Spain

Originally published: Aug-25-2006

Government

The Spanish government is a parliamentary monarchy made up of three branches:

• Executive – president nominated by the monarch subject to approval by the democratically elected Congress of Deputies;
• Legislative – made up of a 350-seat Congress of Deputies and a Senate;
• Judicial – a Constitutional Tribunal has jurisdiction over constitutional issues; Supreme Tribunal heading a system comprising territorial, provincial, regional and municipal courts.

The country is divided into 47 peninsular and three island provinces.

Legal System

Spain has civil law system, with regional applications. It accepts compulsory International Court of Justice jurisdiction, with reservations.

The judicial system is open and transparent, although sometimes slow-moving. It is independent from the executive and legislative branches and therefore, the government is obliged to follow court rulings. The prosecution system allows for successive appeals to a higher Court of Justice, and the European Court of Justice can hear the final appeal.

People

Population: 40,397,842 (July 2006 est.)

Population growth rate: 0.13% (2006 est.)

Languages: Castilian Spanish 74%, Catalan 17%, Galician 7%, Basque 2%

Castilian is the official language nationwide; the other languages are official regionally.

Spain's population density, lower than that of most European countries, is roughly equivalent to New England's.

Economy

A peaceful transition to democracy following the death of dictator Francisco Franco in 1975, and rapid economic modernization following its accession to the European Community (now the EU) in 1986 have given Spain one of the most dynamic economies in Europe. As the country opened its economy, modernized its industrial base, improved infrastructure and revised economic legislation to conform to EU guidelines, it also increased gross domestic product (GDP) growth, reduced the public debt to GDP ratio, and reduced unemployment and inflation.

Fundamental challenges still remain including further decreasing unemployment, reforming labor laws, lowering inflation, narrowing the current account deficit and raising per capita GDP. As well, the educational system, professional training and research and development are still underdeveloped.

Spain holds some mining resources, but their exploitation is relatively undeveloped. As the world’s third largest producer of wine and top producer of olive oil, the country is an agricultural power. Manufacturing has developed particularly in the textile, food-processing, iron and steel, mechanical building and naval engineering sectors.

Spain has become the world's second most popular tourist destination.

Economic Indicators

(e) estimate (f) forecast

Currency: EUR (euro)

EUR per US dollar: 0.77848 (August 23, 2006)

Leading Markets (2005): France 19.4%, Germany 11.4%, Portugal 9.5%, UK 8.5%, Italy 8.4%

Leading Exports-commodities: machinery, motor vehicles, foodstuffs, pharmaceuticals, medicines, other consumer goods

Leading Suppliers (2005): Germany 15%, France 14.4%, Italy 8.5%, UK 5.8%, Netherlands 5%, China 4.3%

Leading Imports-commodities: machinery and equipment, fuels, chemicals, semi-finished goods, foodstuffs, consumer goods, measuring and medical control instruments.

Top Industries: textiles and apparel (including footwear), food and beverages, metals and metal manufactures, chemicals, shipbuilding, automobiles, machine tools, tourism, clay and refractory products, footwear, pharmaceuticals, medical equipment

Business Climate

Conversion and Transfer Policies: There are no controls on capital flows. Remittances of profits, debt service, capital gains and royalties from intellectual property can all be affected at market rates using commercial banks.

Expropriation and Compensation: Spanish legislation sets up a series of safeguards that virtually prohibit the nationalization or expropriation of foreign investment and no expropriation or nationalization of foreign investment has taken place in recent years.

Dispute Settlement: The Government of Spain abides by rulings of the International Court of Justice at The Hague. Spain is a member of both the International Center for the Settlement of Investment Disputes (ICSID) and the New York Convention of 1958 on the Recognition and Enforcement of Foreign Arbitral Awards.

Right to Private Ownership and Establishment: Spanish law establishes clear rights to private ownership and foreign firms receive the same legal treatment as Spanish companies. There is no discrimination against public or private firms with respect to local access to markets, credit, licenses and supplies.

Protection of Property Rights: Spanish law protects property rights with enforcement carried out at the administrative and judicial levels. Property protection is effective in Spain, although the system is slow. Spanish patent, copyright, and trademark laws all approximate or exceed EU levels of intellectual property protection.

Transparency of Regulatory System: Spain modernized its commercial laws and regulations following its 1986 entry into the EU. Its local regulatory framework compares favorably with other major European countries. Bureaucratic procedures have been streamlined and much red tape has been eliminated, although permitting and licensing processes can still suffer delays. Efficacy of regulation at the regional level is uneven.

Corruption: Spain has a wide variety of laws, regulations, and penalties dealing with corruption. Spain is a signatory of the OECD Convention on Combating Bribery, and Spanish officials attach importance to combating corruption. The government is working to amend domestic law to make the Convention a more useful investigative and prosecutorial tool.

