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Foreign direct investment in consultancy grows 48%

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    October 19, 2018
    Taking 22nd place, in 2018 Portugal enters the top 25 most attractive countries in the world for Foreign Direct Investment (FDI).

    In the first half of 2018, the Portuguese economy raised about 2.6 million euros in foreign direct investment (FDI), a figure that reflects a drop of more than 50% compared to the same period last year.

    Since 2014, when Portugal was in the final year of the adjustment program, there had not been such a weak quarter registered in terms of FDI. This decline is justified by the fact that FDI transactions continue to be very dependent on the banking and financial business sectors.

    The fall since the beginning of the quarter is related to at least two important deals that boosted the amounts recorded: Spanish CaixaBank bought BPI; and Santander Totta remained with Banco Popular Portugal operations.

     

    Growing Sectors

    The consultancy and scientific activities sector captured 605 million euros in the first half of last year. In the same half of 2018 this reached 897 million, a growth of 48%.

    This year also marked Portugal’s entry into the top 25 of the world’s most attractive countries for Foreign Direct Investment (FDI), ranking 22nd, ahead of Norway, Austria and Brazil.

    In 2017 the technology sector showed an explosive growth of 673% in domestic and foreign investments, compared to the previous year.

    Factors such as the Web Summit´s move to Lisbon, Google’s plan to build a new center in Lisbon, or partnerships with Cisco and Out Systems in the areas of digitization and artificial intelligence, have all contributed to this growth.

     

    Origin of Investments

    The country that generated the most value in FDI picked up by the Portuguese economy in the first six months of the year was Luxembourg with 939 million euros. However, one of the largest reductions in this balance is caused by Luxembourg’s businesses. The value of transactions originating in this country where taxation remains highly favorable has fallen by almost 779 million euros.

    In second place is the United Kingdom, the second most important source of investment, with 515 million euros. The Netherlands in third place, with 414 million, is another territory that hosts several Portuguese business groups, mainly for tax reasons and access to financing.

    The countries that extracted the most value were Spain (484 million) and Ireland (230 million).

    In historical terms, the Netherlands is the leading country with the accumulated value of around 28 billion euros invested in Portugal, followed by Luxembourg (24.5 billion) and Spain (22.3 billion).

    The United Kingdom, France, Brazil and China are, in this order, the other most relevant sources in terms of FDI that arrive in Portugal.

     

    Sectors in Decline

    Of the total amount of FDI raised, consultancy activities contributed the most, with 897 million euros. The financial and insurance activities followed with 683 million euros.

    On the negative side of FDI, foreign investors divested mainly in the industrial sector (minus 139 million in FDI in the first quarter) and in trade (minus 177 million euros).

    This phenomenon can be justified by the repatriation of profits, for example.

    Compared to the same period last year, the biggest drop was in the financial sector, with 2.3 million euros.

    In the same period of 2017, the real estate sector attracted 322 million euros in FDI. At the moment it is being drained in an amount equivalent to 130 million euros. This amounts to minus 452 million euros.

    The same situation has also been observed in commerce: in the first half of last year 313 million euros were raised, now the balance of the FDI for the sector is less 177 million. This is the highest cut observed in all sectors with minus 490 million euros invested.

     

    Source: Dinheiro Vivo