Spain has a distinct face these days. With a history rich in architecture, the country is exploding with fascinating new designs that are both innovative and distinctive: Frank Gehrey’s Bilbao Guggenheim Museum, Santiago Calatrava’s Planetarium in Valencia City of Arts and Science, Rafael Moneo’s Kursaal Auditorium in San Sebastian, and Ricardo Bofill’s new Barcelona air terminal.

Innovation is key to Spain’s success, and reason, in part to this Iberian nation being the eighth-largest economy in the world and seventh largest of OECD countries. At 3.4 percent, Spain’s annual gross domestic product (GDP) ranks above that of the European Union (EU) average and surpassing the UK, France, Germany and Italy. The country is also the fifth in Europe in attracting foreign direct investment.

Today, nearly 4,000 foreign companies are established in Spain, 50 percent of which are Fortune 100 companies. Spain has been a focal point for a number of reasons. More than 50 international banks have offices in Spain. In fact, given Spain’s strength in finance, Merrill Lynch reports that it is increasing its presence in Spain to gain headway in the private banking business and among large institutions. Consequently, the company plans to increase their staff by 60 percent this year.

The nation is home to 44 million consumers and has a potential access to more than 1.2 billion consumers. Logistically, it offers access not only to the EU, but non-EU Mediterranean countries with 264 million consumers, in addition to being a hub for South and Central America Latin America.

The country offers 47 airports, 53 seaports on both the Atlantic and the Mediterranean coasts (positioning Spain in fourth position in sea freight transportation, after the UK, Netherlands and Italy); 665,000 kilometers of roads; and third in the EU for its railway network.

Costs are competitive for commercial office and industrial space. Spain offers an exceptional quality of life, a competitive tax system for foreign investment, and the most favorable fiscal incentives for research and development within the OECD. The list goes on.

Industry Savvy

Spain excels in numerous industrial sectors. In aerospace, business is focused on niche technologies for big players such as Boeing, Airbus and Bombardier. Manufacturers there are involved in everything from gas turbine engines to flight simulators.

Spain’s technological and academic capabilities, as well as a long-standing relationship with local firms were among the reasons Boeing has located its Research and Development Center in Madrid, the first of its kind outside of the United States. Add to that, 74.9 percent of Spain’s aeronautical engineers work in Madrid. Madrid has the largest Aeronautical Engineering School, the best non-universities programs and most prestigious post-graduate and business schools in the country.

The biotech industry has experienced a whopping 350 percent growth in Spain during the past four years. Biomedicine is where Spain excels. Some of the biggest trends are centered around universities and investors such as at the University of Navarra, which raised $188 million to be used within the next 10 years for its Center of Applied Medicine Research in Pamplona.

British pharmaceutical company Sanofi-Aventis plans to invest more than $3.6 million in Alcorcon’s industrial park in Madrid to promote its industrial and scientific activities within the region during the next two years. The company is already based in Barcelona, with a commercial delegation in Madrid, a distribution center in San Agustin de Guadalix, a manufacturing and research plan in Alcorcon, as well as a factory and bioanalysis and farmacocinetic lab in Riells (Gerona).

Machine technology has also been big business in Spain. Spain is the third largest machine tool and automotive manufacturer in Europe.

GM Expands in Spain

Despite the automakers woes in the United States, General Motors recently announced that the company will manufacture its new Meriva model at its Opel plant in Figueruelas, near Zaragoza. According to Carl Peter Forster, CEO at General Motors Europe, the deciding factors in selecting the Spanish plant were costs, quality, worker compliance, productivity and logistical conditions. The new Meriva will start production in 2009.

During the past few months there has been a great deal of speculation over which plant would be in charge of manufacturing the new Opel model in Europe. Forster said the delay was because they wanted to make certain that the right decision was made.

The electronics sector also factors in well, resulting in Hewlett-Packard choosing Madrid as the heart of a network of European centers of excellence. The Madrid center, which will benefit from a nearly $5 million investment, will focus on research and innovation in services and products for major corporate clients in Spain, Portugal, the UK, Italy, Belgium and Germany.

HP chose Spain as the location for the center partly because of the experience of its Spanish subsidiary in this field. In November, HP also decided to locate software support and business continuity centers in Madrid.

HP also is planning to open a research and development center in Spain to test a radio frequency identification device (RFID). Many companies are in hot pursuit of RFID technology since it could replace bar codes in the future.

While in March the company still was not disclosing the location of the new center, reports said the facility will be up and running in two months. Until now, HP only had one other RFID center in Milan, for all of Europe.

The company has spent $150 million to date in RFID research, including a team of consulting specialists and a worldwide network of research centers.

Chemicals continue to be another big sector for Spain. As a result, Akzo Nobel NV is planning a major expansion of its coatings activities in Spain.

“This relocation of our activities in Spain is a significant development, enabling us to expand our market presence and enhance the profitability of our business,” said Leif Abildgaard, general manager of the company’s Decorative Coatings Europe business. A shortlist of possible locations points to the greater Barcelona metropolitan area for the new plant.

Connecticut-based Hexcel Corp. is also expanding its Magnamite carbon fiber production capacity by about 50 percent with the opening of a new $100 million plant near Madrid. The new line will be aerospace-qualified by the end of 2008.

“The large increase in carbon fiber composites’ usage in commercial and military aircraft is driving Hexcel to expand its manufacturing capacity to support growing customer demand,” said David Berges, chairman, president and CEO of the company.