The Technical and Political Discussion of the Escudo Zone Problems, and the Reform of 1971

Depreciation of colonial escudos was considered as an unacceptable solution for the payment arrears in the Escudo Monetary Zone: revenues of receivers living in the Metropolis would be eroded, and credibility effects regarding the financial sustainability of the colonial empire would damage the government’s image on the international scene. Negotiations with Europe to move the empire territories all together into the European Economic Community were also considered to be politically impossible, because of weak international support to Portugal to preserve a colonial empire. As a result, the 1971 reform introduced quantitative limits to the overseas imports, tariffs, and ceilings for each kind of financial transfer, giving up the goal of a Portuguese free trade area in the Escudo Monetary Zone. The Foreign Exchange Management Funds of the territories of Angola and Moçambique were awarded with loans to settle the orders of payment that were still outstanding. Colonial Foreign Exchange Management Funds were authorised to issue domestic loans expressed in any escudos, but they were jointly responsible for them.