Pedro with the dark brown eyes complained that his girlfriend doesn’t understand him and, at 33, he’s feeling it’s time to settle down. The discussion took place in a tiny bar on a cobblestone street in Bairro Alto, home to much of Lisbon’s nightlife. Pedro was pouring out his soul, just as the Portuguese folk singers do in small clubs throughout the city where they sing the mournful fado tunes that have become a source of national pride.

Lisbon is a city with soul. It’s also a place that’s a little rough around the edges, like a diamond waiting to be cut. It’s a hilly European capital city that’s surprisingly provincial, but clearly has its eyes on the future. For every existing ramshackle structure there seems to be a new building under construction.

The city of nearly 2 million is located on the Tagus estuary about 10 miles from the Atlantic coast. Lisbon’s proximity to the sea accounts for Portugal’s hey day during the 15th and 16th centuries’ “Age of Discovery.” As one of the world’s great ports, it was the gateway to a proud empire that reached from Brazil to India.

In 1755, an earthquake that destroyed much of the downtown area also diminished its wealth and status. The city center (Baixa) was eventually rebuilt in elegant, classical style, although medieval sections remain, including Alfama, a humble neighborhood with narrow streets where even today people sit and chat on stoops.

Portugal joined the European Union in 1986 — it was one of the first members to adopt the euro in 1999 — moving towards greater political and economic integration with the rest of Europe. The current president of Portugal, Anibal Cavaco Silva, is a social democrat. Cavaco Silva, who was also the country’s prime minister from 1985 to 1995, was elected to a five-year term as president in January 2006 with 50.6 percent of the vote. He succeeded Jorge Sampaio, a member of the Socialist Party.

Industry here is mostly of the light variety (although there is some motor vehicle and machinery manufacturing). Services, in particular tourism, play an increasingly important role in the economy. Many former state-controlled firms were privatized and key economic areas — finance, telecommunications — were liberalized following Portugal’s entry into the European Union. About 60 percent of the work force is in government and services; 30 percent is in industry; and 10 percent is involved in agricultural pursuits. The government recently raised the country’s minimum monthly salary by 4.4 percent to about $535. Some 500,000 workers — about 5 percent of the workforce — earn the minimum monthly wage. The new salary minimum remains lower than that of other western European countries, but is higher than minimum salaries in some eastern European nations.

The world’s largest producer of cork, Portugal recently began exploring the development of new cork products including shoes and purses. The country is, however, facing increased competition from China in its textile and footwear sectors. Other goods include pulp and paper products, fish, wine, porcelain and pottery, chemicals and petroleum (oil refining). Total exports in 2005 amounted to $37.68 billion.

Portugal’s per capita GDP is below that of other E.U. countries including Slovenia, Malta and Cyprus, but there is room for optimism. Government officials anticipate economic growth in 2007 and Prime Minister Jose Socrates cited the creation of 57,000 new jobs in 2006 during a recent speech in New York. The world’s largest solar power station is under construction, about 125 miles southeast of Lisbon in one of Europe’s sunniest regions.

The 1998 Lisbon World Exposition put Lisbon back on the map as a destination, drawing 11 million visitors in 132 days. An ironic twist: Despite its long history, Lisbon has recently started appearing on Top 10 lists of “undiscovered” places to visit.

LODGING

LAPA PALACE

Perched on a hilltop with beautiful gardens and stunning views , Lapa Palace was once a private palace for the Counts of Valencas. Dine at the acclaimed Ristorante Hotel Cipriani, and indulge in a relaxing massage at the property’s impressive wellness center. Guestrooms are both spacious and gorgeous. Most accommodations are in a modern, six-story wing, but the suites in the original palace are truly spectacular. $$$$
LAPA PALACE
Rua do Pau de Bandeira, 4
tel 351 21 394 9494, fax 351 21 395 0665
http://www.lapapalace.com

