Portugal flag Portugal: Investing in Portugal

Foreign direct investment (FDI) in Portugal

FDI in Figures

According to UNCTAD's World Investment Report 2021, FDI flows to Portugal almost halved from USD 12 billion in 2019 to USD 6.3 billion in 2020, due to the economic crisis triggered by the Covid-19 pandemic. In the same year, the total stock of FDI stood at USD 162 billion. Data by OECD show that the majority of investments are directed to the financial and insurance services, professional, scientific and technical activities, the wholesale and retail sectors, real estate (as Lisbon has become a key destination for FDI in real estate), and manufacturing. The main investing countries are the Netherlands, Spain, Luxembourg, and France. According to EY's 2021 Attractiveness Survey, Portugal secured 154 new FDI projects in 2020, thus entering the top 10 investment destinations in Europe, positioning itself as one of the main destinations for FDI and demonstrating its resilience compared to other European countries. The latest data available from OECD shows that in the first semester of 2021 FDI inflows to Portugal totalled USD 2.6 billion, up by 21.6% compared to the same period one year earlier (when investments stood at USD 1.6 billion).

FDI is considered a priority by the Portuguese government. The country has recently launched the development of renewable energies, specifically solar energy (Portugal has the second largest solar power station in the world) and wave power (obtained from wave movements). These sectors could provide new opportunities to foreign investors, so as the IT and tourism sectors. Portugal also created "free zones" to strengthen technology-driven investments. Citizenship by Investment (ARI) via Portugal's Golden Visa programme offers a fast track for non-EU investors to gain citizenship. The government also launched the “Startup Visa” programme, a hosting program for foreign investors who wish to develop new projects in the Iberic country. Portugal offers a diversified economy and benefits from its EU member status, but bureaucratic and judicial burdens can discourage FDI. Government approval is required only in certain sensitive sectors, including defence, water management, public telecommunications, railways, maritime transportation, and air transport. The country should benefit from around EUR 14 billion in EU grants between 2021 and 2026, to support its Recovery and Resilience Plan. Portugal ranks 39th (out of 190) in the World Bank's latest Doing Business report, losing five positions compared to the previous edition.

 
Foreign Direct Investment 201920202021
FDI Inward Flow (million USD) 12,3617,7568,020
FDI Stock (million USD) 165,132177,419175,531
Number of Greenfield Investments* 166112161
Value of Greenfield Investments (million USD) 3,4684,2247,126

Source: UNCTAD, Latest available data

Note: * Greenfield 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.

 
Country Comparison For the Protection of Investors Portugal OECD United States Germany
Index of Transaction Transparency* 6.0 6.5 7.0 5.0
Index of Manager’s Responsibility** 5.0 5.3 9.0 5.0
Index of Shareholders’ Power*** 7.0 7.3 9.0 5.0

Source: Doing Business, Latest 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.

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What to consider if you invest in Portugal

Strong Points

Portugal was one of the countries which was the most strongly hit by the economic crisis of the late 2000s. Thanks to a policy of rigor and the implementation of reforms of the banking sector, of pensions and of the labour market, the country has since regained an interesting economic competitiveness and has begun a deep diversification of its exports (both sectoral and geographical). Its economy has stabilised, with a GDP growth of 4% in 2022 (IMF forecasts) based on its main strengths:

  • A skilled and often multilingual workforce at a significantly lower cost than other Western European countries
  • A system promoting investment in innovation and R&D, which has enabled the country to attract new FDI, essential to its development. The large number of multinationals from all sectors testifies to it. 
  • Its strategic international relations with Europe, Africa and America, in addition to its membership of the European Union, allow Portugal to maintain close ties with its former colonies such as Brazil, Mozambique, Macao and Angola, and can serve as a gateway to other Portuguese-speaking markets
  • Early sectoral and geographical diversification of exports
  • Political stability and fluid governance
  • A good business environment (the country was ranked 39th on the World Bank's Doing Business 2020 report.
Weak Points

The main weaknesses of Portugal's economy include:

  • High unemployment rate
  • Economy is weakened by high levels of private and public debt
  • Small population
  • Low productivity
  • Underdeveloped manufacturing sector
  • Rigidity of labour law.
Government Measures to Motivate or Restrict FDI
In recent years, Government policies have prioritised the promotion of Portugal’s appeal to foreign investors. As a result, taxation procedures have been simplified, effective warehouse and transport logistics have been developed (especially in the Sines terminal located in the southwest of Portugal) and telecommunication infrastructure has been improved. The Government has also worked to establish the AICEP - an agency for investment and foreign trade. The Government adopted the golden visa residence programme, which is a simple and fast-track residence permit programme designed to attract foreign investment into the country. Other measures implemented to help draw investment include easing some labour regulations to increase workplace flexibility and creating a special aid regime for large products (over EUR 25 million).

To improve the business climate, the Government has created the "Simplex" website, an information repository containing all measures taken to reduce bureaucracy, and the 'Empresa na Hora' initiative (a company in one hour), which allows companies to incorporate in less than an hour.

Bilateral investment conventions signed by Portugal
To see the list of investment treaties signed by Portugal, consult UNCTAD's International Investment Agreements Navigator.

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Latest Update: September 2022