Foreign direct investment in the context of the financial crisis and bailout: Portugal

Full text

Foreign direct investment in the context of the
financial crisis and bailout: Portugal
Joaquim Ramos Silva
1. Introduction
The experience of the Portuguese economy with foreign direct investment
(FDI) after the outbreak of the global financial crisis in 2008 and the
sovereign crisis that followed represents a new stage in its complex
history with this increasingly critical flow. This is true with regard to both
inward and outward flows and stocks and it is the main focus of the
present chapter, which focuses on the period 2008–2013, especially after
Portugal’s bailout by international institutions in May 2011,1which lasted
until June 2014.
At the beginning of the twenty-first century, the Portuguese economy was
characterised by fundamental weaknesses, including very slow growth
and serious macroeconomic imbalances, demonstrated by high and
persistent public and current deficits (Andrade and Duarte 2011).
External economic relations must be highlighted in this context (Silva
and Simões 2012). Besides excessive current deficits and the loss of
market share in major export destinations (Amaral 2006), its difficulties
in attracting large net FDI inflows, as well as those encountered by
Portuguese companies in the process of internationalisation through
direct investment provide substantial evidence of the seriousness of the
external challenges (Simões and Cartaxo 2011 and 2012). At the onset of
the crisis, the troubles also began to affect the ability of the indebted
Portuguese state and firms to borrow in international markets. Indeed,
171Foreign investment in eastern and southern Europe
1. The so-called Troika: the European Commission (EC), the European Central Bank (ECB)
and the International Monetary Fund (IMF). In order to obtain loans (up to 78 billion euros)
on more favourable terms than those prevailing in the international financial markets, the
government of Portugal, supported by the three main political parties, signed an agreement
with these institutions in May 2011. The document – the so-called ‘Memorandum of
Understanding’, hereafter ‘the Memorandum’ (Portuguese Government 2011) – established
the economic policy conditionals to be followed during the next three years (that is, up to
June 2014). As will be shown below, in important respects, the Memorandum was relevant
to the analysis of FDI issues in the period.

after 2008, although it mainly affected the financial sector, it also had a
strong impact on the economy as a whole.
Certainly, many of these problems were not confined to the 2000s and
were already visible in the previous decade or even before (Silva 2013).
In the early twenty-first century, however, the Portuguese economy and
its firms found themselves unprepared to find a place in such increasingly
competitive environments as the European Single Market and the euro
area, not to mention emerging markets and globalisation. This means
that the key problems of Portuguese economy were primarily structural
and the conditions required by euro area membership were not being
considered for major policy purposes, such as disciplined macroeconomic
management or adequate preparation for global competition (Silva 2012).
When the financial crisis of 2008 shook the fragile Portuguese economy
and the subsequent sovereign crisis led to the bailout of May 2011,2the
shock was widespread. For example, GDP gradually fell by around 7 per
cent from 2008 to 2013, and after very slow growth (0.9 per cent) in the
following year, by the beginning of 2015, in contrast to Ireland or Spain,
signs of a recovery were scant (and based on consumption rather than
investment).3Obviously, there are some industries (in particular,
traditional ones such as tourism, footwear and wine) and firms that have
managed to overcome the challenges of the crisis and the internationali -
sation process in the adverse conditions prevailing in the period. However,
this is not a systemic feature of the Portuguese economic situation,
especially if we consider the minimum requirements for sus tained
competitiveness. Moreover, if there has been a significant improvement
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172 Foreign investment in eastern and southern Europe
2. In order to understand the entire context better, it is convenient to recall an important
caveat. Prior to the Memorandum, political factors did not have to be completely
disregarded. At the beginning of 2010, Portugal’s sovereign bond yields were clearly below
those of other countries at risk in the European Union. However, after the elections of
October 2009, there was a minority government (in fact, a continuation of the previous
government) in a weak political position, while the president had a different political
orientation. By the middle of 2010, sovereign bond yields began to rapidly increase and
Portugal was still far from the new ECB policy of ‘whatever it takes’ to save the common
currency. The conditions were thus highly favourable for political confrontation. After the
Memorandum was signed, in June 2011, further elections were held and a coalition
politically more in accordance with the president became the new government.
3. Data for Portugal in 2014 from the National Institute of Statistics (February 2015); the
European Commission estimates (November 2014) for the year 2015 forecast that Portugal
will grow between 1 per cent and 1.5 per cent, while Ireland and Spain will grow faster, at
above 2.5 per cent. In these estimates, Greece also received a more favourable forecast, but
we need to take into account the possible effects of the change in government after the
elections of January 2015 (Silva, 2015).

in the external balance in recent years it was in an environment not only
of sharp cuts in wages and ‘brutal’ tax rises, but also increasing inequality
and poverty (OECD 2014), the emigration of qualified people, extension
of working time and the elimination of holidays. Clearly, most of these
trends, particularly after 2011, were no stimulus for structural productivity
gains (for example, in terms of labour productivity per hour, whose low
level and slow catch-up was at the root of Portuguese economic stagnation
in the early 2000s and later financial and sovereign crises, insofar as it
means that it will not be possible to pay debts in the long term). In
addition, as shown by Cravinho (2015), the basis of this ‘medicine’ was
essentially cost competitiveness of the worst sort, involving, as we have
mentioned, substantial cuts in nominal wages and social benefits, rather
than structural competitiveness, which requires the use of better qualified
workers and a much broader vision.
It is important to recall that the deterioration of the Portuguese economy
during the 2000s affected external relations – ranging from trade to
FDI – and other flows, such as revenues. Furthermore, from the
economic policy point of view, the two decades or so that preceded the
crisis of 2008 were clearly characterised by a distortion that favoured
the non-traded goods and services sector, which was highly negative for
a small economy such as Portugal (Silva 2013), as the case of exports has
shown fairly well.4Indeed, such an orientation has acted as a disincentive
to prepare well to face the European Single Market and tough interna -
tional competition. It was one of the main reasons for the poor results
observed in the decade before the crisis (for example, after having slowed
down since the early 1990s, the process of real convergence with
European partners was interrupted by the turn of the century). Taking
into account all these trends we may put a few questions to be clarified
in the present chapter: how did Portuguese FDI react to the crisis and the
Foreign direct investment in the context of the financial crisis and bailout: Portugal
173Foreign investment in eastern and southern Europe
4. The Portuguese coalition government (2011–2015) and the media claimed emphatically that
the ratio of exports of goods and services to GDP had at last substantially increased in the
period (concerning the analytic relevance of this issue, see Silva 2008: 15). However, while
accepting the good export performance of many firms, the increase in this indicator was due
mainly to the sharp drop in GDP and to other circumstances, most not related to this
government; for example, according to the figures released by the National Institute of
Statistics, on average, the annual growth rate of exports in 2010–2013 was below that of
2005–2007; in other words, export performance was already improving before the crisis.
Also, in the previous bailout programmes in 1978 and 1983 Portuguese exports increased
very rapidly – albeit for different reasons (currency devaluation) – and external equilibrium
was restored, but only for a short period. In other words, we need more time to see whether
the recent export trend is sustainable, particularly in the context of an effective economic
recovery. Establishing a strong and competitive export sector requires deep roots.

bailout? Which policies were adopted towards FDI? What was their
impact on employment and elsewhere? It is perhaps too early to obtain
clear and definitive answers to all these issues, but we shall begin the
necessary work of diagnosis and evaluation in this chapter.
Before starting our analysis, we must alert the reader to some
fundamental flaws of the available statistical data.5Although we also use
other sources (UNCTAD and Eurostat, for example), the Bank of Portugal
is the primary provider of data on flows and stocks of FDI (inward or
outward), which are also used by Eurostat. In our principal source, data
are obtained through the usual international rules and practices (for more
details, see IMF 2009), but we must be cautious about interpreting these
official FDI figures, which are imperfect from several points of view.
A few examples, not necessarily related to statistical methodology, are
likely to show the crux of the problems we face at this level. First, FDI
inflows from 1996 to 2013,6on an annual basis have always been positive,
but behind this there are very high investments as well as high
disinvestment inflows, resulting in relatively meagre net positive results
(see Annex 3) and, consequently, a modest increase in investment stock.
Second, as far as FDI outflows are concerned, we have no credible
information about their final destination, to the extent that Portuguese
corporations use third countries fairly substantially to invest abroad,
most notably the Netherlands. This is well-known among FDI specialists
(Dunning and Lundan 2008) and not specific to Portugal, although
strongly evident there. Third, to take a more recent example, Chinese
investments in Portugal have been prominent in the crisis period,
especially since 2011 and the privatisation process, estimated at around
6 billion euros by the end of 2014 (Le Monde 2015), but we find no trace
of similar amounts in national statistical sources (see, for example, Annex
1). This example illustrates how foreign investors also largely use third
countries as intermediaries to enter Portugal. Fourth, contrary to what
happens in some western and central European countries, Portugal does
not have complementary databases from chambers of commerce and
similar institutions that, even if created for other purposes, would allow
us to obtain a more realistic picture of the movements and state of inward
Joaquim Ramos Silva
174 Foreign investment in eastern and southern Europe
5. For a more general treatment of the deficiencies of world FDI statistics, see Dunning and
Lundan (2008: 12–15). The first chapter of this reference book deals directly or indirectly
with this central topic for researchers in the field.
6. Much of this chapter is based on a consistent series on FDI provided by the Bank of Portugal
(and AICEP) over the years 1996–2013. However, the series was broken in the middle of 2014.