SHERATON LISBOA HOTEL & SPA

The Sheraton is centrally located and provides five-star accommodation, with 376 rooms including eight luxury suites. Forty-five “Towers” rooms include butler service and access to a private lounge. Meeting facilities offer leading-edge technology. The 25-story property has two bars and two restaurants serving Portuguese and international cuisine. Services and amenities at the recently renovated property — it reopened in December — include a business center, health club, outdoor pool and a new spa with 10 treatment rooms. $$$
SHERATON LISBOA HOTEL & SPA
Rua Latino Coelho, 1
tel 351 21 312 0000, fax 351 21 354 7164
http://www.sheraton.com

HOTEL ACORES LISBOA

The design at this modern hotel was influenced by the scenic delights of The Azores islands. The four-star property is located within easy access of the historic center and offers high-quality amenities and top-notch service. The 128 guestrooms include 15 executive doubles and five suites, all with Internet access. The hotel has a fitness room and a business center. WiFi is available in public areas. $$
HOTEL ACORES LISBOA
Av. Columbano Bordalo Pinheiro, 3
tel 351 21 722 2920, fax 351 21 722 2929
http://www.bensaude.pt

DINING

BICA DO SAPATO

Actor John Malkovich came to Lisbon to make a movie and ended up being a partner in the coolest restaurant in town.The waterfront Bica Do Sapato is very hip, very fancy for Lisbon and definitely attracts the “in” crowd. And the food is good, too. The restaurant, a mod space in a former boat factory, serves a pleasing menu offering a modern take on Portuguese dishes like cod (prepared here in three ways) and more continental items like filet mignon with foie gras. There is a sushi bar on the upper level. $$$-$$$$
BICA DO SAPATO
Av. Infante Don Henrique, Amazem 8
Cais Da Pedra a Bica do Sapato, Santa Apolonia
tel 351 21 881 0320
http://www.bicadosapato.com

GAMBRINUS

Known for sophisticated cuisine and friendly service, this Lisbon landmark is located behind the National Theater. The dining room boasts a cathedral ceiling and the menu includes Portuguese and Galician-inspired dishes such as steam partridge with chestnuts, sea bass cooked with tomato sauce and ham, and delicious seafood soup. The wine list has many Portuguese choices. $$$-$$$$
GAMBRINUS
Rua das Portas de Santo Antao, 23-25
tel 351 21 342 1466

VELA LATINA
Located in the area known as The Docks, close to the Belem Tower, this stylish restaurant offers views of yachts and boats as you dine on seafood dishes and enjoy the upscale crowd — this place is popular with the city’s elite. Try the lobster-filled crepes. $$-$$$
VELA LATINA
Doca do Bom Sucesso
tel 351 21 301 7118

DIVERSIONS

Put a fado performance in either Alfama or Bairro at the top of your nightlife “to do” list. Fado, Portugal’s version of the blues, is performed in back-street bars and established clubs such as Clube de Fado (Rua de S. Joao da Praca, 94, tel 351 21 885 2704) where you dine on shrimp, cod and other local dishes while taking in the night’s line-up of singers accompanied by a guitarist and guitarra (12-string instrument similar to a mandolin) player. For dance club action — and don’t even think about going out until after midnight — head for Bairro Alto, where clubs are housed in historic buildings, or the waterfront area known as The Docks. The hot new club in town, The Loft (Rua do Instituto Industrial, tel 351 21 396 4841), is open Thursday, Friday and Saturday (best after 2 a.m.). Bedroom (Rua do Norte, 86) in Bairro Alto is, of course, decorated with beds. A place to see and be seen, it features hip hop and hits from the ’80s and ’90s, Wednesday to Saturday. For casual conversation, check out Mao (Av. 24 de Julho 116-118, tel 351 21 396 0911) decorated with nice artwork and featuring whiskey drinks. It’s an especially good place to be on Saturday night.

Checking In With Carlos Fontão de Carvalho Chairman of Turismo de Lisboa
While some business leaders in Lisbon are busy talking about Sonaecom’s hostile takeover bid for much larger rival Portugal Telecom (the proposed bid has been under investigation by Portuguese competition authorities) and Millennium Bank’s takeover battle of Banco BPI, Carlos Fontão de Carvalho is keeping his eye on tourism. Chairman of Turismo de Lisboa, de Carvalho proudly reports the travel industry here is alive and well.