Foreign Direct Investment in Portugal: A Success Story

In recent years, Portugal has emerged as an increasingly attractive destination for Foreign Direct Investment (FDI). This phenomenon is not accidental but rather the result of a combination of economic, social, and cultural factors that make the country particularly appealing to international investors. In this article, we will explore in detail the reasons behind this success and examine some of the significant investments already made by foreign companies in Portuguese territory.

Reasons for Foreign Investment in Portugal

Economic Stability and Sustainable Growth

One of the main attractions of Portugal for foreign investors is its economic stability and the sustainable growth it has demonstrated in recent years. Recent data shows that, despite global challenges, the Portuguese economy continues to show positive indicators:

– GDP grew by 2.3% in 2023, with a forecast of 1.2% for 2024.

– Unemployment remains low, at 6.5% in 2023, with a reduction to 6.1% expected in 2024.

– Inflation is moderating, standing at 2.8% in 2024, close to the eurozone average.

– Exports continue to grow, having increased by 4.7% in 2023.

This solid economic performance creates a favourable environment for long-term investments, offering foreign investors a stable foundation for the growth of their businesses.

Strategic Location and Market Access

Portugal’s geographical position offers significant advantages for companies looking to expand their global presence:

– A gateway to the European market of 500 million consumers.

– A bridge to Portuguese-speaking markets, covering 260 million people across several continents.

– Proximity to the Americas, being the closest European country to the USA and Canada.

– A member of the European Union since 1986 and the Eurozone, facilitating trade transactions.

This strategic location allows companies to use Portugal as a base for international operations, benefiting from trade agreements and logistical ease.

Green Location

Portugal stands out as a country strongly committed to sustainability and the environment, ranking highly in various international indices:

1. 18th in Global Sustainability Performance out of 193 countries.

2. Strong performance in the 2024 Climate Change Performance Index, ranking 13th out of 67 countries.

3. 6th in the EU-27 for the highest share of energy from renewable sources.

4. 4th European country to completely phase out coal as an energy source, in 2021.

This performance attracts investors not only in sectors directly linked to energy but also in various industries and services that prioritise energy and climate sustainability policies in their governance.

Qualified and Competitive Talent

Portuguese human capital is often cited as one of the main attractions for foreign investors. According to international comparative studies such as the World Talent Ranking and the Insead Global Talent Competitiveness:

– Portugal ranks 10th globally in language skills.

– 19th in university education.

– 16th in science graduates.

– High proficiency in English, ranking 8th in the 2023 English Proficiency Index.

– 25th in the World Talent Ranking.

The country has significantly invested in technical and digital training, producing a steady stream of qualified professionals in areas such as IT, engineering, and sciences. The competitive cost of this skilled workforce compared to other European countries makes Portugal even more attractive to technology and innovation companies.

Infrastructure and Digital Connectivity

Portugal has made substantial investments in its physical and digital infrastructure. According to the World Economic Forum:

– 11th globally in infrastructure quality.

– 8th in communication technology.

– 3rd in ultra-fast fixed broadband adoption.

These modern infrastructures support efficient business operations and facilitate global connectivity, essential for international businesses.

Quality of Life and Safety

Quality of life in Portugal is often highlighted as a draw not only for companies but also for international talent:

– 7th safest country in the world, according to the 2023 Global Peace Index.

– 10th best country in the world for expatriates to live, according to Internations.

– Lisbon ranked as the 4th healthiest city in the world to live in.

This safe and welcoming environment makes it easier to attract and retain international talent, a crucial aspect for many global companies.

Business-Friendly Environment and Innovation

Portugal has worked to create a dynamic and innovation-friendly business ecosystem:

– 2nd most open country to FDI in the OECD.

– 6th most attractive destination for FDI in Europe.

– 30th in the 2023 Global Innovation Index.

– Growing startup ecosystem, with about 4,070 startups in 2023.

The Portuguese government has implemented several initiatives to simplify bureaucratic processes, offer tax incentives, and support innovation, making the country particularly attractive to tech companies and startups.

Significant Foreign Investments in Portugal

The growing interest of foreign investors in Portugal is evidenced by a series of significant investments across various sectors.

Automotive and Technology Sector

– A major German car manufacturer has established a software engineering centre in Portugal, focused on solutions for electric vehicles, autonomous driving, and cybersecurity.

– A Japanese automotive components company has expanded its operations in Portugal.

Technology and Centres of Excellence

– Several global tech companies have opened engineering centres and development hubs in cities like Lisbon and Porto, focusing on areas such as AI, IoT, and software development.

– A leading smart lighting solutions company has established an R&D centre in Porto for innovation in connected lighting and IoT solutions.

Renewable Energy

– Significant investments in wind farms and wind turbine technology by international companies.

– Development of a lithium conversion plant by a foreign company, aligned with the growing demand for batteries for electric vehicles.

Aerospace

– Expansion of aerospace structure manufacturing operations by international companies.

Fintech and Financial Services

– Establishment of operational and development centres by South African and other international fintech companies.

Industry and Manufacturing

– Investments in factories producing eco-friendly building materials.

– Expansion of production units for automotive components and recyclable polymer materials.

These investments not only bring capital and job creation but also contribute to knowledge and technology transfer, further strengthening Portugal’s position as a hub for innovation and technology in Europe.

Conclusion

The growth of Foreign Direct Investment in Portugal is a testament to the country’s attractiveness as a business destination. The combination of economic stability, qualified talent, modern infrastructure, quality of life, and a business-friendly environment creates a unique ecosystem that continues to attract investors from all over the world.

As Portugal continues to invest in areas such as digitalisation, green energy, and innovation, it is likely that we will see even more interest from foreign investors in the coming years. The country is well-positioned to capitalise on global trends in technology, sustainability, and new ways of working, offering a conducive environment for companies seeking to innovate and expand in Europe and beyond.

All this brings companies, professionals, students, and people in general to Portugal, driving demand across various real estate segments, such as buildings, factories, shops, logistics, apartments, etc., which in turn creates opportunities for real estate entrepreneurs, both national and foreign. After reading this article, do you consider investing in Portugal? We can help you learn more and guide you through the process. Request a free consultation!