Portugal: Investing

FDI in Figures

After several years of steady growth, the flow of foreign direct investments (FDI) started to decline since 2007, and they contracted more due to the global recession in 2009. Despite a slight recovery in 2010, foreign investments have decreased since the beginning of 2011, following the deterioration of public accounts. Investors fear a scenario similar to that of Greece, moreso because the rating agency Fitch has lowered the country's sovereign debt rating, placing it into the speculative category.

Nonetheless, the FDI is considered a priority by the Portuguese government. The country has recently embarked on the development of renewable energies, specifically solar energy (the country has the second largest solar power station in the world) and wave energy (obtained from wave movements), sectors that could provide new opportunities to foreign investors. Portugal offers a diversified economy and benefits from its membership to the European Union; however, the bureaucratic and legal burdens can be a hindrance to FDI.

Foreign Direct Investment	2008	2009	2010
FDI Inward Flow (million USD)	4,665	2,706	1,452
FDI Stock (million USD)	99,970	114,710	110,241
Performance Index*, Ranking on 141 Economies	106	106	-
Potential Index**, Ranking on 141 Economies	51	-	-
Number of Greenfield Investments***	80	55	-
FDI Inwards (in % of GFCF****)	8.8	35.1	-
FDI Stock (in % of GDP)	41.0	48.9	-

Source: UNCTAD - Last Available Data.

Note: * The UNCTAD Inward FDI Performance Index is Based on a Ratio of the Country's Share in Global FDI Inflows and its Share in Global GDP. ** The UNCTAD Inward FDI Potential Index is Based on 12 Economic and Structural Variables Such as GDP, Foreign Trade, FDI, Infrastructures, Energy Use, R&D, Education, Country Risk. *** Green Field Investments Are a Form of Foreign Direct Investment Where a Parent Company Starts a New Venture in a Foreign Country By Constructing New Operational Facilities From the Ground Up. **** Gross Fixed Capital Formation (GFCF) Measures the Value of Additions to Fixed Assets Purchased By Business, Government and Households Less Disposals of Fixed Assets Sold Off or Scrapped.

FDI Inflows By Countries and Industry

Main Investing Countries	2010, in %
Germany	18.3
France	16.7
UK	13.8
Spain	13.7
The Netherlands	10.3
Luxembourg	7.0
Brazil	5.5
Switzerland	5.2

Main Invested Sectors	2010, in %
Trade (Wholesale and retail)	39.3
Manufacturing sector	24.4
Finance and insurance activities	18.2
Information and communication	5.6
Scientific and technical activities, consulting	3.1
Real estate	1.2
Construction	1.0
Electricity, water and gas	0.6

Source: Bank of Portugal - Last Available Data.

Form of Company Preferred By Foreign Investors: Public limited company, SA
Form of Establishment Preferred By Foreign Investors: Subsidiary
Main Foreign Companies: The leading case of successful foreign investment in Portugal is that of «Autoeuropa», a Volkswagen project in the Setúbal peninsula with an initial investment of 2 billion euros. Because it was so large, the State moderated the negotiations on salaries etc. It is also a pole for other companies making components for the automobile industry.

The FNAC arrived on the Portuguese market in 1997. The first store opened in Lisbon. Since then, 15 stores have opened in the country's main cities. The FNAC makes a profit of more than 250 million EUR in the country.
Sources of Statistics: Banco de Portugal

Why You Should Choose to Invest in Portugal

Strong Points: Portugal's strong points are:
- The low labor costs;
- Its geographical situation. Portugal act as a bridge between 3 continents: Europe, Africa, America;
- its temperate climate;
- its socio-political stability and the non-existence of terrorism; and
- the stability of its currency.
You can consult the Ministry of the Economy website.
Weak Points: Portugal's weak points are its weak demography and a certain rigidity in the labor law.
Government Measures to Motivate or Restrict FDI: Government policies have followed the priority established by the Prime Minister, to promote the country's appeal to foreign investors. In order to do this, simple taxation procedures have been put in place, effective warehousing and transport logistics have been set up (especially the Sines terminal in the South-West of the country), as well as improvements in telecommunication infrastructures, etc. An agency for investment and foreign trade has been established: the AICEP.
Other measures have been implemented, including making the labor law more lenient in order to increase the workforce flexibility, and setting up a special aid regime for large projects (over 25 million EUR).

Protection of Foreign Investment

Bilateral Investment Conventions Signed By Portugal: Portugal has signed bilateral agreements with almost fifty countries (not including the EU).
To see the list of countries, click here.
To see the conventions, click here.
International Controversies Registered By UNCTAD: No cases
Organizations Offering Their Assistance in Case of Disagreement: ICSID , International Center for settlement of Investment Disputes
ICCWBO , International court of arbitration, International chamber of commerce
Member of the Multilateral Investment Guarantee Agency: Yes, since 1988.

Country Comparison For the Protection of Investors

	Portugal	OECD	الولايات المتحدة	Germany
Index of Transaction Transparency*	6.0	6.0	7.0	5.0
Index of Manager’s Responsibility**	5.0	5.2	9.0	5.0
Index of Shareholders’ Power***	7.0	6.8	9.0	5.0
Index of Investor Protection****	6.0	6.0	8.3	5.0

Source: Doing Business - Last Available Data.

Note: *The Greater the Index, the More Transparent the Conditions of Transactions. **The Greater the Index, the More the Manager is Personally Responsible. *** The Greater the Index, the Easier it Will Be For Shareholders to Take Legal Action. **** The Greater the Index, the Higher the Level of Investor Protection.