and outward FDI in Portugal, particularly as far as the role of firms are
concerned. Fifth, and finally, since the early 2000s, research work on
individual internationalised firms and cases has increased (GEPE 2001),
particularly on enterprises investing abroad, but we are still far from
having a desirable level of data from which to draw solid and
representative conclusions on the subject.
Therefore, when we try to go beyond the global flows and stocks of
Portuguese FDI in the main period under analysis (for details see Annexes
1 to 3), and we take a closer look at its origins and destination, its
distribution by economic activity and form and its impact on employment,
the inferences may be nothing more than loose approxi mations. This is
perhaps the result of a long-lasting neglect of the relationship between
the Portuguese economy and FDI (not in political rhetoric, but in practical
and operational terms), a problem whose effects we cannot easily
overcome in the short term. In this study, we shall strive to make the best
of the fairly limited information that is available. In addition, in order to
reduce the statistical gap, we also use some data found in the news media
– Portuguese and international – that we consider helpful.
To summarise the present chapter, after this introduction, in Section 2
we put our analysis of FDI in the context of the evolution of the
Portuguese economy in recent decades. In Section 3 we look in detail and
from various perspectives at inward/outward flows and stocks in the
period of crisis and bailout that is at the core of our analysis. For obvious
reasons, we begin with the policy measures taken after 2011, such as the
speeding up of the privatisation programme and the granting of ‘golden
visas’ to non-EU residents. Then, focusing on 2008–2013, we examine
FDI in terms of its distribution by country of origin and destination,
breakdown by economic activity and forms of investment and the origin
of the leading foreign affiliates. In the course of this we make
comparisons, in particular with previous periods. We adapted our
research methodology to the fact that we are analysing a short and
peculiar period of recent Portuguese history. In the penultimate section
we synthesise the main trends of the period, based on our empirical
analysis. In the final section, we draw some conclusions and raise a few
topics for further research.
Foreign direct investment in the context of the financial crisis and bailout: Portugal
175Foreign investment in eastern and southern Europe

2. Historical overview of FDI in the Portuguese
economy
Despite the peculiar situation created by the financial and the sovereign
debt crises in 2008–2013, in order to better understand FDI in the
Portuguese economy we must look briefly at recent decades. In the second
half of the twentieth century, only joining the European Free Trade
Association (EFTA) in 1960 led to significant investment of foreign capital
in Portugal – particularly up to the early 1970s – often within the context
of the outsourcing of industry from northern European countries. Later,
except for a few years in the 1980s, both before and after EU membership,
Portugal has never attracted large FDI inflows (Silva 1990). More recently,
in an account of the first twenty years in the European Union (1986–
2005), it was demonstrated how, after the initial wave (1986–1991),
inflows clearly decreased as part of world FDI inflows (Silva 2006: 501).
With the fall of the Berlin Wall, the competition to attract FDI increased
and Portugal was unable to maintain its position (see, for example, the
stark contrast with Ireland during the 1990s, in Silva 2000; both countries
were, however, subjected to a very similar framework in terms of EU
policy towards ‘cohesion countries’ designed in the late 1980s).
Meanwhile, like other southern countries of the European periphery,
Portugal basically remained a host FDI country, not a significant foreign
investor. Figure 1 shows the international foreign investment position of
Portugal from 1996 to 2013. It is clear that liabilities always surpass
assets. However, during a short period at the turn of the century – more
precisely, 1998–2001 – net outward investment overtook net inward
investment (see Annex 3), in large part related to investments in Brazil,
attracted by the privatisation process then ongoing in that country in the
telecommunications, energy and other infrastructural sectors (Silva
2005; da Fonseca et al. 2011). After this short but intense experience,
Portuguese outward FDI clearly slowed down. Nevertheless, we cannot
deny that Portuguese enterprises, of different sizes and sectors, like those
of many other countries since the 1990s (including developing and
emergent economies), also became investors abroad. This increased
Portugal’s economic links with the outside world in a new and important
dimension due to the long-term characteristics of FDI that entail a greater
commitment on the part of firms in more competitive contexts.
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176 Foreign investment in eastern and southern Europe

With regard to FDI inflows, Figure 2 gives a more recent picture on a
comparative global basis. Indeed, the 2000s show a similar trend to the
one we have just described: these flows to Portugal have been at a
relatively low level and fairly irregular. It is true that, like most other
investments, by their nature FDI flows are not steady; moreover, for
example, in the fourteen years covered by Figure 2, no clearly discernible
trend is visible but rather substantial annual variability. However, despite
the higher figures for 2011 and 2012, FDI inflows in 2008–2013 – whose
main features we will analyse in the next section – were, on average,
below those of 2000–2007, at 0.36 per cent and 0.52 per cent,
respectively, of the world total. This is not surprising given that the later
period was characterised by high uncertainty, a factor that heavily
influences FDI decisions.
Summarising, in recent decades, apart from short periods – such as the
late 1960s/early 1970s or the late 1980s – Portugal has never attracted
large amounts of FDI; similarly, only during a few years at the turn of the
century was the country a significant investor abroad.7Furthermore,
inward and outward flows have both proved to be erratic, as if a
consistent strategy was lacking with regard to this key aspect of modern
open economies, for instance as regards integration into global value
Foreign direct investment in the context of the financial crisis and bailout: Portugal
177Foreign investment in eastern and southern Europe
Figure 1 Portuguese Foreign Direct Investment Position,
1996–2013 (euro billion)
Source: Banco de Portugal
0
20
40
60
80
100
120
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
Asset Liability
7. Not taking into consideration colonial ties prior to 1974.

chains (UNCTAD 2013). This also shows that Portuguese FDI flows are
more likely to be determined by short-term specific contexts, as happened
with the privatisation programme in some years or the launching of a
major but isolated investment, the main example of which – as far as
inflows are concerned – remains Auto Europa, whose production of
automobile parts for Volkswagen began in 1996.
3. FDI inflows and outflows and related dimensions
under the conditions of crisis and bailout
During the crisis and later ‘austerity’ policies, economic growth, rising
GDP per capita or expanding markets – among other things – were
certainly not motives for attracting FDI inflows, to adopt the usual
theoretical paradigms (UNCTAD 1998). On the contrary, in the search
for cash resources, privatisation programmes – usually involving the sale
of public companies at below market value (in normal conditions) or the
sale of indebted firms with potential, market power or technology – are
much more relevant FDI determinants. Similar short-term expedients –
such as the granting of ‘golden visas’ by the government to non-EU
residents – also became more feasible. In the present section we begin
our detailed analysis of the period 2008–2013 with these policy measures
(for a more global view of this period, see Figure 3).
Joaquim Ramos Silva
178 Foreign investment in eastern and southern Europe
Figure 2 Inward flows to Portugal as a proportion of world FDI,
2000–2013 (% of total)
Source: UNCTAD
0
0.2
0.4
0.6
0.8
1
1.2
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
Average 00-07 Average 08-13

