After the 16th century, Portugal gradually saw its wealth decreasing. Even if Portugal was officially an autonomous state, the country was under the rule of the Spanish monarchy from 1580 to 1640, and Portuguese colonies were attacked by Spain's opponents, especially the Dutch and English.

At home, life was calm and serene with the first two Spanish kings; they maintained Portugal's status, gave excellent positions to Portuguese nobles in the Spanish courts, and Portugal maintained an independent law, currency and government. It was even proposed to move the Spanish capital to Lisbon. Later, Philip III tried to make Portugal a Spanish province, and Portuguese nobles lost power. Because of this, on December 1, 1640, the native king, John IV, was acclaimed, and a Restoration war against Spain was made. Ceuta governors would not accept the new king; they maintained their allegiance to Spain.

In the 17th century the Portuguese emigrated in large numbers to Brazil. By 1709, John V prohibited emigration, since Portugal had lost a sizable fraction of its population. Brazil was elevated to a vice-kingdom and Amerindians gained total freedom.

Pombaline Era

In 1738, Sebastião de Melo, the talented son of a Lisbon squire, began a diplomatic career as the Portuguese Ambassador in London and later in Vienna. The Queen consort of Portugal, Archduchess Maria Anne Josefa of Austria, was fond of de Melo; and after his first wife died, she arranged the widowed de Melo's second marriage to the daughter of the Austrian Field Marshal Leopold Josef, Count von Daun. King John V of Portugal, however, was not pleased and recalled de Melo to Portugal in 1749. John V died the following year and his son, Joseph I of Portugal was crowned. In contrast to his father, Joseph I was fond of de Melo, and with the Queen Mother's approval, he appointed de Melo as Minister of Foreign Affairs. As the King's confidence in de Melo increased, the King entrusted him with more control of the state.

By 1755, Sebastião de Melo was made Prime Minister. Impressed by British economic success he had witnessed while Ambassador, he successfully implemented similar economic policies in Portugal. He abolished slavery in the Portuguese colonies in India; reorganized the army and the navy; restructured the University of Coimbra, and ended discrimination against different Christian sects in Portugal.

But Sebastião de Melo's greatest reforms were economic and financial, with the creation of several companies and guilds to regulate every commercial activity. He demarcated the region for production of Port to insure the wine's quality, and his was the first attempt to control wine quality and production in Europe. He ruled with a strong hand by imposing strict law upon all classes of Portuguese society from the high nobility to the poorest working class, along with a widespread review of the country's tax system. These reforms gained him enemies in the upper classes, especially among the high nobility, who despised him as a social upstart.

Disaster fell upon Portugal in the morning of November 1, 1755, when Lisbon was struck by a violent earthquake with an estimated Richter scale magnitude of 9. The city was razed to the ground by the earthquake and the subsequent tsunami and ensuing fires. Sebastião de Melo survived by a stroke of luck and then immediately embarked on rebuilding the city, with his famous quote: What now? We bury the dead and feed the living.

Despite the calamity, Lisbon suffered no epidemics and within less than one year was already being rebuilt. The new downtown of Lisbon was designed to resist subsequent earthquakes. Architectural models were built for tests, and the effects of an earthquake were simulated by marching troops around the models. The buildings and big squares of the Pombaline Downtown of Lisbon still remain as one of Lisbon's tourist attractions: They represent the world's first quake-proof buildings. Sebastião de Melo also made an important contribution to the study of seismology by designing an inquiry that was sent to every parish in the country.

Following the earthquake, Joseph I gave his Prime Minister even more power, and Sebastião de Melo became a powerful, progressive dictator. As his power grew, his enemies increased in number, and bitter disputes with the high nobility became frequent. In 1758 Joseph I was wounded in an attempted assassination. The Tavora family and the Duke of Aveiro were implicated and executed after a quick trial. The Jesuits were expelled from the country and their assets confiscated by the crown. Sebastião de Melo showed no mercy and prosecuted every person involved, even women and children. This was the final stroke that broke the power of the aristocracy and ensured the victory of the Minister against his enemies. Based upon his swift resolve, Joseph I made his loyal minister Count of Oeiras in 1759.

Following the Tavora affair, the new Count of Oeiras knew no opposition. Made Marquis of Pombal in 1770, he effectively ruled Portugal until Joseph I's death in 1779. His successor, Queen Maria I of Portugal, disliked the Marquis, and forbade him from coming within 20 miles of her, thus curtailing his influence.

Crises of the Nineteenth Century

In 1807 Portugal refused Napoleon's demand to accede to the Continental System of embargo against the United Kingdom; a French invasion under Marshal Junot followed, and Lisbon was captured on 1 December 1807. British intervention in the Peninsular War restored Portuguese independence, the last French troops being expelled in 1812. The war cost Portugal the province of Olivença, now governed by Spain. Rio de Janeiro in Brazil, was the Portuguese capital between 1808 and 1821. 1820 saw constitutionalist insurrections at Oporto (August 24 and Lisbon (September 15). When Brazil declared its independence from Portugal in 1822, Lisbon regained its status as the capital of Portugal.

The death of John VI in 1826 led to a crisis of royal succession. His eldest son, Peter I of Brazil briefly became Peter IV of Portugal, but neither the Portuguese nor the Brazilians wanted a unified monarchy; consequently, Pedro abdicated the Portuguese crown in favor of his seven-year-old daughter, Maria da Glória, on the condition that when of age she marry his brother, Miguel. Dissatisfaction at Pedro's constitutional reforms led the "absolutist" faction of landowners and the church to proclaim Miguel as king in February 1828. This led to the Liberal Wars in which Pedro, with British assistance, eventually forced Miguel to abdicate and go into exile in 1834, and placed his daughter on throne as Queen Maria II.