Bernardo M. Villegas
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Rebalancing Strategy
published: Mar 31, 2017



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Restarting Wonderful Friendship With Spain

           Before the Great Recession that started in 2008, Spanish investors were conspicuously absent among the foreign investors in the Philippines.  There were some failed attempts in the last century in the banking, food manufacturing and tourism sectors (notable exceptions were Mapfre, largest insurance company in Spain and Indra, an IT enterprise).  In my travels to other ASEAN countries, I was struck by the greater presence of Spanish business in Vietnam and Indonesia than in the Philippines, despite our much closer historical and cultural ties with what was referred to as the “Iberian Tiger” in the last quarter of the twentieth century and the first years of the third millennium.    Of course, part of the problem was our own fault.  We were for too long the “sick man of Asia” in the last century.  Foreign investors in general were repelled by our many protectionist policies, a good number of them embedded in our Constitution.  On the side of Spain, their investors were focused on Latin America, Africa and Europe.  Spanish business people had little exposure to Asia, with the exception of China.

          Things are changing.  Last March 24, Spanish Minister of Foreign Affairs and Cooperation Jose Manuel Garcia-Margallo ended his speech to the Makati Business Club by quoting a refrain from a very famous film in the 1950s entitled “Casablanca”:  “It is time to start a wonderful friendship between the Philippines and Spain.”  I found his remarks especially meaningful because the theme song from that movie which starred Ingrid Bergman and Humphrey Bogart is one of my favourites, i.e. “As Time Goes By.”  I have been always convinced that sooner or later, as time goes by, after almost five hundred years since Magellan landed in Cebu in 1521, the Philippines and Spain would rediscover one another in a more lasting friendship based on economic, cultural and social bonds.  That is why, I have personally committed myself to organising a good number of non-deal investment road shows to such key cities as Madrid, Barcelona, Bilbao, Valencia and other business centres of Spain.  The first was last March 2014 when a group of CEOs from the Philippines traveled to Madrid, Bilbao, Barcelona, and Girona  The next will be in early October this year during which we will partner with Casa Asia and the respective chambers of commerce and industry in Barcelona, Madrid and Valencia.  Within the next two years we plan to cover many more cities in Southern Spain. 

          We are taking the cue from what Minister Margallo said in his MBC address.  As a result of the reforms undertaken by the present Government of Spain, the country is undergoing a dramatic change in its economic strategy.  From a model that was based on private and public indebtedness, real estate, and loss of competitiveness, the Spanish economy is now transforming itself into a system which will be founded on productivity, competitiveness, and export-orientation.  Although unemployment is still quite high, especially among the young professionals and workers, the Government is now enjoying a fiscal surplus of 3% of GDP.  The farm sector has recovered strongly and exports constitute some 35% of GDP.  Spain no longer deserves to be classified under the unflattering PIGS, an acronym for countries which were at the brink of bankruptcy during the depths of the Great Recession from 2008 to 2013.  Over the medium-term, Spain can bank on its inherent strengths:  Its economy is the fourth largest in the Euro Zone and the fifth in the European Union as a whole.  It is the eleventh largest investor in the world with more than $600 billion in foreign direct investment and is second only to the U.S. as the largest foreign direct investor in the whole of Latin America.  It can be a very important gateway for Asian investors to the emerging markets of Latin America, such as Mexico, Brazil, Chile and Peru.

          The Philippines can play a major role in linking Spanish investors to the ASEAN Economic Community that formally takes off next year.  As Minister Margallo explained:  “In the Spanish government, we believe that Asia, especially this part of Asia, is a very attractive destination now and will be even more attractive in the years to come.  We are looking forward to the opening of your borders to meet the free trade area of ASEAN.  That is why we are here with a big and important delegation of Spanish companies to make the Philippines the hub for the Spanish economy (and a hub for those) who want to take advantage of all the things that the Philippines can offer to Spain.”

          In what industries can there be synergy between Spain and the Philippines?  Let us start with the “Four F’s” of consumer goods and services:  Food, Fashion, Furnishings and Fun.  Spain has some of the most advanced technologies in food processing and have developed world-famous food and beverage products that are very familiar to Filipino consumers (e.g. sausages, cheese, confectioneries, wine, etc.).  The existing trade and investment relations between Spain and the Philippines in these products can be significantly expanded.  Then Spanish fashion (e.g., Zara, Mango, etc.) is already well known among middle-class Filipino consumers.  There are dozens of furniture makers in Spain willing to transfer technology for mass manufacture of home and office furnitures for the hundreds of thousands of condominium units and offices being constructed in the Philippines.  More than a decade of a building boom has produced very efficient producers of furniture and other households furnishings.  Finally, Fun pertains to both entertainment and tourism.  As Minister Margallo proudly pointed out: “Spain is one of the largest markets in Europe with 47 million Spaniards and with more than 60 million tourists who visit it every year.  We have a very impressive infrastructure network.  We are the second best country worldwide in foreign tourist revenue and Europe’s number one destination and third worldwide.”  Spain indeed has some of the most advanced technologies in public infrastructures:  roads, bullet trains, mini dams, airports, solar energy, wind farms, waste management facilities, traffic control systems, etc.   These are some of the industries that our investment road show will explore for possible trade and investments between Spain and the Philippines.  Interested parties on both sides who are interested in the results of these completely private-sponsored road shows may get in touch with Dr. Ricardo Barcelona of Barcino Advisors at email address ricardo_barcelona_04@hotmail.com.   For comments, my email address is bernardo.villegas@uap.asia