Political Violence: The Government of Spain is involved in a long-running campaign against Basque Fatherland and Liberty (ETA), a terrorist organization founded in 1959 and dedicated to promoting Basque independence. ETA regularly targets Spanish government officials, members of the military and security forces, journalists, and members of the Popular Party and Socialist Party for assassination. On March 11, 2004, Islamic terrorists killed 191 people on trains headed for Madrid’s central Atocha train station. Several foreign nationals died in the attack. Islamic extremists remain active in Spain.

Business Practices

Appointments: The siesta remains an integral feature of the Spanish way of life, although it is no longer the case that all Spain 'closes' completely for the afternoon. Business can be conducted over meals but you should be aware that Spaniards regard eating as a primarily social activity. When arriving at an appointment, the most appropriate way to announce yourself is to present your business card to the receptionist.

Punctuality: Spain is one of the least punctual countries in Europe. Although you should always be punctual yourself, you should not be surprised or alarmed if you are kept waiting for some 15-30 minutes. This is neither uncommon nor intentionally rude.

Business Attire: Spaniards are extremely dress-conscious and will perceive your appearance as an indication of your professional achievement and relative social standing. It is important to dress well, but conservatively. The female business traveler should strive to dress with the utmost modesty, as Spanish women are expected to avoid drawing attention to their physical sexuality and tend to emphasize their femininity through their immaculate clothes and hair.

Conversation: The Spanish are a vivacious and gregarious people. Modesty is valued above assertiveness but there is no place for self-deprecation in a culture that emphasizes personal pride and honor.

Addressing others: As a guiding principle, first names are traditionally reserved for family, close friends and children. It is always correct to use the basic titles of courtesy - Señor [Mr], Señora [Mrs], Señorita [Miss] - followed by the surname. Spaniards have two surnames - their father's first surname and their mother's first surname - and you should take care to use both unless/until it becomes clear that your colleague uses only one; the same applies to compound first names, e.g. José-María.

Business Gifts: In ordinary Spanish business culture gifts are usually given only at the conclusion of successful negotiations. If you receive a gift, you should open it immediately and in front of the giver. When offering any gift, you should ensure that it is a high-quality item and that it is finely wrapped. It should not advertise your company name unless it is a fine pen or a tasteful desk accessory.

Business Atmosphere: Personal contacts and relationships are essential for all business success in Spain. Hierarchy and position play an important role in Spanish culture. For example, it would be frowned upon if you spent a great deal of time and attention on someone of lesser rank than you. In this hierarchical business culture, only the boss has the authority to make decisions. For the most part Spaniards work well in teams and the boss sees himself as a team player but theirs remains a 'closed-door' approach to management.

Credit and Collections

• Collection Experience: Good to Fair
• Exchange Delays: 3+ months
• Preferred Credit Terms: Sight Draft
• Minimum Credit Terms: 30 day Sight Draft

Payments: The bill of exchange is frequently used for commercial transactions in Spain. SWIFT bank transfers are also widely utilized.

Debt Collection: An out-of-court settlement begins with formal notice served by recorded delivery letter inviting the debtor to pay, within ten days, the principal increased by any past-due interest set by the parties. Barring special clauses included in the commercial contract, the applicable interest rate is that applied by the European Central Bank prior to the first calendar day of the half year concerned, increased by seven percentage points.

A seller unable to settle with a buyer out of court, may enforce his right to payment through a new civil procedure which provides for ordinary proceedings for claims over 3,000 Euros and oral proceedings for smaller claims. In addition, for monetary claims over 30,000 Euros, creditors benefit from a more flexible special procedure initiated with a pre-printed form addressed to the judge, who may, after reviewing supporting documents, order the debtor to pay within 20 days.

Where legal action is required, new rules have been instituted (since 2001) that significantly cut litigation time and give oral arguments priority over written submissions. However, authentication of large numbers of documents remains a requirement.

Risk Assessment

Coface Country Risk Rating: A1 - The steady political and economic environment has positive effects on an already good payment record of companies. Very weak default probability.

Ducroire Delcredere Political Risk Rating: 1 - Lowest Risk
Ducroire Delcredere Commercial Risk Rating: A – Lowest Risk

Sources for further information on doing business in Spain

Doing business in Spain, Communicaide: Information on Spanish social and business culture.

Executive Planet: An excellent resource on business practices and appropriate conduct in Spain.

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This information is provided by ABC-Amega Inc. Providing international receivable management and debt collection services for exporters to more than 200 countries including Spain. For further information, contact info@abc-amega.com.

This report represents a compilation of information from a wide variety of reputable sources including: the U.S. Department of State, U.S. Commercial Service, CIA World Factbook, Federation of International Trade Associations, and Economist Country Briefings.

Risk Assessment information: Provided with permission by Coface Country Rating. Also Belgian credit insurance company Ducroire Delcredere

Information on credit terms and the probability of prompt payment are provided, with permission, from Overseas Press and Consultants (OP&C) as published in IOMA's Report on "Managing Credit, Receivables & Collections," September 2006.