3.1 Expediency measures: the privatisation programme and the
granting of ‘golden visas’
The Memorandum of May 2011 (Portuguese Government 2011) was clear
about privatisation. The programme was supposed to be accelerated in
2011–2012 and to involve some of the most important companies that
remained in public ownership – in most cases only partially – such as in
the energy sector (EDP, REN, Galp), transport (ANA [airports], TAP [air
company], and CP Carga [railway freight], communications (CTT, the
mail company) and insurance (Caixa Seguros), to mention the main
companies referred to in the Memorandum. The initial objective was to
obtain 5.5 billion euros in revenue by the end of the programme.
However, although that objective was attained, the Memorandum did not
impose the complete sale of larger companies. In the financial and
banking conditions then prevailing in Portugal, this meant they would be
sold mainly to foreign investors. Essentially, it meant the foreign private
acquisition of Portuguese public assets.8A door was thus opened to
foreign investors with relatively abundant financial resources, pre-
Foreign direct investment in the context of the financial crisis and bailout: Portugal
179Foreign investment in eastern and southern Europe
8. Later, in the summer of 2014, just after the end of the official bailout period, the collapse of
Grupo Espírito Santo (GES), long the most important financial group in Portugal with close
links to the real economy, but with risky and opaque operations abroad, created a similar
situation. A few months later, by the beginning of 2015, the assets of GES after having been
broken up, including the ‘clean’ part of its bank (‘Novo Banco’), were being sold off, mainly
to foreign buyers. Despite its intrinsic interest and the issue’s affinities with the policy part
of the present volume – management of the sale of the remainder of GES was conducted
Figure 3 Portugal FDI flows as a percentage of GDP
Source: Eurostat
-4
-2
0
2
4
6
8
2008
2009
2010
2011
2012
2013
Outflows Inflows

eminently the Chinese companies that bought EDP, REN and Caixa
Seguros, which gave them – as far as the first two companies are
concerned – a crucial role in the Portuguese energy sector.
After the end of the bailout programme – and by the end of 2014 – most
of the privatisation plan had been implemented and the biggest
remaining stake was in TAP, although in 2015 this company, too, was
slated for sale. According to the daily Público (2014), by November 2014
fourteen companies in which the state had a share had been privatised,
totally or partially.9Most of these privatisations – and the more profitable
ones – occurred in 2011–2012, during the first phase of the bailout
programme. In any case, the same source estimated the total revenue of
these sales at 9.28 billion euros, 68.7 per cent above the targeted revenue
of the Memorandum. However, as mentioned by Público, it must be noted
that the remaining public assets for sale, including TAP, ‘will not bring
money to the state’; in other words, state-owned property that
represented significant net positive assets – and, not surprisingly, where
economic rents were not negligible due to previous public ownership and
deficient regulation, as in the energy sector – had already been sold.
Here is not the place to discuss privatisation in detail and its ‘economic
rationale’, even considering the circumstances in which Portugal was
immersed. Nevertheless, there is no doubt that in this case the govern -
ment’s objective of obtaining the maximum cash revenue for the state in
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180 Foreign investment in eastern and southern Europe
directly or indirectly by the government and the Bank of Portugal – the default of GES in
2014 departs from our central theme and thus we shall not develop it in detail. However, in
our view, this collapse illustrates a glaring deficiency in the bailout programme, at least as
carried out by the Portuguese government, which has focused almost exclusively on public
finance policies (spending and taxation – without discussing the quality of the measures
taken), neglecting the banking and financial basis of the crisis. The demise of GES just after
the end of the bailout programme is unlikely to have been accidental.
9. Nevertheless, according to the data provided by Público (2014), and not considering the case
of sales in the stock exchange dispersed among different owners, in the four main
privatisation deals, Chinese capital participated in three: the acquisition of 21.35 per cent of
EDP for 2.7 billion euros (Three Gorges, December 22, 2011); 80 per cent of Caixa Seguros
for 1.65 billion euros (Fosun, 9 January 2014); 25 per cent of REN for 593 million euros,
which also includes a 15 per cent stake of Oman Oil (State Grid, 2 February 2012). The
second most important privatisation by revenue obtained was the sale of 95 per cent of ANA
for 1.88 billion euros to Vinci (a French company, 27 December 2012). Camargo Corrêa and
AMIL, both from Brazil (not necessarily the country of the direct investor), acquired,
respectively, 9.6 per cent of Cimpor (for 354.2 million euros) and 100 per cent of Caixa
Saúde (for 85.6 million euros) in 2012; Isabel dos Santos, close to the government of Angola,
acquired Zon for 163.8 million euros (12 June 2012). Of 14 privatisations, only one was
clearly acquired by a Portuguese company: 95 per cent of EGT was bought by Mota-Engil, a
construction firm.

the short term often prevailed over any other purpose, no matter what a
given privatisation’s impact on the economy or the consequences for the
firm itself might be in the long run. From the FDI point of view, an
obvious issue is whether an acquisition of existing assets could possibly
have the same impact as greenfield investment, most obviously with
regard to employment. Indeed, a number of studies have demonstrated
that asset acquisitions are likely to have a negative impact on employment
(Buckley and Artisien 1987; Margolis 2006). This is even more true with
regard to public companies that have not yet been ‘restructured’,
particularly if cost reduction is of particular importance to the new owner,
which is frequently the case.
Another policy characteristic of the period was the granting of fast-track
‘golden visas’ to non-EU citizens who acquire – ‘invest in’ – properties
worth at least 500,000 euros, which makes them, if correctly registered,
part of the item ‘real estate’ with regard to FDI (in)flows. According to
the Financial Times (2014: 3), the programme has been ‘highly
successful’ and in two years it attracted 1.972 billion euros from outside.
Again, ’80 per cent of the 1,775 permits have been issued to Chinese
citizens’ (ibid.). The real estate sector (and construction in general),
whose importance strongly increased in the period of policy bias
favourable to the non-tradable goods and services sector (Silva 2013),
also became characterised by heavy lobbying, which remains active. We
may concede that the ‘golden visas’ policy contributed to the revival of
real estate, but despite the importance of tourism in the Portuguese
economy, in a country whose population is rapidly ageing, it is illusory
to see this sector (as well as construction) as a major driver of sustainable
economic growth. In addition, in November 2014 the Portuguese
judiciary acted on allegations of serious corruption involving some highly
placed members of the border agency that grants these visas to rich non-
EU residents.10
Clearly, privatisations and the granting of ‘golden visas’ were a response
to short-term concerns, such as the urgent need for financial funds (to
Foreign direct investment in the context of the financial crisis and bailout: Portugal
181Foreign investment in eastern and southern Europe
10. After these events, the popular press raised allegations of money laundering, through the
channel of golden visas, in the order of 500 million euros. Of course, there is no precise
information about all aspects of the policy, but its closer scrutiny began in November 2014
and in 2015 the Portuguese government decided to extend fast-track golden visas to non-EU
residents who invest in culture and science. All this means that, under the circumstances,
this policy is not necessarily erroneous, but it is very limited and entails risks of illegality
that cannot be overlooked.

‘reduce the deficit’ and the burden of public debt11 or to reactivate
stagnant sectors), rather than the much-needed structural transformation
of the Portuguese economy towards sustained competitiveness and
higher productivity.
3.2 Main features of FDI inflows and outflows to/from Portugal
For statistical reasons presented in the introduction and examined in
more detail below, it is advisable to analyse inflows and outflows at the
same time, because there are important connections between them.
As Figure 4 shows, two advanced ‘tax havens’,12 the Netherlands and
Luxembourg, as countries of origin, are – cumulatively – the most
important net investors in Portugal during the crisis, accounting for
more than half the total. Spain comes third with 15 per cent and these
three countries represent 70 per cent of the net total invested in 2008–
2013. If we look at FDI inflows (Table 1) by investing country in each
year of the period, we note that the Netherlands, Luxembourg and
Spain occupy a leading position in most years. Some new investors,
such as Angola, Brazil and China, are not significantly represented in
Figure 4 (accumulated net inflows), but according to Table 1, in some
years they were among the leading investors (China only in 2013). In
any case, it is apparent in Figure 5 as well as in Table 1 that a high
concentration of these flows comes from western Europe, particularly
EU member states (for example, the United States appears only once
as leading investor, taking sixth place in 2011). A similar global feature
of FDI inflow distribution was obtained for a previous period (Silva
2006: 503–504).
As regards net FDI outflows, Figure 5 and Table 1 show the results for the
period in terms of symmetrical indicators. Again, the Netherlands is by
far the main partner by net accumulated outflows, and Germany is
second, but outside the euro area Poland (third) and the United States
(sixth) are important countries. Moreover, in Table 1, despite the fact that
Joaquim Ramos Silva
182 Foreign investment in eastern and southern Europe
11. It is, however, important to note that every year since 2010 Portuguese public debt has
increased in relation to GDP. Representing 93.3 per cent in 2010 (the Troika’s evaluation),
the ratio reached more than 130 per cent in 2014, according to the figures released in March
2015. Nevertheless, the pace of the increase has been smaller since 2012.
12. We borrow the expression from Dunning and Lundan (2008: 12).

