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Companies Say Si to Spain

Updated transportation system adds to country's allure to businesses.

  [ 5/1/2000 ]  By: Nanci Tangeman   Print This Article  Reprint/License This Article  E-mail This Article To A Friend  
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Bulls and paella aside, it's important to get a few facts straight about Spain. Yes, the country is one of 11 that have adopted the Euro as its currency. It's also the third largest country in the European Union, with unrestricted access to more than 370 million consumers.

Most of Spain's business activity is centered in the autonomous community of Catalonia (home to Barcelona) in the northeast, with Madrid and Andalusia, in the south, close behind.

Its population is relatively young - 70 percent of Madrid's population is under 45 years old. The Economist recently ranked the quality of life in Spain third in the world, so it's safe to assume those workers will be sticking around to provide plenty of labor in the future.

For the past decade, Spain has focused on updating its transportation and telecommunications infrastructure.

Today, Spain enjoys a modern highway network and is establishing high-speed rail links between its most important cities. Within the next five years it will be possible to travel from Madrid to Barcelona and on to the French border via high-speed train.

In terms of total traffic, six Spanish ports are among the top 20 in Europe. Around 85 percent of Spain's total imports and 70 percent of exports pass through these ports.

Quoted in the Financial Times last year, Joaquim Tosas, port authority president in Barcelona, predicted that his port in the Catalonia region would be the top Mediterranean intermodal center by the year 2011.

Airports abound

More than Spain's infrastructure has been transformed in the past 10 years. Spanish industry has reinvented itself through ambitious industrial conversion and privatization programs.

Spain's entry into the European Union greatly opened its economy and exposed its companies to foreign competition.

Monopolies in telecommunications and energy have been eliminated and privatization processes have been completed, resulting in increased competition, new and better services and steadily falling prices. This has invited a boom in call centers and other telecom-related industries.

Call centers all the rage

In fact, Spain is home to nearly 1,300 call centers - with more than half of these located in the region of Madrid. Johnson & Johnson, IBM and SmithKline Beecham are just a handful of the U.S. companies who have set up call center operations in Spain.

What attracts call centers to Spain? Telecommunications quality has gone up while costs have come down due to recent liberalization of the sector.

Last year, IBM invested over $3 million in a 500-seat call center servicing customers in Spain and Portugal, taking advantage of the best language skills in Spain.

Isabel Filippini, program director of IBM's call center in Madrid, explains that her company's new facility does much more than work with incoming and outgoing calls.

"IBM Espańa now has available an e-contact center, which integrates the fundamental channels of telephone and the Web," said Filippini. "Our Madrid e-contact center is dedicated to the latest technology, permitting the automation of routine tasks with little added value, and bringing the client directly to the most-qualified personnel so their request or problem can be solved."

Market access the right answer

One company that has enjoyed Spain's easy access to the European Union, as well as the rest of the world, is General Electric Plastics, in Murcia.

"GE Plastics has been active in Europe through its plant in the Netherlands since the 1970s," said Mario Armero, president of GE Plastics in Spain. "In the late 1980s and 1990s we needed to open a new plant. Spain was attractive and southeastern Spain, in particular, was ideal because it had a port to ship around the world."

The company opened its first plant in Spain in 1994. Its second plant opened last year, at the same location in Cartegena. It produces Lexan, optical quality plastic used in CD-ROMs and the auto industry.

"Our main customers are in northern Europe and the Pacific, but we have the harbor to give us good communications with them," said Armero.

A third plant will open in 2002, taking advantage of recent reforms in the country's electricity sector. These changes have helped other chemical companies dramatically reduce costs.

The Spanish chemical industry ranks eighth in the world in terms of production. U.S. chemical companies Dow Chemicals and Eastman Chemical also have operations in Spain.

Auto industry big for Spain

The automotive industry is very important to the Spanish economy: it represents 2 percent of the gross domestic product - triple that if parts and services are included - and employs approximately 70,000 workers.

Spain is Europe's largest manufacturer of modified passenger cars and light vans and the third-largest car manufacturer and exporter throughout Europe.

According to The Economist Intelligence Unit, car factories in Spain are the most productive in Europe. Every Spanish worker manufactures 64.3 cars per year, almost five more vehicles, on average, than their European counterparts.

This comes as no surprise to the U.S. automotive companies that have located plants and facilities in Spain. Such major U.S. component firms as Allied Signal, United Technologies, Tenneco and TRW all have plants in Spain.

Last November, Ford Motor Co. announced its Almussafes plant, in Valencia on Spain's east coast, would be responsible for the European production of the I4 engine.

According to Ford, Almussafes was chosen for its productivity, quality and willingness to find the most adequate solutions to adapt to the industry's competitive situation.

For many, incentives are the answer

U.S. companies setting up in Spain are greeted with a wide range of economic incentives to invest. Firms with foreign capital have the same access to these incentives as Spanish firms.

For instance, the Basque Government recently announced that it has earmarked $94 million to subsidize three industrial projects in the aerospace and automotive industries that will generate a global investment of $1.04 billion, plus 462 direct and 600 induced jobs.

Two Spanish aerospace firms and one German automotive company will be the recipients.

General incentives include regional economic initiatives, incentives for research and development, tax deductions and incentives for hiring and training workers. The state-financed regional incentive plan consists of grants equal to a percentage of the investment - which can reach up to 50 percent in many regions.

Incentives for hiring Spanish workers consist mainly of substantial relief from employer social security co-payments to encourage longer-term employment, as well as converting temporary contracts into indefinite ones.

Incentives were part of the attraction for GE Plastics' continued investment.

"We could attract good human resources in Cartegena and there are good companies in the engineering, construction and equipment sectors to build the plant," said Armero. "There is also a good industrial sector for raw materials and supplies."

Changes for the better

If there's a constant in Spain, it's change.

Visiting U.S. business leaders highlighted the profound changes that the region has undergone over recent years, changes that, in their opinion, have converted the Basque Country into one of the most economically vigorous and attractive areas for foreign investors.

For instance, Javier Guzmán, vice president of corporate development at Citigroup, liked what he saw.

"The Basque Country is currently going through a positive phase and its institutional, legal and fiscal framework offers great advantages which will aid its development in the financial world," said Guzmán.

 

 









 

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