Over the last couple of years, the performance of the Portuguese economy has been somewhat better than expected given the slightly shambolic nature of the coalition currently in charge (it is blend of centre-left, left-left and communists). Predictably enough the standard solution on offer to boost growth rates is by doling out public sector cash to promising looking businesses – in the case of Portugal, this public sector cash generally comes mainly from the EU cohesion funds (money that is given to poorer areas of the EU to help them to get up to speed with the rest of Europe).
To date, EU funding has been available for all areas of Portugal other than Lisbon (which is considered sufficiently wealthy to not need it) – now there is a growing movement to use funds to encourage investment in the Portuguese interior, which has suffered dramatic population declines in recent years. In Portugal, the 50km strip running along the Atlantic coast is where most of the economic activity takes place; this coastal area has a more forgiving geography (it is flat!), cooler summers and warmer winters and much better accessibility than the interior, so convincing businesses to invest inland is no easy task.
Whereas small and medium sized businesses can apply for EU money to support investments (typically 45% of the value of the investment) according to a series of rules, largest projects (€25m+) are negotiated separately and given a mixture of incentives including lower tax rates, subsidies for training workers, free or subsidies land and of course the cash. There are currently 17 of these larger projects lining up for these incentives, of which 90% are on the coast (a value of €1578 million) and 10% inland (€155 million).
The debate running at the moment is whether the incentives should be sweetened for those companies willing to consider locating further inland at the expense of those who only wish to locate nearer the coast. It seems very likely though that any company willing to set-up in the interior will be first in line for the incentives and it is potentially a fantastic opportunity for foreign companies investing in Portugal.
With a relatively skilled workforce at relatively low wages, general low cost-base, good internal infrastructure and excellent transport links to the rest of the world as well as the quality of life available to ex-pats, Portugal is already an attractive bet for many firms looking to relocate. It is not yet clear if these additional financial incentives will be sufficient to encourage foreign firms to invest in the interior of the country rather than on the coast, but we have seen in the past that if the incentives are big enough, the businesses will come.
If your business (big or small) is interested in investing in Portugal, here at PortugalWorks we can provide you with the help you need to navigate the incentives available as well as to choose the very best location and get your business started. Please contact us to set up an exploratory meeting.