Andorra: Country and Foreign Investment Regime

Andorra is an independent European state with a democratically elected parliament; the titular heads of state are represented locally by officials called vergeurs. The uni-cameral legislature (the Consell General de las Valls) with 28 members is elected every 4 years, half directly by the parishes, and half through a national constituency list. The co-princes appoint a Cap de Govern (Prime Minister) on a recommendation from the Consell General, and the Prime Minister then appoints an executive cabinet.

The legal system is based on the French and Spanish civil codes, with an independent judiciary under the 1993 Constitution. Andorra is a business-friendly jurisdiction, but legal processes may become somewhat complex at higher court levels.

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Andorra Economy and Currency

With only a tiny amount of arable land - about 2% of its total area - Andorra's agrarian economy was historically based on livestock, especially sheep, pigs and cattle. In modern times, animal farming is still important, along with tobacco production, but tourism has come to dominate the economy, accounting for no less than 80% of GDP. The main tourist magnet is the absence of duties or VAT, although Andorra's relative advantage vis a vis France and Spain has diminished as those countries have begun to liberalise their markets.

Andorra is prosperous, with minimal government and taxation. Its per capita GDP was estimated at USD45,157 for 2010, one of the highest in the world.

According to the IMF, the growing financial services sector represented about 15% of the economy in 2006, but tourism is by far Andorra's biggest earner, accounting for more than 80% of GDP. Most goods have to be imported, and there is a structural trade deficit. Government finances are healthy, with a primary surplus most of the time, and a small amount of national indebtedness.

Growth rates have been volatile: Andorra's economy tends to be heavily influenced by its neighbours. Currently the economy is suffering from the global economic downturn experienced by Spain and France and the resulting stagnation of tourist numbers from those countries. Growth of 6.5% and 5.7% in 2005 and 2006 respectively, was followed by a decline of 0.1% in 2007, with 2008 figures reflecting a decline of 4.3%. In 2009, growth fell further by 2.9% and is expected to have fallen by 1.2% for 2010. Forecasts predict a contraction of 0.2% in 2011 and a rise of 0.4% in 2012.

In August, 2004, ratings agency Standard & Poor's raised its long-term sovereign credit rating on Andorra to "AA" from "AA-" following an improvement in the country's fiscal position. Noting "a wealthy economy, a competitive services sector and a stable political and institutional framework,” the S&P analysis stated: "The upgrade reflects Andorra's improved fiscal position, supported by recent fiscal reforms aimed at preserving the general government surplus and net creditor position." Furthermore, the ratings agency affirmed its "A-1+" short-term sovereign credit rating on the principality whilst also maintaining a stable outlook. "The upgrade also reflects the principality's healthy medium-term growth prospects," said S&P.

Andorra is a member of the EU Customs Union and is treated as an EU member for trade in manufactured goods and as a non-EU member for agricultural products. Therefore it applies the common external tariff of the EU for non-agricultural goods.

Andorra had no official currency and a wide range of currencies were accepted internally, the main one being the Euro from 2002. On June 30, 2011, Andorra signed a monetary agreement with the EU and has thereby adopted the Euro as its official currency.

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Andorra Entry and Residence