Capital inflows

Few economies have been so heavily damaged by the crisis as that of Spain. And in few countries has the slump in asset prices of every type — from financial to real estate — been so pronounced. The effects do not end there: wages are also depressed due to one of the highest rates of unemployment in the euro zone, and thanks to the consequences of a labor market reform that has given employers more flexibility. All this is taking place in a context of historically low interest rates in the international economy.

These circumstances are favorable for the return of foreign investment to Spain, including direct investment — i.e. the purchase of a stake in a company in order to take control of, or exert influence over, its management. The return of direct foreign investment, which disappeared during the years of deep depression, is one of the most encouraging indicators that the recession phase is coming to an end. But it is more than just a symptom; it will probably also help to reinforce corporate confidence and consolidate the slight signs of recovery.

As Economy Minister Luis de Guindos recently announced, direct foreign investment in Spain amounted to 19.4 billion euros in the first eight months of this year, a figure that more than doubles that of the same period in 2012. The chief factor influencing this renewed interest has been the softening of the crisis in the euro zone. Moreover, the present situation of the Spanish economy is less threatening than it was last year. There have also been signs of improved competitive capacity in the international markets for goods and services, although it is obvious as well that this improved competitiveness is almost exclusively based on the containment of labor costs.

However, it would be more than just a technical error to draw overly optimistic conclusions from these new inflows of capital, since the relatively favorable statistics for 2013 are being compared with one of the darkest periods in the economic history of recent decades. The most prudent conclusion is to consider the return of foreign capital as, at least, a solid starting point for 2014.

Discretional limitations

The acquisition of Spanish companies at good prices should also be considered in the light of other kinds of caution. In some cases, such as that of the possible purchase by the Chinese conglomerate Sinopec of Repsol’s stake in Gas Natural, we are looking at strategic companies that bear responsibility for supplying power to the Spanish public.

It is not a question in this case of imposing any discretional limitations on the movement of capital, but merely of keeping in mind the fact that in some continental markets — for example, those of Germany, France and Italy — the national power grids are carefully protected either by state capital, or by a national network of private capital that is closely coordinated by the state.