Spain: An Overview
With a population of 45.12 million, Spain holds the enviable position of being the world’s largest producer of olive oil, the third-largest producer of wine and the second-most popular tourist destination in the world, behind France, according to World Bank data from 2006 and the World Tourism Organisation.
Modern Spain has flourished since Franco’s regime ended with his death in 1975. While he was in power, the nation’s economy was closed off from the outside world. Strategic sectors, such as energy and telecommunications, were completely nationalised. Basic products were scarce, modernisation was dramatically halted and there was a very high rate of unemployment. From 1960 to 1973 approx-imately 1.5 million Span-iards emigrated to France, Germany and Switzerland. After Franco’s death the situation started to change and by 1982, when the Socialist Party came into power, inflation was finally brought under control and salaries began to rise.
In 1986, Spain entered the European Economic Community (EEC), opening up the country’s economy, modernising its industrial base and revising economic legislation. Spain greatly improved infrastructures, reduced public debt, reduced unemployment from 23 percent to ten percent and inflation fell to less than three percent.
The redondeo effect
As a member of the EEC, the euro was implemented as the common currency in Spain on January 1, 2002, a date that most Spanish people will never forget. That day, the euro overthrew 131 years of the peseta’s reign and overnight, prices climbed. With the new currency exchanging at the rate of 1 euro = 166.386 pesetas, the “redondeo” or “round-up” effect affected the price of all consumer goods, but unfortunately did not affect salaries. The savings of families were dramatically reduced when converted into euros. That said, clearly things have improved overall since that New Year’s day in 2002. The euro has undeniably helped Spain to develop its economy. In 2007, with the EU enlargement to 27 members, Spain slightly exceeded (100.7 percent) the average of the EU gross domestic product (GDP) in 2004.
The Spanish economy has three core sectors: agriculture (comprised of farming, fishing and mining), industry (construction and manufacturing) and the service industry (covering tourism, trade, transport and technology and telecommunications).
Agriculture has always been a key industry in Spain. It remains a major part of the Spanish economy and employs, along with forestry and fishing, seven percent of the nation’s labour force. The country produces wheat, sugar, tomatoes, citrus fruit and cork among others, but the agricultural stars are olives and grapes. Spain produces more than 100 different types of grapes and has more than 250 million olive trees.
The Mediterranean country is the largest producer of olive oil, the third-largest producer of wine in the world and it is Europe’s largest producer of lemons, oranges and strawberries, according to the Federation of International Trade Associations (FITA). In 2004, the country exported more than 632 tons of olive oil, representing more than 1.5 billion euros in sales, as well as 14.4 million hectolitres of wine.
As the world’s seventh-biggest car producer and fourth-biggest exporter in 2005, Spain’s automobile sector employed around 350,000 people and represented almost ten percent of the country’s GDP, according to information published by Spanish newspaper El País in September 2005. This is one of the main reasons why multinational companies haven’t gone to other countries: Spain offers quality and variety for a good price. Despite the fact that the automotive sector is a big employer, all of the companies operating in Spain are multinationals. The production plants of Nissan, Citroën, Renault, Ford, Opel, Mercedes and Seat (Volkswagen’s subsidiary in Spain) are located throughout Spain.
But according to a PricewaterhouseCoopers study carried out in 2007, automobile manufacturing in this country will fall 11.5 percent in the five years leading up to 2012 due to a greater focus on the Asian and Pacific markets, where 45 percent of the global car production will be concentrated. Moreover, the Spanish automobile industry has suffered a drop in the number of exports since the end of 2005 due to arising presence in the East European countries.
Since the turn of the millennium, the services sector has been the biggest employer in Spain. In 2004, 65 percent of employed Spanish people worked in this sector, which includes several activities such as commerce, tourism, transport, IT and technical and judicial services. Two years later, the importance of the services sector was still outstanding, representing 66.7 percent of the country’s GDP.
In the services industry, the significance of the telecommunications market has grown over the years as it passed from a state-run telephone service monopoly in the 1980s to a fully liberalized market at the end of the 1990s. In 1924 the government gave a license to the Compañía Telefónica Nacional de España (Spanish National Telephone Company), now known as Telefónica, to manage all the telephone services in the country. It wasn’t until January 1988 that the legal system changed, when the Telecommunications Act (LOT) came into place, establishing new regulations. Through the 1990s, technological advancements combined with a bigger demand for telephone services, broke down a telephone service monopoly and needs of consumers. In 1995, the Spanish government started to gradually liberalise the sector, reaching a total liberalisation of the telecommunications market in December 1998.
With new telecommunications companies operating in the country, Telefónica started to expand internationally, taking particular hold in Latin America.
Follow the sun
Tourism plays a crucial role in the Spanish economy. If you have recently basked in the sun in Spain, you might have been one of the 60 million tourists who visited the southern European country in 2007, making it the world’s second-most visited country after France, according to the World Tourism Organisation, a United Nations organisation (UNWTO).
