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Pablo Contreras, profesor del Máster en Dirección de Marketing y Gestión Comercial de EAE Business School

Wednesday, 12 de July, 2017

By Pablo Contreras, a lecturer on the Master in Marketing and Commercial Management at EAE Business School

The year 2013 marked the beginning of the recovery of the Spanish economy, after a number of extremely hard years, as we are all aware. From that year onwards, the macroeconomic indicators clearly started to rally, with a particular improvement with respect to employment statistics, income per capita and, very notably, in people’s mood, an aspect that is hard to measure but very important in qualitative terms. This was all achieved through severe cutbacks and sacrifices, within the context of a ‘doped’ economy as required in the case of Spain, at the cost of a great deal of jobs and companies along the way.

However, based on a large set of reforms that were criticized and praised in equal measure, including employment and financial system reforms, these adjustments have enabled the Spanish economy to reach a situation in which, in certain aspects, the country is the envy of our European partners, particularly with respect to the dynamism of our company investment, which is increasing in Spain at rates three times higher than the European average, according to statistics from Eurosta.

In effect, according to this source, between 2012 and 2016, Spanish companies increased their levels of investment in machinery and equipment assets by almost 30 points, tripling the average for the Eurozone. This resulted in a rise of no less than one point in GDP since 2012, equivalent to around 10 billion euros, compared to the meagre growth of two tenths of a point of GDP recorded in the Eurozone in the same period.

This fact, which is impressive enough in its own right, is even more so if we consider that, at the same time, Spanish companies have been able to lower their borrowing. We know that, usually, in times of boom, companies make investments through greater leverage, in the expectation that the additional profitability generated will enable the cost of this external financing to be repaid.

However, a process is taking place that we may refer to as a virtuous circle, facilitated by the growing margins that companies are benefiting from, thanks to the aforementioned set of reforms and favourable economic factors such as consistently low oil and raw material prices, a more positive scenario for Spanish exports and a ‘learning effect’ in terms of Spanish businesspeople, who have certainly learned significant lessons from the recession. All in all, it could be said that Spanish companies are smartly taking advantage of the good circumstances to set the foundations for future growth without the burden of debt.


Companies are not all behaving in the same way however. There are companies that invest without borrowing more, while others do not invest but reduce their debt. The net effect is as described, which is certainly positive for the economy as a whole.

We know that production investment is the foundation of future growth and sustainability. If this investment is funded without the need for borrowing, even better. Great news! However, are the factors that have led Spanish companies simultaneously to invest and save sustainable in the long term? Will salary, financial and raw material costs remain at levels as low as those that have facilitated this process? What undoubtedly favourable role has been played in this scenario by factors such as low oil prices and the monetary policy of the European Central Bank?

Virtuous circles such as the one specified above are not easy to build and always require sacrifices. However, when they do exist or they are achieved, we have to strive to keep them going. In particular, it has not been in vain helping to reduce the high unemployment rate of 17% of the working population that we still have to bear, albeit at the cost of high job insecurity and an 11% drop in salaries over the course of the recession.

Will this process keep impacting on labour costs to the same extent? The Ministry of Employment recently claimed that that we are witnessing an “integrating recovery” that will result in improvements in terms of salaries and employment. These improvements would certainly help to stimulate national demand and drive growth forward once again, but this must be achieved without risking factors that are helping to create jobs and generate a more solid and sustainable production base, underpinned by the much sought-after new production model.


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