the Netherlands occupies pole position four times, the scenario is
somewhat more diversified than for net inflows. For example, in the six
years displayed in the table, Angola, Brazil and Mozambique appear
several times in the leading group of countries of destination, although,
according to Figure 5, their place in the accumulated net flows seems to
be negligible in 2008–2013.
Foreign direct investment in the context of the financial crisis and bailout: Portugal
183Foreign investment in eastern and southern Europe
Figure 4 Net inward FDI by country, 2008–2013 (accumulated flows)
Source: Banco de Portugal
Netherlands
37%
Luxembourg 18%
Spain 15%
Austria 9%
France 6%
Switzerland 4%
Others Euro Area 3% Others EU 1%
Rest of the World
7%

Figure 5 Net outward FDI by country, 2008–2013 (accumulated flows)
Source: Banco de Portugal
Rest of the World
3%
Others EU
3%
Others Euro Area 7%
Denmark 4%

France
4%
United States
4%
United Kingdom
5%

Spain 6%
Poland 6%
Germany 20%
Netherlands
38%

In light of previous data, one of the most striking features is the leading
position of the Netherlands in both net inflows and net outflows.
Appropriately, UNCTAD Report of 2013 (pp. 70–71) noted with precision
how Portuguese outward FDI has been characterised by ‘large jumps’,
with a focus on the Netherlands:
Joaquim Ramos Silva
184 Foreign investment in eastern and southern Europe
Table 1 FDI net inflows and outflows, by country
Source: Banco de Portugal
1st
2nd
3rd
4th
5th
6th
7th
8th
9th
10th
2008
United
Kingdom
Canada
Luxembourg
Spain
Sweden
Malta
Belgium
Netherlands
France
Italy
2009
Netherlands
France
Spain
Luxembourg
Brazil
Ireland
Angola
Cyprus
Switzerland
Austria
2010
Luxembourg
Netherlands
Brazil
Italy
Austria
Malta
Cyprus
Angola
Hungary
Germany
2011
Netherlands
Spain
Switzerland
France
Germany
USA
Italy
Cyprus
Australia
Venezuela
2012
Luxembourg
Austria
Spain
Netherlands
Angola
Cyprus
Germany
Switzerland
Malta
France
2013
Belgium
Spain
France
United
Kingdom
Switzerland
Brazil
China
Angola
Austria
Japan
FDI net inflows – Ranking by country
1st
2nd
3rd
4th
5th
6th
7th
8th
9th
10th
2008
Netherlands
France
Brazil
Germany
United
Kingdom
Poland
Hungary
Luxembourg
Italy
South Africa
2009
Netherlands
Denmark
Brazil
Germany
USA
Ireland
Spain
Romania
Mozambique
Mexico
2010
Luxembourg
Poland
United
Kingdom
Angola
USA
Spain
Hungary
Italy
Mozambique
Germany
2011
Netherlands
Angola
Luxembourg
United
Kingdom
Spain
Belgium
Ireland
Poland
USA
Italy
2012
Netherlands
Angola
France
Italy
Poland
Denmark
USA
Hungary
United
Kingdom
Germany
2013
Germany
Spain
Poland
Luxembourg
United
Kingdom
USA
Denmark
Ireland
Italy
France
FDI net outflows – Ranking by country

Portuguese firms’ relocation of capital to the Netherlands is likely
to have created this peculiar pattern of outward FDI from Portugal
… Most, if not all companies in the PSI-20, the main stock exchange
index in Portugal, are thought to have a holding company in the
Netherlands. As such, the Netherlands has become the largest
inward investor in Portugal and the largest destination for
Portuguese outward FDI in recent years.
In light of previous periods, the crisis and the bailout seem to have
accelerated this process of relocation.
At this point, and in order to better understand the relevance of this
bilateral relationship during this period, we must distinguish between
final investors and direct investors. A final investor13 is the firm through
which the investment is channelled to the host country, but not
necessarily the primary investor; for example, an internationalised firm
may use a subsidiary in another country to invest abroad (among other
reasons, because there are better conditions for financing the operation
or less ‘red tape’ in the country where the subsidiary is established). A
direct investor is the mother firm in its home country, where the effective
decision about FDI is, in principle, taken (and managed). In light of this,
in the Portuguese case, companies may use the Netherlands (to mention
the most obvious case) to invest in a third and ultimate destination, or
vice versa. Indeed, much of ‘Dutch’ investment in Portugal is in reality
Portuguese investment returning home through a Dutch base. For
example, in 2010–2011 the sale to Telefonica of the holding in Vivo of
Portugal Telecom (PT), and later the acquisition of a holding in Oi by PT
– both operations of a Portuguese company in Brazil that amounted to
several billion euros each – were essentially made not directly but through
the final investor (Simões and Cartaxo 2012).14 It should be recalled that
one of the most passionate public debates in recent years concerned the
relocation of the holding of Jerónimo Martins (Pingo Doce), a major
distribution group that has important investments abroad, from Portugal
to the Netherlands. Under current conditions, internation alised firms
have no other choice, if local conditions to outward investment are not
favourable and they want to remain competitive: they have to migrate.
Globalisation and the free circulation of capital facilitate this, particularly
within the EU, with its different national frameworks.
Foreign direct investment in the context of the financial crisis and bailout: Portugal
185Foreign investment in eastern and southern Europe
13. The term ‘indirect’ is also used for ‘final’ (see Kalotay 2012).
14. Although, indirectly and imprecisely, the large size of these outflows movements are clearly
visible in Figure 3 for 2010 and 2011.

Concluding this point, we must now turn our attention to Annex 3. This
shows our calculations of the permanency rate, a measure that relates
both annual flows, inward and outward, by their weight in GDP through
their movements in terms of the balance of payments – that is, credit,
debit and net value – particularly in the period 1996–2013. In the case of
Portuguese inward FDI, we have the inflow investment (credit) and
disinvestment (debit), and the net value that results from credit less debit.
For Portuguese outward FDI, we have the debit (investment abroad), the
credit (disinvestment, that is, Portuguese outward FDI that returns
home), and the net value, in this case, is represented by debit less credit.
Credit and debit thus have different signs (+ and –) because we are
dealing with inflows and outflows (this does not apply to the balance of
payments, but we are more concerned with the economic sense of these
moves). This measure aims to know whether these flows show a trend in
terms of country of destination (Portugal for inward flows and the
countries where Portugal invests for outflows). As can be observed in
Annex 3 (at the bottom), in the 1980s the permanency rate was very high,
meaning that most of the flows remained in the country of destination.
However, the permanency rate clearly decreased over the different
periods that we have considered and the period 2008–2013 shows the
lowest permanency rate of all. Of course, faced with these data it is not
easy to draw conclusions because we don’t know whether ‘bad’
investment is being substituted by ‘good’ investment, or inversely, but
underlying them there is a great and increasing instability of FDI flows
towards and from Portugal. This is an issue that deserves more in-depth
study and is linked – among other dimensions – to the dynamic
specialisation of the country through its economic structure and its
possible changes.
3.3 Stocks of FDI
It is also necessary to look briefly at the evolution of inward and outward
FDI stocks. Figure 6, based on UNCTAD data, enables us to make a few
observations on the subject. In light of what we have seen so far, it is not
surprising that inward Portuguese FDI stock is substantially greater than
outward stock, and their evolution relatively synchronised over the years
2000–2007 and 2008–2013. However, looking at Figure 6 the pace of
evolution during both periods is perhaps the most important aspect.
Indeed, in the early 2000s the two stocks considerably increased while,
by contrast, in 2008–2013 their stagnation and slow movement are clear.
Joaquim Ramos Silva
186 Foreign investment in eastern and southern Europe

