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Portugal's advantages attract new investors

After years of reforms, the country is asserting itself as a safe and competitive destination. The country is attracting more and more French companies. In a wide range of sectors, they are looking to relocate their activities near France.

Investing in Portugal? And why not. The small country has some attractive assets to attract French investors, as it finally emerges from a long economic crisis that has accelerated the reorganization and modernization of its administration. The signals are now positive, with a public deficit reduced to 2 % in 2016 and growth forecasts revised upwards to 1.8 % for this year, while unemployment continues to fall, to less than 10 %. Now consumption is rebounding, despite skepticism from financial marketsThis is due to the new optimism of households and the dynamism of the booming tourism sector, where Portugal is one of the most popular destinations for European visitors.

Drastic reforms

The country has turned the corner with a series of drastic reforms, starting with the relaxation of the labor code, which has led to lower labor costs, coupled with a reduction in corporate taxes (to 21 % today) that encourages investment. It has also made it easier to set up businesses by opening up a 24-hour company incorporation route and has introduced a range of measures to reduce social security contributions on first-time employment contracts for people under 30 and on the hiring of people who have been looking for work for more than 12 months. Tax incentives are also geared towards highly skilled professionals, with the introduction of a cap on income tax at 20 %.

All these efforts have led to a return to competitiveness. Portugal is currently in 25e position (out of 190) in the 2017 Doing Business ranking, ahead of France, Italy and Spain, among others, according to the Portuguese Agency for Foreign Trade Promotion (Aicep). The country is a natural bridge to the 200 million consumers of the Portuguese-speaking markets, starting with Brazil. But it is also particularly attractive for its European neighbors: legally secure, politically stable, with good infrastructure, while offering a welcoming environment and a good quality of life.

This context is all the more favorable for French companies as they are already very present, with more than 600 subsidiaries located in Lisbon. They benefit from favorable salary scales, with a minimum wage of 557 euros (over 14 months), but not only that, says Laurent Marionnet, director of the Luso-French Chamber of Commerce in Lisbon: "The country is a good test market for innovative companies that find a customer base very open to new things."

Skilled labor

More and more companies are also choosing to move parts of their operations or services to Portugal, he notes. "This movement accelerated starting in 2011, when some companies started choosing to relocate to Europe instead of North Africa." In Portugal, they find a highly qualified workforce, a solid university system and good language skills, in English as well as in French, which makes it particularly easy to relocate call centers. Altran has set up its IT services between Porto and Lisbon, and BNP Paribas has seconded some of its human resources, while Renault and PSA have recently increased their investments in Portugal.

While local governments have little leeway to offer tax breaks to companies that set up shop, they have stepped up initiatives to attract companies," says Laurent Marionnet. They have, however, multiplied initiatives to attract companies," says Laurent Marionnet: "It is common to see municipalities joining together to set up promotion agencies, make land or premises available in incubators and organize support to facilitate administrative procedures."


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