FOREIGN DIRECT

INVESTMENT
IRENE GRANADOS CAMARENA
CRISTINA PREZ DEL POSTIGO ALONSO
3 ADE + MK

INDEX
INTRODUCTION
SPAIN IN THE SCENARIO OF THE FOREIGN DIRECT INVESTMENT
FOREIGN DIRECT INVESTMENT RECEIVED BY SPAIN
EVOLUTION
SECTORAL AND SPATIAL STRUCTURE

FOREIGN DIRECT INVESTMENT ABROAD SPAIN

EVOLUTION
SECTORAL AND SPATIAL STRUCTURE
A. SECTORAL STRUCTURE
B. GEOGRAPHIC LOCATIONS

EFECTS OF FOREIGN DIRECT INVESTMENT IN THE SPANISH ECONOMY

1. INTRODUCTION
FOREIGN DIRECT INVESTMENT
financial operations between a
direct investor and a resident Company in other country (direct
investment Company) that an investor interferes or control the
Company.
Spain has tradicionally been a receiver country of foreign investment
that contributes to its productive system.
The position of Spain in the international scenario of FDI.
Singular characters of the foreign capital activity in Spain and Spanish
capital abroad.
Efects of each of them in the Spanish economy.

2. SPAIN IN THE SCENARIO OF FDI

The internationalization of production activity through FDI has been one of the
most important features of the evolution of the global economy.
Along two decades the figure of FDI stock has been multiplied by four (1/3 of
global GDP)
Characterized by:

1. resorting to mergers and a new investment

2. expansion of existing adquisitions.

Factors: from high global economic growth in emerging countries to market

globalizations, advancement of information and communications technology.

3. FDI RECEIVED BY SPAIN

3.1 EVOLUTION
Spain needed to supplement the lack of entrepreurship and finantial
resources to carry out its industrialization from abroad to modernise
and making more efficient its production system since joining UE area.
EU accession generated new location advantanges for foreign
investors, to ensure more open and competitive policies, reinforcing its
interest in access to large national market.
Growth without imbalances and good provisions of infrastructure and
human capital have been something extra.

 Economic cycle and FDI are related. The impact of the recent crisis on
flows in the world economy has been significant in developed countries
and in Spain.
In Spain, decreased inputs and improved the divestments during the
crisis, but the net balance was clearly positive between 2007 2013.

3.2 SECTORAL AND SPATIAL STRUCTURE.

Impact of FDI in the economy depends on its:
Volumen
Quality: greater or less technology level, to extend or modernise productive activity
or to promote the competence, reducing the price of good and services.

The sectoral composition of global FDI received by Spain has been linked to
business opportunities offered by certain sectors but also greater or less
difficulty finding foreign capital to implant in some of them.
Investment in service was driven by the launch of the unique European market.
Energy and water where the massive inflow of capital took place in past decade,
disruption some extent the composition of investment.
The spatial composition of FDI, the data of regional stock of FDI, places Madrid
with almost two thirds of the total by the large number of Company
headquarters on its territory.

Asymmetries in
investment
structure of Spain
and 2 groups of
EU countries: EU
4 and Eastern
countries (EU -6)
Comparing with
EU, foreign capital
in Spain is much
less represented
in services and
more in
manufacturing
and above all
water and energy.

4. DIRECT INVESTMENT ABROAD OF SPAIN

4.1 EVOLUTION
In 1985 the GDP accounted for 2.5% figure well below most large EU countries.
In the next decade there is greater investment encouraging trade.
In the 90s increased competition and globalization strategies firms adopt.
In 2000 Spain's international investment. Growth stocks.
In the following period no financial crisis in 2007 that truncates the vertical line
maintained by FDI until 2010.
In the first phase, the stock continued to grow 4% annually. Since then the stock
has stagnated at 47% of GDP back in 2012.
In 2013 a change in investors shows that slow divestment strategies and maintain
positions abroad, leading to the conclusion that outward FDI has been very strong
during the crisis.

 We have to take into account the substantial international business

improving competitive advantage and the accumulation of experience
in international production, entry strategies in countries where it has
dominated the acquisitions, favorable borrowing conditions of national
markets and tax benefits to support investment abroad.
The investment has been fragmented to leverage cost advantages and
profitability of intangibles in large nearby markets geographical and
culturally whose appeal lies in accelerated growth forecasts and
granting access to other markets.
There are concentration of investments in larger and
productivity. By internalizing higher profitability is obtained.

higher

4.2 SECTORAL AND SPATIAL STRUCTURE

A. SECTORAL STRUCTURE
The
services
have
occupied for decades the
center position of the
Spanish investment abroad
almost two-thirds of the
stock in 2012.
Banking, insurance and
pension
activities
are
leading
away
from
telecommunications
and
trade and other business
activities.
The second link of FDI are
manufacturing activities.

B. GEOGRAPHIC LOCATIONS
In 2003 there were two main
areas, 15 EU and Latin America
with 40% of stocks. In other OECD
countries it accounted more than
one-tenth and the other small
fractions.
During the last decade the EU-15
has led the investment process.
UK, Brazil and the United States
together account for nearly 40%
of the stock in 2012 being
important to access markets as
prime determinant of Spanish IDE.
In 2012 the EU is the preferred
location
of
services,
manufacturing and construction.
Its in Asia and Latin America in
energy extractive water and
agriculture.

5. EFECTS OF FOREIGN DIRECT INVESTMENT IN THE

SPANISH ECONOMY
The overall impact is positive because it contributes to the expansion of gross capital
formation and favors the introduction of new technologies and thus improving
productivity and economic growth. One negative is the inhibition of native
entrepreneurship.
The contributions of FDI on macroeconomic aggregates are:
1. Gross capital formation (lost importance)
2. GDP (increase 4% in Spain)
3. Productivity (technological externalities on local businesses and increase
in the markets)

competition

4. Employment (promotions in the service sector)

5. Balance on current and capital account (except when favorable capital
payments are added)

income

and

FDI benefits:
1. It facilitates business growth and diversification of risk (crisis,
advantage of having distributed production in different areas)
2. Production and employment (horizontal investments)
3. Productivity (firms that invest abroad obtain higher productivity and
growth)
4. Qualification of the workforce (investment activity, R & D)
5. Exportations (important in the activity of a company to be an
investment prior to step outside).