3.4 Breakdown of FDI flows by sector of economic activity
and form
We shall present our main findings by comparison of the periods 2000–
2007 and 2008–2013; although the two periods do not have the same
length, they allow us to take into account trends before and after the
crisis. Annexes 4 to 7 will help us in this endeavour (where there were
significant negative changes in some items, we used tables instead of
figures). First, we refer to the main empirical trends of the sectoral and
formal dimensions of FDI and then address some qualitative issues.
As regards the distribution of net FDI inflows by sector of activity (Annex
4), in both periods financial and insurance activities are the most
important item; their share increased during the crisis (from 39.1 per cent
to 65 per cent). By contrast, the second item of 2000–2007, consulting,
scientific and technical activities lost ground, plummeting from 30.9 per
cent to only 3.9 per cent. The residual ‘others’ remained important, at
17.9 per cent (previously 20.2 per cent). Not surprisingly, during the crisis
and bailout, in view of the above, manufacturing, real estate and utilities
increased their shares in total net accumulated inflows, although in a
modest way by value (for details, see Annex 4). Furthermore, foreign
disinvestment in the item ‘retail and wholesale trade’ was boosted
considerably between both periods, which is not surprising after two
decades of strongly increasing consumption.
Foreign direct investment in the context of the financial crisis and bailout: Portugal
187Foreign investment in eastern and southern Europe
Figure 6 Portuguese outward and inward FDI stock (USD million)
Source: UNCTAD
0
20000
40000
60000
80000
100000
120000
140000
2000
2005
2007
2008
2009
2010
2011
2012
2013
Portuguese outward FDI stock Portuguese inward FDI stock

Turning our attention to the net FDI outflows from Portugal by sector of
activity, first, it is important to note that their accumulated value was
greatly reduced between the two periods (see Annex 5). As far as
distribution is concerned, it is clear that, like net inflows, the item
‘financial and insurance activities’ always occupies first place, but its
weight increased substantially in 2008–2013 (84.4 per cent as against
48.9 per cent in 2000–2007). In general, this pattern, for both outflows
and inflows, was also confirmed by authors that analysed other periods
(Simões and Cartaxo 2011, 2012; Silva 2006). According to Annex 5, the
item ‘consulting, scientific and technical activities’, second by net value
within Portuguese FDI outflows in 2000–2007 (22.4 per cent of the
total), lost almost completely ground in 2008-2013 (with only 0.6 per
cent of the total), and ‘manufacturing’ occupies second place in the latter
period (22.6 per cent), although its absolute accumulated value is not
much different from that of 2000–2007. Most of the other items have
secondary importance in this context, but it must be stressed that
outflows in construction were dominated by disinvestment in 2008–
2013.
Analysis of the form of FDI also provides relevant information about the
changes that occurred in the period of the crisis and bailout. Examining
the data on net inward flows by form (Annex 6), equity is by far the most
important item in both 2000–2007 and 2008–2013 (63.3 per cent and
54 per cent, respectively), but the increase in the share of reinvested
profits is remarkable (from 14.4 per cent to 36.2 per cent). By contrast,
the item ‘credits and lending’ changed its sign, from positive to negative.
Finally, ‘real estate’ remained approximately at the same level (15.1 per
cent and 13.7 per cent, respectively). Continuing our analysis of FDI
forms, now from the perspective of Portuguese net outflows (Annex 7), it
is quite clear that reinvested profits dethroned equity as the main item,
going from 5 per cent in 2000–2007 to 72 per cent in 2008–2013 (and
inversely for equity, from 75 per cent to 0 per cent). The share of credits
and loans increased slightly (16 per cent and 19 per cent), and the other
items are residual or marginal as forms of FDI in the 2000s.15
Joaquim Ramos Silva
188 Foreign investment in eastern and southern Europe
15. As mentioned earlier, regarding outward FDI, Portugal is still in an initial phase, and
according to a publication by AICEP (2012) its most dominant type of firm is commercial
subsidiaries: ‘It is estimated that more than 60% of foreign affiliates with Portuguese capital
correspond to affiliates exclusively with commercial purposes, which involve less risks and
are less costly in terms of investment, allowing however the acquisition of the much desired
international experience’ (p. 6).

3.5 Brief overview of the leading foreign affiliates in 2013
Also, we should complement our analysis with other data, for example,
on the main foreign subsidiaries in Portugal by sales in 2013; Annex 8
shows the twenty companies in this group. Curiously, no Dutch company
is found in this set of foreign-owned firms. Spain leads with four
subsidiaries (two related to REPSOL, a retailer and a steel mill). Three
countries each have three companies in the group. Let us start with
Germany, which is well represented in manufacturing (Volkswagen – Auto
Europa, Continental Mabor and Bosch). According to the same Annex,
France and Brazil each have three subsidiaries. However, in January 2015,
two Brazilian subsidiaries (PT Comunicações and MEO) were sold to a
French company (Altice); the process of this sale was complex and was
only completed by the end of May 2015 (according to the media, Portugal
Telecom SGPS has changed its name to Pharol). Thus, if the selection of
main foreign affiliates remains the same in the middle of 2015, France
would become the most represented country in the group with five
companies (one more than Spain). Moreover, five other countries also had
subsidiaries in the group: the United Kingdom (2), Italy (2), Emirates (1)
and Switzerland (1–Nestlé); the United States was represented only by
OCP in pharmaceuticals, with modest sales, below 500 million euros.
3.6 Synthesis of the main trends of Portuguese FDI flows and
stocks aer 2008
Disregarding the statistical problems mentioned earlier, in this section
we synthesise the main trends of Portuguese FDI flows and stocks
(inward or outward) observed in the course of our research. Although we
focus on 2008–2013, as in other parts of this chapter, in order to better
understand the issues under analysis, we also make comparisons with
previous periods and add some relevant facts that occurred after 2013.
— Following the historical pattern of recent decades, both flows from
and to Portugal remained highly irregular and unstable in 2008–
2013, which is quite evident, for example, from the permanency
rate indicator.
— In the same period, as compared with the previous one at the
beginning of the twenty-first century, FDI inflows to Portugal
shrank significantly as a proportion of similar world flows.
Foreign direct investment in the context of the financial crisis and bailout: Portugal
189Foreign investment in eastern and southern Europe

— The empirical findings also show that Portugal has a peculiar pat -
tern in its internationalisation through FDI, in which third coun -
tries, particularly the Netherlands, play a major role as a vehicle of
both inward and outward flows; the available data suggest that this
role has increased in the period of the crisis and bailout.
— Relative to 2000–2007, when the FDI stocks, inward and outward,
increased substantially, in 2008–2013 there is a fairly clear trend
towards stagnation or slow growth.
— Although it is not apparent in the official statistics, new investors
such as Angola, China and even Thailand (which acquired the BES
hotel network at the beginning of 2015) appeared or, like Brazil,
consolidated their position (Silva 2014).
— Over the period, Portuguese-speaking countries have been an
important destination of Portuguese FDI outflows, but their
weight seems negligible in term of global net value. Insofar as the
internationalisation of Portuguese firms is relatively recent they
seem to have moved faster in this linguistic area, also disinvesting
when necessary for their strategy.
— As far as sectoral patterns are concerned, financial and insurance
activities absorbed the most important part of net inflows to
Portugal, in both 2008–2013 and 2000-2007. This is largely due
to methodological reasons that have not been addressed in this
chapter (FDI is reported mainly through financial holding
companies), but it must be pointed out that its share increased
substantially during the crisis. On the other hand, consulting,
scientific and technical activities largely ceased to attract FDI to
Portugal. Manufacturing, utilities and real estate, among other
minor items, increased their share in the total but their net
absolute value remains low (Annex4). During the crisis, retail and
wholesale trade increased their negative contribution to the net
inflows to Portugal (foreign capital strongly disinvested in the
sector), showing the inversion of a trend of high consumption
growth that characterised the first two decades of EU membership.
Most of these trends reflect the environment of the crisis and the
bailout, and the policy measures that were implemented. The same
could be said of the sectoral patterns of net Portuguese FDI
outflows. They decreased strongly between both periods and, as in
Joaquim Ramos Silva
190 Foreign investment in eastern and southern Europe

the previous case, financial and insurance activities are dominant
in Portuguese investment abroad, and indeed have increased their
share. By contrast, consulting, scientific and technical activities
lost considerable ground and almost disappeared as a positive
contributor to Portuguese net outflows. Also, manufacturing
became a more important sector of destination during the crisis,
and other items are relatively insignificant (see Annex5).
— If we look from the perspective of the form of FDI (Annex6), we
observe that, as far as net inflows are concerned, equity remained
most important in both periods, although more recently its share
has diminished. By contrast, the share of reinvested profits rose
substantially during the crisis. Real estate operations are an
important form with a similar percentage in both periods, and
other items are negligible or negative (such as credit and lending).
Regarding the forms of Portuguese FDI net outflows (Annex7), the
most salient fact is the strong increase in the share of reinvested
profits to the detriment of equity. Credits and loans and real estate
operations also increased their share, but only slightly. To conclude
our consideration of the form of FDI, the new role of reinvested
profits during the period, either for inflows or outflows, must be
highlighted. It came to the fore because the crisis discouraged new
investments and firms preferred, when possible, to expand existing
businesses through resources generated by their own activity.
— From the policy point of view, FDI flows fundamentally revealed
short-term concerns, in particular the increase in public revenues
(through a large programme of privatisation, in large part
characterised by foreign acquisitions, that produced two-thirds
more than the targeted revenue required by the Memorandum),
but also the granting of ‘golden visas’ to non-EU residents who
invested in real estate. Clearly, this kind of measure prevailed over
a structural approach, that is, a response to fundamental problems
seriously affecting the Portuguese economy, such as the lack of
competitiveness and the need to substantially improve
productivity. For example, there was nothing comparable to the
investment of Embraer (a Brazilian aircraft producer) during the
second half of the 2000s, when, after acquiring OGMA in 2005
(presently with about 1,600 employees), it expanded to Évora,
creating around 500 direct jobs in this high-technology industry in
its new plants (Cechella et al. 2014).
Foreign direct investment in the context of the financial crisis and bailout: Portugal
191Foreign investment in eastern and southern Europe

