Foreign Direct Investment in Spain (WP)
William Chislett. WP 47/2007 - 17/10/2007
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<p><b><span lang=EN-GB style='font-size:11.0pt'>Contents</span></b></p>
<p><span lang=EN-GB style='font-size:11.0pt'>Introduction<br>
</span><span lang=EN-GB style='font-size:11.0pt'>Main Investor Countries<br>
</span><span lang=EN-GB style='font-size:11.0pt'>Multinationals’ Importance
in Exports<br>
</span><span lang=EN-GB style='font-size:11.0pt'>Sectors of Opportunity<br>
</span><span lang=EN-GB style='font-size:11.0pt'>Spain as a Hub for Latin
American and European Business<br>
</span><span lang=EN-GB style='font-size:11.0pt'>Prospects<br>
</span><span lang=EN-GB style='font-size:11.0pt'>Bibliography</span></p>
<p><b><span lang=EN-GB style='font-size:11.0pt'>Introduction</span></b><a
href="#_ftn1" name="_ftnref1" title=""><span lang=EN-GB style='font-size:11.0pt'><span
lang=EN-GB style='font-size:11.0pt;font-family:"Times New Roman"'>[1]</span></span></a></p>
<p style='text-align:justify'><span lang=EN-GB
style='font-size:11.0pt'>Foreign direct investment (FDI) plays a prominent role
in the Spanish economy. The inward FDI stock, according to the United Nations
Conference on Trade and Development (UNCTAD), stood at US$443.3 billion in
2006 and was divided up among more than 11,000 foreign companies (48 of them
<i>Fortune</i> 100 companies) employing 1.27 million people (6.6% of total
jobs). Among the world’s big economies, Spain’s stock in GDP terms (36.2%)
is higher than the US’s, France’s, Germany’s and Italy’s (see Figure 1). The
country received US$240 billion of FDI between 1997 and 2006, 3.5% of the
total for OECD countries and the eighth-largest amount (see Figure 2). Inward
FDI’s importance is also clearly seen in Figure 3.</span></p>
<p style='text-align:justify'><b><span
lang=EN-GB style='font-size:9.0pt;font-family:Arial'>Figure 1. Inward FDI Stocks
by Selected Countries (% of GDP)</span></b></p>
<table width="70%" border="1" cellspacing="0" cellpadding="0">
<tr class="MsoNormalTable">
<td width=109 valign=top bgcolor="#E5E5E5" class="Normal"> </td>
<td width=144 valign=top bgcolor="#E5E5E5" class="Normal">
<p align=right style='text-align:right'><b><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>1990</span></b></p>
</td>
<td width=156 valign=top bgcolor="#E5E5E5" class="Normal">
<p align=right style='text-align:right'><b><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>2006</span></b></p>
</td>
<td width=156 nowrap valign=bottom bgcolor="#E5E5E5" class="Normal">
<p align=right style='text-align:right'><b><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>2011 (1)</span></b></p>
</td>
</tr>
<tr class="MsoNormalTable">
<td width=109 valign=top class="Normal">
<p><span lang=EN-GB style='font-size:9.0pt;font-family:Arial'>France</span></p>
</td>
<td width=144 valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>7.1</span></p>
</td>
<td width=156 valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>34.8</span></p>
</td>
<td width=156 nowrap valign=bottom class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>42.2</span></p>
</td>
</tr>
<tr class="MsoNormalTable">
<td width=109 valign=top class="Normal">
<p><span lang=EN-GB style='font-size:9.0pt;font-family:Arial'>Germany</span></p>
</td>
<td width=144 valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>6.7</span></p>
</td>
<td width=156 valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>26.2</span></p>
</td>
<td width=156 nowrap valign=bottom class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>33.1</span></p>
</td>
</tr>
<tr class="MsoNormalTable">
<td width=109 valign=top class="Normal">
<p><span lang=EN-GB style='font-size:9.0pt;font-family:Arial'>Italy</span></p>
</td>
<td width=144 valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>5.4</span></p>
</td>
<td width=156 valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>15.9</span></p>
</td>
<td width=156 nowrap valign=bottom class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>22.4</span></p>
</td>
</tr>
<tr class="MsoNormalTable">
<td width=109 valign=top class="Normal">
<p><span lang=EN-GB style='font-size:9.0pt;font-family:Arial'>Poland</span></p>
</td>
<td width=144 valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>0.2</span></p>
</td>
<td width=156 valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>30.4</span></p>
</td>
<td width=156 nowrap valign=bottom class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>32.8</span></p>
</td>
</tr>
<tr class="MsoNormalTable">
<td width=109 valign=top class="Normal">
<p><b><span lang=EN-GB style='font-size:9.0pt;font-family:
Arial'>Spain</span></b></p>
</td>
<td width=144 valign=top class="Normal">
<p align=right style='text-align:right'><b><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>12.5</span></b></p>
</td>
<td width=156 valign=top class="Normal">
<p align=right style='text-align:right'><b><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>36.2</span></b></p>
</td>
<td width=156 nowrap valign=bottom class="Normal">
<p align=right style='text-align:right'><b><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>41.5</span></b></p>
</td>
</tr>
<tr class="MsoNormalTable">
<td width=109 valign=top class="Normal">
<p><span lang=EN-GB style='font-size:9.0pt;font-family:Arial'>UK</span></p>
</td>
<td width=144 valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>20.6</span></p>
</td>
<td width=156 valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>47.5</span></p>
</td>
<td width=156 nowrap valign=bottom class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>57.5</span></p>
</td>
</tr>
<tr class="MsoNormalTable">
<td width=109 valign=top class="Normal">
<p><span lang=EN-GB style='font-size:9.0pt;font-family:Arial'>US</span></p>
</td>
<td width=144 valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>6.9</span></p>
</td>
<td width=156 valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>15.5</span></p>
</td>
<td width=156 nowrap valign=bottom class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>19.8</span></p>
</td>
</tr>
</table>
<p style='text-align:justify'><span lang=EN-GB
style='font-size:8.0pt;font-family:Arial'>(1) Forecast by the Economist Intelligence
Unit.<br>
</span><span lang=EN-GB
style='font-size:8.0pt;font-family:Arial'>Source: UNCTAD.</span></p>
<p class=MsoHeading7 style='text-align:justify'><b><span
lang=EN-GB style='font-size:9.0pt;font-family:Arial'>Figure 2. Cumulative FDI
Inflows, Top 10 OECD Countries, 1997-2006</span></b></p>
<table width="70%" border="1" cellspacing="0" cellpadding="0">
<tr class="MsoNormalTable">
<td width=145 valign=top bgcolor="#E5E5E5" class="Normal">
<p class=TableTitle><span
lang=EN-GB>Country</span></p>
</td>
<td width=420 valign=top bgcolor="#E5E5E5" class="Normal">
<p align=right style='text-align:right'><b><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>US$ billion</span></b></p>
</td>
</tr>
<tr class="MsoNormalTable">
<td width=145 valign=top class="Normal">
<p><span lang=EN-GB style='font-size:9.0pt;font-family:Arial'>1. US</span></p>
</td>
<td width=420 valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>1,637.2</span></p>
</td>
</tr>
<tr class="MsoNormalTable">
<td width=145 valign=top class="Normal">
<p><span lang=EN-GB style='font-size:9.0pt;font-family:Arial'>2. Belgium/Luxembourg</span></p>
</td>
<td width=420 valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>1,188.7</span></p>
</td>
</tr>
<tr class="MsoNormalTable">
<td width=145 valign=top class="Normal">
<p><span lang=EN-GB style='font-size:9.0pt;font-family:Arial'>3. UK</span></p>
</td>
<td width=420 valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>797.2</span></p>
</td>
</tr>
<tr class="MsoNormalTable">
<td width=145 valign=top class="Normal">
<p><span lang=EN-GB style='font-size:9.0pt;font-family:Arial'>4. France</span></p>
</td>
<td width=420 valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>480.8</span></p>
</td>
</tr>
<tr class="MsoNormalTable">
<td width=145 valign=top class="Normal">
<p><span lang=EN-GB style='font-size:9.0pt;font-family:Arial'>5. Germany</span></p>
</td>
<td width=420 valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>473.2</span></p>
</td>
</tr>
<tr class="MsoNormalTable">
<td width=145 valign=top class="Normal">
<p><span lang=EN-GB style='font-size:9.0pt;font-family:Arial'>6. Netherlands</span></p>
</td>
<td width=420 valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>299.1</span></p>
</td>
</tr>
<tr class="MsoNormalTable">
<td width=145 valign=top class="Normal">
<p><span lang=EN-GB style='font-size:9.0pt;font-family:Arial'>7. Canada</span></p>
</td>
<td width=420 valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>285.3</span></p>
</td>
</tr>
<tr class="MsoNormalTable">
<td width=145 valign=top class="Normal">
<p><b><span lang=EN-GB style='font-size:9.0pt;font-family:
Arial'>8. Spain</span></b></p>
</td>
<td width=420 valign=top class="Normal">
<p align=right style='text-align:right'><b><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>239.8</span></b></p>
</td>
</tr>
<tr class="MsoNormalTable">
<td width=145 valign=top class="Normal">
<p><span lang=EN-GB style='font-size:9.0pt;font-family:Arial'>9. Sweden</span></p>
</td>
<td width=420 valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>192.9</span></p>
</td>
</tr>
<tr class="MsoNormalTable">
<td width=145 valign=top class="Normal">
<p><span lang=EN-GB style='font-size:9.0pt;font-family:Arial'>10. Mexico</span></p>
</td>
<td width=420 valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>178.4</span></p>
</td>
</tr>
</table>
<p style='text-align:justify'><span lang=EN-GB
style='font-size:8.0pt;font-family:Arial'>Source: OECD.</span></p>
<p class=MsoHeading7 style='text-align:justify'><b><span
lang=EN-GB style='font-size:9.0pt;font-family:Arial'>Figure 3. FDI Inflows in
Relation to Population, GDP and Fixed Investment (1)</span></b></p>
<table width="70%" border="1" cellspacing="0" cellpadding="0">
<tr class="MsoNormalTable">
<td width=97 valign=top bgcolor="#E5E5E5" class="Normal">
<p><b><span lang=EN-GB style='font-size:9.0pt;font-family:
Arial'>Country</span></b></p>
</td>
<td width=156 valign=top bgcolor="#E5E5E5" class="Normal">
<p align=right style='text-align:right'><b><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>Inward FDI Stock<br>
per Head (US$)</span></b></p>
</td>
<td width=156 valign=top bgcolor="#E5E5E5" class="Normal">
<p align=right style='text-align:right'><b><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>FDI Inflows/GDP<br>
(%)</span></b></p>
</td>
<td width=156 valign=top bgcolor="#E5E5E5" class="Normal">
<p align=right style='text-align:right'><b><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>FDI Inflows/Fixed<br>
Gross Investment (%)</span></b></p>
</td>
</tr>
<tr class="MsoNormalTable">
<td width=97 valign=top class="Normal">
<p><span lang=EN-GB style='font-size:9.0pt;font-family:Arial'>France</span></p>
</td>
<td width=156 valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>12,910</span></p>
</td>
<td width=156 valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>3.9</span></p>
</td>
<td width=156 valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>18.9</span></p>
</td>
</tr>
<tr class="MsoNormalTable">
<td width=97 valign=top class="Normal">
<p><span lang=EN-GB style='font-size:9.0pt;font-family:Arial'>Germany</span></p>
</td>
<td width=156 valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>9,230</span></p>
</td>
<td width=156 valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>1.5</span></p>
</td>
<td width=156 valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>8.4</span></p>
</td>
</tr>
<tr class="MsoNormalTable">
<td width=97 valign=top class="Normal">
<p><span lang=EN-GB style='font-size:9.0pt;font-family:Arial'>Italy</span></p>
</td>
<td width=156 valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>5,070</span></p>
</td>
<td width=156 valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>2.1</span></p>
</td>
<td width=156 valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>10.1</span></p>
</td>
</tr>
<tr class="MsoNormalTable">
<td width=97 valign=top class="Normal">
<p><b><span lang=EN-GB style='font-size:9.0pt;font-family:
Arial'>Spain</span></b></p>
</td>
<td width=156 valign=top class="Normal">
<p align=right style='text-align:right'><b><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>10,060</span></b></p>
</td>
<td width=156 valign=top class="Normal">
<p align=right style='text-align:right'><b><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>1.6</span></b></p>
</td>
<td width=156 valign=top class="Normal">
<p align=right style='text-align:right'><b><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>5.4</span></b></p>
</td>
</tr>
<tr class="MsoNormalTable">
<td width=97 valign=top class="Normal">
<p><span lang=EN-GB style='font-size:9.0pt;font-family:Arial'>UK</span></p>
</td>
<td width=156 valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>18,910</span></p>
</td>
<td width=156 valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>5.8</span></p>
</td>
<td width=156 valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>31.9</span></p>
</td>
</tr>
<tr class="MsoNormalTable">
<td width=97 valign=top class="Normal">
<p><span lang=EN-GB style='font-size:9.0pt;font-family:Arial'>US</span></p>
</td>
<td width=156 valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>6,940</span></p>
</td>
<td width=156 valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>1.4</span></p>
</td>
<td width=156 valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>8.5</span></p>
</td>
</tr>
</table>
<p style='text-align:justify'><span lang=EN-GB
style='font-size:8.0pt;font-family:Arial'>(1) Figures for 2006.<br>
</span><span lang=EN-GB
style='font-size:8.0pt;font-family:Arial'>Source: Economist Intelligence Unit.</span></p>
<p class=Wm><span lang=EN-GB
style='font-size:11.0pt'>Barred from the post-World War II Marshall Fund, which
benefited almost all European countries outside the Soviet bloc, because the
Franco regime that won the 1936-39 Civil War sided with Hitler and Mussolini,
it was not until the 1953 Pact of Madrid, which established US bases in Spain,
that the country began to receive a trickle of foreign investment and aid
(nearly all of it from America)<a href="#_ftn2" name="_ftnref2" title=""><span
lang=EN-GB style='font-size:11.0pt;font-family:"Times New Roman"'>[2]</span></a>.