But tourism in Spain is not new. It started in the 1920s, although it was interrupted by the Spanish Civil War (1936-1939) and the Second World War (1939-1945). It wasn’t until the 1960s that the tourism boom really kicked off in Spain, rising from 6.1 million tourists in 1960 to 24.1 million in 1970, according to the government’s study: Spain 1989. The number continued to increase gradually, rising from 38 million tourists in 1980 to 47.9 million in 2000 and 53.3 million in 2004, by which point it had already the second-most visited country in the world.
The UNWTO has predicted tourism in Spain will increase by five percent over the next 30 years, benefitting the Spanish economy further and, of course, creating more employment. In 2006, Spain’s tourism sector took in 36 billion euros, 2.8 percent more than the previous year and employed 2.5 million people. The region of Catalonia is the country’s most popular tourist destination — receiving 25 percent of the total number of visitors to Spain every year — followed by the Balearic Islands, Canary Islands and Andalusia.
The house invasion
A lot of people dream of having a second home in Spain either in a sunny seaside town or in the mountains. In fact, these dreams, among other factors, have placed the construction sector in an important and influential position within the Spanish economy in terms of financial and labour market conditions.
In 2006, the construction sector had an income of 30 billion euros, 53.5 percent of the total income in Spain. For 2007, the financial newspaper El Economista predicted a growth of nine percent in the sector. However, the news-paper also forecasted a deceleration in the construction industry of 6.5 percent and 5.5 percent for 2008 and 2009, respectively. In fact, according to EU industry analysts Eurostat, at the end of 2007, Spain was one of the few European countries that had experienced a strong descent in home construction due to rising prices of construction materials and labour.
The 35 most-liquid stocks in Spain, traded on the continuous market, are listed on the IBEX 35 — which stands for Iberia Index — the official index of the Spanish continuous market. Created in December 1989 as the benchmark index for the Bolsa de Madrid (the Madrid Stock Exchange) the IBEX 35 is adjustable according to stock market capitalisation. Basically, it is a price index weighted by capitalisation and adjusted to the free float of each company comprised in the index. The index changes on the first of January and the first of July every year. Most of the top Spanish employers featured in this guide are listed on the IBEX 35 list.
Public becomes private
The public sector has traditionally played a major role in the Spanish economy, although since the late 1990s the government has made a considerable privatisation effort to deregulate certain markets such as telecommunications, air transport, electricity, gas and fuels. The deregulation of government companies ultimately started in 1997, when the Partido Popular (PP) came into power and approved a reorganisation of the industrial public sector in order to facilitate the privatisation. However, the government had to guarantee some services to the citizens so that some of the “essential” companies didn’t escape from the state’s hands. These companies included RTVE (radio and television), Renfe (rail transport), Correos (postal service), Hunosa (mining), EFE (the state’s news agency), Enresa (nuclear waste) and the Paradores (tourism).
No long-life hindrances
Spain registered the biggest increase in its 2007 unemployment figures of all countries in Europe, according to El País. Furthermore, the unemployment percentage in Spain remains among the worst in the 30 countries subscribed in the Organisation for Economic Cooperation and Development (OECD), according to a study of the Labour Market Conditions in Spain conducted by the Universitat Pompeu Fabra (UPF) of Barcelona. It is characterised by a high presence of temporary workers — 30.9 percent at the end of December 2004.
Temporary employment is the weak spot in the Spanish labour market and it continues to grow year after year. In 2004, 32.45 percent of the total employed population were working with temporary contracts, and from 1998 — when a special resolution was put forward by the government for the stability of employment — until 2007, this rate has only been reduced by 0.6 percent.
Women at work
A 2007 study by the European Commission revealed that women in Spain earn 13 percent less than men. This figure has not changed since 1995. In fact, the same study showed that salaries differences are even higher if you look at certain sectors such as financial services, where there is an average difference of 37 percent between the salaries of men and women, compared to a 29 percent difference in the services sector, and a ten percent difference in salaries in the construction sector.
In 2004, 45 percent of the working-aged female population was employed in the highest level in Spain’s female employment history to that date. That year, the number of female workers grew 4.7 percent while the male employed population only grew 1.5 percent, according to the Universitat Pompeu Fabra study.
Peer into the crystal ball
The future for job seekers in Spain is positive as improvements to the temporary work situation are forecast. According to the 2008 study “Previsión de Empleo en España para 2008” (2008 Employment forecast in Spain) of Spanish recruitment company CBjobs, 38 percent of companies will increase their number of full-time workers, hiring about 1.2 million people between 2008 and 2010. The study shows that job vacancies will arise mainly in technical and professional posts, while 18 percent of the companies will hire more administrative workers and only seven percent will need managers and executive employees. According to the CBjobs study, salaries will also increase between three and five percent in general terms, because of a higher demand for qualified employees.
Welcome to Spain
Tourism is expected to continue to rise in the coming years, benefiting both the economy and employment figures. The percentage of workers in the Spanish services industry, which has represented about two-thirds of the employed population in Spain in the last four years, will continue to grow.
In general terms, in spite of high unemployment and a drop in the traditionally strong construction sector, the Spanish economy is still expected to continue its growth, based on the development of the global economy and a bigger trade relationship with Latin America and Asia.