Procedures Relative to Foreign Investment

Freedom of Establishment: Yes
Acquisition of Holdings: Portuguese law allows a taking up of the capital or the acquisition of a Portuguese company up to 10% or more.
Obligation to Declare: Foreign investors may carry out all types of activities in the same conditions as a local investor. Foreign investment in Portugal is, on principle, free of all administrative control. The only formality that the foreign investor must comply with is registration, for statistical reasons, within 30 days of the investment.
Finally, investment projects "presenting a particular interest for the Portuguese economy" (projects over 4.9 million euros, especially those creating jobs, allowing industrial reconversion, ensuring the development of a priority region, or introducing new technologies) are subject to a particular procedure managed by the Institute for Investment, Trade and Tourism in a restructured Portugal "AICEP".
The agency for the promotion of foreign investment in the country can provide information about the authorizations necessary for setting up.
Competent Organization For the Declaration: AICEP
Requests For Specific Authorizations: There are no restrictions on foreign investment in Portugal, but only an analysis of the legality of the project (applicable also to any project of national capital).
Consult the Guide for investors.

Office Real Estate and Land Ownership

Possible Temporary Solutions: There are several temporary solutions: domiciliation of the company at the private address of the director, domiciliation in a business center, lodging in relay-workshops, company incubators and renting professional premises.
The Possibility of Buying Land and Industrial and Commercial Buildings: Foreign investors can become the owners of land which is necessary for their setting up. It is possible to buy freehold or leasehold, to build industrial and commercial premises or to buy through a real estate company.
Risk of Expropriation: According to Portuguese law, foreign investors are entitled to compensation if they are victims of expropriation.

Investment Aid

Forms of Aid: A foreign company setting up in Portugal is more and more likely to benefit from subsidies, facilitation of formalities for creating a company, financial incentives such as partial financing of a project (from 15 to 50% of the amount of the investment for a tourist project), and regional incentives.

For further information, consult the Institute for support for SMEs website (IAPMEI) and the Portuguese Institute for Trade, Tourism and Investment website ICEP.
Privileged Domains: Fishing, agriculture, renewable energies, tourism and electronics.
Privileged Geographical Zones: The National Strategic Tourism Plan advances regions for tourist development and some sub-sectors.
There are no privileged zones for foreign investment.
For important dossiers (more than 25 million euros) the numbers of jobs created (fundamental), the added value of the goods, the contribution of technological innovation and the export possibilities of the goods will all be analyzed before aid is granted.

For further information on regional aid, consult the European Union website.
Free Zones: One of the institutions which is part of AICEP (the Portuguese Agency for Investment and Foreign Trade) is AICEP PARQUES which owns areas for setting up companies and industrial estates. They are located in areas which are economically disadvantaged (and in which apply the fiscal and social measures in favor of companies with the aim of stimulating employment) but which are strategically placed from a geographical point of view for easy access to road, rail and sea transport.
Organizations Which Finance: The EU through the ERDF.
The institution created by the government is a venture capital company: Capital Global.

Investment Opportunities

The Key Sectors of the National Economy: The Agency for Investment in Portugal (API) regularly publishes investment opportunities on its Internet site. Potential for tourist investment in the Douro Valley or in the Alentejo region, agrifood projects in the Alentejo region (biofuels, olive oil, fruit, flowers, etc.) or forest investment projects all over the country.
The automobile sector has attracted many investors. The chemical industry benefits from wide experience especially in sectors from extraction to petrochemical refining as well as manufacturing products from the most basic to solutions with high added value. The electric and electronic sectors also provide many opportunities; they have recently undergone considerable transformation with the setting up of several foreign groups. With more than 7 600 companies in ICT, the Portuguese information and communication technologies market has shown itself capable of rapid adaptation to and effective assimilation of new inventions. Biological industries bring together several international projects in domains such as pharmacy, biotechnologies (especially with renowned Portuguese universities) and R&D.

Portugal offers specific advantages for setting up call centers. The country has a qualified workforce, which speaks several languages and is competitive, associated with modern telecommunication networks and real estate offers which are easily accessible and inexpensive. Finally, in the tourist sector, Portugal aims to provide high quality products and services.
High Potential Sectors: The sectors which have been officially designated as the most desirable are:
- biotechnologies (to create synergies with the American MIT project in Portugal);
- shared service centers (call centers and other associated infrastructures);
- the electric and electronic sectors (a big gamble on alternative energies);
- high value added chemistry (eg. polymers, etc.);
- the NICT (new information and communication technologies);
- high level tourism.
Privatization Programs: Air transport (national airline company and airports), the postal service (Correios).
Tenders, Projects and Public Procurement: Tenders Info, Tenders in Portugal
Ted - Tenders Electronic daily, Business opportunities in EU 27
DgMarket, Tenders Worldwide

Sectors Where Investment Opportunities Are Fewer

Monopolistic Sectors: No monopolistic sectors.
Sectors in Decline: Traditional agriculture, faience, some textiles and furniture.

Finding Assistance For Further Information

Investment Aid Agency: AICEP
Institute for support for SMEs and investment (IAPMEI)
Other Useful Resources: Portuguese Tourist Institute
Doing Business Guides: Guide for Investors
Portugal Commercial Guide 2010 - Buy USA

Any Comments About This Content? Report It to Us.

Learn more about Investing in Portugal on Globaltrade.net, the Directory for International Trade Service Providers.