The total amount of all types of US aid in the first decade after the 1953
agreement was around US$1.5 billion (half of what Italy received from the
Marshall Plan).<a href="#_ftn3" name="_ftnref3" title=""><span lang=EN-GB
style='font-size:11.0pt;font-family:"Times New Roman"'>[3]</span></a> In the 1960s,
the liberalisation and stabilisation measures of 1959 under an agreement with
the IMF and the World Bank, which put an end to 20 years of autarky, opened
the country to tourism and started to integrate the peseta into a transnational
monetary system. A more liberal approach towards FDI was adopted. Complete
freedom was granted for such investment as long as foreign ownership of individual
enterprises did not exceed 50%. For investments involving over 50% ownership,
applications had to be submitted to the cabinet for approval. FDI jumped from
US$12 million in 1958 to US$86 million in 1960.</span></p>
<p class=Wm><span lang=EN-GB
style='font-size:11.0pt'>Between 1961 and 1973, when the Spanish economy grew
by 7% a year in real terms –</span><span lang=EN-GB style='font-size:11.0pt'>the
fastest growth among member states of the OECD apart from Japan– the US was
the main source of inward FDI, accounting for some 40% of the total invested
(and probably more if one includes investment by US subsidiaries in third
countries such as Switzerland)</span><a href="#_ftn4" name="_ftnref4" title=""><span
lang=EN-GB style='font-size:11.0pt'><span lang=EN-GB style='font-size:11.0pt;
font-family:"Times New Roman"'>[4]</span></span></a><span lang=EN-GB
style='font-size:11.0pt'>. Tiny Switzerland was the second largest investor, followed
by Germany, the UK and France. As Mauro Guillén points out, the punitive taxation
of imports of industrial and consumer goods in a domestic market of considerable
growth potential spurred inward FDI.</span><a
href="#_ftn5" name="_ftnref5" title=""><span lang=EN-GB style='font-size:11.0pt'><span
lang=EN-GB style='font-size:11.0pt;font-family:"Times New Roman"'>[5]</span></span></a><span
lang=EN-GB style='font-size:11.0pt'> During the 1960s and early 1970s, annual
inward FDI inflows ranged between 0.15% and 0.59% of GDP, while outward stayed
under 0.1% of GDP, ie, 25 to 30 times smaller than inward FDI. At the end
of 1973, according to the Commerce Ministry, one in five jobs were financed
by foreign investment, much of which was in chemicals, glass, food and printing.
Of the 25 main private industrial companies in 1975, only one was completely
Spanish-owned (the steel plant Altos Hornos de Vizcaya). The rest, particularly
automotive and petrochemical industries, were almost entirely foreign-controlled
or state enterprises.</span></p>
<p class=Wm><span lang=EN-GB
style='font-size:11.0pt'>Inward FDI surged after Spain joined the European Economic
Community (now EU) in 1986; at times it seemed as if the country was up for
sale (in 1991 inflows represented 4.2% of GDP). Liberalisation of the economy
opened up opportunities for foreign companies and inward FDI was also facilitated
by regulatory changes. The motor industry (the world’s eighth-largest producer
of cars and Spain’s main single export) has been entirely owned by multinationals
since 1986 when Seat, founded in 1950 with Fiat assistance, was sold to Volkswagen.<a href="#_ftn6" name="_ftnref6" title=""><span
class=MsoFootnoteReference><span lang=EN-GB
style='font-size:11.0pt;font-family:"Times New Roman"'>[6]</span></span></a> Multinationals
are also strong in cement (Portland and Lafarge Asland), electrical appliances
(Sony, Philips and Electrolux), electronic components (Siemens and Robert
Bosch), electronics (Philips and Honeywell), information technology (IBM and
HP) and consumer products (Unilever and Procter & Gamble). It is estimated
that foreign companies control about one-half of food production companies,
one-third of chemical firms and two-thirds of the cement sector. Several foreign
banks (Barclays, Citibank and Deutsche Bank) acquired retail banking networks
from ailing Spanish banks, though their share of the total banking market
remains small, and foreign firms have a not insignificant share of the insurance
market (Allianz, Axa, Aviva and Generali). The French Auchan (known in Spain
as Alcampo) and Carrefour groups led a revolution in Spanish retailing, opening
hypermarkets on the outskirts of cities which lured customers away from traditional
corner shops. Marks & Spencer’s flagship store in Madrid, opened in 1990
on a prime site and was closed in 2001 as part of a Europe-wide scaling down,
despite its extraordinary success. Before its arrival, upper middle-class
Spaniards would fly to London with an empty suitcase to shop in M&S and
pay for the trip on what they saved. Not even the wine industry has been immune
from foreign takeovers: in 1994 Allied-Lyons acquired Pedro Domecq, the leading
spirits company in Spain, and in 2001 the renamed Allied Domecq bought Bodegas
y Bebidas, Spain’s largest wine producer. </span><span
lang=EN-GB style='font-size:11.0pt'>Many of Spain’s top exporters of products
are multinationals, particularly in the car industry, which accounts for more
than 20% of total merchandise exports (vehicles and components).</span></p>
<p class=Wm><span lang=EN-GB
style='font-size:11.0pt'>Spain had 9,255 foreign affiliates in 2006, more than
Germany and Italy (see Figure 4). UNCTAD has developed an index to gauge the
relative importance of FDI in an economy, over and above investments’ share
of GDP or the number of foreign affiliates. This is measured by the transnationality
index of host countries, which is calculated as the average of the following
four shares: FDI inflows as a percentage of gross fixed capital formation
over a three-year period and FDI inward stocks as a percentage of GDP, value
added of foreign affiliates as a percentage of GDP and employment of foreign
affiliates as a percentage of total employment, all in the latest year available.
In its 2007 World Investment Report, Spain was ranked 18th out of 31 developed
countries based on the latest data. Belgium, a small economy and hence feeling
the impact of FDI much more, topped the index.</span></p>
<p class=MsoHeading7 style='text-align:justify'><b><span
lang=EN-GB style='font-size:9.0pt;font-family:Arial'>Figure 4. Foreign Affiliates
Based in Selected EU Countries (1)</span></b></p>
<table width="70%" border="1" cellspacing="0" cellpadding="0">
<tr class="MsoNormalTable">
<td width="28%" valign=top bgcolor="#E5E5E5" class="Normal"> </td>
<td width="71%" nowrap valign=bottom bgcolor="#E5E5E5" class="Normal">
<p align=right style='text-align:right'><b><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>Foreign Affiliates</span></b></p>
</td>
</tr>
<tr class="MsoNormalTable">
<td width="28%" valign=top class="Normal">
<p><span lang=EN-GB style='font-size:9.0pt;font-family:Arial'>France</span></p>
</td>
<td width="71%" nowrap valign=bottom class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>10,713 (2002)</span></p>
</td>
</tr>
<tr class="MsoNormalTable">
<td width="28%" valign=top class="Normal">
<p><span lang=EN-GB style='font-size:9.0pt;font-family:Arial'>Germany</span></p>
</td>
<td width="71%" nowrap valign=bottom class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>9,193 (2005)</span></p>
</td>
</tr>
<tr class="MsoNormalTable">
<td width="28%" valign=top class="Normal">
<p><span lang=EN-GB style='font-size:9.0pt;font-family:Arial'>Italy</span></p>
</td>
<td width="71%" nowrap valign=bottom class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>7,181 (2005)</span></p>
</td>
</tr>
<tr class="MsoNormalTable">
<td width="28%" valign=top class="Normal">
<p><b><span lang=EN-GB style='font-size:9.0pt;font-family:
Arial'>Spain</span></b></p>
</td>
<td width="71%" nowrap valign=bottom class="Normal">
<p align=right style='text-align:right'><b><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>9,255 (2006)</span></b></p>
</td>
</tr>
<tr class="MsoNormalTable">
<td width="28%" valign=top class="Normal">
<p><span lang=EN-GB style='font-size:9.0pt;font-family:Arial'>UK</span></p>
</td>
<td width="71%" nowrap valign=bottom class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>13,667 (2005)</span></p>
</td>
</tr>
</table>
<p style='text-align:justify'><span lang=EN-GB
style='font-size:8.0pt;font-family:Arial'>(1) Latest year is in brackets.<br>
</span><span lang=EN-GB
style='font-size:8.0pt;font-family:Arial'>Source: World Investment Report 2007,
UNCTAD.</span></p>
<p class=Wm><span lang=EN-GB
style='font-size:11.0pt'>Foreign companies were enticed by the size of the domestic
market, its growth potential and the possibilities of using the country as
a platform for exports. These factors assumed as much if not more importance
than wage levels, where the gap relative to the then EU-15 average had been
narrowing fast until devaluations in 1992 and 1993 began to restore competitiveness.
In 1993 Spain’s hourly wages in the manufacturing sector were 93% higher than
in 1985, compared with an average rise for the EU of 52%.</span></p>
<p class=Wm><span lang=EN-GB
style='font-size:11.0pt'>FDI in Spain, however, has been on a downward trend since
2002 (although the volumes have still been significant) for many reasons,
including the increasing location advantages of the new EU members, particularly
Hungary, Poland and the Czech Republic, for manufacturers, little scope for
further investment in some sectors, the rise in Spain’s labour and other costs,
insufficient reforms in the labour market and the administrative complexities
of doing business in Spain (see Figure 5). In order to pro-actively counter
this trend and better coordinate investment between the 17 autonomous and
competing regions, <i>INTERES Invest in Spain</i> was created in 2005 by the
central government to attract, promote and maintain foreign investment in
Spain. Greater efforts are also being made by the government to narrow Spain’s
wide gap with the more advanced countries in R&D. Despite the upward trend,
Spain’s expenditure on R&D is still low. Even if the country manages to
almost double its current spending on R&D to 2% of GDP by 2010, under
the <i>Ingenio</i> <i>Plan</i>, which is very unlikely, it will be not much
more than the current average of the EU-25 (see Figure 6). Spain is the only
OECD country that spends more on gambling every year than on R&D. In 2005
(latest figure), Spaniards spent €29 billion on all forms of gambling, including
the national lottery, or €722 per capita, according to the Munich-based Media
& Entertainment Consulting Network, while R&D expenditure (private
and public sector) totalled only one-third of this at around €10 billion.</span></p>
<p class=MsoHeading7 style='text-align:justify'><b><span
lang=EN-GB style='font-size:9.0pt;font-family:Arial'>Figure 5. FDI in Selected
European Countries (US $bn)</span></b></p>
<table width="70%" border="1" cellspacing="0" cellpadding="0">
<tr class="MsoNormalTable">
<td width="18%" valign=top bgcolor="#E5E5E5" class="Normal"> </td>
<td width="14%" nowrap valign=bottom bgcolor="#E5E5E5" class="Normal">
<p align=right style='text-align:right'><b><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>2001</span></b></p>
</td>
<td width="14%" valign=top bgcolor="#E5E5E5" class="Normal">
<p align=right style='text-align:right'><b><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>2002</span></b></p>
</td>
<td width="12%" valign=top bgcolor="#E5E5E5" class="Normal">
<p align=right style='text-align:right'><b><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>2003</span></b></p>
</td>
<td width="12%" valign=top bgcolor="#E5E5E5" class="Normal">
<p align=right style='text-align:right'><b><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>2004</span></b></p>
</td>
<td width="14%" valign=top bgcolor="#E5E5E5" class="Normal">
<p align=right style='text-align:right'><b><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>2005</span></b></p>
</td>
<td width="14%" valign=top bgcolor="#E5E5E5" class="Normal">
<p align=right style='text-align:right'><b><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>2006</span></b></p>
</td>
</tr>
<tr class="MsoNormalTable">
<td width="18%" valign=top class="Normal">
<p><span lang=EN-GB style='font-size:9.0pt;font-family:Arial'>France</span></p>
</td>
<td width="14%" nowrap valign=bottom class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>50.5</span></p>
</td>
<td width="14%" valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>49.1</span></p>
</td>
<td width="12%" valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>42.5</span></p>
</td>
<td width="12%" valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>32.6</span></p>
</td>
<td width="14%" valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>81.0</span></p>
</td>
<td width="14%" valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>81.1</span></p>
</td>
</tr>
<tr class="MsoNormalTable">
<td width="18%" valign=top class="Normal">
<p><span lang=EN-GB style='font-size:9.0pt;font-family:Arial'>Germany</span></p>
</td>
<td width="14%" nowrap valign=bottom class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>26.4</span></p>
</td>
<td width="14%" valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>53.6</span></p>
</td>
<td width="12%" valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>32.4</span></p>
</td>
<td width="12%" valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>-9.2</span></p>
</td>
<td width="14%" valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>35.8</span></p>
</td>
<td width="14%" valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>42.9</span></p>
</td>
</tr>
<tr class="MsoNormalTable">
<td width="18%" valign=top class="Normal">
<p><span lang=EN-GB style='font-size:9.0pt;font-family:Arial'>Hungary</span></p>
</td>
<td width="14%" nowrap valign=bottom class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>3.9</span></p>
</td>
<td width="14%" valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>3.0</span></p>
</td>
<td width="12%" valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>2.1</span></p>
</td>
<td width="12%" valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>4.5</span></p>
</td>
<td width="14%" valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>7.6</span></p>
</td>
<td width="14%" valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>6.1</span></p>
</td>
</tr>
<tr class="MsoNormalTable">
<td width="18%" valign=top class="Normal">
<p><span lang=EN-GB style='font-size:9.0pt;font-family:Arial'>Italy</span></p>
</td>
<td width="14%" nowrap valign=bottom class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>14.9</span></p>
</td>
<td width="14%" valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>14.6</span></p>
</td>
<td width="12%" valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>16.4</span></p>
</td>
<td width="12%" valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>16.8</span></p>
</td>
<td width="14%" valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>20.0</span></p>
</td>
<td width="14%" valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>16.6</span></p>
</td>
</tr>
<tr class="MsoNormalTable">
<td width="18%" valign=top class="Normal">
<p><span lang=EN-GB style='font-size:9.0pt;font-family:Arial'>Poland</span></p>
</td>
<td width="14%" nowrap valign=bottom class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>5.7</span></p>
</td>
<td width="14%" valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>4.1</span></p>
</td>
<td width="12%" valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>4.9</span></p>
</td>
<td width="12%" valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>12.5</span></p>
</td>
<td width="14%" valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>9.5</span></p>
</td>
<td width="14%" valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>13.9</span></p>
</td>
</tr>
<tr class="MsoNormalTable">
<td width="18%" valign=top class="Normal">
<p><b><span lang=EN-GB style='font-size:9.0pt;font-family:
Arial'>Spain</span></b></p>
</td>
<td width="14%" nowrap valign=bottom class="Normal">
<p align=right style='text-align:right'><b><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>28.3</span></b></p>
</td>
<td width="14%" valign=top class="Normal">
<p align=right style='text-align:right'><b><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>39.2</span></b></p>
</td>
<td width="12%" valign=top class="Normal">
<p align=right style='text-align:right'><b><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>25.8</span></b></p>
</td>
<td width="12%" valign=top class="Normal">
<p align=right style='text-align:right'><b><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>24.8</span></b></p>
</td>
<td width="14%" valign=top class="Normal">
<p align=right style='text-align:right'><b><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>25.0</span></b></p>
</td>
<td width="14%" valign=top class="Normal">