— If we consider the availability of financial resources and its new
role as a driver in the world economy, it is natural that China’s
weight has increased in Portuguese FDI inflows. Moreover, in
recent years Portugal became the fourth destination of Chinese FDI
outflows in the European Union (just after the United Kingdom,
Germany and France), and the member state with the largest
amount of Chinese FDI per capita (Le Monde 2015). However, the
entry of Chinese state-owned firms on a large scale is now an issue
of worldwide concern (Globerman 2015; Sauvant 2013), and
countries such as Canada have imposed restrictions (Van Harten
2014).16 Specifically, in the case of Portugal it is not clear whether
we are facing a traditional problem from the past – that is, an
emerging power in search of areas of influence through vulnerable
countries17 – or economic involvement in the Portuguese economy
that will improve its efficiency and performance. For example, the
Memorandum recommended elimination of the substantial
economic rents that exist in the virtually monopolised energy
sector; the Chinese investor that has taken a dominant position in
the privatised EDP, however, has have done everything it can to
retain such privileges. It may not be a good idea to discriminate
against Chinese or other capital with similar characteristics, but
monitoring of the process will be important and, at the very least,
it would be wise for Portugal to balance such influences.18
— Not only because of privatisation but also later, after the collapse of
Grupo Espírito Santo in summer 2014 and the sale of its parts (a
process still largely ongoing in the first half of 2015) and the entry of
new investors, the position of foreign subsidiaries in Portugal has
Joaquim Ramos Silva
192 Foreign investment in eastern and southern Europe
16. On this subject, see also several chapters of Sauvant and Reimer (2012).
17. This policy may lead to relatively more generous offers in the case of privatisations (for
details, see Silva and Galito 2014). On China’s loan policy towards other countries, see The
Economist (2015).
18. According to the Financial Times (2 June 2015), the coming sale of Novo Banco, the most
profitable remnant of GES (see Note 8), will probably come under Chinese ownership. The
Financial Times commented on the fight between two Chinese groups for the acquisition of
financial services in Europe, as followings: ‘The main battleground is in Portugal, where
China has become the biggest source of foreign direct investment. By the end of June, Fosun
International and Anbang Insurance are expected to submit the highest final bids for Novo
Banco, the country’s third-biggest bank by assets. A €4bn-plus acquisition of Novo Banco
would represent more than 2 per cent of country’s gross domestic product’ (ibid.: 19). The
consideration that the two Chinese groups were in a better position to win this battle was,
however, denied by part of the Portuguese media (see Diário Económico, June 2).

undergone fairly significant changes in the period through a number
of major deals, such as the sale of major Brazilian subsidiaries in the
telecommunications sector to a French company in 2015.
These are the main conclusions stemming from our empirical study of
Portuguese FDI, particularly of the changes that occurred during the
period of the crisis and bailout.
4. Conclusion
The worsening of Portugal’s economic fundamentals in the first decade
of the twenty-first century, aggravated by the outbreak of the
international crisis in 2008 and by the deep sovereign crisis that followed,
which also affected other euro-zone countries, particularly on the EU
periphery, led to a bailout by the Troika in May 2011. The underlying
agreement was framed by a Memorandum, which lasted three years up
to June 2014, although some conditionals and monitoring of the process
remained. Without neglecting the historical background and the
environment from which this situation emerged, this chapter focused on
the Portuguese economy’s relationship with FDI during 2008–2013. We
analysed the main dimensions of FDI, flows and stocks, inward or
outward, and we referred to other relevant aspects, such as the role of
particular countries, sectors, firms and cases. However, due mainly to
statistical reasons, our analysis has important limitations and requires
further in-depth research work.
Portugal has never had strong links with FDI, but the period 2008–2013,
in particular after 2011, stands out. For example, the attraction of FDI was
driven mainly by short-term concerns such as the privatisation program
(to mitigate the problems generated by the public deficit and debt) and
other expediency measures, such as the fast-track granting of ‘golden
visas’ to non-EU residents who invest in the real estate sector. Whatever
the measures, and probably due to austerity and uncertainty about the
final outcome of the bailout, FDI inflows have not been significant by
international standards and indeed have diminished. As far as FDI
outflows are concerned, Portuguese firms intensified their relocation to
other countries, particularly to the Netherlands, where conditions for
conducting operations abroad are much more favourable, making
Portugal even more passive and marginalised from this point of view.
Foreign direct investment in the context of the financial crisis and bailout: Portugal
193Foreign investment in eastern and southern Europe

Therefore, during this period the evidence shows that a strategic
approach continues to be lacking in all the processes involving Portuguese
FDI, no matter what the dimension studied. In fact, there were major
short-term problems and the link with FDI could contribute to their
solution, but what is effectively missing for a small country such as
Portugal is an approach to FDI linked to the necessary structural
transformation of its economy towards increased international
competitiveness and improved productivity, both based on advanced
factors (such as technology and the use of higher qualified workers).
Clearly, it was not this path that was followed, and short-term objectives,
relatively easy to implement given the circumstances, largely prevailed
over any other policy consideration.
Joaquim Ramos Silva
194 Foreign investment in eastern and southern Europe

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Joaquim Ramos Silva
198 Foreign investment in eastern and southern Europe
Annex 1 Geographical distribution of inward FDI flows (credit) to Portugal,
2000-2013 (‘000 euros)
Source: Banco de Portugal
World
Developed economies
Europe
Switzerland
European Union
Netherlands
France
Germany
Spain
United Kingdom
North America
Canada
United States
Other developed
economies
Australia
Japan
Developing economies
Africa
Angola
Mozambique
Asia and Oceania
China
Latin America and
the Caribbean
Brazil
2000
26,594,587
314,868
22,119,378
4,238,444
2,845,489
5,442,419
4,691,908
2,679,198
67,884
306,474
885
9,828
1219
303
144,452
2001
27,866,318
361,038
22,703,447
3,755,079
3,006,460
4,760,001
1,981,686
5,887,739
60,854
898,947
3
6,126
2,208
525
980
265,803
2002
21,707,163
524,851
19,555,018
3,210,839
4,100,143
2,769,182
1,824,523
3,148,734
13,275
833,106
1,472
20,725
1,630
345
1,463
397,193
2003
32,224,368
169,617
23,398,877
4,500,254
3,715,277
2,858,073
3,569,770
432,5257
6,340,283
1,182,472
541
27,830
8,017
91
148
25,4345
2004
27,111,220
291,890
22,648,862
3,648,950
3,097,021
3,416,703
4,456,393
4,126,375
360,466
1,044,201
2,531
8,882
4,163
21
313
2,4251
2005
27,676,638
497,010
25,483,838
3,653,255
3,911,338
4,637,718
4,027,728
3,490,411
150,890
657,626
125
1,6753
6,255
16
217
6,9120

