Spain - Market OverviewSpain - Market Overview

Despite the ups and downs of Spain’s political and economic landscape over the last few years, the country remains a vital partner for the United States, both bilaterally and within the European region.  Spain leads the way in Europe on Latin America, which can provide strategic synergies for U.S. exporters engaged in both Spain and Latin America.  Spain’s vibrant economy and growing digital industry are also increasingly important aspects to furthering U.S.-Spain bilateral trade and investment.  Spain concluded both presidential and regional elections in the Spring of 2019.  At the publication date off this report, Spanish authorities were still negotiating the formation of a coalition government that could lead Spain through the next four years, offering prospects for greater political stability than Spain has seen in the past three years.  Spain’s Socialist Party was the big election winner, so they are in the lead to form a government.  As such, the new government is likely to pursue policies to expand government programs that favor workers, potentially raise corporate taxes, and spur innovation and entrepreneurship.  Furthermore, some proposals, such as transitioning to a green economy and enacting labor market reforms, could put downward pressure on growth if mishandled.

Spain, with a GDP of USD 1.3 trillion and a population of 46.6 million people, is the fourth-largest economy in the Eurozone. Spain’s economy grew 2.6% percent in 2018, exceeding the Eurozone average.  Forecasts for the next several years suggest GDP growth of 2.1 percent in 2019 and 1.9 percent in 2020.

Spain’s resurgence follows a recession that the country entered into in the second quarter of 2008, and from which it emerged in the third quarter of 2013. Following government initiatives taken between 2011 and 2013 to reduce the deficit and reform labor laws, public services, and the financial sector, Spain is much more competitive in comparison to costs in other European countries.

Record tourism and export levels, coupled with revived domestic consumption, helped drive Spain’s economic recovery, yielding three straight years of at least three-percent GDP growth from 2015 to 2017.

Spain has a structurally high unemployment rate; which economists estimate to be between 8 and 12 percent. Due to the 2008-2013 economic crisis, Spain’s unemployment rate ballooned to almost 27 percent in 2013. However, the unemployment rate decreased to 14.5 percent in 2018 and is forecast to fall to 12.2 percent by 2020 due to strong job creation.

Youth unemployment—those under the age of 25—decreased to 33.5 percent in 2018, down from 37.5 in 2017, 42.9 percent in 2016, and 56.9 percent in 2013.

Spain has traditionally represented a significant export market for the United States. According to the U.S. Department of Commerce, U.S. exports of goods to Spain in 2018 amounted to USD 13 billion, up from USD 11.06 billion in 2017. The actual U.S. export numbers to Spain are substantially higher than the reported numbers, since many of Spain’s imports from the U.S. arrive in Europe via ports of entry in other European countries. Services exports from the U.S. to Spain continue to be strong at USD 6.96 billion in 2017. Spanish exports to the U.S. in 2018 were USD 17.2 billion.

As a member country of the European Union (EU), Spain adheres to EU legislation, as is the case of all member countries. The Spanish government generally aligns with the EU consensus, and the Spanish public has broadly favorable views of the EU.

Investment plays a key role in the bilateral economic relationship.  Many of the largest U.S. companies are present, many of which are in the industrial sector – automobiles, chemicals, pharmaceuticals, industrial machinery, etc.  According to the Spanish Ministry of Industry, Trade and Tourism, U.S. investment in Spain was estimated at USD 70 billion in 2017.  It is estimated that U.S. firms in Spain employ over 163,000 people. 

The presence of large well-known foreign companies serves as a catalyst for innumerable local suppliers and service providers and, in almost all cases, increases exports. Over 50 percent of Spanish exports are made by foreign multinationals located in Spain. U.S. investors also hold significant portfolio investment in shares of some of Spain’s largest companies.

Spain’s recovery has enabled it to increase its foreign direct investment. Spanish investments in the United States have increased substantially in recent years, making Spain the 11thth largest investor in the United States in 2017, according to data from SelectUSA and the U.S. Bureau of Economic Analysis. Much of the investment has taken place in the past seven years, growing from a stock of USD 14 billion in 2006 to approximately USD 75 billion in 2017 (Ultimate Beneficial Owner).  Spanish-owned U.S. subsidiaries contributed more than USD107 million in R&D and accounted for USD 845 million in exports from the U.S. in 2016. The United States was the third-largest destination of FDI from Spain in 2018, according to data from the Spanish Ministry of Industry, Trade and Tourism.  The same source indicates U.S. subsidiaries of Spanish firms employed over 104,000 people in the United States in 2016.

Spanish energy companies have traditionally invested heavily in the United States. The cutting-edge technology of major Spanish multinationals has allowed them to successfully undertake multiple renewable energy projects throughout the country.  Spanish wind power companies are in over 20 U.S. states.

Spain’s premier position in the construction and transportation sectors has also enabled Spanish companies to be on the front line for major infrastructure, railroad, and metro projects throughout the country. The success of the larger Spanish multinationals is gradually attracting the interest of their service providers.

Wind energy was the second largest source of electrical generation in Spain in 2018. Installed wind capacity was 23,484 MW at the end of 2018. Spain is the fifth country in the world in terms of installed wind power after China, the U.S., Germany and India. Over 22,000 people work in the sector. The Spanish industry exports technology worth over EUR 2.5 billion per year. It invests around EUR 85.5 million annually in R&D. The wind energy contributes about EUR 2.4 billion euros to GDP, accounting for 0.31 percent of Spain’s GDP.

Spain is home to dozens of multinational companies, including five of the world’s 10 largest construction companies, and Europe’s second largest phone company. Major Spanish firms in the banking, telecommunications, infrastructure, and energy sectors have become global leaders. Procurement decisions for these companies continue to be predominately made in Spain.

The auto equipment and parts sector is another leading sector, ranked the sixth largest in the world by turnover and the third largest in Europe. In terms of total vehicle production, it is the second largest in Europe and the eighth largest in the world.

Tourism has traditionally been one of Spain’s most important sectors. The country is the world’s second largest tourist destination receiving 82.8 million foreign visitors in 2018 and ranks second in terms of receipts (expenditures) following the United States. 

Spain offers excellent potential as a source of visitors to the United States.   Figures for 2018 show Spanish arrivals at 876,248, an increase of 6 percent over 2017, making it the 15^th largest international market for the United States and the fifth largest in Europe

With more than 1,970 miles of high-speed rail, Spain is second only to China in terms of high-speed train infrastructure. Madrid has high-speed train connections with 27 cities.