<p align=right style='text-align:right'><b><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>20.0</span></b></p>
</td>
</tr>
<tr class="MsoNormalTable">
<td width="18%" valign=top class="Normal">
<p><span lang=EN-GB style='font-size:9.0pt;font-family:Arial'>Turkey</span></p>
</td>
<td width="14%" nowrap valign=bottom class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>3.4</span></p>
</td>
<td width="14%" valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>1.1</span></p>
</td>
<td width="12%" valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>1.8</span></p>
</td>
<td width="12%" valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>2.9</span></p>
</td>
<td width="14%" valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>9.8</span></p>
</td>
<td width="14%" valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>20.2</span></p>
</td>
</tr>
<tr class="MsoNormalTable">
<td width="18%" valign=top class="Normal">
<p><span lang=EN-GB style='font-size:9.0pt;font-family:Arial'>UK</span></p>
</td>
<td width="14%" nowrap valign=bottom class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>52.7</span></p>
</td>
<td width="14%" valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>24.1</span></p>
</td>
<td width="12%" valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>16.8</span></p>
</td>
<td width="12%" valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>56.0</span></p>
</td>
<td width="14%" valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>193.7</span></p>
</td>
<td width="14%" valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>139.6</span></p>
</td>
</tr>
</table>
<p style='text-align:justify'><span lang=EN-GB
style='font-size:8.0pt;font-family:Arial'>Source: OECD. </span></p>
<p class=TableTitle style='text-align:justify'><span
lang=EN-GB>Figure 6. R&D Spending (% of GDP)</span></p>
<table width="70%" border="1" cellspacing="0" cellpadding="0">
<tr class="MsoNormalTable">
<td width="38%" valign=top bgcolor="#E5E5E5" class="Normal"> </td>
<td width="32%" valign=top bgcolor="#E5E5E5" class="Normal">
<p class=TableText align=right style='text-align:right'><b><span lang=EN-GB
style='font-size:9.0pt;layout-grid-mode:line'>1995</span></b></p>
</td>
<td width="29%" valign=top bgcolor="#E5E5E5" class="Normal">
<p class=TableText align=right style='text-align:right'><b><span lang=EN-GB
style='font-size:9.0pt;layout-grid-mode:line'>2005</span></b></p>
</td>
</tr>
<tr class="MsoNormalTable">
<td width="38%" valign=top class="Normal">
<p><span lang=EN-GB style='font-size:9.0pt;font-family:Arial'>France</span></p>
</td>
<td width="32%" valign=top class="Normal">
<p class=TableText align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;color:black;layout-grid-mode:line'>2.29</span></p>
</td>
<td width="29%" valign=top class="Normal">
<p class=TableText align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;color:black;layout-grid-mode:line'>2.13</span></p>
</td>
</tr>
<tr class="MsoNormalTable">
<td width="38%" valign=top class="Normal">
<p><span lang=EN-GB style='font-size:9.0pt;font-family:Arial'>Germany</span></p>
</td>
<td width="32%" valign=top class="Normal">
<p class=TableText align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;color:black;layout-grid-mode:line'>2.19</span></p>
</td>
<td width="29%" valign=top class="Normal">
<p class=TableText align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;color:black;layout-grid-mode:line'>2.51</span></p>
</td>
</tr>
<tr class="MsoNormalTable">
<td width="38%" valign=top class="Normal">
<p><span lang=EN-GB style='font-size:9.0pt;font-family:Arial'>Italy</span></p>
</td>
<td width="32%" valign=top class="Normal">
<p class=TableText align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;color:black;layout-grid-mode:line'>0.97</span></p>
</td>
<td width="29%" valign=top class="Normal">
<p class=TableText align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;color:black;layout-grid-mode:line'>1.10</span></p>
</td>
</tr>
<tr class="MsoNormalTable">
<td width="38%" valign=top class="Normal">
<p><b><span lang=EN-GB style='font-size:9.0pt;font-family:
Arial'>Spain</span></b></p>
</td>
<td width="32%" valign=top class="Normal">
<p class=TableText align=right style='text-align:right'><b><span lang=EN-GB
style='font-size:9.0pt;color:black;layout-grid-mode:line'>0.79</span></b></p>
</td>
<td width="29%" valign=top class="Normal">
<p class=TableText align=right style='text-align:right'><b><span lang=EN-GB
style='font-size:9.0pt;color:black;layout-grid-mode:line'>1.12</span></b></p>
</td>
</tr>
<tr class="MsoNormalTable">
<td width="38%" valign=top class="Normal">
<p><span lang=EN-GB style='font-size:9.0pt;font-family:Arial'>UK</span></p>
</td>
<td width="32%" valign=top class="Normal">
<p class=TableText align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;color:black;layout-grid-mode:line'>1.95</span></p>
</td>
<td width="29%" valign=top class="Normal">
<p class=TableText align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;color:black;layout-grid-mode:line'>1.73</span></p>
</td>
</tr>
<tr class="MsoNormalTable">
<td width="38%" valign=top class="Normal">
<p><span lang=EN-GB style='font-size:9.0pt;font-family:Arial'>EU-25</span></p>
</td>
<td width="32%" valign=top class="Normal">
<p class=TableText align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;color:black;layout-grid-mode:line'>1.82</span></p>
</td>
<td width="29%" valign=top class="Normal">
<p class=TableText align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;color:black;layout-grid-mode:line'>1.85</span></p>
</td>
</tr>
</table>
<p style='text-align:justify'><span
lang=EN-GB style='font-size:8.0pt;font-family:Arial'>Source: Eurostat.</span></p>
<p class=Wm><span lang=EN-GB
style='font-size:11.0pt'>Almost two-thirds of total FDI in Spain is in the sectors
of other manufacturing, commerce, transport and communications and chemicals
(see Figure 7). In common with other developed economies, inward FDI has been
shifting from manufacturing to services, although so far Spain has had limited
success in attracting foreign investment in the information communications
and technology (ICT) sector. This is due to various factors including major
shortcomings in the country’s educational system, the relatively low level
of R&D spending and the lack of a strong domestic industry in these areas.</span></p>
<p class=MsoHeading7 style='text-align:justify'><b><span
lang=EN-GB style='font-size:9.0pt;font-family:Arial'>Figure 7. Stock of Productive
FDI in Spain by Sector (1)</span></b></p>
<table width="70%" border="1" cellspacing="0" cellpadding="0">
<tr class="MsoNormalTable">
<td width="53%" valign=top bgcolor="#E6E6E6" class="Normal">
<p><b><span lang=EN-GB style='font-size:9.0pt;font-family:
Arial'>Sector</span></b></p>
</td>
<td width="46%" nowrap valign=bottom bgcolor="#E6E6E6" class="Normal">
<p align=right style='text-align:right'><b><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>% of Total</span></b></p>
</td>
</tr>
<tr class="MsoNormalTable">
<td width="53%" valign=top class="Normal">
<p><span lang=EN-GB style='font-size:9.0pt;font-family:Arial'>Other manufacturing
industries</span></p>
</td>
<td width="46%" nowrap valign=bottom class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>22.6</span></p>
</td>
</tr>
<tr class="MsoNormalTable">
<td width="53%" valign=top class="Normal">
<p><span lang=EN-GB style='font-size:9.0pt;font-family:Arial'>Commerce</span></p>
</td>
<td width="46%" nowrap valign=bottom class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>15.3</span></p>
</td>
</tr>
<tr class="MsoNormalTable">
<td width="53%" valign=top class="Normal">
<p><span lang=EN-GB style='font-size:9.0pt;font-family:Arial'>Transport
and communications</span></p>
</td>
<td width="46%" nowrap valign=bottom class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>14.0</span></p>
</td>
</tr>
<tr class="MsoNormalTable">
<td width="53%" valign=top class="Normal">
<p><span lang=EN-GB style='font-size:9.0pt;font-family:Arial'>Chemicals</span></p>
</td>
<td width="46%" nowrap valign=bottom class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>12.8</span></p>
</td>
</tr>
<tr class="MsoNormalTable">
<td width="53%" valign=top class="Normal">
<p><span lang=EN-GB style='font-size:9.0pt;font-family:Arial'>Real estate
and services</span></p>
</td>
<td width="46%" nowrap valign=bottom class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>8.7</span></p>
</td>
</tr>
<tr class="MsoNormalTable">
<td width="53%" valign=top class="Normal">
<p><span lang=EN-GB style='font-size:9.0pt;font-family:Arial'>Banking
and insurance</span></p>
</td>
<td width="46%" nowrap valign=bottom class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>8.1</span></p>
</td>
</tr>
<tr class="MsoNormalTable">
<td width="53%" valign=top class="Normal">
<p><span lang=EN-GB style='font-size:9.0pt;font-family:Arial'>Food, beverages
and tobacco</span></p>
</td>
<td width="46%" nowrap valign=bottom class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>5.2</span></p>
</td>
</tr>
<tr class="MsoNormalTable">
<td width="53%" valign=top class="Normal">
<p><span lang=EN-GB style='font-size:9.0pt;font-family:Arial'>Electricity,
gas, water distribution/production</span></p>
</td>
<td width="46%" nowrap valign=bottom class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>3.3</span></p>
</td>
</tr>
<tr class="MsoNormalTable">
<td width="53%" valign=top class="Normal">
<p><span lang=EN-GB style='font-size:9.0pt;font-family:Arial'>Paper, printing
and graphic arts</span></p>
</td>
<td width="46%" nowrap valign=bottom class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>2.3</span></p>
</td>
</tr>
<tr class="MsoNormalTable">
<td width="53%" valign=top class="Normal">
<p><span lang=EN-GB style='font-size:9.0pt;font-family:Arial'>Mining</span></p>
</td>
<td width="46%" nowrap valign=bottom class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>1.7</span></p>
</td>
</tr>
<tr class="MsoNormalTable">
<td width="53%" valign=top class="Normal">
<p><span lang=EN-GB style='font-size:9.0pt;font-family:Arial'>Construction</span></p>
</td>
<td width="46%" nowrap valign=bottom class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>1.5</span></p>
</td>
</tr>
<tr class="MsoNormalTable">
<td width="53%" valign=top class="Normal">
<p><span lang=EN-GB style='font-size:9.0pt;font-family:Arial'>Hotel trade</span></p>
</td>
<td width="46%" nowrap valign=bottom class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>1.5</span></p>
</td>
</tr>
<tr class="MsoNormalTable">
<td width="53%" valign=top class="Normal">
<p><span lang=EN-GB style='font-size:9.0pt;font-family:Arial'>Textiles
and clothing</span></p>
</td>
<td width="46%" nowrap valign=bottom class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>1.0</span></p>
</td>
</tr>
<tr class="MsoNormalTable">
<td width="53%" valign=top class="Normal">
<p><span lang=EN-GB style='font-size:9.0pt;font-family:Arial'>Agriculture,
cattle, hunting and fisheries</span></p>
</td>
<td width="46%" nowrap valign=bottom class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>0.2</span></p>
</td>
</tr>
<tr class="MsoNormalTable">
<td width="53%" valign=top class="Normal">
<p><span lang=EN-GB style='font-size:9.0pt;font-family:Arial'>Other </span></p>
</td>
<td width="46%" nowrap valign=bottom class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>1.5</span></p>
</td>
</tr>
</table>
<p style='text-align:justify'><span lang=EN-GB
style='font-size:8.0pt;font-family:Arial'>(1) Figures at the end of 2005 and excluding
Special Purpose Entities.<br>
</span><span lang=EN-GB
style='font-size:8.0pt;font-family:Arial'>Source: Investment Registry.</span></p>
<p><b><span lang=EN-GB style='font-size:11.0pt'>Main Investor Countries</span></b></p>
<p class=Wm><span lang=EN-GB
style='font-size:11.0pt'>The main investors in Spain on the basis of the ultimate
investing country as opposed to the intermediate country are the US, France,
the UK and Germany; between them, they accounted for just over 60% of the
total stock of productive investment of €212.1 billion at the end of 2005
(see Figure 8). The leading investor country is the US, which had ceased to
be the main investor in the first years after Spain joined the EU and then
came back with several particularly large investments, notably by General
Electric (GE).</span></p>
<p class=MsoHeading7 style='text-align:justify'><b><span
lang=EN-GB style='font-size:9.0pt;font-family:Arial'>Figure 8. Stock of Productive
FDI in Spain by Main Ultimate Investing Countries (% of total) (1)</span></b></p>
<table width="70%" border="1" cellspacing="0" cellpadding="0">
<tr class="MsoNormalTable">
<td width="23%" valign=top bgcolor="#E5E5E5" class="Normal"> </td>
<td width="76%" nowrap valign=bottom bgcolor="#E5E5E5" class="Normal"> </td>
</tr>
<tr class="MsoNormalTable">
<td width="23%" valign=top class="Normal">
<p><span lang=EN-GB style='font-size:9.0pt;font-family:Arial'>US</span></p>
</td>
<td width="76%" nowrap valign=bottom class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>19.9</span></p>
</td>
</tr>
<tr class="MsoNormalTable">
<td width="23%" valign=top class="Normal">
<p><span lang=EN-GB style='font-size:9.0pt;font-family:Arial'>France</span></p>
</td>
<td width="76%" nowrap valign=bottom class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>17.5</span></p>
</td>
</tr>
<tr class="MsoNormalTable">
<td width="23%" valign=top class="Normal">
<p><span lang=EN-GB style='font-size:9.0pt;font-family:Arial'>UK</span></p>
</td>
<td width="76%" nowrap valign=bottom class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>16.3</span></p>
</td>
</tr>
<tr class="MsoNormalTable">
<td width="23%" valign=top class="Normal">
<p><span lang=EN-GB style='font-size:9.0pt;font-family:Arial'>Germany</span></p>
</td>
<td width="76%" nowrap valign=bottom class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>7.8</span></p>
</td>
</tr>
<tr class="MsoNormalTable">
<td width="23%" valign=top class="Normal">
<p><span lang=EN-GB style='font-size:9.0pt;font-family:Arial'>Switzerland</span></p>
</td>
<td width="76%" nowrap valign=bottom class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>4.9</span></p>
</td>
</tr>
<tr class="MsoNormalTable">
<td width="23%" valign=top class="Normal">
<p><span lang=EN-GB style='font-size:9.0pt;font-family:Arial'>Netherlands</span></p>
</td>
<td width="76%" nowrap valign=bottom class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>4.6</span></p>
</td>
</tr>
<tr class="MsoNormalTable">
<td width="23%" valign=top class="Normal">
<p><span lang=EN-GB style='font-size:9.0pt;font-family:Arial'>Mexico</span></p>
</td>
<td width="76%" nowrap valign=bottom class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>4.2</span></p>
</td>
</tr>
<tr class="MsoNormalTable">
<td width="23%" valign=top class="Normal">
<p><span lang=EN-GB style='font-size:9.0pt;font-family:Arial'>Italy</span></p>
</td>
<td width="76%" nowrap valign=bottom class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>3.9</span></p>
</td>
</tr>
<tr class="MsoNormalTable">
<td width="23%" valign=top class="Normal">
<p><span lang=EN-GB style='font-size:9.0pt;font-family:Arial'>Luxembourg</span></p>
</td>
<td width="76%" nowrap valign=bottom class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>3.5</span></p>
</td>
</tr>
<tr class="MsoNormalTable">
<td width="23%" valign=top class="Normal">
<p><span lang=EN-GB style='font-size:9.0pt;font-family:Arial'>Portugal</span></p>
</td>
<td width="76%" nowrap valign=bottom class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>3.5</span></p>
</td>
</tr>
<tr class="MsoNormalTable">
<td width="23%" valign=top class="Normal">
<p><span lang=EN-GB style='font-size:9.0pt;font-family:Arial'>Other countries</span></p>
</td>
<td width="76%" nowrap valign=bottom class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>18.8</span></p>
</td>
</tr>
</table>
<p style='text-align:justify'><span lang=EN-GB
style='font-size:8.0pt;font-family:Arial'>(1) Figures at the end of 2005 and excluding
Special Purpose Entities.<br>
</span><span lang=EN-GB
style='font-size:8.0pt;font-family:Arial'>Source: Investment Registry.</span></p>
<p class=Wm><span lang=EN-GB
style='font-size:11.0pt'>The four leading investor countries have invested in
very different sectors. While the bulk of US investment is in the industrial
sector, especially the motor industry, pharmaceuticals and chemicals, the
main sectors for France are commerce and transport and communications (see
Figure 9). However, in recent years the presence of US companies in the services
sector has been increasing steadily, particularly in information technology
and consulting services. US companies account for more than one-third of total
production of new passenger cars, around 15% of auto components and about
40% of the sales of pharmaceuticals. Some of these companies are among the
largest in Spain and among the country’s biggest exporters (see Figure 10).