Annex 1 Geographical distribution of inward FDI flows (credit) to Portugal,
2000-2013 (‘000 euros) (Continued)
Foreign direct investment in the context of the financial crisis and bailout: Portugal
199Foreign investment in eastern and southern Europe
2008
35,287,296
1,930,344
31,688,900
5,735,588
4,488,639
5,331,580
5,507,296
5,577,662
601,616
481,818
58,642
30,125
49,820
23
1,650
81,075
2009
32,017,747
1,359,805
29,431,677
5,673,153
5,619,569
4,185,226
4,153,064
6,575,282
1,103
27,1731
63,644
21,727
116,030
1,564
-1,049
328,415
2010
39,622,139
1,907,359
35,116,015
4939,744
6,656,995
6,395,247
5,704,977
4,305,304
17,257
499,797
651
12,091
32,842
1,527
625
1,834,042
2011
43,086,515
2,891,360
38,908,316
10,520,899
6,559,670
3,878,876
8,474,910
5,072,066
149,540
522,405
19,709
-12,698
-102,782
786
538
29,988
2012
47,655,795
2,017,689
44,416,264
5,510,482
7,122,438
2,940,227
8,843,375
4,366,869
14,319
400,860
2,567
684
226,531
410
442
175,590
2013
30,109,086
896,323
28,061,172
2,396,847
5,441,027
3,448,794
6,713,787
4,736,958
12,538
95,071
4,396
49,299
83,117
1,114
157,762
169,939
2007
32,633,798
890,486
29,673,119
4,661,349
3,386,862
6,444,626
5,400,448
5,258,820
741,719
794,410
17,0771
19,490
15,184
175
2,226
11,4340
2006
32,820,132
786,029
28,340,862
4,776,306
4,298,888
5,177,659
4,196,491
4,606,239
1,742,887
869,070
28,414
32,900
17,672
1,895
1
92,256

Joaquim Ramos Silva
200 Foreign investment in eastern and southern Europe
Annex 2 Geographical distribution of outward FDI flows (debit) from Portugal,
2000-2013 (‘000 euros)
World
Developed economies
Europe
Switzerland
European Union
Netherlands
France
Germany
Spain
United Kingdom
North America
Canada
United States
Other developed
economies
Australia
Japan
Developing economies
Africa
Angola
Mozambique
Asia and Oceania
China
Latin America and
the Caribbean
Brazil
2000
14,002,093
11,127
7,641,682
3,651,150
55,108
125,866
2,548,331
469,835
1,546
202,405
655
100
121,897
98,486
2,006
3,842,643
2001
13,384,156
18,734
10,310,581
3,206,275
108,396
15,254
4,210,923
379,206
4,297
84,128
536
56,757
69,404
440
2,279,264
2002
11,611,646
24,965
9,362,111
5,937,644
34,574
11,109
2,766,640
96,701
8,230
204,771
807
50,341
37,561
292
1,091,302
2003
10,093,213
20,053
5,273,517
1,128,562
55,795
16,920
950,543
78,919
1,563
66,496
535
12
40,075
26,035
56
194,119
2004
11,951,799
28,865
9,552,551
2,589,893
496,633
124,377
2,691,155
275,318
1,357
308,946
1,256
103,090
22,718
1,695
509,768
2005
9,780,692
22,906
6,613,129
2,524,273
142,294
52,290
1,733,161
141,616
279,331
195,599
618
2,537
263,647
33,053
2,228
350,985
Source: Banco de Portugal

Annex 2 Geographical distribution of outward FDI flows (debit) from Portugal,
2000-2013 (‘000 euros) (Continued)
Foreign direct investment in the context of the financial crisis and bailout: Portugal
201Foreign investment in eastern and southern Europe
2008
11,376,143
55,564
8,380,422
3,662,763
347,831
219,730
2,231,925
504,888
2,089
138,916
2,796
289
775,127
83,445
1,377
539,194
2009
7,770,221
32,861
5,500,098
2,419,187
70,997
368,732
1,257,462
63,755
40,141
296,559
4,524
49
693,765
161,805
-2,945
518,356
2010
9,789,794
39,508
5,739,503
2,055,939
89,197
87,262
773,176
259,035
6,416
153,194
5,964
146
669,472
79,928
-3,923
1,681,061
2011
19,559,679
29,697
16,769,254
13,286,134
105,537
35,280
1,729,475
247,456
14,276
110,291
3,658
-1,116
909,505
135,123
3,562
554,422
2012
15,965,770
16,243
13,170,476
11,025,286
270,265
85,008
710,057
173,295
10,368
147,901
5,272
-365
892,131
153,061
-5,046
552,975
2013
14,047,534
16,640
13,070,484
8,867,785
92,037
2,254,692
1,183,644
149,677
4,069
73,434
4,920
77
129,634
93,308
2,347
361,854
2007
14,835,430
51,848
10,202,943
5,739,502
101,672
111,526
1,940,456
586,488
1,088
372,185
8,410
733
451,124
113,243
3,629
665,733
2006
9,828,043
25,254
6,312,121
3,685,728
74,413
113,194
1,083,552
252,820
21,096
229,033
4,362
578
273,720
40,591
3,078
426,596

Joaquim Ramos Silva
202 Foreign investment in eastern and southern Europe
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
1980–1989
1990–1995
1996–1999
2000–2007
2008–2013
Credit
(1)
4.9
7.8
9.9
11.4
20.7
20.5
15.2
22.0
17.8
17.4
19.7
18.6
19.7
18,2
22.0
24.5
28.1
17.6
1.3
3.9
8.5
19.0
21.7
Debit
(2)
3.8
5.8
7.5
10.5
15.1
15.4
13.9
17.7
16.8
15.5
14.5
17.3
17.9
17.1
20.9
19.9
24.0
16.2
0.1
1.6
6.9
15.8
19.3
Net (A)
(1)-(2)
1.1
2.0
2.4
0.9
5.6
5.1
1.3
4.3
1.0
2.0
5.2
1.3
1.8
1.1
1.1
4.6
4.1
1.4
1.2
2.2
1.6
3.2
2.3
Permanency Rate
%
22.3
25.9
24.4
8.0
27.1
25.0
8.8
19.7
5.7
11.4
26.5
6.9
9.0
6.1
5.0
18.6
14.7
7.8
91.3
57.1
20.2
16.4
10.2
Credit
(1)
0.4
0.4
5.2
6.0
4.0
4.7
8.3
2.9
3.9
5.1
2.5
6.2
5.3
4.1
8.6
5.0
9.1
7.6
0.1
0.1
3.0
4.7
6.6
Debit
(2)
1.0
2.2
8.5
8.5
10.9
9.9
8.1
6.9
7.8
6.2
5.9
8.5
6.4
4.4
5.4
11.1
9.4
8.2
0.1
0.6
5.1
8.0
7.5
Net (B)
(2)-(1)
0.6
1.8
3.2
2.5
6.9
5.2
-0.1
4.0
3.9
1.1
3.4
2.3
1.0
0.3
-3.1
6.1
0.3
0.6
0.0
–0.5
2.0
3.3
0.9
Permanency Rate
%
58.6
81.4
38.3
29.4
63.0
52.3
-1.4
57.8
50.2
17.4
57.9
27.1
16.5
7.6
-57.8
54.8
2.8
7.6
72.1
80.9
51.9
40.5
5.3
(A) – (B)
0.5
0.2
-0.8
-1.6
-1.3
0.0
1.5
0.3
-2.9
0.9
1.8
-1.0
0.7
0.8
4.3
-1.5
3.9
0.7
1.2
2.7
–0.4
–0.1
1.5
Portuguese Inward FDI Portuguese Outward FDI
Annex 3 FDI flows as a percentage of Portuguese GDP
Source: Banco de Portugal

