What is Madeira Escudo
Madeira escudo was the former currency of Madeira, an island off the coast of Portugal. The Madeira escudo was used as Madeira's currency until it adopted the euro along with Portugal on January 1, 2002.
BREAKING DOWN Madeira Escudo
Madeira escudo was Madeira’s currency from the mid-1970s until the end of 2001, when the country adopted the euro along with Portugal. The conversion to a common currency was put in place to help simplify and expedite trade among the countries that comprise the European Union (EU), a group of 28 countries that operates as a cohesive economic and political block, 19 of which use the euro as their official currency. The conversion was also intended to help eliminate the many uncertainties that were posed by unstable exchange rates and the need to exchange currencies prior to completing a transaction.
The widespread adoption of the euro also meant that individual EU member countries could no longer inflate their national currencies to eliminate government debt. However, the European Central Bank, which is responsible for the monetary system of the euro currency area, still maintains that power.
Critics of the euro asserted that its widespread implementation decreases currency competition, giving individuals and businesses fewer options to hold their money in a different currency when faced with wealth-eroding monetary policies such as inflation. Others pointed out that broad use of a single currency could be followed by tax harmonization policies that would decrease tax competition among member states and stifle economic growth.
Economy of Madeira
As an island nation with a 90-mile long coastline, Medeira’s economy and industry is heavily dependent upon the sea, its port operations and tourism as drivers of economic activity. Tourism represents the island’s primary source of revenue and accounts for approximately 20 percent of the island’s gross domestic product (GDP). The nation’s main port, the Port of Funchal is used by cruise shipping companies as their main dock and, overall, 88 percent of Madeira’s imports and 12 percent of its exports flow through the port.
The opening of a free trade zone in Madeira has also played a growing role in its economic development. The Free Zone of Madeira, or Madeira International Business Center, provides tax breaks to companies if they establish businesses on the islands, develop manufacturing facilities or use the island as a major trading point. In response, international investors have drawn to Madeira’s business environment of low taxes, low inflation and solid infrastructure development. As a result of its continued progress, the free trade zone has made a sizable contribution to Madeira’s income.