They include Opel (part of General Motors) and Ford in the motor industry,
IBM and Hewlett Packard Compaq in IT, General Electric (plastics), Dow Chemical
and DuPont in chemicals, Alcoa in metals and Procter & Gamble in consumer
products.</span></p>
<p class=MsoHeading7 style='text-align:justify'><b><span
lang=EN-GB style='font-size:9.0pt;font-family:Arial'>Figure 9. Distribution of
Productive FDI Stock and Main Countries (% of Each Country’s Total) (1)</span></b></p>
<table width="70%" border="1" cellspacing="0" cellpadding="0">
<tr class="MsoNormalTable">
<td width="41%" valign=top bgcolor="#E5E5E5" class="Normal">
<p><b><span lang=EN-GB style='font-size:9.0pt;font-family:
Arial'>Sector</span></b></p>
</td>
<td width="12%" valign=top bgcolor="#E5E5E5" class="Normal">
<p align=right style='text-align:right'><b><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>US</span></b></p>
</td>
<td width="14%" valign=top bgcolor="#E5E5E5" class="Normal">
<p align=right style='text-align:right'><b><span lang=EN-GB style='font-size:9.0pt;font-family:Arial'>France</span></b></p>
</td>
<td width="12%" valign=top bgcolor="#E5E5E5" class="Normal">
<p align=right style='text-align:right'><b><span lang=EN-GB style='font-size:9.0pt;font-family:Arial'>UK</span></b></p>
</td>
<td width="19%" valign=top bgcolor="#E5E5E5" class="Normal">
<p align=right style='text-align:right'><b><span lang=EN-GB style='font-size:9.0pt;font-family:Arial'>Germany</span></b></p>
</td>
</tr>
<tr class="MsoNormalTable">
<td width="41%" valign=top class="Normal">
<p><span lang=EN-GB style='font-size:9.0pt;font-family:Arial'>Chemicals</span></p>
</td>
<td width="12%" valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>32</span></p>
</td>
<td width="14%" valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>–</span></p>
</td>
<td width="12%" valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>8</span></p>
</td>
<td width="19%" valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>20</span></p>
</td>
</tr>
<tr class="MsoNormalTable">
<td width="41%" valign=top class="Normal">
<p><span lang=EN-GB style='font-size:9.0pt;font-family:Arial'>Other manufacturing</span></p>
</td>
<td width="12%" valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>23</span></p>
</td>
<td width="14%" valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>14</span></p>
</td>
<td width="12%" valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>–</span></p>
</td>
<td width="19%" valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>17</span></p>
</td>
</tr>
<tr class="MsoNormalTable">
<td width="41%" valign=top class="Normal">
<p><span lang=EN-GB style='font-size:9.0pt;font-family:Arial'>Commerce</span></p>
</td>
<td width="12%" valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>12</span></p>
</td>
<td width="14%" valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>32</span></p>
</td>
<td width="12%" valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>9</span></p>
</td>
<td width="19%" valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>24</span></p>
</td>
</tr>
<tr class="MsoNormalTable">
<td width="41%" valign=top class="Normal">
<p><span lang=EN-GB style='font-size:9.0pt;font-family:Arial'>Banking
and insurance</span></p>
</td>
<td width="12%" valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>12</span></p>
</td>
<td width="14%" valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>–</span></p>
</td>
<td width="12%" valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>7</span></p>
</td>
<td width="19%" valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>–</span></p>
</td>
</tr>
<tr class="MsoNormalTable">
<td width="41%" valign=top class="Normal">
<p><span lang=EN-GB style='font-size:9.0pt;font-family:Arial'>Transport
and communications</span></p>
</td>
<td width="12%" valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>–</span></p>
</td>
<td width="14%" valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>21</span></p>
</td>
<td width="12%" valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>54</span></p>
</td>
<td width="19%" valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>–</span></p>
</td>
</tr>
<tr class="MsoNormalTable">
<td width="41%" valign=top class="Normal">
<p><span lang=EN-GB style='font-size:9.0pt;font-family:Arial'>Real estate
and services</span></p>
</td>
<td width="12%" valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>–</span></p>
</td>
<td width="14%" valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>8</span></p>
</td>
<td width="12%" valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>–</span></p>
</td>
<td width="19%" valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>12</span></p>
</td>
</tr>
<tr class="MsoNormalTable">
<td width="41%" valign=top class="Normal">
<p><span lang=EN-GB style='font-size:9.0pt;font-family:Arial'>Other sectors</span></p>
</td>
<td width="12%" valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>21</span></p>
</td>
<td width="14%" valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>25</span></p>
</td>
<td width="12%" valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>22</span></p>
</td>
<td width="19%" valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>27</span></p>
</td>
</tr>
</table>
<p style='text-align:justify'><span lang=EN-GB
style='font-size:8.0pt;font-family:Arial'>(1) Figures at the end of 2005.<br>
</span><span lang=EN-GB
style='font-size:8.0pt;font-family:Arial'>Source: Investment Registry.</span></p>
<p class=TableTitle style='text-align:justify'><span
lang=EN-GB>Figure 10. Largest US Companies in Spain by Revenues (1)</span></p>
<table width="70%" border="1" cellspacing="0" cellpadding="0">
<tr class="MsoNormalTable">
<td width="33%" valign=top bgcolor="#E5E5E5" class="Normal">
<p class=TableText><b><span lang=EN-GB style='font-size:9.0pt;layout-grid-mode:
line'>Company</span></b></p>
</td>
<td width="31%" valign=top bgcolor="#E5E5E5" class="Normal">
<p class=TableText align=right style='text-align:right'><b><span lang=EN-GB
style='font-size:9.0pt;layout-grid-mode:line'>Sector</span></b></p>
</td>
<td width="12%" valign=top bgcolor="#E5E5E5" class="Normal">
<p class=TableText align=right style='text-align:right'><b><span lang=EN-GB
style='font-size:9.0pt;layout-grid-mode:line'>Employees</span></b></p>
</td>
<td width="21%" valign=top bgcolor="#E5E5E5" class="Normal">
<p class=TableText align=right style='text-align:right'><b><span lang=EN-GB
style='font-size:9.0pt;layout-grid-mode:line'>Revenues (€ million)</span></b></p>
</td>
</tr>
<tr class="MsoNormalTable">
<td width="33%" valign=top class="Normal">
<p class=TableText><span lang=EN-GB style='font-size:9.0pt;color:black;
layout-grid-mode:line'>Opel España</span></p>
</td>
<td width="31%" valign=top class="Normal">
<p class=TableText align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;color:black;layout-grid-mode:line'>Automotive </span></p>
</td>
<td width="12%" valign=top class="Normal">
<p class=TableText align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;color:black;layout-grid-mode:line'>7,500</span></p>
</td>
<td width="21%" valign=top class="Normal">
<p class=TableText align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;color:black;layout-grid-mode:line'>6,765</span></p>
</td>
</tr>
<tr class="MsoNormalTable">
<td width="33%" valign=top class="Normal">
<p class=TableText><span lang=EN-GB style='font-size:9.0pt;color:black;
layout-grid-mode:line'>Ford España</span></p>
</td>
<td width="31%" valign=top class="Normal">
<p class=TableText align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;color:black;layout-grid-mode:line'>Automotive</span></p>
</td>
<td width="12%" valign=top class="Normal">
<p class=TableText align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;color:black;layout-grid-mode:line'>8,000</span></p>
</td>
<td width="21%" valign=top class="Normal">
<p class=TableText align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;color:black;layout-grid-mode:line'>5,727</span></p>
</td>
</tr>
<tr class="MsoNormalTable">
<td width="33%" valign=top class="Normal">
<p class=TableText><span lang=EN-GB style='font-size:9.0pt;color:black;
layout-grid-mode:line'>Dow Chemical Ibérica</span></p>
</td>
<td width="31%" valign=top class="Normal">
<p class=TableText align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;color:black;layout-grid-mode:line'>Chemicals</span></p>
</td>
<td width="12%" valign=top class="Normal">
<p class=TableText align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;color:black;layout-grid-mode:line'>898</span></p>
</td>
<td width="21%" valign=top class="Normal">
<p class=TableText align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;color:black;layout-grid-mode:line'>1,348</span></p>
</td>
</tr>
<tr class="MsoNormalTable">
<td width="33%" valign=top class="Normal">
<p class=TableText><span lang=EN-GB style='font-size:9.0pt;color:black;
layout-grid-mode:line'>Hewlett-Packard </span></p>
</td>
<td width="31%" valign=top class="Normal">
<p class=TableText align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;color:black;layout-grid-mode:line'>Information technology</span></p>
</td>
<td width="12%" valign=top class="Normal">
<p class=TableText align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;color:black;layout-grid-mode:line'>2,116</span></p>
</td>
<td width="21%" valign=top class="Normal">
<p class=TableText align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;color:black;layout-grid-mode:line'>1,223</span></p>
</td>
</tr>
<tr class="MsoNormalTable">
<td width="33%" valign=top class="Normal">
<p class=TableText><span lang=EN-GB style='font-size:9.0pt;color:black;
layout-grid-mode:line'>Atlantic Copper</span></p>
</td>
<td width="31%" valign=top class="Normal">
<p class=TableText align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;color:black;layout-grid-mode:line'>Capital goods</span></p>
</td>
<td width="12%" valign=top class="Normal">
<p class=TableText align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;color:black;layout-grid-mode:line'>544</span></p>
</td>
<td width="21%" valign=top class="Normal">
<p class=TableText align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;color:black;layout-grid-mode:line'>1,104</span></p>
</td>
</tr>
<tr class="MsoNormalTable">
<td width="33%" valign=top class="Normal">
<p class=TableText><span lang=EN-GB style='font-size:9.0pt;color:black;
layout-grid-mode:line'>Philip Morris Spain</span></p>
</td>
<td width="31%" valign=top class="Normal">
<p class=TableText align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;color:black;layout-grid-mode:line'>Food and tobacco</span></p>
</td>
<td width="12%" valign=top class="Normal">
<p class=TableText align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;color:black;layout-grid-mode:line'>394</span></p>
</td>
<td width="21%" valign=top class="Normal">
<p class=TableText align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;color:black;layout-grid-mode:line'>922</span></p>
</td>
</tr>
<tr class="MsoNormalTable">
<td width="33%" valign=top class="Normal">
<p class=TableText><span lang=EN-GB style='font-size:9.0pt;color:black;
layout-grid-mode:line'>Pfizer</span></p>
</td>
<td width="31%" valign=top class="Normal">
<p class=TableText align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;color:black;layout-grid-mode:line'>Pharmaceuticals</span></p>
</td>
<td width="12%" valign=top class="Normal">
<p class=TableText align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;color:black;layout-grid-mode:line'>1,518</span></p>
</td>
<td width="21%" valign=top class="Normal">
<p class=TableText align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;color:black;layout-grid-mode:line'>869</span></p>
</td>
</tr>
<tr class="MsoNormalTable">
<td width="33%" valign=top class="Normal">
<p class=TableText><span lang=EN-GB style='font-size:9.0pt;color:black;
layout-grid-mode:line'>Lilly</span></p>
</td>
<td width="31%" valign=top class="Normal">
<p class=TableText align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;color:black;layout-grid-mode:line'>Pharmaceuticals</span></p>
</td>
<td width="12%" valign=top class="Normal">
<p class=TableText align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;color:black;layout-grid-mode:line'>246</span></p>
</td>
<td width="21%" valign=top class="Normal">
<p class=TableText align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;color:black;layout-grid-mode:line'>653</span></p>
</td>
</tr>
<tr class="MsoNormalTable">
<td width="33%" valign=top class="Normal">
<p class=TableText><span lang=EN-GB style='font-size:9.0pt;color:black;
layout-grid-mode:line'>Refrescos Envasados (Coca-Cola)</span></p>
</td>
<td width="31%" valign=top class="Normal">
<p class=TableText align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;color:black;layout-grid-mode:line'>Beverages</span></p>
</td>
<td width="12%" valign=top class="Normal">
<p class=TableText align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;color:black;layout-grid-mode:line'>1,041</span></p>
</td>
<td width="21%" valign=top class="Normal">
<p class=TableText align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;color:black;layout-grid-mode:line'>647</span></p>
</td>
</tr>
<tr class="MsoNormalTable">
<td width="33%" valign=top class="Normal">
<p class=TableText><span lang=EN-GB style='font-size:9.0pt;color:black;
layout-grid-mode:line'>Esso Española</span></p>
</td>
<td width="31%" valign=top class="Normal">
