Overseas investment has not significantly changed Portugal’s production structure

 In Administration, Companies, Economy, News

Foreign investment that has poured into Portugal recently has had no significant effect on changing Portugal’s structure of production.

This is according to a business manager, Luís Todo-Bom, who said in an interview with Jornal Económico that there was no guarantee that EU funds would serve as a catalyst for more overseas investment in Portugal.
However, it could serve as a platform for Portugal to be able to continue along its path of development by attracting more projects such as those from Mercedes and BMW in the country, as well as encouraging more technology-based overseas companies to set up in Portugal.
But instead, most foreign investment has come in for call centres while the lion’s share of overall investment has little in the way of fixed assets.
Luís Todo-Bom says Portugal needs to attract a different type of investment cash than it has generally attracted so far.
“Today, overseas investment rarely sets up a new factory. The scenario that happened with Autoeuropa is rare. Factories, thanks to robotisation, are returning to their countries of origin. If Autoeuropa closes, the cars that are currently being produced there will be produced back in Germany,” he says.
A large part of international investment is done in partnership with local companies and there are groups of some size where these partnerships are useful and work,” adds the company manager.
Luís Tudo Bom has also recently criticised Public-Private Partnerships in Portugal where the State has failed to take the necessary precautions, leading to a situation of imbalance benefiting the private sector and providing fuel to the left-wing parties who call for the total elimination of private initiative in the public sector.
He says that such PPPs can work adequately in a win-win situation providing that the private sector has its own mechanisms to protect its private company interests, with the balance residing in the organisation, monitoring and supervision of these private entities by the Government and public sector in order to ensure a balanced solution between risk and return.
The critical point of this balance resides in the rate of contractually fixed own capital return that goes to private PPP investors.
“In the current financial market phase, and taking on board the low risk of these projects, and of the country, the rate of return should, in my opinion, be set at around 6%, which is a generous return for shares and which should serve as a benchmark to that effect,” said Luís Todo-Bom.
If the Inspectorate-General of Finances carried out more stricter audits on all the PPPs in the various sectors, making sure that the returns where fixed at this value, then a lot of the current criticism would disappear, since the PPPs would benefit the Portuguese population from the services given by these partnership entities.