Turismo de Portugal: Supporting Investment, Research Paper Example

As a successful consulting company we specialize in giving correct and relative consulting advice to our clients. Consulting Intellegence, LLC is a team of expertise analysts and economists who thoroghly gather insider information and statistics for further consulting advice. We would like to recommend Portugal as a perspective country to invest. It is populated by more than 10.7 million and the country is the size of the state of Indiana, this provides conditions for great gain as the country is rather small and so densly populated. It has a deep historical background, and a peculiar geological landscape. The Portuguese language is the 6^th most spoken in the world due to the excessive colonization period of the country. Most of its wealth and status it lost with the destruction of Lisbon in a 1755 earthquake, occupation of the whole country during the Napoleonic wars, and later the loss of its colonies, especially Brazil, the richest of Portuguese former colonies (CIA The World Factbook, 2010). The country has a mild warm climate and a drier Mediterranean climate in southern parts, thereby in the average temperature in the winter is around 10 º Celsius and around 23 º Celsius in the summer (WTIP, 2009). The country is divided into three main different parts by four rivers, thus the main cities of Portugal are situated either on the banks of these rivers, or at the coastline of the Atlantic. Its potential is high especially due to the fact that the progress that tok place in Europe left Portugal somewhat behind.

The economic activity of Portugal has proven the influence of entering the European community in 1986. Since then the economy has become diversified and mainly service-based, where more than 72% of economic activity is concentrated on services. The past two decades have been examples of government activity in privatizing state-controlled firms and the liberalization of some of the key areas in the Portuguese economy – financial and telecommunication sectors. Much of the 1990s Portugal had shown high economic growth, above the European Union average. Later Portugal achieved qualification for the European Monetary Union in 1998 and the euro came into circulation on 1 January 2002, starting in 2001 through 2009 economic growth dropped to 3.3%. Today, amid the economic crisis and similar debt problem speculation as of Greece, Portugal’s GDP per capita roughly stands at two-thirds of the EU-27 average. In the 1990s and the early 2000s Portugal became economically vulnerable. It had an unsophisticated labor-intensive manufacturing line, and with the entrance of China to world markets and the expanse of the European Union towards the east, its national manufacturers could not deal with such low-cost competition. This however does not mean that Portugal’s exports had dropped, between 2000 and 2007 overall goods and services exports had grown by 31% (Wolf M., 2008). Amid these peculiarities Portugal is showing great investment attractiveness, supported by profitable possibilities.

However when deciding the best type of business for investments in Portugal we can give confident advice towards property investments. Land in Portugal is below the average cost of land in Spain, there are still a lot of possibilities in buying unoccupied land as well as already owned property at a relevantly low price. Afterwards investors can build various types of establishments, regarding the growing role of services in Portugal. Especially attractive are certain coastal parts of Algarve, attractive for development of resorts and rentable villas for tourists. Besides resort areas it is also attractive to invest into continental land, where one can go about developing different types of manufactures such as wine or other agricultural cultures, which have proven to be productive in Portugal. Personally I would advise to invest into coastal property. The prices on such property are extremely low, especially after the economic crisis and in comparison

House Price Change

The coastal land of Portugal is rich with tennis courts, and world class golf courses, thus the growing popularity of services will guarantee a profitable investment even into ready-made local business. Correspondingly if the investor has a great amount of investment funds, it would be more potentially profitable to purchase ones own property rather than going into rental relations with the existing owners. This is because today’s Portugal’s laws give the upper hand to the original owners, where individuals who rent are only allowed to withdraw the net profit, while all the assets invested into development are rightfully owned by the owner of the property. Thus when deciding the structure of ownership, it would be recommended to invest into wholly owned subsidiary. The investor will save all the capital invested to oneself and at the same time will receive all the net profit. Portugal is one of the several countries which the house price boom in the European Union had passed by from 1999 to 2006. When average property prices in Spain rose by 100% through this period, in Portugal the prices rose merely by 17% (Global Property Guide, 2009).

Portugal has maintained its extraordinary high appeal among tourists as a tourists “second home”, or the perfect retirement destination. The economy is showing sluggish stability, while the government is trying to maintain the EU GDP growth average. The political situation in the country is likewise stable, which gives certain guarantees from unexpected risks, thus all the more attractive for foreign investors. Among the greatest advantages of Portuguese property investments is that Portugal has one of the lowest prices of living in the European Union, which is including gas, energy and other tax expenses. The country is increasingly appealing as a tourist location, and the quality of life is highly conducive to a peaceful place for retirement. The natural beauty is stunning yet diverse, from clean sandy beaches, mountainous terrain to championship golf courses. The wealthy historical and cultural heritage create great tourist potential throughout the whole country, not just the coastline. The property market in Portugal is fare and well established, providing stability as well as transparency in purchasing procedures for local and foreign clients. The English language is widely spoken in the country due to a large presence of British. In the Algarve alone there are about 50,000 properties owned by the British. The weather is great for attracting tourists all year round; Portugal receives over 300 days of sunlight each year. The country is showing the lowest crime rate in all of Europe, and the political situation is stable. The infrastructure is well-developed, with the presents of via budget airlines and airports, making Portugal a close flight destination from the United Kingdom, and an advanced infrastructure of the roads. These conditions make it possible to travel through the country without decent trouble. The extremely popular and well-developed Algarve coast is receiving competition from a developing coastal region, the “Silver Coast”, situated north of Lisbon with lower prices on resorts than in Algarve. Membership with the European Monetary Union and NATO give even more positive aspects in the stability and protection of business. The Portuguese government has built a favorable legislation system towards foreign investors, and national organizations which assist further investing activities. Among the disadvantages in investing into Portugal is that US investors are most likely to meet European competition. Calculations of Value Added Tax often are problematic as well as registration of foreign companies. Among the existing disadvantages is that the global economic downturn and recent troubles in Greece will withhold the rising of prices and national economic recovery. Finally Portugal’s legal system is not advanced; it is very slow and deliberate. It takes up to a year to resolve even the simplest case.

