Before the field trip ambassador Eduardo Ibáñez López-Dóriga met with the members of the delegation and briefed them about the problems and opportunities of the Spanish economy, and their priorities as one of the EU’s presiding countries. The Factory brings you the ambassador's speech in full. „There is little doubt that Spain has been hit hard by the economic crisis and there are several macroeconomic figures which are indeed reason to worry. Perhaps the two main concerns at this time are the figures of unemployment – with approximately 3,9 million unemployed, reaching 19,4% at the end of 2009; and, secondly, the public deficit which is at 9,5% of the GDP. The burst of the real estate bubble – which had been one of the drivers of Spanish economy in recent years, is still pulling back the economic performance. Nevertheless, with these bad news in mind, I would like to offer a sober analysis, by which, on the one side, Spain has not been worst affected than its EU partners in other economic indicators – rather the contrary in many cases-, and, on the other side, one must not lose sight of those more stable factors which had made Spain one of the world’s main recipients of foreign investments, factors which are still very much there for those willing to take the

Eduardo Ibáñez López-Dóriga

• GDP: In the first place, the expected shrinking of the GDP in Spain will be the same as the average in the Eurozone – that is, a minus 4%. The question remains as to the speed of the recovery. The BBVA bank’s report on Spanish economy presented in November 2009 holds that the potential for growth of the Spanish economy once the crisis is upturned would be of a 2% -that is, above the expected average growth in the Eurozone. The tempo will, however, depend on the speed and success of a package of structural reforms and the wise use of counter-cyclical fiscal policy.
• Public debt: Despite strong public investments and spending during 2008 and 2009, public debt at the end of 2009 will be of 54%, which is very high compared with Estonia’s minimal public debt, but is still considerably better than the 80% average in the Eurozone. Perhaps one reason for this is that Spain’s banking sector has proved to be solid and well prepared to withstand the financial crisis. Therefore, the Spanish government has not had to spend such huge amounts as the US or other EU countries in order to rescue financial institutions.
• Industrial growth: According to the latest figures by the Central Bank of Spain, economic activity and production has kept contracting throughout 2009, but at a considerably slower rhythm during the last trimester (-0,3% compared to -1,1% during the previous trimester).
• Consumer trust: Also consumer trust indicators and retail show some improvement, as they have remained relatively stable. Nevertheless, the trend is now, inevitably, that of increasing savings.
• Commercial Balance: As is the case in Estonia, Spain’s chronic trade deficit is being reduced almost by half during this crisis, with imports falling and exports faring better, in addition to a relative stability in the tourist industry.
• Inflation: After having dangerously entered a phase of deflation at the beginning of 2009, by November, inflation was again positive, at 0.3%.
• Deficit: The deficit is one of the other worrying aspects, as it has risen up to almost 9.5% of the GDP. Spain is one of the eight Eurozone countries which have been subject to a procedure for excessive deficit. However, the Commission has assessed positively the measures adopted by the government and the plan presented to bring the deficit back to the 3% limit by 2013.

In all, one must point out that the main challenges for the Spanish economy at this moment are perhaps three:

1. the need to push back the unemployment figures, which is a prerequisite for restoring consumer trust. It is expected that unemployment will stabilize in 2010 at 20.
2. the need to balance fiscal stimulus to the economy with a sustainable public deficit
3. to minimize the negative impact on the economy of the real estate bubble burst.

Attractive investment magnet

Now, I will try to focus on less transitory factors which should make Spain attractive for investment, as a modern economy, offering excellent infrastructures and incentives, trying to go beyond stereotypes, as Spain has slowly progressed to become the 9th largest world economy, the 8th largest investor in the world and the 6th largest Foreign Direct Investment recipient (and 3rd in the EU), amounting to $ 77.000 million, especially in high added value sectors such as ICTs, environment and water treatment, biotechnology and health sciences, aeronautics and aerospace and renewable energies

Spain as an international business hub

1. Spain’s strategic geographic location, its membership of the EU and Eurozone, and its extensive links with Latin America, North Africa and the Near Middle East, make Spain an attractive springboard with potential access to European, Mediterranean and Latin American countries.
2. Modern transport infrastructure, including:
   a. 47 airports and 250 airlines with international connections to several cities – Spain is the 3rd country in the EU in terms of air traffic.
   b. 44 sea ports, both in Atlantic and Mediterranean, placing Spain in 4th place in sea freight transport (after UK, Netherlands and Italy, and ahead of France)
   c. Spain has the 2nd largest EU highway network (11.432kms)
   d. But improvement has been especially spectacular with railways, with the 4th largest network in the EU, but with an ambitious plan for high speed trains that will cover 7,200 kms, which are almost complete.

Competitive business environment in Spain

While offering an attractive environment and world class services, the costs tend to be lower than in the rest of the EU:

• Salaries are well below EU average (more or less, 16 euros/h, compared to 25 EU).
• Lower cost of commercial space, with Madrid registering cheaper commercial m² prices than many of the world’s largest cities (approximately 600 euros m² per year).
• Relatively cheap cost of living in Madrid and Barcelona, which hold, respectively, places 28 and 31 in the 2008 ranking.
• Electricity, gas and communication prices below EU average (electricity at 13 cents/kwh in 2008; gas price for industrial use at approximately 9 euros/gigajoule; communication costs among the lowest international calls tariffs in Europe).
• Most favourable fiscal incentives among OECD countries for Research & Development to large companies, and second for SMEs.
• Also below EU average in tax burden, according to Eurostat.

This is combined with general incentives, coming both from the European Union’s structural funds, the national government and the regional authorities.

Highly qualified workforce

Spain can pride itself with a highly skilled labour force, ranking 9th among OECD countries in students of tertiary education and 4th in Europe in terms of number of persons with scientific/technical tertiary education, just behind Germany, France and the UK (and here we are talking of absolute numbers, which leaves Spain with the best ratio).

Spanish Business Schools also appear among the top 20 in the world, according to the FT, with IE Business School, Iese Business School and Esade Business School, making it to the list.

Moreover, Spain has a comprehensive system of incentives for hiring and training workers within certain categories, providing major cost savings to employers.

Advanced ICT network:

Spain is the European leader in business broadband penetration, with more than 90% of companies with access to broadband. Also, we head European broadband access from mobile terminals.

World leading companies

In the last decade, several Spanish companies have emerged among international leading companies in several sectors, notably:

• Public works, with Acciona or Albertis
• Telecommunications, with Telefónica
• Banking, with BBVA and Santander-Central Hispano
• Renewable energies, with Iberdrola
• Engineering companies, such as Indra

Exceptional Lifestyle

Finally, something must be said too about the exceptional lifestyle, which complements the rest of advantages. The European Cities Monitor placed Barcelona at the head of European Cities in terms of quality of life for employees, with Madrid coming 3rd (with Geneva in between). The Economist ranked the quality of life in Spain as 10th in the world, following a set of social, political, cultural and economic parameters.

Spain has the largest number of international schools in Europe (according to the European Council of International Schools).

Despite the adverse conditions created by the crisis, all these factors remain essentially true and continue to make Spain an attractive place for investments or for finding business partners.

See also “Lisbon treaty to be focus of Spanish presidency”