The saga of the Spanish economy

Today marks the national day of Spain, which we fondly call Dia de la Hispanidad. It was on this day in 1492 that Christopher Columbus discovered the Americas and there began the proliferation of Spanish culture worldwide. The national day of Spain commemorates Spain’s heritage and her contributions to humanity.

As a tribute to the country that unified our islands into single nation, let me recount the interesting saga of the Spanish economy with its many ups and downs.

Spain’s glory days as a colonial power ended in 1898 when it released its last colonies – Cuba, Puerto Rico and the Philippines – following the Spanish-American war. Virtually bankrupt, the Spanish economy was fragile throughout the first quarter of the 20th century. It had an agricultural economy characterized by low outputs due to the lack of irrigation, absence of rural credit and outmoded land tenure practices. Although it had textile, metals and shipbuilding industries, its productivity lagged behind those of its European neighbors.

It was during this era that the Spanish people lived in hardship. In fact, the Philippines had a higher per capita income than Spain at this time. The hardships of life led to social unrest. Turbulence and instability came to a tipping point in 1936 as civil war broke out. It was then that General Francisco Franco rose to power as head of state.

Back then, Franco was an ally of Nazi Germany and Spain remained the only fascist country in Europe. Trade sanctions were imposed to isolate Spain from the world. This compelled Franco to adopt an economic policy of Autarchy or self-reliance.

But the centrally-planned Autarchy model proved disastrous. Massive government spending and tight price controls led to runaway inflation, the devaluation of the peseta and food shortages. Unbridled state spending dried up foreign reserves to an extent that the country could no longer import basic essentials. The black market boomed, fueled by smuggling and corruption.

The situation reached a critical point in the late 1950’s. Franco had no choice but to implement the Stabilization Plan of 1959 which liberalized the economy. No longer centrally planned, industries began to flourish under a free market environment and Spanish fortunes began to reverse.

A treaty with the United States was signed wherein Spain allowed American squadrons to fly over its airspace in exchange for access to the US market. For the next three decades, Spain became an aggressive exporter of agricultural and manufactured goods to America and beyond. Its industrial base strengthened as companies diversified and modernized.

Franco died while in power in 1975. He left Spain with a strong industrial backbone as his legacy. A new democratic constitution was adopted in 1978, followed by Spain’s admission into the European Union in 1982. This ushered in an unprecedented period of growth and economic freedom.

Massive amounts of foreign investments flowed into Spain, lured by its industrial backbone, skilled labor force, low production cost and absence of cross-border restrictions within Europe. Behemoths like Volkswagen, Renault, Mercedes Benz and Airbus established manufacturing plants in Spain. This made the country the 9th largest car manufacturer in the world and a leading supplier of aeronautic components.

With a booming economy, Spanish conglomerates began to flourish. The likes of the Santander Group, Iberdrola, Telefonica and Acciona began conquering foreign markets. Multinationals repatriated profits to the motherland, which further contributed to the country’s growing fortunes.

All these were complimented by Spain’s rise as a tourism powerhouse. Spain is where Greek, Roman and Arab culture intersect and as a tourism product, it is second to none. In fact, so strong is its tourism industry that it generated 71.2-billion euros in revenues in 2019 on the back of 83.7 million visitors.

Granted that Spain experienced a period of extreme difficulty during the financial crisis of 2008 and the property and banking bust that followed, the country managed to maintain its status as among the world’s most competitive economies.

Today, Spain is the 4th largest economy in Europe. It is the world’s second most visited country for tourism. The World Economic Forum ranks it as the 23rd most competitive economy. It also leads in many specialized pursuits, including sports, gastronomy and health care.

Considering the historical, familial and cultural links that bind our countries, the Philippines will do well to partner with Spain as it goes through its golden age of   infrastructure, industrial development and military modernization. Spain has much to offer, especially in these sectors:

• Aerospace and defense. Spanish aeronautics covers the entire value chain of aircraft manufacturing, both for commercial and military use. It is renowned for its military transport and special mission aircraft, radars and air traffic management systems, among others. The Spanish aerospace and defense industry is the 8th largest worldwide.

• Ships and submarines. Navantia is a state-owned naval industrial company known for container vessels and ferries. They have a submarine program that is suitable for Philippine purposes.

• Renewable energy. In 2020, Spain generated 121,350 GWh of renewable energy or 47 percent of the country’s energy output. By the year 2050, all of Spain’s power will be derived from renewable sources. Companies like Gamesa, Nexus Energia, Solaria and Greenalia provide cutting edge technologies in all modes of renewable power including wind, solar, geothermal, hydropower, biomass, photovoltaics, etc.

• Infrastructure. Companies such as Acciona, Ferrovial, Inclam, Sacyr and Copisa lead in engineering and construction with expertise in roads and bridges, airports, railways and trains, seaports and telecoms.

Other areas of competence include agriculture (wines, packaged food, pork and beef), ICT, chemicals, education, pharmaceuticals, industrial equipment and retail.

On her national day, we celebrate the resilience of the Spanish economy and Spain’s cultural contributions to the world. We look forward to closer ties and more partnerships between the Philippines and her madre patria.

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Email: [email protected]. Follow him on Twitter @aj_masigan