1 THE SPANISH EXPERIENCE MINISTRY OF INDUSTRY, TOURISM AND TRADE SECRETARY OF STATE FOR TOURISM AND TRADE S.G.I.E.X. THE SPANISH PATH TO DEVELOPMENT 1959 / 2005

2 THE SPANISH EXPERIENCE MINISTRY OF INDUSTRY, TOURISM AND TRADE SECRETARY OF STATE FOR TOURISM AND TRADE S.G.I.E.X.  Political & Economical Isolation  Stagnation  Protectionism (Tariffs, Quotas, Licenses, Taxes)  Interventionism (Public Companies)  Controls (Capitals, Wages, Prices)  Subsidies  Low Fiscal Pressure  Overregulation AUTARCHY

3 THE SPANISH EXPERIENCE MINISTRY OF INDUSTRY, TOURISM AND TRADE SECRETARY OF STATE FOR TOURISM AND TRADE S.G.I.E.X. OBJECTIVES: Opening Liberalization Rationalization  Internal and External Balance  Provide Development Foundations  Place Spain in the Global Community STABILIZATION PLAN 1959 …

4 THE SPANISH EXPERIENCE MINISTRY OF INDUSTRY, TOURISM AND TRADE SECRETARY OF STATE FOR TOURISM AND TRADE S.G.I.E.X. WAYS TO ACHIEVE THE OUTER BALANCE  Progressive Liberalization of Foreign Trade  Setting new Exchange Rates  Liberalizing Capital Movements  New Tariffs STABILIZATION PLAN 1959

5 THE SPANISH EXPERIENCE MINISTRY OF INDUSTRY, TOURISM AND TRADE SECRETARY OF STATE FOR TOURISM AND TRADE S.G.I.E.X. WAYS TO ACHIEVE THE INNER BALANCE  FISCAL POLICIES ∆Public Services Prices ∆Monopolies´ Prices ∆Taxes  MONETARY POLICIES Liberalization & Expansion of Credit facilities Interest Rates  COMMERCIAL POLICIES Liberalization of Imports End of Quantitative Restrictions Multilateralization STABILIZATION PLAN 1959

6 THE SPANISH EXPERIENCE MINISTRY OF INDUSTRY, TOURISM AND TRADE SECRETARY OF STATE FOR TOURISM AND TRADE S.G.I.E.X. OUTCOME  Rapid growth of resources (human, capital)  Comprehensive Modernization - Progressive democratization - Freedom of Enterprise, Education, Prices - Industrial Restructuration - End of Subsistence Agriculture STABILIZATION PLAN 1959

7 THE SPANISH EXPERIENCE MINISTRY OF INDUSTRY, TOURISM AND TRADE SECRETARY OF STATE FOR TOURISM AND TRADE S.G.I.E.X. YEAR € Mill , , , , , , , , , , , , , , , , , , , , ,16 SECTORS Agrofood Automotive Biotechnology Chemicals Electronics Environment Medical Equipment Pharmacy Plastics Public Works Telecommunications YEAR € Mill , , , , , , , , , , , , , , , , , , ,00 SUSTAINED GROWTH 1960 – 1975 onwards FDI INFLOWS Source: SGIEX Registry

8 THE SPANISH EXPERIENCE MINISTRY OF INDUSTRY, TOURISM AND TRADE SECRETARY OF STATE FOR TOURISM AND TRADE S.G.I.E.X. Strong initial inflows in Agrofood, Automobile, Banking, Distribution and Metalmechanics. Even stronger subsequent outflows in Banking, Energy, Telecom SUSTAINED GROWTH 1975 onwards Source: OECD

9 THE SPANISH EXPERIENCE MINISTRY OF INDUSTRY, TOURISM AND TRADE SECRETARY OF STATE FOR TOURISM AND TRADE S.G.I.E.X. FOREIGN INVESTMENT IN SPAIN Source: SGIEX Registry

10 THE SPANISH EXPERIENCE MINISTRY OF INDUSTRY, TOURISM AND TRADE SECRETARY OF STATE FOR TOURISM AND TRADE S.G.I.E.X. REMITTANCES Industrialization Rural Depopulation Over supply of Labour Destination: Europe and America Income Transfers Capitalization SMEs Emerging Middle Class External behavioural influences SUSTAINED GROWTH 1960 – 1975 onwards

11 THE SPANISH EXPERIENCE MINISTRY OF INDUSTRY, TOURISM AND TRADE SECRETARY OF STATE FOR TOURISM AND TRADE S.G.I.E.X. TRANSITION to a NEW STATE Monarchy + Welfare State 2.New Taxation System 3.Industrial Reorganizing 4.Internationalization of the Economy 5.‘Tertiarization’ 6.Macroeconomic Stabilization 7.Accessing to the EU: Preferential Agreement (1970)

12 THE SPANISH EXPERIENCE MINISTRY OF INDUSTRY, TOURISM AND TRADE SECRETARY OF STATE FOR TOURISM AND TRADE S.G.I.E.X. EUROPEAN UNION 1986 PROS 1.New Market Size ∆ x ∆ FDI 2.Commercial Liberalization (ways to achieve) 3.Financial Deharnessing 4.Fiscal Harmonization 5.Subsidies in the way out 6.‘Deregulation’ 7.Labour Reforms 8.Privatizations 9.Industrial Restructuration 10.Correct use of Structural Funds

13 THE SPANISH EXPERIENCE MINISTRY OF INDUSTRY, TOURISM AND TRADE SECRETARY OF STATE FOR TOURISM AND TRADE S.G.I.E.X. ECONOMIC & MONETARY UNION 1993  No more Capital Controls  End for Financial and Monetary competences  Withdrawal of Regulatory ability on Agriculture & Industry  Low Financial Costs  Complete Structural Modernization  Umbrella Effect against financial crisis

14 THE SPANISH EXPERIENCE MINISTRY OF INDUSTRY, TOURISM AND TRADE SECRETARY OF STATE FOR TOURISM AND TRADE S.G.I.E.X. THE BLISS POINT PCI 4000% since % GDP per capita (1960 – 2003 = + 26 pp) 3.Real Convergence with EU based in superior Growth 4.Interest Rates in minimum levels 5.Real Income in maxima (consumption + housing) 6.Cohesion Funds 7.Deregulation + Liberalization + Competence + Flexibilization 8.AAA 9.Zero Public Deficit ( Balanced Budget Law) Electricity Telecom Banking Workmanship

15 THE SPANISH EXPERIENCE MINISTRY OF INDUSTRY, TOURISM AND TRADE SECRETARY OF STATE FOR TOURISM AND TRADE S.G.I.E.X.  EEC / EU Market size No tariffs Costs Profits Homologation  EMU No exchange risk All time low interest rates

16 THE SPANISH EXPERIENCE MINISTRY OF INDUSTRY, TOURISM AND TRADE SECRETARY OF STATE FOR TOURISM AND TRADE S.G.I.E.X. LEGISLATION  1974 Law on Foreign Investment  1979 Law on Exchange Control  1986 Law on Foreign Investments in Spain ( after accessing EEC )  1986 Royal Decree on Foreign Investment  1992 Law on Foreign Investments in Spain  1999 Royal Decree on Foreign Investment = COMPLETE LIBERALIZATION PROGRESIVE LIBERALIZATION