Portugal is to ease restrictions on building hypermarkets with a new law set to come into force at the beginning of 2004.

The previous government had stopped granting building permits for hypermarkets in October 2001 when stores of 2,000 square metres or more reached a legal limit of 35% of the country's food retail market, reported Reuters.

"This reform aims to increase competition in the retail sector and have a greater balance between different retail formats," Economy Mister Carlos Tavares was quoted by Reuters as saying.

German retailer Tengelmann has previously complained that the freeze on new hypermarkets had prevented it going ahead with plans to invest €300m (US$343.4m) in Portugal by 2007.