The Spanish economy displays the best performance of Western countries. Recent OECD data shows a one-point improvement in the country’s growth, to 2.8%, compared to 2.7% in the government’s official review. These and other data seem to indicate, as the President of the Government, Pedro Sánchez, said at the time, that the Spanish economy is “going like a rocket.” But despite all this, Spain is not attractive for foreign investment.
Recent figures from GlobalInvex, the interactive tool of the Ministry of Economy which collects the results of surveys to which foreign companies operating in our country are subject, show that gross foreign investments have decreased 18.7% over one year in the first half, in its largest and most important section, that which specifically refers to disbursements intended for capital and equity. In net terms, the drop is also significant: 15.7%.
As a result, the total volume of resources that our country received from foreign investors amounted until last June to 11,762.83 million euros gross, below the level immediately before the pandemic of 12,452 million in 2019.
Gross foreign investment is a very difficult variable to calculate from an annual perspective because, as the economist José Carlos Díez explained to elEconomista.esone year it may set a record “because a large acquisition transaction or an unusual investment in a company was made…” and the next year it appears to collapse. But the truth is that, if we look at historical data, this variable in Spain, after reaching a maximum in 2018, has lagged far behind in all subsequent years.
The expert points out that there are several factors that push foreign capital to prefer other countries in which to invest. Among them, he mentioned “political instability”, referring to the lack of consensus and budgets. “Parliamentary fragmentation has affected autonomy, which makes politics less stable,” he explained.
At the same time, he speaks of “very limited interlocutors”, particularly at the regional level. “The ICEX works reasonably well and is quite neutral when it comes to providing a framework for investment in Spain, but it all depends on the level of openness of the governments of the autonomous communities,” he said.
The economics professor of Comillas (ICADE), Emilio González, spoke in the same sense. The professor emphasizes that “there are economic reasons, linked to the high levels of Spanish public debt and the absence of a budgetary adjustment policy to reduce it, which represent an economic risk for investors.”
At the same time, he also talks about political uncertainty and “the government’s labor and tax policy, unlike that of business,” he said.
In this sense, Diez referred to Portugal: “They invested a lot in capital goods, plus the Costa government was strong and focused on management, on the other hand ours did not band good”, said the economist. It is true that these are many requests expressed by the majority of companies that participate as speakers in the conferences organized by elEconomista.es throughout the year. They all act under the same mantra: “The excessive bureaucracy and a very rigid regulatory framework”, which strongly discourages investments, both in Spain and at the European level.
The data speaks
Ministry data shows that in the first half of 2017 gross investment in Spain was 14.126 million euros, in 2018 it increased to 28.175 million in the first six months of the year and in 2019 the figure increased was corrected again to 12.452 million mentioned previously. . Excluding 2020 and 2021, pandemic years where the variable closed at minimum with 9,629 and 7,778 million respectively, the recovery has not been perceptible in the capital that multinationals based beyond our borders invest in our country.
In a report published by ICEX on foreign investments in 2023, they confirm that FDI continues to decline, especially last year, by 18.5% over one year and amounts on average to 29.002 million euros over the last five years. Of course, they specify that the reduction in investments occurred in the chapter of “Other increases”, that is to say capital increases to reduce debt or recapitalizations to clean up balance sheets, “without affecting the new investments or acquisitions”, they underline. document.
In fact, new investments and expansions to increase production capacity (greenfield/brownfield) increased by almost 12% in 2023, reaching €5.68 billion. Acquisitions amounted to around 12 billion, up slightly compared to the average of the last five years.
But, according to data from the former Ministry of Industry, Trade and Tourism, since its maximum peak in 2018, investment has declined significantly, with a 45% drop in the first quarter of 2023 compared to the same period of the previous year. year.
Historically, Spain has always been an attractive destination for foreign investment. Its strategic location between Europe and Africa and the cultural proximity of European and Latin American markets make it a pivotal country between continents and a strategic axis. At the same time, the country has key infrastructure. It is the second in the world with the most kilometers of high-speed rail lines, it has key cargo ports like Barcelona, Valencia or Algeciras, and the Adolfo Suárez-Madrid Barajas Airport hub, which is the main connection. Halfway between Latin America and Europe, they bring enough added value to the country for companies to choose it to internationalize.
According to the most recent data from the Ministry of Industry and the Bank of Spain, the largest investment stock in the country comes from the Netherlands, which accumulates around 70 billion euros. Generally speaking, the vast majority of investments from this country are made by multinationals who choose Amsterdam as a base to establish their headquarters there for tax reasons.
Behind them are the United States, the largest gross investor, in stock they occupy second place with 50 billion euros. The American country presents a wide diversification of investments in sectors ranging from technologies to pharmaceuticals, renewable energy and financial services, among others.
The third country with the largest volume of investment stock is Luxembourg (35 billion), followed by Germany and France (30 billion each), then Italy, Switzerland, Mexico and China, the latter with a stock of 4.5 billion euros. In the case of the Asian giant, its presence in Spain has increased in recent years, although its stock is lower than that of other European and American countries. Their main investments focus on infrastructure and renewable energy, although they are trying to expand into other sectors such as automobiles and technology.
The situation and the contagion
The situation of the global economy, although it seems quite resilient, is entering a process of deceleration. The escalation of tensions in the Middle East, the trade war between China and the United States, in which the European Union is involved, as well as two currently open war conflicts (the invasions of Gaza by Israel and the invasions of Ukraine by Russia), also make investors act with even more caution.
Recently, the German Ifo institute published that business confidence in Germany, surely the most watched economy in the Eurozone at the moment due to its poor performance, once again surprised negatively in September, placing confidence in the manufacturing sector at its lowest level. since 2020 – a year of pandemic –, and this has a direct impact on investment, because faced with uncertainty, companies become more cautious in the management of their capital.
We must not forget that, even if the Netherlands or the United Kingdom are the European countries with the most actions investment in our country, in the case of the first this is due to the circumstances of a more favorable tax framework and the second focuses above all on sectors such as real estate, finance and tourism.
On the other hand, it is Germany and France, two muscles of the euro zone, which actions present in investment linked to the manufacturing sector. Thus, if French and German industrial companies are “in decline in morale”, this will have a direct impact on Spanish foreign direct investments, since this “fear” of a deterioration of the economy leads to a contraction of investments, as well in their own country. as in foreign subsidiaries.
It must be remembered that Spain is not alone in the worldbut belongs to the European Union and, therefore, although each country has its particularities, certain elements are common to the Twenty-Seven.
The sustained decline in FDI is occurring in a large part of the member countries, with a few exceptions, because there are numerous community regulations in this area. In a special report from the European Court of Auditors, they assure that, although the Commission has adopted “appropriate measures” to establish and apply a framework for controlling indirect foreign investments in the EU, “there remain significant limitations which reduce its effectiveness. .
Mario Draghi himself, in his 2024 report, says it clearly: “the European single market must be deepened, by eliminating bureaucratic barriers”. At the same time, he also highlights the need to “increase the EU’s competitiveness in areas such as technology, artificial intelligence and renewable energy”. All this under the guise of a reform of EU budgetary rules.
In itself, it offers greater flexibility to authorize public investments in key sectors, but while maintaining Community budgetary discipline. What is clear is that the popular saying “The United States invents, China copies and Europe legislates” is very real and this, precisely, provokes capital. move away from the Old Continent.
