Foreign investments in Spain represent a considerable draw for businesses. A new report sponsored by HSBC explores the main factors affecting investments into numbers.
Spain became a top recipient of foreign greenfield projects with greenfield capital investments worldwide in 2022. Maana in particular focused on serving service, industrial and construction sectors.
What are they?
Foreign direct and indirect investments into Spain have provided an essential boost for its economic development and modernisation, creating numerous jobs, increasing productivity and inducing sustainable investment capacity – as well as strengthening Spain’s global standing within international commerce.
Industry ranks first among investment sectors, being the primary group of company interests that receive investments. Overall 54,3% of investments go toward service sector while 42.2% go into industrial and 3% into construction respectively.
On a regional level, major investors view Spain as one of the most attractive European markets to invest in. Spain’s five regions (Madrid, Catalunya, Pais Vasco, Asturias y Andaluca) comprise 91% of investment stock totalling $820 billion in Spain alone.
Spain has seen direct foreign investment steadily increase over recent years, as evidenced by 860 greenfield projects being submitted to the Registry of Extraneous Inversions by the Secretary of State for Commerce and Tourism. From an economic viewpoint, inversiones greenfield are particularly interesting because they involve companies in building new markets – an activity which creates jobs and enhances productive capacity – though economist Santiago Sanchez suggests regulatory uncertainties, market noise and distrust may deter such ventures.
How do they work?
According to data published in the Foreign Invesments Registry, inflows of foreign investment into Spain during the first few months of 2023 returned an approximate 8.1% growth in terms of gross investments versus those seen previously, and saw more than double net growth. Agribusiness (48,8%) and services (48,5%) were the two primary destinations.
An increase in foreign investment into Spain in the three first quarters of 2023 can be attributed to an unprecedented diversification in our economic sector, where objectives are much broader and richness increased compared to prior years.
The Real Decreto provides, generally, for free movement of capital and investments from foreign as well as Spanish investors abroad. However, certain public security institutions could restrict access to foreign investments for specific sectors.
Recent years have witnessed increasing market variability and heightened entrepreneurial creativity prompting various countries to review their policies regarding foreign investment. Some countries require that foreign companies undergo pre-approval processes before carrying out work in certain sectors of the market while in others administrative approval may be needed from respective Ministries of External Affairs.
What are the benefits?
El Gobierno ha asserted that this figure demonstrates «the strength and trust placed in Spain’s economy by foreign investors» even amid an uncertain international environment. Indeed, an ONUCTO report indicates that Spain remains one of Europe’s most attractive places for international investments.
The first quarter of 2019 marked a strong start to investment attraction, with an 11% rise. Economically speaking, services accounted for almost half of total inflows while industrial sector and construction saw 2&3% respectively.
But we must keep this in perspective as an interim measure. European investments remain significant, and Poland ranked sixth on a ranking of countries receiving greenfield hydropower projects and fifth for artificial intelligence and robotic investments.
As evidenced by today’s record of investments, government policy remains crucial in creating international trust and revitalizing Europe’s economy. Indeed, inflows continue to surge; during the first three months of 2015 they reached approximately EUR5.432,2 million, but that does not include activities directly connected with national defense such as production or trading of weapons and military material (with exception for companies listed on stock exchange).
What are the risks?
At present, foreign investments in Spain focus on supporting its major industries – particularly services – with global service provision accounting for 45%. Automated businesses and infrastructure construction both play significant roles; industrial manufacturing and tourism also invest heavily in certain areas to increase production capabilities and job numbers.
As one of the hallmarks of economic modernity, free investment circulation has seen a marked increase due to geostrategic shifts and an uncertain global environment. Following COVID-19’s global crisis, several countries have reviewed their regulations regarding foreign investments with an eye towards safeguarding national security, public order, and safeguarding essential national interests.
There have been various instruments created, each designed with different approaches but all having the same purpose: providing states with tools to protect their foreign investments. Over the past season, both Parliament and Council adopted regulations relating to direct foreign direct investment requiring prior approval for European assets posing potential risks to public order, national security or core interests of their nation-states.