Newly assembled macroeconomic statistics for early modern Portugal reveal one of Europe's most vigorous colonial traders but one of its least successful growth records. Was the empire a blessing or a drag to the economy? Using an estimated dynamic model, we conclude that intercontinental trade had a substantial and increasingly positive impact on economic growth. In the heyday of colonial expansion, eliminating the economic links to empire would have reduced Portugal's per capita income by at least a fifth. While the empire helped the domestic economy, it was not sufficient to annul the tendency of the latter toward decline in relation to Europe's advanced core, which began to set in from the seventeenth century onward, but only became definite after 1800. We conclude that the explanation for Portugal's long-term backwardness must be sought primarily in domestic conditions.