Portugal, with its long Atlantic coast, lies on the western coast of the Iberian Peninsula in southwestern Europe—the most westerly country on the European mainland. The land consists of highland forests in the north and rolling lowland in the south. It tends to be wetter and cooler in the north. The south can be hot and parched, and it is dotted with reservoirs to conserve water. Most people live along the coast, with a third of the population living in the urban areas of Lisbon and Porto.

Established in the 12th century, Portugal came to preside over a vast realm that had its roots in the seafaring expeditions of the 1400s. In 1487-88 Bartolomeu Dias was the first European to round Africa's Cape of Good Hope. Breakup of the last great overseas empire came in the 1970s, when Portugal relinquished Angola, Mozambique, and other colonies; the influx of some 700,000 returning settlers—retornados—strained an already weak economy. Portugal includes the Azores and the Madeira Islands. Macau, the nation's last possession, reverted to China at midnight on December 19, 1999.

A coup in 1974 ended 42 years of dictatorship. Portugal joined the EU in 1986. EU loans funded infrastructure improvements but added to the burden of debt. To reverse the depopulation and desertification of its southeast region, the government built the Alqueva Dam on the Guadiana River. The hydroelectric dam was completed in 2002—the filling reservoir is creating Europe's largest manmade lake.