Business in Spain
Posted by Dreamer
Information about business in Spain and Spain’s economy, including Spain’s business outlook and key business opportunities and pitfalls.
To put it simply,
business in Spain is good
November 2010 update: Since this article was originally published in December 2007, the world’s economy has taken a substantial turn for the worse and business has gone down across the board. Spain has been no exception. Spain’s enviable growth rate of a few years ago has gone down to half of what it was and is now on par with the rest of Europe. Like other nations, Spain’s demand is down, unemployment is up, and uncertainty abounds; Spain is not immune to the inevitable boom and bust cycles of capitalism. However, the euro is still strong, Spain is still a good bet, and the show must go on. For those ready to do business, there are still a plethora of opportunities to be found in Spain.
With a dynamic European economy characerized by strong economic growth, Spain is the world’s ninth largest economy and is responsible for half the new jobs created in the European Union recently. Doing business in Spain provides ample opportunities to target Spain’s 44.7 million resident consumers, to take advantage of Spain’s modern infrastructure and to create a strategic base for pursuing Latin American and other European markets.
Previously dubbed the “Spanish miracle”, Spain’s economy and Spanish business are still riding high, though not without a potential Achilles heel or two to watch out for.
In a mere 30 years Spain’s economy has witnessed a spectacular rise from stagnation to “miracle” status. Nowadays Spain’s economy is a solid bet and is actually one of the most dynamic economies in the world.
As the world’s ninth largest economy, Spain represents a GDP of over €980 billion with a per capita GDP of US$27,914 and provides large amounts of foreign aid each year.
The traditional economic powerhouses in the world are the US, Japan, Germany and Britain. Yet the Spanish economy is currently growing at almost 4% per year, a figure substantially higher than all four of these economies. What’s more, Spain’s economy is now growing three times the European average and Spain “created more than half of all the new jobs in the European Union” from 2000 to 2005.
As part of the Eurozone Spain enjoys a stable international currency, and in fact was one of the earliest adopters of the euro. Spain’s inflation remains under 3% and the unemployment rate is about 8%, less than half of what the unemployment rate was 10 years ago.
Though imports from China are on the rise, Spain’s main import and export partners are found in the European Union. Spain’s imports include machinery, medical equipment, fuels and consumer goods, and exports include cars, pharmaceuticals and consumer goods.
Spain’s main industries include tourism, manufacturing, clothing and footwear, food, medical equipment and construction; however, Spain’s economy is largely service-oriented and services account for over 66% of its GDP.
Spain’s most powerful companies are: Santander (banking), Telefónica (telecommunications), BBVA (banking), Endesa (energy), Repsol (oil and gas), Inditex (textiles, which includes the Zara brand) and Ferrovial (construction) – and figure among some of the world’s most powerful businesses. These companies hold large market shares both at home in Spain and abroad and are actively expanding.
Today Spain ranks 19th in the world (out of 175 UN countries) on the Human Development Index (HDI) according to the United Nations Development Programme’s Human Development Report 2006, which takes into account such factors as standard of living, education and economic policies. For a little perspective, Australia ranks 3rd, Canada 6th, the US 8th and the UK 18th. At 19th, Spain ranks ahead of New Zealand and Germany, 20th and 21st respectively.
Yet for all of Spain’s good news, Spain is keeping a close eye on the challenges for the future. These challenges include increasing competiveness and diversifying current offerings (especially in the technology and tourism sectors), keeping unemployment down and meeting the increased service demands of rising immigration. A potential housing market crash is also something to watch out for, as construction and real estate growth has been an important component of Spain’s economic growth.
A country of 44.7 million residents (as of 2006), Spain has 44.7 million potential consumers for your products and services, both Spaniards and foreigners, plus the 60 million foreign tourists who visit Spain each year. In addition, Spain provides business opportunities well beyond its borders.
Demographically, Spain is a nation of small businesses. Recognizing this, the Spanish government actively supports this sector of the economy. As of 2006 there were over 3 million small and medium-sized businesses in Spain, representing over 99% of all businesses in the country. In fact, most companies in Spain opt for Sole Trader or Sole Proprietor status (called Empresario Individual or Autónomo in Spanish) and 93% of Spanish businesses have less than 10 employees. The Spanish government (on the national level on down to the local level) provides various grants and incentives for the creation and expansion of small businesses in Spain as well as provides support and services to business owners. Recent government campaigns and initiatives have focused on support for entrepreneurs, primarily in response to Spain’s economic goals for the future. Increasing competiveness and promoting innovation were identified as key strategies to maintain, grow and keep Spain’s economy dynamic.
Firmly rooted in today’s digital age, Spain was one of the first countries to have broadband wireless technology. Today the IT industry in southern Spain has been called the “California of Europe” in clear reference to California’s preponderant Silicon Valley. Currently Spain has 20 million Internet users and ranks 15th in the world in actual number of Internet users. Fast broadband Internet access is widely available to both commercial and residential subscribers. For the traveler, WI-FI hot spots are fairly common in cafes, hotels and other establishments, especially in the bigger cities. But even though a large percentage of the Spanish population enjoys Internet access, ecommerce isn’t as widespread in Spain as in the US or other Western European nations. However, ecommerce in Spain, and the opportunities ecommerce presents, are clearly growing.
Foreigners make up 4.1 million of Spain’s residents, or just over 9%, and represent an important new domestic market for goods and services. The majority of Spain’s foreign residents come from Latin America and the European Union, though in absolute terms, the greatest number of Spain’s foreign residents come from Morocco, Ecuador, Romania, the United Kingdom and Colombia, respectively.
Apart from sharing strong cultural ties to Europe and Latin America, Spain shares strong economic ties as well. Spanish companies are the second largest investors in Latin America (the first being US companies) and the EU is Spain’s greatest export market, as well as its greatest source of imports (particularly France, Germany and the UK). Culturally, linguistically and economically speaking, Spain is considered a strategic location for penetrating the Latin American market. And due to Spain’s modern infrastructure, shared cultural values with Europe, relatively favorable business and work conditions, sea ports (on both the Mediterranean Sea and the Atlantic Ocean) and long-time geographical advantage as a gateway, Spain is also a good candidate as an access point for the rest of Europe’s markets.