<p class=TableText align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;color:black;layout-grid-mode:line'>Petroleum</span></p>
</td>
<td width="12%" valign=top class="Normal">
<p class=TableText align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;color:black;layout-grid-mode:line'>156</span></p>
</td>
<td width="21%" valign=top class="Normal">
<p class=TableText align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;color:black;layout-grid-mode:line'>605</span></p>
</td>
</tr>
<tr class="MsoNormalTable">
<td width="33%" valign=top class="Normal">
<p class=TableText><span lang=EN-GB style='font-size:9.0pt;color:black;
layout-grid-mode:line'>Ingram Micro</span></p>
</td>
<td width="31%" valign=top class="Normal">
<p class=TableText align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;color:black;layout-grid-mode:line'>Information technology</span></p>
</td>
<td width="12%" valign=top class="Normal">
<p class=TableText align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;color:black;layout-grid-mode:line'>240</span></p>
</td>
<td width="21%" valign=top class="Normal">
<p class=TableText align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;color:black;layout-grid-mode:line'>574</span></p>
</td>
</tr>
<tr class="MsoNormalTable">
<td width="33%" valign=top class="Normal">
<p class=TableText><span lang=EN-GB style='font-size:9.0pt;color:black;
layout-grid-mode:line'>Zardoya Otis</span></p>
</td>
<td width="31%" valign=top class="Normal">
<p class=TableText align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;color:black;layout-grid-mode:line'>Capital goods</span></p>
</td>
<td width="12%" valign=top class="Normal">
<p class=TableText align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;color:black;layout-grid-mode:line'>3,813</span></p>
</td>
<td width="21%" valign=top class="Normal">
<p class=TableText align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;color:black;layout-grid-mode:line'>552</span></p>
</td>
</tr>
<tr class="MsoNormalTable">
<td width="33%" valign=top class="Normal">
<p class=TableText><span lang=EN-GB style='font-size:9.0pt;color:black;
layout-grid-mode:line'>Procter & Gamble España</span></p>
</td>
<td width="31%" valign=top class="Normal">
<p class=TableText align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;color:black;layout-grid-mode:line'>Consumer products</span></p>
</td>
<td width="12%" valign=top class="Normal">
<p class=TableText align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;color:black;layout-grid-mode:line'>363</span></p>
</td>
<td width="21%" valign=top class="Normal">
<p class=TableText align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;color:black;layout-grid-mode:line'>502</span></p>
</td>
</tr>
<tr class="MsoNormalTable">
<td width="33%" valign=top class="Normal">
<p class=TableText><span lang=EN-GB style='font-size:9.0pt;color:black;
layout-grid-mode:line'>Lear (MAI)</span></p>
</td>
<td width="31%" valign=top class="Normal">
<p class=TableText align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;color:black;layout-grid-mode:line'>Automotive</span></p>
</td>
<td width="12%" valign=top class="Normal">
<p class=TableText align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;color:black;layout-grid-mode:line'>3,522</span></p>
</td>
<td width="21%" valign=top class="Normal">
<p class=TableText align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;color:black;layout-grid-mode:line'>479</span></p>
</td>
</tr>
<tr class="MsoNormalTable">
<td width="33%" valign=top class="Normal">
<p class=TableText><span lang=EN-GB style='font-size:9.0pt;color:black;
layout-grid-mode:line'>Alcoa Inespal</span></p>
</td>
<td width="31%" valign=top class="Normal">
<p class=TableText align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;color:black;layout-grid-mode:line'>Metals</span></p>
</td>
<td width="12%" valign=top class="Normal">
<p class=TableText align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;color:black;layout-grid-mode:line'>1,100</span></p>
</td>
<td width="21%" valign=top class="Normal">
<p class=TableText align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;color:black;layout-grid-mode:line'>420</span></p>
</td>
</tr>
<tr class="MsoNormalTable">
<td width="33%" valign=top class="Normal">
<p class=TableText><span lang=EN-GB style='font-size:9.0pt;color:black;
layout-grid-mode:line'>PBG Holding (Pepsi Cola)</span></p>
</td>
<td width="31%" valign=top class="Normal">
<p class=TableText align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;color:black;layout-grid-mode:line'>Beverages</span></p>
</td>
<td width="12%" valign=top class="Normal">
<p class=TableText align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;color:black;layout-grid-mode:line'>990</span></p>
</td>
<td width="21%" valign=top class="Normal">
<p class=TableText align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;color:black;layout-grid-mode:line'>361</span></p>
</td>
</tr>
<tr class="MsoNormalTable">
<td width="33%" valign=top class="Normal">
<p class=TableText><span lang=EN-GB style='font-size:9.0pt;color:black;
layout-grid-mode:line'>Delphi</span></p>
</td>
<td width="31%" valign=top class="Normal">
<p class=TableText align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;color:black;layout-grid-mode:line'>Automotive</span></p>
</td>
<td width="12%" valign=top class="Normal">
<p class=TableText align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;color:black;layout-grid-mode:line'>1,171</span></p>
</td>
<td width="21%" valign=top class="Normal">
<p class=TableText align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;color:black;layout-grid-mode:line'>181</span></p>
</td>
</tr>
<tr class="MsoNormalTable">
<td width="33%" valign=top class="Normal">
<p class=TableText><span lang=EN-GB style='font-size:9.0pt;color:black;
layout-grid-mode:line'>Sara Lee (Southern Europe)</span></p>
</td>
<td width="31%" valign=top class="Normal">
<p class=TableText align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;color:black;layout-grid-mode:line'>Consumer goods</span></p>
</td>
<td width="12%" valign=top class="Normal">
<p class=TableText align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;color:black;layout-grid-mode:line'>280</span></p>
</td>
<td width="21%" valign=top class="Normal">
<p class=TableText align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;color:black;layout-grid-mode:line'>130</span></p>
</td>
</tr>
<tr class="MsoNormalTable">
<td width="33%" valign=top class="Normal">
<p class=TableText><span lang=EN-GB style='font-size:9.0pt;color:black;
layout-grid-mode:line'>Johnson Controls</span></p>
</td>
<td width="31%" valign=top class="Normal">
<p class=TableText align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;color:black;layout-grid-mode:line'>Automotive</span></p>
</td>
<td width="12%" valign=top class="Normal">
<p class=TableText align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;color:black;layout-grid-mode:line'>400</span></p>
</td>
<td width="21%" valign=top class="Normal">
<p class=TableText align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;color:black;layout-grid-mode:line'>125</span></p>
</td>
</tr>
<tr class="MsoNormalTable">
<td width="33%" valign=top class="Normal">
<p class=TableText><span lang=EN-GB style='font-size:9.0pt;color:black;
layout-grid-mode:line'>Lucent Technologies</span></p>
</td>
<td width="31%" valign=top class="Normal">
<p class=TableText align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;color:black;layout-grid-mode:line'>Information technology</span></p>
</td>
<td width="12%" valign=top class="Normal">
<p class=TableText align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;color:black;layout-grid-mode:line'>300</span></p>
</td>
<td width="21%" valign=top class="Normal">
<p class=TableText align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;color:black;layout-grid-mode:line'>122</span></p>
</td>
</tr>
<tr class="MsoNormalTable">
<td width="33%" valign=top class="Normal">
<p class=TableText><span lang=EN-GB style='font-size:9.0pt;color:black;
layout-grid-mode:line'>General Electric</span></p>
</td>
<td width="31%" valign=top class="Normal">
<p class=TableText align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;color:black;layout-grid-mode:line'>Plastics, medical
systems, finance</span></p>
</td>
<td width="12%" valign=top class="Normal">
<p class=TableText align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;color:black;layout-grid-mode:line'>979</span></p>
</td>
<td width="21%" valign=top class="Normal">
<p class=TableText align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;color:black;layout-grid-mode:line'>121</span></p>
</td>
</tr>
</table>
<p style='text-align:justify'><span lang=EN-GB
style='font-size:8.0pt;font-family:Arial'>(1) 2005 figures.<br>
</span><span lang=EN-GB
style='font-size:8.0pt;font-family:Arial'>Source: Fomento de la Producción.</span></p>
<p class=Wm><span lang=EN-GB
style='font-size:11.0pt'>US direct investment in Spain has averaged around 2%
of the US’s total annual investment abroad since 1999 (see Figure 11). In
terms of annual flows, Spain has ranked among the top eight countries in the
EU receiving US FDI. At the world level, Spain ranks lower, generally among
the top 20 and above China in most of the recent years (not in 2006). On a
historical cost basis, US investment in Spain rose fivefold between 1994 and
2006 to US$49.4 billion, compared with a doubling in Italy to US$28.9 billion
(see Figure 12). The growth in US investment in Spain has been among the fastest
in Europe. Of the US$49.4 billion, US$14.2 billion is in manufacturing (US$7.8
billion in chemicals), US$6.3 billion in finance and insurance and US$19 billion
in non-bank holding companies.</span></p>
<p class=MsoHeading7 style='text-align:justify'><b><span
lang=EN-GB style='font-size:9.0pt;font-family:Arial'>Figure 11. US Direct Investment
Flows Abroad, 1994-2006 (US$ billion)</span></b></p>
<table width="70%" border="1" cellspacing="0" cellpadding="0">
<tr class="MsoNormalTable">
<td width="27%" valign=top bgcolor="#E5E5E5" class="Normal"> </td>
<td width="18%" valign=top bgcolor="#E5E5E5" class="Normal">
<p align=right style='text-align:right'><b><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>1994</span></b></p>
</td>
<td width="18%" valign=top bgcolor="#E5E5E5" class="Normal">
<p align=right style='text-align:right'><b><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>1998</span></b></p>
</td>
<td width="18%" valign=top bgcolor="#E5E5E5" class="Normal">
<p align=right style='text-align:right'><b><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>2002</span></b></p>
</td>
<td width="18%" valign=top bgcolor="#E5E5E5" class="Normal">
<p align=right style='text-align:right'><b><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>2006</span></b></p>
</td>
</tr>
<tr class="MsoNormalTable">
<td width="27%" valign=top class="Normal">
<p><span lang=EN-GB style='font-size:9.0pt;font-family:Arial'>All countries</span></p>
</td>
<td width="18%" valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>73.2</span></p>
</td>
<td width="18%" valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>131.0</span></p>
</td>
<td width="18%" valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>134.9</span></p>
</td>
<td width="18%" valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>216.6</span></p>
</td>
</tr>
<tr class="MsoNormalTable">
<td width="27%" valign=top class="Normal">
<p><span lang=EN-GB style='font-size:9.0pt;font-family:Arial'>Europe</span></p>
</td>
<td width="18%" valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>34.4</span></p>
</td>
<td width="18%" valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>86.1</span></p>
</td>
<td width="18%" valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>79.5</span></p>
</td>
<td width="18%" valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>127.4</span></p>
</td>
</tr>
<tr class="MsoNormalTable">
<td width="27%" valign=top class="Normal">
<p><span lang=EN-GB style='font-size:9.0pt;font-family:Arial'> France</span></p>
</td>
<td width="18%" valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>2.6</span></p>
</td>
<td width="18%" valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>4.3</span></p>
</td>
<td width="18%" valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>4.6</span></p>
</td>
<td width="18%" valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>4.8</span></p>
</td>
</tr>
<tr class="MsoNormalTable">
<td width="27%" valign=top class="Normal">
<p><span lang=EN-GB style='font-size:9.0pt;font-family:Arial'> Germany</span></p>
</td>
<td width="18%" valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>2.8</span></p>
</td>
<td width="18%" valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>3.0</span></p>
</td>
<td width="18%" valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>2.4</span></p>
</td>
<td width="18%" valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>8.2</span></p>
</td>
</tr>
<tr class="MsoNormalTable">
<td width="27%" valign=top class="Normal">
<p><span lang=EN-GB style='font-size:9.0pt;font-family:Arial'> Italy</span></p>
</td>
<td width="18%" valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>2.6</span></p>
</td>
<td width="18%" valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>-0.9</span></p>
</td>
<td width="18%" valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>1.2</span></p>
</td>
<td width="18%" valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>3.1</span></p>
