Bernardo M. Villegas
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Spanish Resilience

          The international business press is filled with dire news about the economic prospects of the so-called PIGS countries, including Spain.  In a recent article in the Financial Times (April 1, 2012), Victor Mallet reports that the newly elected conservative Government of Spain has unveiled the toughest budget since 1970s when democracy was restored after long-time authoritarian leader Francisco Franco died in 1975. The Spanish Government is trying hard to comply with the requirement of the European Union that it reduce its total public sector deficit from 8.5 to 5.3 percent.  This would involve draconian measures such as cutting budgets of some ministries by half or by a third.  The new prime minister, center-right Mariano Rajoy, is determined to bring Spain's public finances under control so that a bailout by the EU and the IMF could be averted.  Some observers consider this an impossible task.

          I think differently.  I am reminded of a recent movie I saw entitled Iron Lady in which Meryll Streep obtained the Best Actress award as the legendary British Prime Minister Margaret Thatcher.  Having observed Spanish politics since the early 1960s (I lived in Spain for the first time during the academic year of 1963 to 1964), I think the conservative elements in the Spanish government have enough political will and professional expertise to "do a Thatcher", i.e. to defy populist demands for a continuation of the extravagant expenditures during the Socialist regime of Zapatero and to really bite the bullet.  While living in Spain for the second time under the Socialist regime in 2006 to 2008, I saw how untenable was the "entitlement" culture that the Socialists fostered by literally pampering the working class with counter-productive privileges.  I personally knew of workers who preferred to be unemployed so that they could obtain the very generous unemployment compensation, while clandestinely accepting jobs in the underground economy.  Socialism has to be distinguished from the social market economy of Germany in which the spirit of enterprise is not stifled by a womb-to-tomb welfare state.  Socialism generally weakens the spirit of enterprise.

          Once the Partido Popular, the party now in power, is able to inject once again the spirit of enterprise and innovation among the Spaniards, I have no doubt that Spain will be able to recover from its current recession.  In another article in the Financial Times (March 23, 2012), Victor Mallet cites some of the strengths of the Spanish economy:  "Politicians and entrepreneurs alike insist theirs is a 'serious' economy.  'The corporate base of Spain is phenomenal,' says Jorge Calvet, chairman of Gamesa, a wind turbine manufacturer and wind farm developer.  'You have only to look at the power of sales, research, financial strength and internationalisation in the Ibex 35 (the index of large Madrid stocks).  That cannot be compared to other countries that are in difficulties."

          As an economist who has interacted with hundreds of CEOs and other senior executive of Spain during my years at the IESE Business School, I can truly attest to what Mr. Calvet claims as the phenomenal base of Spanish business. In the last thirty years, Spanish corporations have invested heavily in management development, an effort that has now endowed the country with some of the best corporate executives in Europe.  It is not a coincidence that among the top ten to fifteen business schools in the European Union, three are in Spain:  the IESE Business School, the IE Business School in Madrid and the ESADE in Barcelona.  Especially well known for executive education programs targeting  middle and top management, Spanish business schools have  contributed significantly to producing a cadre of highly skilled and experienced top managers who have guided Spanish corporations to take leadership in such strategic industries as ship building; tourism; airplane manufacturing;  alternative energy such as solar, wind, and biofuels; construction and real estate; agribusiness; infrastructures; information technology; car manufacturing; and biotech.  Spain today is no longer an emerging market but is a fully developed country, already belonging to the First World. 

          That is why I believe that Spain will recover ahead of the other troubled EU countries, especially under the leadership of the conservative party that knows how to regenerate the entrepreneurial spirit among the Spaniards at all levels of business: large, medium-scale, small and cooperatives (Spain has one of the largest successful cooperatives in the world called Mondragon).  Juan Rosell, the head of the Employers' Federation, is quoted by Mallet as saying that the most pressing economic problems are the lack of confidence and lack of liquidity.  In his opinion, Mr. Rajoy's labor reforms will help restore confidence while the European Central Bank is providing liquidity.  The Spanish economy is not far from what the U.S. economy has achieved in recent months: a job recovery and an economic upturn in the next year or so.  Although the full recovery may take some two to three years, I am confident that the resilience of the Spanish economy will be demonstrated. I strongly recommend that Filipino entrepreneurs seek strategic alliances with leading Spanish corporations, especially in such sunrise industries as tourism, infrastructure, alternative energy, agribusiness, construction and real estate.  It is time for the two countries, bound by numerous historical and cultural ties, to rediscover one another. For comments, my email address is bernardo.villegas@uap.asia.