Foreign direct investment in the context of the financial crisis and bailout: Portugal
203Foreign investment in eastern and southern Europe
Net FDI inflows by sector
of activity
Total
Financial and insurance activities
Manufacturing
Consulting, scientific and
technical activities
Real estate
Construction
Information and communication
Utilities
Retail and wholesale trade
Others
Net inflows FDI by activity
Total
Financial and insurance activities
Manufacturing
Consulting, scientific and technical activities
Real estate
Construction
Information and communication
Utilities
Retail and wholesale trade
Others
2000
7,201,971
5,421,674
134,256
238,018
85,039
-15,097
419,049
-51,617
545,688
424,961
2001
6,962,762
2,235,615
-356,604
282,011
135,629
81,435
200,639
82,271
3,679,414
622,352
2002
1,911,756
961,110
-117,875
-35,510
-270,337
59,269
92,866
67,828
191,220
963,185
2008
3,184,585
1,513,050
402,775
933,567
372,883
-10,671
296,476
119,976
-1,265,252
821,781
2003
6,333,851
-2,224,803
290,999
6,398,346
174,703
61,168
569,368
10,930
596,969
456,171
2009
1,948,169
2,314,523
-1,076,616
-48,897
261,273
71,809
-35,405
179,549
-395,176
677,109
2004
1,558,085
188,665
838,287
2,391,275
34,948
34,412
-159,966
136,650
-2,970,466
1,064,280
2010
1,997,708
1,626,555
696,226
259,051
263,517
34,146
139,574
-954,738
-721,063
654,440
2005
3,159,842
2,048,582
-226,742
156,339
384,131
38,501
95,648
11,445
-419,560
1,071,498
2011
8,020,544
4,588,520
760,653
270,615
-34,760
104,220
227,399
-14,030
2,398,066
-280,139
2006
8,695,404
4,931,322
278,169
1,965,030
54,040
-154,230
-400,642
354,925
-52,881
1,719,671
2012
7,000,742
4,699,066
-64,431
-862,190
72,015
109,626
168,536
2,526,668
-193,453
544,905
2007
2,237,608
1,623,207
10,417
327,563
194,927
111,121
-75,988
387,497
-1,691,222
1,350,086
2013
2,345,354
1,343,487
773,776
411,719
216,940
126,000
24,805
-461,861
-2,063,672
1,974,160
Total
38,061,279
15,185,372
850,907
11,723,072
793,080
216,579
740,974
999,929
-120,838
7,672,204
Total
24,497,102
16,085,201
1,492,383
963,865
1,151,868
435,130
821,385
1,395,564
-2,240,550
4,392,256
Annex 4 Portugal: Net FDI inflows, by sector of economic activity, 2000–2007 and 2008–2013 (‘000 euros)
Source: Banco de Portugal

Joaquim Ramos Silva
204 Foreign investment in eastern and southern Europe
Annex 5 Portugal: Net FDI outflows, by sector of economic activity, 2000–2007 and 2008–2013 (‘000 euros)
Net outflows FDI by sector
of activity
Total
Financial and insurance activities
Consulting, scientific and
technical activities
Others
Manufacturing
Wholesale and retail trade
Utilities
Construction
Real Estate
Information and communication
Net outflows FDI by sector of activity
Total
Financial and insurance activities
Manufacturing
Wholesale and retail trade
Utilities
Others
Real estate
Consulting, scientific and technical activities
Information and communication
Construction
2000
8,826,556
5,894,916
2,175,126
203,217
389,166
77,113
1,240
58,310
13,786
13,682
2001
6,997,303
2,733,060
813,844
-60,471
117,234
3,208,861
3,340
147,612
12,184
21,639
2002
-158,372
2,521,851
348,605
-4,320
25,812
-3,086,708
11,660
-7,024
17,886
13,866
2008
1,871,549
888,113
265,419
261,997
47,334
153,919
89,753
472,183
24,042
-331,211
2003
5,833,053
-640,995
-102,656
6,353,840
228,009
42,185
2,206
-63,951
10,042
4,373
2009
587,723
743,541
437,292
325,319
-53,423
6,536
-8,871
-754,992
14,668
-122,347
2004
6,002,339
1,459,321
4,201,091
199,201
-59,655
130,707
-53,281
107,672
21,694
-4,411
2010
-5,657,691
-6,184,207
624,367
-194,510
-20,221
205,672
23,634
139,224
35,982
-287,632
2005
1,697,490
189,336
30,252
91,364
600,351
696,202
134,980
-7,253
15,527
-53,269
2011
10,722,102
10,470,788
332,028
599,502
177,856
-757,810
21,822
-2,201
-8,606
-111,277
2006
5,691,176
3,249,780
1,446,966
269,884
104,584
219,350
224,508
183,482
-31,220
23,842
2012
450,530
149,942
521,678
-339,400
-36,440
502,697
2,168
101,577
-747
-450,945
2007
4,013,338
3,635,270
-180,302
150,522
180,709
117,637
267,417
-237,969
61,567
18,487
2013
1,074,581
1,566,606
-133,932
25,246
97,175
81,756
-17,296
96,158
-33,921
-607,211
Total
38,902,883
19,042,539
8,732,926
7,203,237
1,586,210
1,405,347
592,070
180,879
121,466
38,209
Total
9,048,794
7,634,783
2,046,852
678,154
212,281
192,770
111,210
51,949
31,418
-1,910,623
Source: Banco de Portugal

Foreign direct investment in the context of the financial crisis and bailout: Portugal
205Foreign investment in eastern and southern Europe
Total Net FDI
Equity
Real estate operations
Reinvested profits
Credits and lending
Other operations
Total Net FDI
Equity
Reinvested profits
Real estate operations
Other operations
Credits and lending
2000
7,201,971
5,807,862
250,297
692,816
437,918
13,078
2001
6,962,762
1,295,173
323,990
726,463
4,584,096
33,040
2002
1,911,756
1,526,609
481,337
-556,571
454,871
5,511
2008
3,184,585
1,171,276
906,781
874,466
35,188
196,872
2003
6,333,851
5,912,724
600,244
400,340
-599,705
20,248
2009
1,948,169
86,413
1,121,167
543,691
27,882
169,017
2004
1,558,085
3,674,960
707,499
504,056
-3,336,218
7,788
2010
1,997,708
333,860
2,715,500
409,560
2,889
-1,464,102
2005
3,159,842
1,207,129
917,321
666,916
361,352
7,122
2011
8,020,544
4,617,904
1,439,898
438,165
15,130
1,509,446
2006
8,695,404
4,412,974
1,130,693
2,221,529
922,799
7,410
2012
7,000,742
6,524,562
1,024,042
421,024
-4,916
-963,972
2007
2,237,608
245,345
1,353,402
840,088
-204,683
3,457
2013
2,345,354
505,740
1,648,837
667,802
-1,167
-475,858
Total
38,061,279
24,082,776
5,764,783
5,495,637
2,620,430
97,654
Total
24,497,102
13,239,755
8,856,225
3,354,708
75,006
-1,028,597
Annex 6 Portugal: Net inward flows, by form: 2000-2007 and 2008-2013 (‘000 euros)
Source: Banco de Portugal

Joaquim Ramos Silva
206 Foreign investment in eastern and southern Europe
Annex 7 Portugal: Net FDI outflows, by form, 2000–2007 and 2008–2013
Equity 75%
Credits and Loans
16%
Reinvested Profits 5%
Other Operations 3%
Real Estate Operations 1%

Source: Banco de Portugal
Reinvested Profits
72%
Credits and Loans
19%
Other Operations 7%
Real Estate Operations
2%
Equity 0%


Foreign direct investment in the context of the financial crisis and bailout: Portugal
207Foreign investment in eastern and southern Europe
Annex 8 Portugal: main foreign affiliates in the country, ranked by sales,
2013 (‘000 euros)
Rank
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
Company
REPSOL PORTUGUESA
PT COMUNICAÇÕES
SAIPEM (PORTUGAL)
VOLKSWAGEN
AUTOEUROPA
BP PORTUGAL
AUCHAN PORTUGAL
CEPSA
WELLAX FOOD LOGISTICS
MEO
VODAFONE PORTUGAL
ENDESA ENERGIA
CONTINENTAL MABOR
DIA PORTUGAL
ITMP ALIMENTAR
REPSOL POLÍMEROS
PEUGEOT CITRÖEN
AUTOMÓVEIS
OCP-PORTUGAL
SN SEIXAL - SIDERURGIA
NACIONAL
BOSCH CAR MULTIMÉDIA
PORTUGAL
NESTLÉ - PORTUGAL
Industry
Oil and gas
Telecommunications
Services
Automotive industry
Oil and gas
Retail
Oil and gas
Wholesale
Telecommunications
Telecommunications
Utilities
Chemicals
Retail
Retail
Chemicals
Automotive industry
Pharmaceutical
Metal transformation
Electrical machinery
Agro industry
Country of origin
Spain
Brazil*
Italy
Germany
United Kingdom
France
Emirates
Brazil
Brazil*
United Kingdom
Italy
Germany
Spain
France
Spain
France
United States
Spain
Germany
Switzerland
Sales
2,085,604,769
1,708,228,286
1,609,158,385
1,606,039,683
1,489,925,070
1,404,983,164
1,304,487,294
1,273,702,634
1,054,564,457
1,051,859,779
800,577,832
794,328,034
776,612,589
741,325,339
637,885,959
503,922,579
488,425,869
468,894,489
446,454,694
442,323,324
Note: * Participation sold by Brazilian Oi to Altice (a French company) in January 2015.
Source: Based on “500 maiores e melhores empresas”, Exame, November 2014