Notoriously bad foreign investment data this week A small earthquake occurred in the offices of the Ministry of Economic Affairs. Sources consulted by Target indicate that the reading made by the team of the Senior Vice President, Nadia Calviño, is disappointing and indicates a setback that will continue for the rest of the year, especially due to the major collapse of historical business partners. .
Specifically one of the statements that has the government concerned is Poor performance of emerging capital flows in the US and UK. The two main countries from which foreign investments depart to Spain, which during 2022 represents almost half of the 34,000 million euros that arrived in our country.
By all accounts, these two economies took a step back in their investments in Spain during the second quarter. In the case of the United States, It only reached 57.9 million euros between April and June as a “direct country”, a collapse of 96.9%, while in the United Kingdom it remained at 326.5 million, a decrease of 67.9%. This is a decrease that is only comparable to 92.5% in Luxembourg, which amounted to 186.2 million.
If analyzed as “country of origin”, There remain 334.7 million people in the United States, a decrease of 92% compared to April and June of last year.. In the case of the United Kingdom, the number reached 200.1 million, a decrease of 70%. France also joins this collapse with 166.7 million, a decline of 69%.
The difference between “direct country” and “country of origin” lies in the place considered to be the origin of the investment. In the first case, it takes into account the country from which the capital left for Spain, and in the second case it indicates the place where the investor eventually settles. In the Spanish case, in 2022, almost a third of investments were in Luxembourg as the “direct country”, benefiting from its greater tax advantages; But the final destination or “country of origin” for these companies was the United States and the United Kingdom.
That’s why there’s a lot of concern in the government. The decline in investment from Luxembourg can be attributed to the volatility of international investors who may eventually look for another way to reach Spain. However, if the US and UK – the world’s two largest financial centers – fall, it is an indication that things could get worse in the remainder of the year and that distrust in Spain is widespread around the world.
Between April and June, the inflow of foreign capital arriving in our country was only 2,074 million, the lowest figure for a quarter in more than a decade, and 6,074 million less than in the same period of the previous year. This is a 74% decrease that coincided with the three months preceding the general elections on July 23, which experts described as… It was the uncertainty that arose among investors that caused this collapse.
If the figures for the United States are analysed, in terms of “direct country” its contribution to investment in Spain decreased by 1,769 million euros and in terms of “country of origin” it decreased by 3,945 million euros, andFor 65% of everything that stopped coming in the second quarter of this year. This way, if this bad data intersects with investor skepticism due to political instability, we get a dangerous cocktail. The two largest shopping centers and the headquarters of the largest companies in the world do not trust our country in an environment where the political situation remains unclear.
This newspaper previously reported that advisors and investment funds expect a “historic” decline in foreign investment this year. Specifically because the political uncertainty that caused the decline in the second quarter will persist. The problem is that after the general elections on January 23, investors’ worst fears were realized, and barring a last-minute scenario change, the government of Pedro Sánchez, supported by Somar and the independents, will move forward.
If Sánchez is appointed, these funds believe that we will have a government that is strict with big companies and investments and are influenced by parties like ERC or Bildu that They have already indicated on repeated occasions that they want more taxes and more control over companies. On the contrary, if no agreement is reached on his inauguration, we will hold new elections at the earliest in the first quarter of 2024, which would perpetuate the political uncertainty that has already existed in Spain for a year.