2012 Reports

Outward FDI from Portugal and its policy context, 2012

Simões, Vitor Corado; Cartaxo, Rui Manuel

In 2010, Portugal's outward foreign direct investment (OFDI) was severely affected by the global economic and financial crisis, with flows recording a negative figure of -US$ 8.4 billion, the lowest in an ever-steeper declining trend exhibited since 2005. Nevertheless, Portugal's OFDI stock increased almost three-fold between 2000 and 2010. During this period, Portugal's OFDI annual growth rates were lower than those of comparator economies, such as Spain or Ireland, and only slightly above those of Italy. OFDI flows in the 2001-2010 period were concentrated in the services sector, particularly in real estate, followed by retail and manufacturing. In contrast, there has been a clear decline of investment in financial services (largely explaining the negative figures recorded in 2010) and in the construction industry. Excluding 2010, the Netherlands has attracted a significant share of Portugal's OFDI. Investment in non-traditional destinations has gained importance in recent years, both in Europe (Romania, Bulgaria) and outside Europe (the United States, India), but their weight remains limited. The crisis affected OFDI policy, leading to growing concern regarding the localization of value-added activities in Portugal. There has been a shift in government policy in the past three years, prioritizing exports over direct investment as a mode of entry into foreign markets.