Fax: 351-2 200 6504 Banco Totta & Acores Rua do Ouro, 88 -2o. 1100 Lisboa Tel: 351-1 346 9421 Fax: 351-1 346 2386 Banco Comercio e Industria Rua Andrade Corvo 42 1000 Lisboa Tel: 351-1 355 8366 Fax: 351-1 549 453 Caixa Geral de Depositos Lg. do Calhariz 1100 Lisboa Tel: 351-1 346 1981 Fax: 351-1 342 1306 Barclays Bank PLC Av. da Republica 50- 2o, 3o. 1000 Lisboa Tel: 351-1 793 5020 Fax: 351-1 797 9610