Why shouldn’t anyone be paying a cent to attract foreign direct investment to Portugal? To anywhere else for that matter too?
Even if Portugal has a long tradition of subsidising foreign investors to the detriment of domestic ones, as it was reported by J. Lúcio de Azevedo[i] (1988 p. 93), we defend a neutral position regarding investors’ origin. Similar recommendation applies to investors’ destination, be it a country or a city/location within a country.
Investors do their own assessment and of course they would like to make their investments as profitable as possible, be it by their direct returns, be it by playing alternative locations against each other, in what some call a race to the bottom, evoking incentives and subsidies in the most diverse forms and shapes.
This has played well in favour of Autoeuropa, originally a Ford/Volkswagen 50/50 joint venture in Palmela/Portugal, as following tables show, but seems to carry less and less power as the balance shifts in favour of locations’ established characteristics, as it seems to be the case for Amazon’s second headquarters’ location in the USA.[ii]
[i] Azevedo, J. Lúcio de “Épocas de Portugal Económico. Esboços de história”, Clássica Editora, Lisboa, 1988 (4th edition)
[ii] Greg Ip “Why Amazon needs some cities more than they need Amazon”, Wall Street Journal September, 21, 2017, and “Hosting Amazon. One-click shopping”, The Economist, September 16, 2017
As the mentioned The Economist’s entry states: “It is rational for cities to bid for company headquarters, but not for the country”. However, I would go a stretch farther and adapt the statement as it follows: “It is rational for countries to bid for a company headquarters, but not for the world.”
This reminds us of the basic contradictory assumption according to which multinational firms try to maximize their results worldwide, as national governments focus on the national wellbeing. This leads us to assess the need of a worldwide governing body, which would take care national governments, and for that matter city governments too, do not engage in a race to the bottom splashing loads of money to the benefit of multinational firms and subtracting it from the national citizens, tax payers’ pockets.