</td>
</tr>
<tr class="MsoNormalTable">
<td width="27%" valign=top class="Normal">
<p><b><span lang=EN-GB style='font-size:9.0pt;font-family:
Arial'> Spain</span></b></p>
</td>
<td width="18%" valign=top class="Normal">
<p align=right style='text-align:right'><b><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>1.5</span></b></p>
</td>
<td width="18%" valign=top class="Normal">
<p align=right style='text-align:right'><b><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>1.8</span></b></p>
</td>
<td width="18%" valign=top class="Normal">
<p align=right style='text-align:right'><b><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>3.0</span></b></p>
</td>
<td width="18%" valign=top class="Normal">
<p align=right style='text-align:right'><b><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>2.7</span></b></p>
</td>
</tr>
<tr class="MsoNormalTable">
<td width="27%" valign=top class="Normal">
<p><span lang=EN-GB style='font-size:9.0pt;font-family:Arial'> UK</span></p>
</td>
<td width="18%" valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>9.6</span></p>
</td>
<td width="18%" valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>29.0</span></p>
</td>
<td width="18%" valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>15.2</span></p>
</td>
<td width="18%" valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>19.3</span></p>
</td>
</tr>
</table>
<p style='text-align:justify'><span lang=EN-GB
style='font-size:8.0pt;font-family:Arial'>Note: US direct investment abroad is
the ownership or control, directly or indirectly, by one US resident of 10%
or more of the voting securities of an incorporated foreign business. These
figures are for total capital and consist of equity capital, intercompany
debt and reinvested earnings.<br>
</span><span lang=EN-GB
style='font-size:8.0pt;font-family:Arial'>Source: US Bureau of Economic Analysis.</span></p>
<p class=MsoHeading7 style='text-align:justify'><b><span
lang=EN-GB style='font-size:9.0pt;font-family:Arial'>Figure 12. US Direct Investment
Position Abroad on a Historical Cost Basis (US$ million)</span></b></p>
<table width="70%" border="1" cellspacing="0" cellpadding="0">
<tr class="MsoNormalTable">
<td width="25%" valign=top bgcolor="#E5E5E5" class="Normal"> </td>
<td width="37%" valign=top bgcolor="#E5E5E5" class="Normal">
<p align=right style='text-align:right'><b><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>1994</span></b></p>
</td>
<td width="37%" valign=top bgcolor="#E5E5E5" class="Normal">
<p align=right style='text-align:right'><b><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>2006</span></b></p>
</td>
</tr>
<tr class="MsoNormalTable">
<td width="25%" valign=top class="Normal">
<p><span lang=EN-GB style='font-size:9.0pt;font-family:Arial'>All countries</span></p>
</td>
<td width="37%" valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>612,592</span></p>
</td>
<td width="37%" valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>2,384,004</span></p>
</td>
</tr>
<tr class="MsoNormalTable">
<td width="25%" valign=top class="Normal">
<p><span lang=EN-GB style='font-size:9.0pt;font-family:Arial'>Europe</span></p>
</td>
<td width="37%" valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>297,133</span></p>
</td>
<td width="37%" valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>1,250,508</span></p>
</td>
</tr>
<tr class="MsoNormalTable">
<td width="25%" valign=top class="Normal">
<p><span lang=EN-GB style='font-size:9.0pt;font-family:Arial'> France</span></p>
</td>
<td width="37%" valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>27,322</span></p>
</td>
<td width="37%" valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>65,933</span></p>
</td>
</tr>
<tr class="MsoNormalTable">
<td width="25%" valign=top class="Normal">
<p><span lang=EN-GB style='font-size:9.0pt;font-family:Arial'> Germany</span></p>
</td>
<td width="37%" valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>38,878</span></p>
</td>
<td width="37%" valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>99,253</span></p>
</td>
</tr>
<tr class="MsoNormalTable">
<td width="25%" valign=top class="Normal">
<p><span lang=EN-GB style='font-size:9.0pt;font-family:Arial'> Italy</span></p>
</td>
<td width="37%" valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>14,808</span></p>
</td>
<td width="37%" valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>28,936</span></p>
</td>
</tr>
<tr class="MsoNormalTable">
<td width="25%" valign=top class="Normal">
<p><b><span lang=EN-GB style='font-size:9.0pt;font-family:
Arial'> Spain</span></b></p>
</td>
<td width="37%" valign=top class="Normal">
<p align=right style='text-align:right'><b><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>9,5722</span></b></p>
</td>
<td width="37%" valign=top class="Normal">
<p align=right style='text-align:right'><b><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>49,413</span></b></p>
</td>
</tr>
<tr class="MsoNormalTable">
<td width="25%" valign=top class="Normal">
<p><span lang=EN-GB style='font-size:9.0pt;font-family:Arial'> UK</span></p>
</td>
<td width="37%" valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>100,817</span></p>
</td>
<td width="37%" valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>364,084</span></p>
</td>
</tr>
</table>
<p style='text-align:justify'><span lang=EN-GB
style='font-size:8.0pt;font-family:Arial'>Source: US Bureau of Economic Analysis.</span></p>
<p class=Wm><span lang=EN-GB
style='font-size:11.0pt'>US companies, in particular, have played a significant
role in the internationalisation of the Spanish economy. Opel (General Motors)
and Ford are regularly among the country’s top ten exporters. US firms operating
in Spain account for around 9% of total exports of goods. In R&D, the
role of US companies is also greater than that corresponding to their weight
in the Spanish economy. The dissemination of technology and entrepreneurial
know-how throughout the Spanish industrial structure has been a key contribution
from US companies. This can be seen in the figures on R&D spending by
American companies compared to average expenditure in Spain by all companies,
and in the figures on the employment of research staff.</span></p>
<p class=Wm><span lang=EN-GB
style='font-size:11.0pt'>Ford’s first car produced in Spain, the <i>Fiesta</i>,
came off the assembly line at Almussafes near Valencia on 18 October 1976.
It was a far-sighted investment to make Spain a springboard for exporting,
as it was finalised in 1973 in the final part of the Franco regime when the
political climate was uncertain. The government had to pass a decree in order
to let Ford invest, because at that time government approval was needed for
foreign investment in the auto industry. Ford’s exports of cars rose from
4,526 units in 1976 (26% of total production) to 359,408 in 2006 (85%). During
this period just over 9 million vehicles were produced and the average annual
level of exports was 76%. Ford chose to manufacture its new <i>KA</i> model
in the 1990s at this plant rather than at its facilities in Cologne, Germany,
and Dagenham, UK. Albert Caspers, chairman of Ford Europe, said at the time
that the plant in Spain was chosen because it has ‘one of the highest productivity
levels in the world and a quality standard on a par with other European factories’.
In 2003 Spain began to assemble the <i>Mazda2,</i> the first car to be produced
in Europe by Ford’s 33%-owned Japanese affiliate Mazda, and Almussafes became
the second plant in 2005, after Ford’s Saarlius factory in Germany, to manufacture
the new <i>Focu</i>s car. The highly efficient and flexible plant (the only
Ford plant capable of producing four different models at the same time) escaped
the round of job cuts in Europe in 2003, and in August 2007 Ford agreed with
workers to produce three new models at the plant, with an annual production
target of 350,000 cars. Ford, which made a loss of €12.7 billion in 2006,
the largest in its history, is to invest €425 million in the plant, securing
vehicle assembly until 2013. The agreement took two years to forge and was
compared to the ‘pregnancy of an elephant’ by Gonzalo Pino, the UGT trade
union Secretary at Almussafes. In return for guaranteeing its continued existence,
workers agreed to moderate wage rises, not to press for a reduced working
day and to split their holidays and adjust them more to the plant’s needs.
The ‘sword’ hanging over workers was the possibility that Ford would strike
a deal with the government of Romania.</span></p>
<p class=Wm><span lang=EN-GB
style='font-size:11.0pt'>Another victory for the automotive industry was the decision
in 2006 by Adam Opel, part of General Motors, to build the next generation
of its <i>Meriva</i> compact van in Spain and not in Poland, the other alternative.
The decision was particularly important because some auto component firms
in Spain have moved out of the country and relocated to ones with lower labour
costs, particularly the Czech Republic. Delphi, the US car components manufacturer
operating under bankruptcy protection since November 2005, closed its plant
in Puerto Real, Cadiz in 2007.</span></p>
<p class=Wm><span lang=EN-GB
style='font-size:11.0pt'>In the chemicals sector, Dow Chemical’s Tarragona plant
in Catalonia is its European production centre and hence an important link
in its global supply chain. Its new €200 million plant to produce special
polyethylene plastics came on stream in 2006. Exports of chemicals by US companies
in Spain have more or less doubled since 1999. No other export by US companies
in Spain has grown so much. Dupont has several plants in Asturias, making
the region one of the most important production centres worldwide. US companies
are also strong in pharmaceuticals. Eight companies, including Pfizer, have
a market share of close to 30%.</span></p>
<p class=Wm><span lang=EN-GB
style='font-size:11.0pt'>In software, hardware and services, many of the big names
are in Spain, including IBM (which first came to the country in 1926 and stopped
manufacturing in Spain in 1995), Hewlett Packard and Microsoft. In 2005, IBM
restructured its European operations and replaced Paris with two new coordination
centres, one in Madrid and the other in Zurich. Madrid is responsible for
business in France, Italy, Belgium, Holland, Luxembourg, Greece, Israel, Turkey
and Portugal.</span></p>
<p class=Wm><span lang=EN-GB
style='font-size:11.0pt'>In the food and beverages industry, Spain has its ubiquitous
McDonald’s fast-food chains, but it also has producers, such as Kellogg’s,
Kraft, RJR Nabisco and Unilever Best Foods. PepsiCo’s Southern Europe Business
Unit, which covers 11 countries, is in Barcelona, while Coors Brewing’s factory
in Zaragoza, which it bought from Heineken in 1994, is its hub for the European
market. This purchase was Coors’ first outside the US. Wrigley, the world’s
largest chewing gum maker, acquired confectionary businesses that were part
of Joyco, a subsidiary of the Spanish food conglomerate Agrolimen.</span></p>
<p class=Wm><span lang=EN-GB
style='font-size:11.0pt'>US companies in Spain were generally satisfied with the
performance of their businesses, particularly in the sectors of food, beverages
and tobacco, other services, finance and insurance, business and consulting
and the information society, but less so in the car industry, and to some
extent chemicals, pharmaceuticals and other manufacturing industries, according
to the 2007 barometer of US companies in Spain, an annual survey conducted
by the American Chamber of Commerce and the ESADE business school. The sector
with the highest concentration of companies more or less pessimistic about
the future of their investment plans is the car industry (33%). Only two sectors
reported significant increases in their production capacity (more than 50%):
pharmaceuticals and other services.</span></p>
<p class=Wm><span lang=EN-GB
style='font-size:11.0pt'>Among European countries, France, Germany and the UK
are well represented in Spain. According to <i>INTERES Invest in Spain</i>,
there were 2,185 French companies in Spain in 2006, 1,483 from Germany and
1,360 from the UK. The largest UK companies include Altadis (the product of
the merger between Spain’s Tabacalera and France’s Seita), the big tobacco
group which was expected to be acquired by Imperial Tobacco later this year,
Vodafone, Asturiana de Zinc, Dinosol (supermarkets), Abbott Laboratories and
Schweppes. Among the largest French companies are Peugeot and Renault, Cepsa
(oil products), Saint-Gobain (glass), Sabeco (supermarkets), Alcampo (hypermarkets)
and L’Oreal (cosmetics, perfumes). Germany’s include Seat (cars), Siemens,
Robert Bosch (electrical components) and Makro (wholesale stores).</span></p>
<p><b><span lang=EN-GB style='font-size:11.0pt'>Multinationals’ Importance in
Exports</span></b></p>
<p class=Wm><span lang=EN-GB
style='font-size:11.0pt'>Many of Spain’s top exporters are multinationals, particularly
in the car industry, where all the manufacturers of vehicles are foreign.
The auto components sector, however, is mainly Spanish. In 2006, exports of
cars and engines accounted for 12% of the total exports of €169.8 billion
and components for 6.8%. Other sectors with a strong presence of multinationals
are food (13.6% of total exports) and chemicals (12.7%). There is also a foreign
presence in domestic appliances and consumer electronics. Overall, foreign
companies in Spain are estimated to account for around 40% of total exports.
