Why is Portugal an attractive location for investment? - Portugal: Gateway to Europe - includes related articles

Business America, May 20, 1991 by Miguel Athayde Marques

Foreign direct investment in Portugal has risen at an extraordinary pace in the past few years, from a mere $156 million in 1986 to $3.2 billion in 1990. In only five years, it has grown 20-fold.

The reasons for this success undoubtedly relate to Portugal having become a member-state of the European Community, together with certain facts that make the country especially competitive, such as a low cost of living, and a combination of relatively low wages with highly competent labor.

I think these reasons fall far short of characterizing what Portugal has to offer to the foreign investor. And for decision makers, labor costs are only a part of the picture, since many other factors must be considered in making a foreign investment.

So what makes Portugal such an attractive location for investment? Here are some reasons:

Geographic location: Portugal has a European and Atlantic location, lying just between North America and Central Europe; it is at the crossroads of the commercial flows among the American, African, and European continents.

Climate and living: moderate climate; diversity in landscape; rich cultural roots; low crime rate; good shopping facilities; good leisure infrastructure (hotels, golf courses, etc.).

Tradition of international involvement: long tradition of international relations, deriving from the age of the explorers and navigators; ease to contact with foreigners and capacity to build collaborative efforts with other peoples; Portuguese-speaking community of nearly 200 million people in many areas of the world; special programs of cooperation with the Portuguese-speaking African countries; intensification of economic relations with Portuguese-speaking Brazil; member of the main political and economic international organizations, such as the OECD, EC, and NATO.

Internal market of 340 million consumers: Portugal's accession to the EC in 1986 increased the domestic market at the disposal of companies established

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in the county from 10 million to 340 million people; new investment opportunities in Portugal for companies originating from countries outside the EC, such as the United States, Japan, and the Nordic countries (Portugal is seen as the gateway to Europe); opportunity for multinational groups to restructure their production and logistics by practicing global integration strategies on a European scale.

Political and social stability: parliamentary democracy; normal and sound functioning of the country's institutions; social order; reduced level of strikes; no terrorism (separatist feelings are nonexistent).

Economic conditions: fast-growing economy (the second fastest in the OECD, after Japan during 1986-89); improvement of the purchasing power and well-being of the population; modernization of infrastructure (new highways, roads, airports, ports, etc.); increasing sophistication of the financial markets.

Labor force: high productivity levels if workers are integrated into well-managed companies; more cost-effective wages when compared with other countries in Europe; versatility of the European workforce and its willingness to learn new methods and skills; relatively high pool of qualified workers; available technical expertise in science, technology, and management, due to a university system geared to the advanced needs of the job market; widespread knowledged of the English language.

International perception of risk: consistent improvement in the international "ratings" for country risk; low level of political risk; low level of economic risk; virtually no risk of default.

Investment incentives: several incentive programs available, including cash grants, fiscal incentives, and training incentives.

Public opinion: welcoming attitude towards the multinational corporation; willingness to accept products, companies, and working methods from abroad; public attitude more favorable to foreign direct investment than is the case in many other European countries.

Official policy towards foreign investment: active policy of attracting foreign direct investment; complete freedom to repatriate profits and invested capital; no discrimination between national and foreign investors.

All these traits of Portugal's profile, taken as a whole, make the country extremely attractive for investment. Almost unbeatable, I believe.

Why don't you check for yourself? If you have ever been to Portugal, you have already been introduced to its fine beaches, monuments, restaurants, and golf courses. And to the legendary sun and mild climate. All this and more will make a trip enjoyable. But try to get to know Portugal's capabilities in other areas, such as engineering, manufacturing, finance, marketing, etc. Then, you will understand that you can find in Portugal not only nice and friendly people, but also motivated and efficient workers, and knowledgeable and competent managers.

A Suggested Approach to Setting Up

An Industrial Subsidiary in Portugal

I. First Visit

The company should send its CEO (or other decision-making corporate officer), production vice president (or plant specialist), and marketing vice president.