Portugal attracts overseas investment despite Covid-19
Portugal succeeded in attracting two overseas investment projects in the middle of a lockdown caused by the Covid-19 pandemic.
The projects were revealed by Portugal’s overseas trade and investment agency AICEP.
“Since the lockdown we netted two investments, the second right in the middle of the State of Emergency with the final ‘visit’ taking place via videoconference”, said Luís Castro Henriques to online business news source Dinheiro Vivo to which he said that despite the crisis “it’s business as usual at AICEP”.
Since March AICEP has helped seal the deal on three overseas investment projects, two Swiss and one German in the services area: a shared services centre and two software development centres that should create around 250 jobs to 2021. One will be in Porto and the other in Lisbon while the third has yet to decide.
The AICEP president announced the deals last week on the TSF/Dinheiro Vivo programme State of the Nation in partnership with Santander and which also counted on the participation of the President of the Portuguese Industrial Association, António Saraiva and ISEG economist João Duque and Rui Constantino, Santander chief economist.
Despite positive signs, Castro Henriques says there is no place for exaggerated optimism because “this is a particularly complex period for which no country was prepared and it still wasn’t certain what the impact would be the ‘Day After’.
In terms of investment levels the impact would be asymmetrical with some sectors being badly affected (tourism) while others might actually expand.
“There are some international companies which will have to focus on local markets and security and we have to see how Portugal could position itself in this sense.”
Castro Henriques admits, however, that this year will not see the records achieved in recent years in terms of foreign direct investment which would suffer as a result of the pandemic.
But in order to support economic activity, AICEP has already made €40 million available to companies and associations since the start of the crisis. Some sums were already earmarked but the payments have been fast-tracked, others were brought forward on the back of recent support measures.
From the side of the banks, Rui Constantino said that the sector was working to deliver money to the companies and there had been tens of thousands of applications that are being processed and the support would arrive shortly.
As to the impact of the pandemic, the Santander economist admitted it would be “very damaging”, but that it could only be analysed beyond 2020.
“A recovery in 2021 will be important to recover part of the losses. That way we will avoid the impact of the recession that we had during the adjustment period (Troika – 2011-2014).
CIP President António Saraiva said the situation was “unsettling and worrying”, referring to estimates of a GDP fall in 2020 of 8% and 20% for the quarter. “These numbers would throw us into a crisis of a magnitude greater than in 2011”.
In a strategy for kickstarting the economy, António Saraiva calls for its reconfiguration so that it is not excessively dependent on distribution chains and outsourcing production to other countries.
“We need the European space to be re-industrialised and in our case replace imports with manufacturing at home, but this requires a strategy” he said.
Economist João Duque said he had reservations about the alternatives to austerity. “This crisis will have an impact on Portugal’s debt because the revenues collected will be so much less than we had expected” he warned.
In other words, in order to maintain people’s income artificially, the country will have to take on more debt which will have to be paid off.
“If we don’t pay it now in terms of the public’s financial despair because we have arranged some mitigating measures, we’ll have to pay later. Either we pay with harder measures in the short term or measures that are less harsh but will last longer. We’ll have to see what will be the political options,” he said.