Introduction:
Foreign investment plays a major role in the Spanish economy, and the country has long held a place of international prominence as an attractive destination for international investment. In this post, we will analyze the latest dynamics in the Spanish foreign investment market by diving into the statistics from 2023.Global Context:
Overview of FDI in Spain:
Spain remains one of the world’s premiere locations for FDI in 2023. This year, the country maintained its position as the 10th most attractive destination for international investment in the world and the 3rd in Europe.
The largest proportion of investment in Spain took the form of acquisitions, which accounted for 43.0% of all of 2023’s financial flows, followed by expansions by resident companies with foreign capital, at 37.2%. Dynamics of Investment:
Over the last years, investment in Spain has grown more and more consolidated, both in terms of location and investors. 2023 continued the pattern of the majority of investment coming from a small number of large investors and to similar destinations in Spain. For instance, only 29% of the foreign-owned companies that reported in 2023 contributed 92% of employment associated with FDI.This trend manifested itself strongly in the nature of merger and acquisition operations, the largest contributor to Spain’s foreign investment. While the total number of these operations decreased in 2023, the average size and value of them grew to the extent that the overall volume of acquisitions investment in 2023 was the second highest in Spanish history, only following 2018 levels.Another area that exemplified this consolidatory trend in 2023 was investment by foreign affiliates.- While these businesses only represent 0.5% analyzed companies, they were responsible for 27.5% of Spain’s total turnover.
- These organizations are responsible for 40% of all national exports, 32.9% of gross investment in physical assets, and 24.8% of national personnel expenditures. The latter statistic demonstrates how much of a powerhouse these companies are for national employment.
- These foreign affiliates’ role grew in the last year, reaching a height of 14,761 and marking a 25.9% increase from 2022.
Greenfield Projects: Spain Leading the Way
Of the types of foreign investment, in 2023, Spain was a particularly popular destination for greenfield projects.- The country ranked fourth in the world and second in Europe in the number of cross-border greenfield projects received, only behind the United States, United Kingdom, and China.
- In total, Spain was the destination of 3.8% of all greenfield projects announced worldwide.
- This trend runs parallel to global dynamics, which saw an increase in the announcement of greenfield projects, particularly in the manufacturing sector, and a decrease in infrastructure development and cross-border mergers and acquisitions.
- The location of these projects differed from national investment trends, which tend to concentrate strongly on Madrid. Cataluña was the principal destination of greenfield projects, accounting for 28.7%, followed by the Community of Madrid at 21.9% and Andalucía at 12.3%.
- Over 40% of these projects were in the retail sector, followed by 14.1% of projects in commercial offices and 7.6% in logistics and distribution.
Stand Out Sectors:
As Spain possesses a highly-developed, service-based economy, international investment primarily favored the service sector.
Within these larger categories, telecommunications and oil extraction received particularly high levels of investment.
Not only does this track with the dynamics of the Spanish economy, but mirrors the international trend away from infrastructure and supply chain sector investment, which had been strong prior to 2023.International Network:
Understanding where Spain’s robust international investment is coming from is key to understanding the country’s FDI landscape.- By far, the most central of Spain’s investment networks is the Organization for Economic Cooperation and Development (OECD). Since 1993, these thirty-eight countries from around the world have constituted 90% of Spain’s international financial flows, particularly European countries such as the United Kingdom, France, the Netherlands, Italy, and Luxembourg.
- While this network remains strong, foreign investment is diversifying. North American investment, especially from the United States, has increased in recent years, as has investment from Asia and Oceania.
- The importance of the North American market is exemplified by the fact that the United States has invested 19.4% of Spain’s total investment stock since 2013. This, along with modest growth in investment from Latin America, has generated the creation of more diverse and rich international connections for Spain, pointing to the country’s rise as an attractive location for global investment.
Employment:
The employment associated with foreign investment paints a clear picture of how FDI is woven into the Spanish economy. 2023 continued the eight-year growth trend in employment associated with FDI, totaling 1.88 million direct jobs. This represents a sizable 9.1% of the country’s total employed population. The size of international investment’s impact on the Spanish job market has driven the country’s recovery from the 2008 financial crisis. Since the unemployment heights reached in 2013 and 2014, foreign-owned companies have generated a staggering 700,000+ new jobs. FDI is responsible for approximately 22% of the total 3.14 million jobs created since 2015. The vast majority of these jobs have been created in the service sector, which captured 70.9% of them in 2023.Conclusion:
While gross international investment in Spain fell in 2023, following international trends, the country’s FDI continues to be strong, particularly on the international stage. Further analysis to break down the nature of this foreign investment paints a comprehensive but complex picture of a country with robust global investment which continues to geographically diversify but consolidate in terms of location and investor size. Of particular note in 2023 were the greenfield project announcements and the growing role of acquisitions and foreign affiliates.The data from this analysis was drawn from Mutlinacionales con España’s July 2024 report entitled «La inversión extranjera en cifras».
