A handful of the world’s largest companies are opening tech-focused offices in Portugal, while the number of startups in the country continues to grow. Entrepreneurs and economists alike seem to believe this is a sign of things to come.
At the start of the year, news broke that American tech giant Google will open a technology center on the outskirts of Lisbon in the town of Oeiras, creating around 500 jobs. Portugal’s economy minister said talks about the new hub had begun last November during the annual Web Summit, one of the world’s largest technology conferences, in Lisbon. The founder of the Web Summit, Paddy Cosgrave, said there are “rumors” that Google is “the first of a number of high profile tech companies opening major offices in Lisbon”.
Just after the Google announcement, more news broke that Amazon, the American online shopping giant, is negotiating to buy property in Porto – Portugal’s second-largest city – in order to build a new European base. The company told Portuguese newpaper Jornal de Negócios that it is “preparing a great investment in Portugal”. While the Porto plan is still under discussion, Amazon decided in September that its first Portugal office will located in the capital city, aimed at supporting the network of growing clients for its web services. The news came just as Amazon hit one trillion dollars in profit.
Beyond tech companies, major clothing companies and carmakers are setting up shop in Portugal. Germany’s Zalando, an e-commerce fashion company, opened a branch in Lisbon at the end of last year. The team of 16 currently focuses on Zalando’s “Digital Experience”. By the end of this year, the team is expected to grow to 35 employees.
The German car companies Volkswagen and Mercedes-Benz have both established tech hubs in Lisbon. In April, Volkswagen announced it is investing in a software development center in the capital that will focus on the “development of cloud-based software solutions for the further digitalization of corporate processes … and for the connected vehicle”. In the medium-term, the hub will employ around 300 IT specialists.
Mercedes-Benz had a head start, having opened its Lisbon digital tech hub in May 2017. “The Portuguese authorities very actively assisted the founding phase of the new centre with minimal bureaucracy”, read a statement by Daimler, Mercedes-Benz’s parent company, on the new office.
Also in May of last year, Vestas, a Danish wind turbine company that leads the world in developing and delivering clean wind energy, announced it was opening an engineering design centre in Porto to work on industry-leading research and development. The centre, which is responsible for developing core technology for the company’s product portfolio, expects to hire several hundred engineers by 2020, when the operation is fully up and running.
“The Porto area offers access to a breadth of skills in areas that Vestas is looking to recruit, namely electrical, mechanical and software engineering”, read a Vestas press release on the new office. “The proximity to leading universities and other research institutions of a high standard is key to choosing Porto and Portugal”.
Additional economic factors contribute to the recent appeal of the western-most European country for big tech, clothing, car, and energy companies. For example, Portugal has extremely competitive development prices – that is, software developers in Portugal earn much less than their counterparts in Germany or Sweden, but are of the same quality.
Property prices in Portugal are also very competitive, costing much less per square meter than Berlin, Stockholm, Zurich, or London. And with an annual inflation rate of just around one percent, the cost of living in Lisbon is also much lower than the aforementioned cities.
Policy changes in the wake of the global financial crisis have also aided to the flow of business investment in Portugal. As the country strived to become a business and startup-friendly state, it rolled out a new tax incentive in May 2013, which allows a 20 percent tax deduction on investments of up to five million euros – this can lower the corporate tax rate in some cases to as low as 5.5 percent, from the normal rate of 24 percent.
Specifically with regards to startups, the Portuguese government also eased residency programs for foreign startups and lessened bureaucracy, so that startup founders can establish their company via a simple online process. The government has also allocated 200 million euros to aid in foreign companies investing in local companies or relocating to Portugal.
The plan seems to be working. Startup Lisboa, an incubator in Lisbon launched in February 2012, is already home to 280 startups and has created more than 1,500 jobs. The companies range from commerce to tourism to, of course, technology. Firefly, for example, is a tech startup based in Lisbon that uses “sensing capabilities of Earth Observation satellites to automatically detect areas of land with dense vegetation, low soil moisture and high surface temperature,” in an effort to prevent wildfires before they begin.
As Portuguese policies continue to support companies – both big and small – and the education system continues to churn out highly qualified tech professionals, the future of the business landscape in the country looks only positive.