Many American companies are learning what others have known for years: Spain makes an excellent, cost-effective country through which to access the European market. With borderless trade between European Union (EU) nations now a reality, Spain has become even more attractive.
Today Spain is the second largest EU member, occupying over 194,000 square miles of Southwest Europe. Some 40 million people call Spain home, and an incredible 50 million people travel to the country every year, making it the world's number one tourist destination.
Spain's 17 autonomous regional governments are establishing their own development policies based upon their goals for economic development. As a result, many are offering their own incentives or schemes for attracting industry.
The regional government of Valencia, for example, is concentrating its efforts not on a large number of small companies, but rather a small number of huge companies.
| In order to attract high tech companies, Spain has set up a number of technology parks throughout the country. |
"Companies with 70 or 80 employees can make a big difference to a Valencian town," says Javier Quesada, an official at the Valencia economics ministry.
Valencia has been successful in attracting foreign investment. Foreign investment in Spain may have grown an impressive 217 percent from 1987 to 1991, but it topped 509 percent for the Region of Valencia.
Even one of the least developed regions in Spain, Andalucia, is quickly becoming one of the most promising regions for the future in Europe thanks to the improvements in infrastructure over recent years, excellent climate and geographical advantages. In only 10 years the region has gone from being one of the most depressed areas in Europe to being a region equipped to the highest standards.
Although Andalucia has attracted only one vehicle manufacturer, Suzuki-Santana, to the region, there exists a strong automobile supply industry. The region is also making efforts to attract companies within the computer sector, telecommunications (Alcatel and Fujitsu have located in Malaga), the aeronautical industry, the agrofood industry and services.
Companies interested in locating to the region should be aware that the area has been designated an area of economic promotion by the European Economic Community, meaning that a project can receive maximum subsidy (up to 50 percent of the investment approved).
"Legislation is currently pending to change regulations regarding firing," says Charles Harrison, a spokesman for Harrison, Montoya & Associates, which gives U.S. representation for the State of Andalucia. Whereas the law once required employers to pay workers 45 days wages per year work upon termination, the term is being shortened to 20 days wages per year.
"This is similar to the laws of other European nations," he says. Harrison attributes the government's somewhat more corporate-friendly attitude to a softening of 13 years of Socialistic governing, where workers' rights took precedence.
High-tech Investment
Since 1995, Spain has been the recipient of impressive U.S. investment in a host of industry groups that include automotive, food processing, chemicals and high technology. Manufacturing is a key Gross Domestic Product sector for Spain, with 35 of the 48 biggest multi-national manufacturers utilizing Spain as one of their European business locations.
In the high tech sector, Hewlett-Packard recently opened a $15.4 million plant in Sant Cugat del Valles outside of Barcelona in the province of Catalonia. From here HP oversees its worldwide research and development (R&D), and manufacturers and markets its large and small scale HP DesignJet printers for Europe.
As HP has found, Catalonia is one of Spain's leading economic regions, generating one-fifth of its total GDP, one-quarter of its industrial GDP, and one quarter of all Spain's exports. Companies are attracted to Catalonia because of its liberal labor and investment laws, excellent distribution channels, highly skilled and productive labor force, proximity to a wide range of long- established industrial suppliers, and high-tech R&D facilities.
"What is happening in Barcelona is a wonderful example of how we like to work at HP," says Lewis E. Platt, president of the Hewlett-Packard Co. subsidiary "Here the local infrastructure, the government and educational environment meet universal standards."
Likewise, AT&T's subsidiary, AT&T Microelectronica Espana, is investing $145 million in its integrated circuit factory in Tres Cantos, a town outside of Madrid. Most of the investment will go to increase the company's production of integrated circuits for GSM mobile phones.
| "The goal is to keep the factory competitive and increase the number of components we send for assembly to GM plants in Eisenach, Germany and Azambuja in Portugal."
--Juan Jose Sanz, chairman and managing director, Opel Espana |
Although AT&T has had a presence in Spain since 1985, its Microelectronica's Tres Cantos factory remains its only such plant in Europe. From here AT&T exports 95 percent of its production, 60 percent of which goes to EU markets.
"Our company's business is growing very fast," says Edward Akers, AT&T Microelectronica Espana managing director. He expects worldwide demand for mobile phones to lift company exports some 20 percent per year in the near term.
Tres Cantos is attractive to a number of high tech companies, in part due to its Madrid Technology Park. The park offers 45 square meter modules in a center created for R&D projects related to company activities in the park. A number of such parks are located throughout Spain's regions.
Automotive investment
Automotive manufacturing remains a key industry in Spain's economy. Mercedes, Citroen, Peugeot, Renault, Nissan, General Motors and Ford are currently re-engineering their Spanish plants, a testimony to their confidence in Spain as a place to do business.
Opel Espana, a Spanish subsidiary of General Motors, recently invested some $200 million to upgrade its Figueruelas plant in Aragon.
"The goal is to keep the factory competitive and increase the number of components we send for assembly to GM plants in Eisenach, Germany and Azambuja in Portugal," says Juan Jose Sanz, chairman and managing director of the plant.
Ford chose to manufacture its new KA Model at its Almusafes plant in the region of Valencia, rather than at its facilities in Cologne, Germany, and Dagenham, United Kingdom. Albert Caspers, president of Ford Europa, reveals the company chose its Spain facility because its has "one of the highest productivity levels in the world and a quality standard on a par with other European factories."
The estimated $200 million investment is expected to produce 240,000 cars in 1997, 90 percent of which will be exported. Increased production is projected to have a major impact on the local component industry since Ford uses a large percentage of domestic components in its new model.
Ford's Almusafes facility is also developing another important project, the new ZETEC engine for medium/small passenger cards.
Food processing
U.S. food manufacturers also find Spain strategically advantageous. Coors Brewing, for example, recently turned its Zaragoza factory into its strategic hub for the European market. Coors bought the facility from Heineken in 1994 for $26.5 million. It is Coors' first factory outside the United States.
Currently, Coors is brewing three brands there for the Spanish market. Next year, however, it plans to turn full production of Coors Gold over to the Zaragoza facility. Half of the production will supply certain European markets such as Italy, France and Greece, which are currently supplied by a Coors' factory in Memphis, Tenn.
In other food processing activity, RJR Nabisco continues to invest in Spain with the acquisition of Royal Brands, formerly owned by Spain's government holding company, Tabacalera. The $128.8 million purchase included the plants in Navarre, Bilbao and Barcelona.
RJR Nabisco is also spending $11.3 million to construct a canned meat facility for its Merida affiliate Caresa in the province of Badajoz.
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