The figures for each sector other than the motor industry are not known as
there is a dearth of information on this subject.</span></p>
<p><b><span lang=EN-GB style='font-size:11.0pt'>Sectors of Opportunity</span></b></p>
<p class=Wm><span lang=EN-GB
style='font-size:11.0pt'>The main sectors of opportunity, as opposed to sectors
that are solidly established, are the newly emerging ones, particularly renewable
energy, life sciences and biotechnology, information and communication technology
(ICT) and water treatment and desalination.</span></p>
<p class=Wm><span lang=EN-GB
style='font-size:11.0pt'>In renewable energy, Spain was the second most attractive
country in the world in 2007 –along with India and the UK– after the US, according
to Ernst & Young’s Renewable Energies Attractiveness Indices (see Figure
13). Several Spanish companies are major players on the global renewable energy
stage, particularly in wind power and solar energy. The government is encouraging
the sector with subsidies and by 2010 aims to generate 30% of electricity
from renewable sources.</span></p>
<p class=MsoHeading7 style='text-align:justify'><b><span
lang=EN-GB style='font-size:9.0pt;font-family:Arial'>Figure 13. All Renewables
Index, Top Five Countries</span></b></p>
<table width="70%" border="1" cellspacing="0" cellpadding="0">
<tr class="MsoNormalTable">
<td width="19%" valign=top bgcolor="#E5E5E5" class="Normal"> </td>
<td width="15%" valign=top bgcolor="#E5E5E5" class="Normal">
<p align=right style='text-align:right'><b><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>All</span></b></p>
<p align=right style='text-align:right'><b><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>Renewable</span></b></p>
</td>
<td width="10%" valign=top bgcolor="#E5E5E5" class="Normal">
<p align=right style='text-align:right'><b><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>Wind</span></b></p>
<p align=right style='text-align:right'><b><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>Index</span></b></p>
</td>
<td width="10%" valign=top bgcolor="#E5E5E5" class="Normal">
<p align=right style='text-align:right'><b><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>Onshore</span></b></p>
<p align=right style='text-align:right'><b><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>Wind</span></b></p>
</td>
<td width="10%" valign=top bgcolor="#E5E5E5" class="Normal">
<p align=right style='text-align:right'><b><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>Offshore</span></b></p>
<p align=right style='text-align:right'><b><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>Wind</span></b></p>
</td>
<td width="8%" valign=top bgcolor="#E5E5E5" class="Normal">
<p align=right style='text-align:right'><b><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'><br>
Solar</span></b></p>
</td>
<td width="10%" valign=top bgcolor="#E5E5E5" class="Normal">
<p align=right style='text-align:right'><b><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>Biomass/</span></b></p>
<p align=right style='text-align:right'><b><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>Other</span></b></p>
</td>
<td width="13%" valign=top bgcolor="#E5E5E5" class="Normal">
<p align=right style='text-align:right'><b><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'><br>
Infrastr. (2)</span></b></p>
</td>
</tr>
<tr class="MsoNormalTable">
<td width="19%" valign=top class="Normal">
<p><span lang=EN-GB style='font-size:9.0pt;font-family:Arial'>1. US (1)</span></p>
</td>
<td width="15%" valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>72</span></p>
</td>
<td width="10%" valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>73</span></p>
</td>
<td width="10%" valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>80</span></p>
</td>
<td width="10%" valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>58</span></p>
</td>
<td width="8%" valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>75</span></p>
</td>
<td width="10%" valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>64</span></p>
</td>
<td width="13%" valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>76</span></p>
</td>
</tr>
<tr class="MsoNormalTable">
<td width="19%" valign=top class="Normal">
<p><span lang=EN-GB style='font-size:9.0pt;font-family:Arial'>2. India</span></p>
</td>
<td width="15%" valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>64</span></p>
</td>
<td width="10%" valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>65</span></p>
</td>
<td width="10%" valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>75</span></p>
</td>
<td width="10%" valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>43</span></p>
</td>
<td width="8%" valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>61</span></p>
</td>
<td width="10%" valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>55</span></p>
</td>
<td width="13%" valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>65</span></p>
</td>
</tr>
<tr class="MsoNormalTable">
<td width="19%" valign=top class="Normal">
<p><b><span lang=EN-GB style='font-size:9.0pt;font-family:
Arial'>2. Spain</span></b></p>
</td>
<td width="15%" valign=top class="Normal">
<p align=right style='text-align:right'><b><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>64</span></b></p>
</td>
<td width="10%" valign=top class="Normal">
<p align=right style='text-align:right'><b><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>64</span></b></p>
</td>
<td width="10%" valign=top class="Normal">
<p align=right style='text-align:right'><b><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>71</span></b></p>
</td>
<td width="10%" valign=top class="Normal">
<p align=right style='text-align:right'><b><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>48</span></b></p>
</td>
<td width="8%" valign=top class="Normal">
<p align=right style='text-align:right'><b><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>72</span></b></p>
</td>
<td width="10%" valign=top class="Normal">
<p align=right style='text-align:right'><b><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>58</span></b></p>
</td>
<td width="13%" valign=top class="Normal">
<p align=right style='text-align:right'><b><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>76</span></b></p>
</td>
</tr>
<tr class="MsoNormalTable">
<td width="19%" valign=top class="Normal">
<p><span lang=EN-GB style='font-size:9.0pt;font-family:Arial'>2. UK</span></p>
</td>
<td width="15%" valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>64</span></p>
</td>
<td width="10%" valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>65</span></p>
</td>
<td width="10%" valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>63</span></p>
</td>
<td width="10%" valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>69</span></p>
</td>
<td width="8%" valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>50</span></p>
</td>
<td width="10%" valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>58</span></p>
</td>
<td width="13%" valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>69</span></p>
</td>
</tr>
<tr class="MsoNormalTable">
<td width="19%" valign=top class="Normal">
<p><span lang=EN-GB style='font-size:9.0pt;font-family:Arial'>5. Germany</span></p>
</td>
<td width="15%" valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>63</span></p>
</td>
<td width="10%" valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>63</span></p>
</td>
<td width="10%" valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>62</span></p>
</td>
<td width="10%" valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>64</span></p>
</td>
<td width="8%" valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>73</span></p>
</td>
<td width="10%" valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>61</span></p>
</td>
<td width="13%" valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>60</span></p>
</td>
</tr>
</table>
<p style='text-align:justify'><span lang=EN-GB
style='font-size:8.0pt;font-family:Arial'>(1) This indicates US states with Renewable
Portfolio Standards and favourable renewable energy regimes.<br>
</span><span lang=EN-GB
style='font-size:8.0pt;font-family:Arial'>(2) Combines with each set of technological
factors to generate the individual technology indices.<br>
</span><span lang=EN-GB
style='font-size:8.0pt;font-family:Arial'>Source: Ernst & Young, August 2007.</span></p>
<p><span lang=EN-GB>Biotechnology is also taking off in Spain, the fourth-largest
EU country in terms of the production of biotech research papers, but the
country is at the back of the line in terms of patents.</span><a
href="#_ftn7" name="_ftnref7" title=""><span lang=EN-GB style='font-size:11.0pt'><span
lang=EN-GB style='font-size:11.0pt;font-family:"Times New Roman"'>[7]</span></span></a><span
lang=EN-GB style='font-size:11.0pt'> </span><span lang=EN-GB>Foreign pharmaceutical
firms including Merck, Lilly, Abbott, and Baxter have developed labs in Spain.
The French company Sanofi-Aventis is investing nearly €8 million in a new
basic-research centre outside Madrid. Growth in ICT is also well above the
EU average. Spain has a cluster of companies with expertise in advanced technologies,
including Telefónica, Indra, Panda Security and Hispasat, and a number of
ICT multinationals are located in Spain (BT, Lucent, Motorola and Vodafone).</span></p>
<p class=Wm><span lang=EN-GB
style='font-size:11.0pt'>The seawater desalination plant at Carboneras near the
Mediterranean is Europe’s biggest. Production of desalinated water in Spain
doubled from 2000 to 2004, and the government predicts it will double again
by 2009. The country, which has a serious water scarcity problem, is the fourth-largest
user of desalination technology in the world, behind Saudi Arabia, the United
Arab Emirates and Kuwait. Its more than 700 plants produce around 1.6 million
cubic metres of water a day (enough for about 8 million inhabitants).</span></p>
<p><b><span lang=EN-GB style='font-size:11.0pt'>Spain as a Hub for Latin American
and European Business</span></b></p>
<p style='text-align:justify'><span lang=EN-GB
style='font-size:11.0pt'>The cultural, historic and linguistic affinities with
Latin America and Madrid’s growing importance as a crossing point between
Europe and a region where there is now a significant European corporate presence
make Spain a natural business hub. Madrid concentrates around 35% of total
air traffic between Europe and Latin America, and there are 29 daily direct
flights from Madrid to Latin American cities. Other attractions are that Santander
and BBVA, the two largest Spanish banks, have Latin America’s largest franchises
–well ahead of Citibank and HSBC– and are also among the biggest players in
Europe, and that the Madrid Stock Exchange is unique in having a euro market
for Latin American securities (Latibex). The six largest companies in the
Madrid Stock Exchange’s IBEX-35 index (around 60% of capitalisation) generate
a significant part of their business in Latin America.</span></p>
<p class=Wm><span lang=EN-GB
style='font-size:11.0pt'>But the results so far are modest. The number of European
and Latin American companies using Spain as a hub is small. Notable examples
are British Telecom and France’s Alstom, which transferred their Latin American
centres from New York and Paris, respectively, to Madrid, and Mexico’s Pemex
oil company, which transferred its European centre from London to Madrid.
The Spanish capital is also the European base of the Corporación Andina de
Fomento (Andean Development Corporation), a multilateral financial institution,
but not for the Inter-American Development Bank, which remains in Paris for
historical reasons.</span></p>
<p class=Wm><span lang=EN-GB
style='font-size:11.0pt'>In the view of three distinguished economists, what Spain
needs in order to enhance the prospects of having a successful hub is private-sector
institutions along the lines of American think tanks, such as the Institute
for International Economics, that analyse Latin America.<a
href="#_ftn8" name="_ftnref8" title=""><span lang=EN-GB style='font-size:11.0pt;
font-family:"Times New Roman"'>[8]</span></a> “It is striking that the
massive drive (for Latin America) by Spanish companies has not been accompanied
by an equally forceful response in the world of knowledge”.<a href="#_ftn9"
name="_ftnref9" title=""><span lang=EN-GB style='font-size:11.0pt;font-family:
"Times New Roman"'>[9]</span></a></span></p>
<p style='text-align:justify'><b><span lang=EN-GB
style='font-size:11.0pt'>Prospects</span></b></p>
<p style='text-align:justify'><span lang=EN-GB
style='font-size:11.0pt'>According to the Economist Intelligence Unit (EIU), Spain
will receive more inward FDI between 2007 and 2011 –an average of US$44.9
billion a year– than in the previous five years (US$26.9 billion <i>per annum</i>),
despite rising wage and non-wage costs, less flexible labour market regulations
than in other EU countries and the growing attractiveness of alternative locations.<a href="#_ftn10" name="_ftnref10" title=""><span lang=EN-GB
style='font-size:11.0pt;font-family:"Times New Roman"'>[10]</span></a> This surprisingly
high amount would be the ninth-largest in the world (see Figure 14). The EIU
says that Spain ‘is not an obvious location for Greenfield investments except
in a few niche fields’, but it is a ‘major market and many Spanish companies
are profitable, making them potentially attractive targets for takeovers’.</span></p>
<p class=MsoHeading7 style='text-align:justify'><b><span
lang=EN-GB style='font-size:9.0pt;font-family:Arial'>Figure 14. FDI Inflows (2007-11
Average), Top Ten Recipient Countries</span></b></p>
<table width="70%" border="1" cellspacing="0" cellpadding="0">
<tr class="MsoNormalTable">
<td width=121 valign=top bgcolor="#E5E5E5" class="Normal">
<p><b><span lang=EN-GB style='font-size:9.0pt;font-family:
Arial'>Country</span></b></p>
</td>
<td width=222 valign=top bgcolor="#E5E5E5" class="Normal">
<p align=right style='text-align:right'><b><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>US$ bn</span></b></p>
</td>
<td width=222 valign=top bgcolor="#E5E5E5" class="Normal">
<p align=right style='text-align:right'><b><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>% of World Total</span></b></p>
</td>
</tr>
<tr class="MsoNormalTable">
<td width=121 valign=top class="Normal">
<p><span lang=EN-GB style='font-size:9.0pt;font-family:Arial'>1. US</span></p>
</td>
<td width=222 valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>250.9</span></p>
</td>
<td width=222 valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>16.75</span></p>
</td>
</tr>
<tr class="MsoNormalTable">
<td width=121 valign=top class="Normal">
<p><span lang=EN-GB style='font-size:9.0pt;font-family:Arial'>2. UK</span></p>
</td>
<td width=222 valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>112.9</span></p>
</td>
<td width=222 valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>7.54</span></p>
</td>
</tr>
<tr class="MsoNormalTable">
<td width=121 valign=top class="Normal">
<p><span lang=EN-GB style='font-size:9.0pt;font-family:Arial'>3. China</span></p>
</td>
<td width=222 valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>86.8</span></p>
</td>
<td width=222 valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>5.79</span></p>
</td>
</tr>
<tr class="MsoNormalTable">
<td width=121 valign=top class="Normal">
<p><span lang=EN-GB style='font-size:9.0pt;font-family:Arial'>4. France</span></p>
</td>
<td width=222 valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>78.2</span></p>
</td>
<td width=222 valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>5.22</span></p>
</td>
</tr>
<tr class="MsoNormalTable">
<td width=121 valign=top class="Normal">
<p><span lang=EN-GB style='font-size:9.0pt;font-family:Arial'>5. Belgium</span></p>
</td>
<td width=222 valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>71.6</span></p>
</td>
<td width=222 valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>4.78</span></p>
</td>
</tr>
<tr class="MsoNormalTable">
<td width=121 valign=top class="Normal">
<p><span lang=EN-GB style='font-size:9.0pt;font-family:Arial'>6. Germany</span></p>
</td>
<td width=222 valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>66.0</span></p>
</td>
<td width=222 valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>4.41</span></p>
</td>
</tr>
<tr class="MsoNormalTable">
<td width=121 valign=top class="Normal">
<p><span lang=EN-GB style='font-size:9.0pt;font-family:Arial'>7. Canada</span></p>
</td>
<td width=222 valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>63.2</span></p>
</td>
<td width=222 valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>4.22</span></p>
</td>
</tr>
<tr class="MsoNormalTable">
<td width=121 valign=top class="Normal">
<p><span lang=EN-GB style='font-size:9.0pt;font-family:Arial'>8. Hong
Kong</span></p>
</td>
<td width=222 valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>48.0</span></p>
</td>
<td width=222 valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>3.20</span></p>
</td>
</tr>
<tr class="MsoNormalTable">
<td width=121 valign=top class="Normal">
<p><b><span lang=EN-GB style='font-size:9.0pt;font-family:
Arial'>9. Spain</span></b></p>
</td>
<td width=222 valign=top class="Normal">
<p align=right style='text-align:right'><b><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>44.9</span></b></p>
</td>
<td width=222 valign=top class="Normal">
<p align=right style='text-align:right'><b><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>2.99</span></b></p>
</td>
</tr>
<tr class="MsoNormalTable">
<td width=121 valign=top class="Normal">
<p><span lang=EN-GB style='font-size:9.0pt;font-family:Arial'>10. Italy</span></p>
</td>
<td width=222 valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>41.6</span></p>
</td>
<td width=222 valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>2.77</span></p>
</td>
</tr>
</table>
<p style='text-align:justify'><span lang=EN-GB
style='font-size:8.0pt;font-family:Arial'>Source: Economist Intelligence Unit.</span></p>
<p style='text-align:justify'><span lang=EN-GB
style='font-size:11.0pt'>One key issue will be whether the government impedes
such takeovers in what it considers strategic sectors, as the Socialists did
in 2006 and early 2007 when they obstructed the attempt by German energy company,
E.On, to acquire Endesa. The bitter two-year struggle for Endesa came to an
end in October 2007 when Italy’s Enel (30% owned by the Italian state) controlled
67% of Endesa and Spain’s infrastructure company Acciona 25%.</span></p>
<p style='text-align:justify'><span lang=EN-GB
style='font-size:11.0pt'>Another important issue is to what extent foreign manufacturing
companies will pull out of Spain and transfer their plants to lower-cost countries.
