Shortly before Christmas, a rather unusual property fair was held in Rio de Janeiro. The estate agents brought with them close to 1,000 offers of houses and apartments in Portugal. However, the key selling point for the event was not the promise of a luxury villa in the Algarve, but rather a present reserved for buyers of Portuguese property: a permanent residency permit, valid not only for Portugal but for all the countries of Europe.

Adopted by the government in October, new legislation, which has now been nicknamed the "golden visa" law, has paved the way for a major programme to attract non-European investors to Portugal – and with them fresh capital to help the country overcome the economic crisis. The country has received financial support from EU bailout funds, the European Central Bank and the IMF since the spring of 2011. However, hardly any progress has been made with the reforms that Portugal was supposed to implement in exchange for this assistance. The population has rebelled against prescribed austerity policies and the privatisation programme has been very slow to get underway.

This was the context for the idea of seeking help abroad. Foreign Minister Paulo Portas spent months trying to convince Portugal’s European partners — a difficult task because a Portuguese residency permit is also valid in other EU countries. In principle, the investors that Portugal intended to attract could also set up in Paris, Berlin or Madrid.

Cash from the colonies

It was for this reason that major restrictions were established. Investors are required to inject at least €1m into a Portuguese company, create a minimum of 30 jobs in the country, or to acquire a property worth €500,000. Once one of these conditions has been fulfilled, they are issued with an “initial” visa that is valid for two years. This can subsequently be converted into a permanent residency permit, or even a Portuguese passport, if the investors are willing to keep their capital in the country for a period of more than five years.

The programme mainly targets investors from Portugal’s former colonies: Brazil, Angola and Mozambique. And it is in Brazil that it has attracted the most interest: a country that has recently attracted growing numbers of unemployed Portuguese, along with Angola. In mid-December, the Minister for Economy, Álvaro Santos Pereira, was also eager to talk up the initiative on a trip to Turkey, a country where many people have given up on the idea of joining the EU. "Come to Portugal,” he told Turkish entrepreneurs. “You will feel at home there."

The programme has delighted potential investors, among them the Vice-President of Rio de Janeiro’s Chamber of Commerce and Industry, Frederico da Cunha who views Portugal as a "doorway to Europe". There is nothing surprising in this response: the EU is a major trading partner for Brazil, and an important destination for destination for its agricultural exports. And the programme has emerged against a backdrop of negotiations between the EU and the Mercosur trade bloc, which have been stalled for years, notably because of France, which is concerned about its own agricultural sector.

Easy access for SMEs

For small and medium sized companies, which lack the resources to bring billions to the negotiating table, purchasing a property looks to be an easy way of establishing residency, remarks Paulo Lourenço, Portugal’s consul general in São Paulo.

Visitors to the fair in Rio de Janeiro were surprised by the high quality of the properties, including a number of exceptionally well situated hotels, which were offered at prices that were in some cases less than half of the going rate for comparable properties in southern Rio. On average, Portuguese property sells for €2,213 per square metre — which is remarkably low for Europe, where only Lithuania, Romania and Cyprus offer cheaper prices.

Spain is now considering the introduction of a bill in many ways similar to the Portuguese legislation. However, the price of building plots in the country, which remains very high — up to €4,000 per square metre — will likely put off investors.

Domestic grumbles

At the same time, the Spanish are far from enthusiastic about the initiative, and in particular the announcement by Secretary of State for Trade Jaime García-Legaz that Russians and the Chinese could obtain residency permits if they spent as little as €160,000 on a property in the country, which has been perceived as an affront.

Human rights organisations have been quick to accuse the government of courting well-off investors, while leaving migrants, who came to Spain during the boom years and are in some cases unemployed and homeless, to their fate. Economists and law associations have pointed out that property purchases can be used to launder money — an issue that has already made the headlines in Spain where the boom years were marked by a number of scandals that drew attention to the use of funds from dubious sources in major real estate deals.

To date, Foreign Minister Paulo Portas has yet to reveal the number of applications the Portuguese government is hoping to receive from investors attracted by the prospect of Portuguese residency. However, he has said that the programme will be careful to abide by Schengen Area regulations, and that Portugal will ensure that only investors judged to "completely above suspicion" will be granted residency.