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Portugal Foreign Direct Investment https://photius.com/countries/portugal/economy/portugal_economy_foreign_direct_inves~1109.html Sources: The Library of Congress Country Studies; CIA World Factbook
Foreign direct investment increased at an extraordinary pace after Portugal's accession to the EC. From a modest commitment of around US$166 million in 1986, the annual inflow of investment controlled and managed by foreigners rose sharply in the following years, reaching US$2.7 billion in 1991. At the end of that year, the accumulated stock of direct foreign investment exceeded US$8 billion, or eight times its value at the end of 1986. From the perspective of multinational firms, Portugal was a strong export base to the emerging single market of 327 million high-income consumers, and since the mid-1980s the country had become especially competitive in attracting foreign investment. These attractions included political stability and a hospitable investment climate that included EC investment subsidies, the lowest wage scale among the EC-12, and programs of economic deregulation and privatization, as well as robust national economic and export growth. The participation of EC-based investors in the annual investment flow to Portugal increased from less than half of the total in 1985-86 to about 70 percent from 1987 to 1990, Britain being the principal country source. Interesting trends in the composition of this investment could be discerned. Britain was the leading country of origin throughout this period, but the United States share fell sharply from 18 percent of the total investment in 1985-86 to less than 3 percent in 1989-90. Within the recently enlarged EC, Spain emerged as a significant direct investor, increasing its share from only 3 percent of Portuguese new investment in 1985-1986 to over 13 percent in 1989-90. Brazilian investors, whose share was negligible in 1985-86, increased their participation to around 7 percent in 1989-90. Manufacturing, the destination of just under half of foreign investment inflow in 1985-86, received only 27 percent of the total in 1988-89; by contrast, the services sector's share in total investment flow rose from 45 percent in 1985-86 to over 60 percent in 1988-89. Within that sector, banking and insurance increased their participation, although investment in wholesale and retail trade and in hotels and restaurants continued to be significant, reflecting foreign investor participation in Portugal's booming tourism industry. Several new investment projects in the automotive industry were being considered in the spring of 1991, including participation by Japanese and South Korean firms. None, however, approached in scale the Ford-Volkswagen commitment to organize an automotive complex at Sines. This joint venture capitalized at US$3.2 billion was to manufacture a new European minivan. Portugal, unlike many other middle-income countries, was remarkably hospitable to foreign investment (foreign-owned enterprises were legally exempted from nationalization during 1975-76). The growing pace of privatization since 1988, however, gave rise to debate regarding the ultimate ownership and control of major state firms being divested. One school of thought anticipated that privatization would "de-Portugalize" vital sectors of the economy. To some degree, Prime Minister Cavaco Silva shared this anxiety: "At the same time, we shall have to foster economic groups in Portugal. These were destroyed at the time of the revolution with nationalization. We need them, as otherwise foreigners will come in and take over our enterprises and economic strategy will be determined from abroad. Thus we are supporting the new entrepreneurs in industry and agriculture." Despite the formation of new Portuguese groups able to compete against foreign-based multinational companies, it was doubtful that these national firms were sufficient in number, risk capital, and managerial-technical know-how to absorb most of the large enterprises scheduled for divestiture. Although the government had succeeded in limiting foreign participation in a number of key enterprises, including the withholding of a temporary "golden share" for the state, such limits on foreign direct investment were to become illegal in 1995, when Portugal's capital movement regulations would come fully into compliance with those of the rest of the EC members. Consequently, the prospect of losing national control over large branches of the economy appeared to be the inevitable price of securing Portugal's economic future and closing the income gap between the Portuguese and their more prosperous neighbors. Data as of January 1993
NOTE: The information regarding Portugal on this page is re-published from The Library of Congress Country Studies and the CIA World Factbook. No claims are made regarding the accuracy of Portugal Foreign Direct Investment information contained here. All suggestions for corrections of any errors about Portugal Foreign Direct Investment should be addressed to the Library of Congress and the CIA. |