The "GOLD" interior of Portugal. What can change in the Portuguese Golden Visa program?
The headline is suggestive enough to indicate the theme of this article: the Portuguese government's recent intention to end Residence Permits for Investment Activity, a.k.a. "Golden Visa", for Lisbon and Porto in order to promote investment in the Interior of Portugal. The intention is excellent, and it is to applaud.
When my partners and I created a company to attract people to Live and Invest in Portugal, our inspiration was the River Zêzere right in the centre of Portugal. We believed that a new company would have more success in identifying opportunities in the interior of the country taking advantage of the natural heritage that could be found in areas far from the large centres such as the Alentejo, the centre of the country or the Douro.
However, the reality was different. We soon realized that someone who arrived for the first time in Portugal preferred the security of the capital. Even to have the first customer investing in Porto was not an easy route.
That is why, still not knowing the exact terms of the legislative changes in the "Golden Visa" regime, that I can say that it will not only be the exclusion of Lisbon and Porto from the regime that will bring investment to the interior. And I hope I'm not accused of being pessimistic. About this, I remember what I was told once: a pessimist is just an optimist with better information. Let me share the information that I think is relevant.
Portugal needs to attract capital; much capital has unfortunately been destroyed in previous years. And the country needs to attract capital for productive activities that can represent an added value for the Portuguese Economy. How? Firstly, we should not want capital that seeks only a refuge or that sees Portugal only as a "gateway" to have free access to the European Economic Area.
For this, it's necessary effective control over the origin of the capital entering the country. The rules on money laundering must be complied by banks, real estate agents, advisors and all those involved in the process. Regulators should carry out specific inspections targeting capital brought under the "Golden Visa" regime to ensure an environment where no one is tempted to bring capital whose origin is unclear. There is no need for new laws. Laws exist already, is just make sure there are severe sanctions for those who don't comply with them. Only then will we effectively have inflows of capital and investors with only one goal: return on investment.
And now the second element of the equation: there will only be investors in the interior of the country if there are interesting projects and an investment-friendly context. Projects cannot be limited to real estate as has happened in the history of "Golden Visa" in Portugal. How? For example, creating investment funds or venture capital for business development in the interior.
These funds could even be entitled to a secondary market regulated by CMVM (Portuguese Securities regulator) and be an opportunity for local authorities themselves or state bodies such as Turismo de Portugal or Portugal Ventures to create investment opportunities. These funds should aim only at productive activities and not allow investment in real estate. I am not suggesting excluding direct investment in real estate, it is also welcome but, in my opinion, when it is effectively intended for residential purposes. Under the current "Golden Visa" regime who invests in a property only needs to be in Portugal 7 days a week from the second year of the investment.
This, if maintained, could lead to areas in the interior with new records in terms of property sales but suffering from the same problem as today: the lack of people. If access to the "Golden Visa" through the purchase of real estate requires the establishment of tax residence in Portugal, it will bring people who effectively want to live in Portugal.
Another alternative would be to allow the investment in real estate to support the development of an industry. For example, if the investment is in a property that will be converted into a hotel, the access to the "Golden Visa" could be allowed. We wouldn't have people living, but we would have tourists in the Interior of Portugal.
And here I come to my last element of the equation: Human Capital. Without it, there is no return on investment. The "Golden Visa" should also provide mechanisms for those with qualifications or added value skills that want to come to work in Portugal. Even Lisbon and Porto currently lack qualified professionals in certain areas. In fact, and for no one to think that I am on a "crusade" against Lisbon and Porto, I can add that in these cities the "Golden Visa" regime can and should continue. The solution is not to end the scheme, but to seek to guide investment under the "Golden Visa" to the right areas. For example, the lack of student residences or accessible rentals for young people in these cities could be solved with investment raised through the "Golden Visa" scheme. Bringing investment to the interior should not be done at the expense of prohibiting or limiting investment in large centres. Portugal enjoys a unique social cohesion, and the last thing we need is a "struggle" between Littoral and Interior.
I end up being optimistic: we have great conditions to bring people to Live and Invest in Portugal and thereby continue to grow above the average of Europe.
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