Poor foreign investment data became known this week has caused a small earthquake in the office of the Ministry of Economy. Sources consulted by THE OBJECTIVE indicated that the readings made by the team of first vice president, Nadia Calviño, were disappointing and indicated setbacks that would continue for the rest of the year, especially due to the significant collapse of historic business partners. .

In fact, one of the data that is of most concern to the Government is poor performance of capital flows originating from the United States and England. The two main countries of origin of foreign investment into Spain and in 2022 represent almost half of the 34,000 million euros coming to our country.

By all parameters, both countries have taken a step back in their investments in Spain in the second quarter. In the case of the United States, It only reached 57.9 million euros between April and June as the “closest country”, a decrease of 96.9%, while in the UK it remained at 326.5 million, a decrease of 67.9%. This decline is only comparable to 92.5% in Luxembourg, which reached 186.2 million people.

Luxembourg Investments

If analyzed as “country of origin”, The United States has 334.7 million people, down 92% compared to April and June last year.. In the UK, the figure was 200.1 million, down 70%. France also experienced this collapse with 166.7 million people and a decline of 69%.

The difference between “nearest country” and “origin country” lies in the place that is counted as the origin of investment.. In the first case, the country of origin of the capital leaving for Spain is considered and in the second case it refers to the place where the investor is ultimately established. In the case of Spain, by 2022 almost a third of investments make Luxembourg their “nearest country”, taking advantage of greater tax advantages; however, the final destination or “country of origin” of these companies is the United States and the United Kingdom.

Therefore, there is great concern from the government. The reduction in investment from Luxembourg can be attributed to the instability of international investors who may ultimately look for other routes to land in Spain. However, if the United States and the United Kingdom – the world’s two largest financial centers – fall, it is a barometer that things could get worse in the rest of the year and distrust of Spain is widespread across the world.

Political situation

Between April and June the flow of foreign capital into our country was only 2,074 million, the lowest figure for a single quarter in more than a decade and 6,074 million less than in the same period the previous year. The 74% drop coincided with the three months before the July 23 general election and was described by experts as the trigger of uncertainty generated among investors that led to this collapse.

If the figures for the United States are analyzed, in terms of “nearby countries” its contribution to investments in Spain decreases by 1,769 million euros and in terms of “country of origin” it decreases by 3,945 million euros, andl 65% of all stops came in the second quarter of this year. In this way, if this bad data intersects with investor doubts due to political instability, we will face dangerous repercussions. The two largest business centers and the headquarters of the world’s largest companies do not trust our country in an environment where the political situation is still unclear.

Bad prospects

This newspaper has reported that advisers and investment funds are expecting a “historic” drop in foreign investment this year, It is precisely because of political uncertainty that the decline in the second quarter will continue. The problem is that after the 23-J elections, investors’ worst fears came true and – unless there is a last-minute change in scenario – the Pedro Sánchez Government supported by Sumar and independent groups will remain in place.

If Sánchez is appointed, the fund believes that we will have a government that is tough on large companies and investments and influenced by parties such as ERC or Bildu who They have repeatedly indicated they want bigger taxes and more control over companies. On the other hand, if there is no agreement on his coronation, we will have new elections as early as the first quarter of 2024, which would perpetuate the political uncertainty that has existed in Spain for a year.