Profitability of Spanish foreign direct investment

Resumo

In this paper the focus is on the profitability of the Spanish FDI stocks owned by foreign and domestic firms. The implicit rates of return are estimated and analyzed for two different main components, capital stakes and inter-company loans, over a period spanning from 1993 and 2007, in a systematic comparison with other developed countries and after a discussion of some methodological and statistical issues. The time dynamics of stock and incomes are also previously considered as a base for a better understanding of the great changes that have recently taken place in the position of the Spanish economy in the international investment overview. The main result is a comparative low profitability of the FDI assets and liabilities in Spain which could explain the slowdown of the inward flows in the last years. However, the contrast between the main data source, Eurostat, and domestic data for the firms involved advises us to be very cautious about this conclusion.