SPAIN IS THE ANSWER

 

Even though globalization allows companies to enter new markets, which is a great opportunity, it also creates a new non-market environment, challenging firms. The implication of the government is highly important in this global village. The State plays the role of regulator in a market that does not seem to have frontiers, paradoxically at the same time; the government has to make its nation attractive in order to attract investors. Business strategy is based in four geopolitical forces; demography, geography, technology and culture.  Therefore, the State has to work in these 4 pillars to convince enterprises to settle down, so as to allow a future growth. Moreover the government, due to the financial crisis, has to come up with solutions to provide funding to national companies, which no longer receive loans from banks.

 

1. Giving solutions to SMEs funding.

 Spanish companies have a high dependence on bank loans in a time that credit does not flow, leading to the closure of many companies. 80% of Spanish companies are financed by bank loans whereas just 30% in the United State (coming from the Spanish journal the ABC).

 Therefore, the Spanish government, trying to change this situation, launched on Monday the 6th of October the “Alternative (fixed) Bond Market” (MARF) in the Spanish economy, which is a privately found bond market. It is an alternative financing structure addressed to small and medium-sized companies (SMEs) that are in bad situations since they are finding difficulties to obtain finance from banks. This regulation provides additional funding to companies, allowing them to issue bonds in the market. In order to issue those bonds, companies do not need to submit the documents that they were previously asked to provide by the Commercial Register, which facilitates emissions. Nevertheless, MARF will only deal with healthy and solvent companies. The rating agency Axesor predicts that this market will deal with one billion euros, being profitable, between 6% and 9% during MARF’s first year.

 

2. Government institution granting money to Spanish Companies

 

ICO-logoThe Spanish Government Credit Institution (Instituto de crédito official, ICO) aims to act as a public bank. It provides loans to fund investment 

operations or liquidity needs to Spanish companies working in any particular sector, inside or outside the country. ICO has granted in July over 2,334 million Euros claiming at its record over the past 3 years. This number outlines the recovery of the Spanish economy. Moreover, exports have increased over the last year partially due to this increased in credit.

 

3. How to be attractive for FDI – foreign direct investment?

 Labour regulation has loosened in order to attract foreign direct investment to our economy. The labour market reform implemented last February increase the labour market’s flexibility, enabling firms to hire easily their staff. Thanks to the new policy, companies can employ professionals in the short-run with temporary contracts making the company more competitive. Foreign companies are attracted by this new labour market, where the government regulation has diminished. BAYER, a German multinational is a good example to illustrate this point; it is going to invest 6 million Euros in Lagreo (Asturias), so as to extend the capacity of its installation by 25%. This factory produces Acetylsalicylic acid, the active ingredient found in aspirins, and at the end of this year the Spanish factory will assume a large part of the world production. Bayer will create new jobs and contribute to our recovery.

4. Investing in Spain, a geostrategic plan

 Spain is a world economic power and the 7th receiver of FDI, according to the “World Investment Report 2011”. Spain’s attractiveness for foreign investment lies in its domestic market and in its ability to operate with other markets. Implanting a firm in Spain is a geostrategic plan; as Spain belongs to the European Union and is the gateway to North Africa and Latin America, countries with which Spain conserves strong relationships due to its economy, history and culture.

 At the same time, Spain has a modern economy, where the service sector represents the 68.94% of its economic activity (INE data). Human capital is highly qualified and Spain features innovative infrastructures, which allow companies to increase competitiveness. All this factors appeal companies to relocate their production to Spain.

 

                   Overall, Spain is a country in which investment is safe and firms can make profits. The Spanish government helps entrepreneurs to develop their ideas, allowing Spain to play a major role in the actual globalized economy. Spain is attractive for FDI due to its geographic position, its new policies and labour market reforms, its innovative infrastructure, its human capital as well as its “(Spanish) way of life”.

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One thought on “SPAIN IS THE ANSWER

  1. Anonymous says:

    Lourdes;

    I’ve read some of your essays, and let me tell you that this one is great; I think this is the best one. Your title is marvelous and when I finished reading it, the first thing that I think is “Spain is the answer.”

    Your main point is that the globalization is the key issue of the new firms or companies in Spain. You, also highlight the importance of the government in the new global market, by implementing laws to favor it.

    I like a lot your arguments and in my opinion they are well supported and really clear. They are very clear because you start introducing the problems of the Spanish companies and then you answer it with great arguments. I think that you should base your arguments in the Spain nowadays. Spain nowadays has a lot of problems with his banks and government debt, and if 80% of the firms are financed by banks or government we can conclude that isn’t safe to invest there contrary to your conclusion. Also you solve a huge problem. How companies or firms can be finance, if banks and the government are weak? You answer me this question by using your main point, the globalization. Your argument is that foreign investment is a good solution and that Spain has a lot of markets and a well-prepared workforce, and you supported with a good example.

    Lourdes I invite you to keep doing Essays just as this one. Your Essay is great congratulations.

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