The Portuguese investment climate directly influences the investment strategy that should be implemented. The Portuguese Agency for Foreign Investment and commerce (AICEP) is directly responsible for the promotion of Portuguese trademarks over the world, exports, and responsible for attracting direct foreign investments. The AICEP directs investors of various sizes with different projects. The AICEP is most favorable towards big investments of more than 25 million Euros, providing the investors with tax cuts, credits, and subsidiaries (Dimireva I., 2009). The Portuguese MEID (Ministry of Economy, Innovation and Development) supports property investments aimed towards its “Tourism Intervention Programme”. It tries to provide efficient competition on the property markets and tries to maintain a normal supply-demand tendency (MEID, 2010). Thus the perfect strategy for US investors would be to decide which coastal land is more attractive for them, either the Silver Coast north of Lisbon, or the Algarve – southern Portugal. The Algarve has a developed infrastructure, and is of high popularity among tourists, yet investors should be ready to face some competition in that area. After deciding the property to purchase investors should already know which type of tourist attraction establishment to build, whether it will be a resort area or separate villa complex.

The peculiarities that will need to be overcome in Portugal are built more on a cultural basis of the country. The Portuguese are open to foreign visitors however if a foreigner wants to cooperate with the local business community, he should know how to behave himself. The Portuguese are somewhat conservative in business; the dress code requires a business suit and no casual clothes. During a business lunch it is normal to talk informal and later through the lunch get into formality of the occasion. The religion in Portugal is Catholic Orthodox, with a rich historic background; this is why one should show respect to their religious objects. Sport is a topic which should be avoided unless you are talking about soccer, in Europe – football. The Portuguese are huge soccer fans of their favorite teams that is why one should be careful not to offend a favorite local team. Politics is also an unfavorable topic, the political situation in Portugal shows stability so it will not be a subject of risk. The currency in Portugal is the Euro, since 2002 it is the official currency. Judging by the recent instability events in Europe, the Euro is sluggishly dropping relatively the US dollar. This is a great opportunity making property in Portugal even more accessible.

Recent news breaks had proclaimed that Portugal is in a risk zone similar to Greece, afterwords news breaks announced that these headlines were just speculations creating a questionable dilemma. Portugal’s debt rate is ranked in the EU average and the situation is nothing like Greece’s (EUbusiness, 2010). Even though in the last year the GDP growth rate was a negative 2%, this year the government of Portugal raised the indexes and the GDP growth rate is about a negative 0.2%. The stimulus plan announced in 2008 and provided in 2009 will give a great jolt to the economy. The matter that property prices were not as affected as in the rest of Europe through the last decade gives great opportunity to growth and development. An investment into coastal Portugal will be certainly profitable. In a year after the economic downturn will be completely managed potential will be huge.

Works Cited

MEID, (2010). Turismo de Portugal: Supporting Investment. Retrieved May 9, 2010 from http://www.turismodeportugal.pt/english/AreasofActivity/Investment/Pages/Investment.aspx

WTIP, (2009). FactSheet Portugal. Retrieved May 9, 2010 from http://where-to-invest- in-portugal.com/FACTSheetPortugal.aspx?CultureID=en-GB#economy

Dimireva I., (2009). Portugal Investment Climate 2009. Retrieved May 9, 2010 from http://www.eubusiness.com/europe/portugal/invest

EUbusiness Ltd., (2010). Portuguese PM Slams Financial Speculation. Retrieved May 9, 2010 from http://www.eubusiness.com/news-eu/portugal-finance.4io

Propertyshowrooms.com & International Property Investment Network, (2008). Why Invest In Portugal Property? Retrieved May 9, 2010 from http://www.propertyshowrooms.com/portugal/property/investment/why-invest-in-  portugal-property.asp

CIA World Factbook, (2010). Portugal. Retrieved May 9, 2010 from https://www.cia.gov/library/publications/the-world-factbook/geos/po.html

Global Property Guide, (2009). Portugal’s Housing Market Hits New Low. Retrieved May 9, 2010 from http://www.globalpropertyguide.com/Europe/Portugal/Price-History