state enterprises, restraining entitlements, and overhauling
the tax code to incorporate the growing gray economy and farmers,
most of whom pay no tax. The previous Socialist-led government
introduced a package of social and administrative spending cuts to
reduce public spending by about $17 billion through 2007, but full
implementation of the plan was trumped by election-year politics in
2005. The right-wing Law and Justice party won parliamentary
elections in September, and Lech KACZYNSKI won the presidential
election in October 2005, running on a state-interventionist fiscal
and monetary platform. Poland joined the EU in May 2004, and surging
exports to the EU contributed to Poland's strong growth in 2004,
though its competitiveness could be threatened by the zloty's
appreciation. GDP per capita roughly equals that of the three Baltic
states. Poland benefited from nearly $23.2 billion in EU funds,
which were available through 2006. Farmers have already begun to
reap the rewards of membership via booming exports, higher food
prices, and EU agricultural subsidies.

Portugal
Portugal has become a diversified and increasingly
service-based economy since joining the European Community in 1986.
Over the past two decades, successive governments have privatized
many state-controlled firms and liberalized key areas of the
economy, including the financial and telecommunications sectors. The
country qualified for the European Monetary Union (EMU) in 1998 and
began circulating the euro on 1 January 2002 along with 11 other EU
member economies. Economic growth had been above the EU average for
much of the 1990s, but fell back in 2001-06. GDP per capita stands
at roughly 70% of the EU-25 average. A poor educational system, in
particular, has been an obstacle to greater productivity and growth.
Portugal has been increasingly overshadowed by lower-cost producers
in Central Europe and Asia as a target for foreign direct
investment. The budget deficit surged to an all-time high of 6% of
GDP in 2005 but was reduced to 4.6% in 2006. The government faces
tough choices in its attempts to boost Portugal's economic
competitiveness while keeping the budget deficit within the
eurozone's 3%-of-GDP ceiling.

Puerto Rico
Puerto Rico has one of the most dynamic economies in the
Caribbean region. A diverse industrial sector has far surpassed
agriculture as the primary lo