Portugal's advantages attract new investors

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

Investing in Portugal? And why not? This small country has a lot to offer French investors, as it finally emerges from a long economic crisis that has accelerated the reorganization and modernization of its administration. The signs are now positive, with the 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 %. Consumption is now rebounding, despite the skepticism of the financial marketsThe Portuguese economy has been boosted by renewed household optimism and a booming tourism sector, at a time when Portugal is one of the most popular destinations for European visitors.

Drastic reforms

The country has redressed the balance by implementing a series of drastic reforms, starting with a more flexible labor code, which has led to lower wage costs, accompanied by a reduction in corporate tax (to 21 % today) that encourages investment. It has also facilitated business start-ups by opening up a 24-hour company incorporation procedure, and deployed a range of measures to reduce social security contributions on first-time employment contracts for under-30s and on the hiring of people who have been looking for work for more than twelve months. Tax benefits are also geared towards highly-skilled professionals, with the introduction of an income tax ceiling capped at 20 %.

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

This context is all the more favorable for French companies, as they already have a strong presence in Lisbon, with over 600 subsidiaries. They benefit from favorable salary scales, with the SMIC at 557 euros (over 14 months), but that's not all," 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 relocate parts of their activities or services to Portugal, he notes. "This movement accelerated from 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 both English and French, which makes it particularly easy to relocate call centers. Altran, for example, has set up its IT services between Porto and Lisbon, and BNP Paribas has seconded part of its human resources, while Renault and PSA have recently increased their investments in the country.

Local authorities have little room for manoeuvre when it comes to offering tax breaks to companies setting up shop. On the other hand, they have stepped up initiatives to attract companies, as Laurent Marionnet points out: "It's not uncommon for local authorities to join forces to set up promotion agencies, provide land or premises in incubators, and organize support to facilitate administrative procedures.

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