At the moment it is a trickle and not a stampede. In the latest delocation
of industrial activity, the British multinational SSL Healthcare Manufacturing
announced in September that it was closing its Durex condom factory in Rubi,
Catalonia in 2008 and transferring production to India and Thailand where
costs are much lower. The plant in Rubi employs 230 people. Spain’s labour
costs in 2005 (latest available comparative data) in the manufacturing sector
were on a par with Italy’s (see Figure 15).</span></p>
<p class=TableTitle style='text-align:justify'><span
lang=EN-GB>Figure 15. International Labour Costs</span></p>
<table width="70%" border="1" cellspacing="0" cellpadding="0">
<tr class="MsoNormalTable">
<td width=282 valign=top bgcolor="#E5E5E5" class="Normal">
<p class=TableText style='text-align:justify'><b><span lang=EN-GB
style='font-size:9.0pt;layout-grid-mode:line'>Country</span></b></p>
</td>
<td width=282 valign=top bgcolor="#E5E5E5" class="Normal">
<p class=TableText align=right style='text-align:right'><b><span lang=EN-GB
style='font-size:9.0pt;layout-grid-mode:line'>€/Hour</span></b></p>
</td>
</tr>
<tr class="MsoNormalTable">
<td width=282 valign=top class="Normal">
<p class=TableText style='text-align:justify'><span lang=EN-GB
style='font-size:9.0pt;layout-grid-mode:line'>West Germany</span></p>
</td>
<td width=282 valign=top class="Normal">
<p class=TableText align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;layout-grid-mode:line'>27.87 (27.60)</span></p>
</td>
</tr>
<tr class="MsoNormalTable">
<td width=282 valign=top class="Normal">
<p class=TableText style='text-align:justify'><span lang=EN-GB
style='font-size:9.0pt;layout-grid-mode:line'>Finland</span></p>
</td>
<td width=282 valign=top class="Normal">
<p class=TableText align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;layout-grid-mode:line'>25.98 (24.88)</span></p>
</td>
</tr>
<tr class="MsoNormalTable">
<td width=282 valign=top class="Normal">
<p class=TableText style='text-align:justify'><span lang=EN-GB
style='font-size:9.0pt;layout-grid-mode:line'>France</span></p>
</td>
<td width=282 valign=top class="Normal">
<p class=TableText align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;layout-grid-mode:line'>21.38 (20.74)</span></p>
</td>
</tr>
<tr class="MsoNormalTable">
<td width=282 valign=top class="Normal">
<p class=TableText style='text-align:justify'><span lang=EN-GB
style='font-size:9.0pt;layout-grid-mode:line'>UK</span></p>
</td>
<td width=282 valign=top class="Normal">
<p class=TableText align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;layout-grid-mode:line'>20.47 (19.89)</span></p>
</td>
</tr>
<tr class="MsoNormalTable">
<td width=282 valign=top class="Normal">
<p class=TableText style='text-align:justify'><span lang=EN-GB
style='font-size:9.0pt;layout-grid-mode:line'>Ireland</span></p>
</td>
<td width=282 valign=top class="Normal">
<p class=TableText align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;layout-grid-mode:line'>19.47 (18.11)</span></p>
</td>
</tr>
<tr class="MsoNormalTable">
<td width=282 valign=top class="Normal">
<p class=TableText style='text-align:justify'><span lang=EN-GB
style='font-size:9.0pt;layout-grid-mode:line'>US</span></p>
</td>
<td width=282 valign=top class="Normal">
<p class=TableText align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;layout-grid-mode:line'> 19.27 (18.76)</span></p>
</td>
</tr>
<tr class="MsoNormalTable">
<td width=282 valign=top class="Normal">
<p class=TableText style='text-align:justify'><span lang=EN-GB
style='font-size:9.0pt;layout-grid-mode:line'>Italy</span></p>
</td>
<td width=282 valign=top class="Normal">
<p class=TableText align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;layout-grid-mode:line'>17.71 (18.79)</span></p>
</td>
</tr>
<tr class="MsoNormalTable">
<td width=282 valign=top class="Normal">
<p class=TableText style='text-align:justify'><b><span lang=EN-GB
style='font-size:9.0pt;layout-grid-mode:line'>Spain</span></b></p>
</td>
<td width=282 valign=top class="Normal">
<p class=TableText align=right style='text-align:right'><b><span lang=EN-GB
style='font-size:9.0pt;layout-grid-mode:line'>17.25 (16.59)</span></b></p>
</td>
</tr>
<tr class="MsoNormalTable">
<td width=282 valign=top class="Normal">
<p class=TableText style='text-align:justify'><span lang=EN-GB
style='font-size:9.0pt;layout-grid-mode:line'>Portugal</span></p>
</td>
<td width=282 valign=top class="Normal">
<p class=TableText align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;layout-grid-mode:line'>7.37 (7.21)</span></p>
</td>
</tr>
<tr class="MsoNormalTable">
<td width=282 valign=top class="Normal">
<p class=TableText style='text-align:justify'><span lang=EN-GB
style='font-size:9.0pt;layout-grid-mode:line'>Hungary</span></p>
</td>
<td width=282 valign=top class="Normal">
<p class=TableText align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;layout-grid-mode:line'>4.88 (4.53)</span></p>
</td>
</tr>
<tr class="MsoNormalTable">
<td width=282 valign=top class="Normal">
<p class=TableText style='text-align:justify'><span lang=EN-GB
style='font-size:9.0pt;layout-grid-mode:line'>Poland</span></p>
</td>
<td width=282 valign=top class="Normal">
<p class=TableText align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;layout-grid-mode:line'>3.80 (3.29</span></p>
</td>
</tr>
</table>
<p style='text-align:justify'><span lang=EN-GB
style='font-size:8.0pt;font-family:Arial'>Note: Cost per hour in 2005 in the manufacturing
sector, including salaries and other expenses, such as employers’ social security
contributions. 2004 figures in brackets.<br>
</span><span
lang=EN-GB style='font-size:8.0pt;font-family:Arial'>Source: German Economics
Institute (IWD), Cologne.</span></p>
<p class=Wm><span lang=EN-GB
style='font-size:11.0pt'>In this year’s edition of <i>European Cities Monitor</i>,
an annual survey conducted by property consultant Cushman & Wakefield
Healey & Baker, Barcelona overtook Amsterdam to break into the top five,
while Madrid formed part of a leading group of seven cities. Both Spanish
cities were praised for carrying out ‘strategic improvements over the past
10 years –from updating their transport infrastructure to the education of
the local workforce’–. Barcelona is also the city perceived as doing the most
in Europe to improve itself as a business location, followed by Prague and
Madrid.</span></p>
<p class=Wm><span lang=EN-GB
style='font-size:11.0pt'>In another survey, drawn up by Ernst & Young Lawyers,
Spain was cited as one of the countries with the lowest tax burden for foreign
executives. Spain has had a special regime since 2004 which benefits foreign
executives who work in the country and make it their tax residence provided
they meet certain requirements including not having been a tax resident in
Spain for 10 years prior to entry, and the place of work is in Spain and benefits
a Spanish company. Those qualifying pay a 24% general rate on income generated
in Spain, substantially lower than what other tax payers pay on their worldwide
income (top rate of 43%). This regime can be adopted for up to six years.</span></p>
<p class=Wm><span lang=EN-GB
style='font-size:11.0pt'>Although Spain remains relatively well placed internationally
in terms of a business friendly environment, the fact is that the country
is falling behind because of the lack of reforms, a certain fatigue in policymakers
and excessive complacency about past achievements. The EIU ranked Spain’s
overall business environment 22<sup>nd</sup> out of 82 countries for 2007-11,
the same position as in 2002-06 (see Figure 16). There are two significant
changes, however, in Spain’s position in the segments that comprise this overall
ranking: the country’s macroeconomic environment dropped from 39<sup>th</sup>
to 54<sup>th</sup>, but in market opportunities it rose from 17<sup>th</sup>
to 11<sup>th</sup> place. The economy, after an extraordinary decade of growth,
will slow down over the next five years.</span></p>
<p class=MsoHeading7 style='text-align:justify'><b><span
lang=EN-GB style='font-size:9.0pt;font-family:Arial'>Figure 16. Business Environment
Rankings</span></b></p>
<table width="70%" border="1" cellspacing="0" cellpadding="0">
<tr class="MsoNormalTable">
<td width=217 valign=top bgcolor="#E5E5E5" class="Normal"> </td>
<td width=36 valign=top bgcolor="#E5E5E5" class="Normal"> </td>
<td width=132 colspan=2 valign=top bgcolor="#E5E5E5" class="Normal">
<p align=center style='text-align:center'><b><span
lang=EN-GB style='font-size:9.0pt;font-family:Arial'>Score (out of 10)</span></b></p>
</td>
<td width=48 valign=top bgcolor="#E5E5E5" class="Normal"> </td>
<td width=132 colspan=2 valign=top bgcolor="#E5E5E5" class="Normal">
<p align=center style='text-align:center'><b><span
lang=EN-GB style='font-size:9.0pt;font-family:Arial'>Rank (out of 82)</span></b></p>
</td>
</tr>
<tr class="MsoNormalTable">
<td width=217 valign=top bgcolor="#E5E5E5" class="Normal"> </td>
<td width=84 colspan=2 valign=top bgcolor="#E5E5E5" class="Normal">
<p align=right style='text-align:right'><b><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>2002-06</span></b></p>
</td>
<td width=84 valign=top bgcolor="#E5E5E5" class="Normal">
<p align=right style='text-align:right'><b><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>2007-11</span></b></p>
</td>
<td width=96 colspan=2 valign=top bgcolor="#E5E5E5" class="Normal">
<p align=right style='text-align:right'><b><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>2002-06</span></b></p>
</td>
<td width=84 valign=top bgcolor="#E5E5E5" class="Normal">
<p align=right style='text-align:right'><b><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>2007-11</span></b></p>
</td>
</tr>
<tr class="MsoNormalTable">
<td width=217 valign=top class="Normal">
<p><span lang=EN-GB style='font-size:9.0pt;font-family:Arial'>Overall
scores and ranks</span></p>
</td>
<td width=84 colspan=2 valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>7.4</span></p>
</td>
<td width=84 valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>7.82</span></p>
</td>
<td width=96 colspan=2 valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>22</span></p>
</td>
<td width=84 valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>22</span></p>
</td>
</tr>
<tr class="MsoNormalTable">
<td width=217 valign=top class="Normal">
<p><span lang=EN-GB style='font-size:9.0pt;font-family:Arial'>Political
environment</span></p>
</td>
<td width=84 colspan=2 valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>7.8</span></p>
</td>
<td width=84 valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>7.8</span></p>
</td>
<td width=96 colspan=2 valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>19</span></p>
</td>
<td width=84 valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>21</span></p>
</td>
</tr>
<tr class="MsoNormalTable">
<td width=217 valign=top class="Normal">
<p><span lang=EN-GB style='font-size:9.0pt;font-family:Arial'>Macroeconomic
environment</span></p>
</td>
<td width=84 colspan=2 valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>7.5</span></p>
</td>
<td width=84 valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>7.2</span></p>
</td>
<td width=96 colspan=2 valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>39</span></p>
</td>
<td width=84 valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>54</span></p>
</td>
</tr>
<tr class="MsoNormalTable">
<td width=217 valign=top class="Normal">
<p><span lang=EN-GB style='font-size:9.0pt;font-family:Arial'>Market opportunities</span></p>
</td>
<td width=84 colspan=2 valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>7.1</span></p>
</td>
<td width=84 valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>7.7</span></p>
</td>
<td width=96 colspan=2 valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>17</span></p>
</td>
<td width=84 valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>11</span></p>
</td>
</tr>
<tr class="MsoNormalTable">
<td width=217 valign=top class="Normal">
<p><span lang=EN-GB style='font-size:9.0pt;font-family:Arial'>Policy towards
priv. enterp. & compet.</span></p>
</td>
<td width=84 colspan=2 valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>7.5</span></p>
</td>
<td width=84 valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>7.8</span></p>
</td>
<td width=96 colspan=2 valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>21</span></p>
</td>
<td width=84 valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>24</span></p>
</td>
</tr>
<tr class="MsoNormalTable">
<td width=217 valign=top class="Normal">
<p><span lang=EN-GB style='font-size:9.0pt;font-family:Arial'>Policy towards
foreign investment</span></p>
</td>
<td width=84 colspan=2 valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>8.2</span></p>
</td>
<td width=84 valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>8.2</span></p>
</td>
<td width=96 colspan=2 valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>17</span></p>
</td>
<td width=84 valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>20</span></p>
</td>
</tr>
<tr class="MsoNormalTable">
<td width=217 valign=top class="Normal">
<p><span lang=EN-GB style='font-size:9.0pt;font-family:Arial'>Foreign
trade & exchange controls</span></p>
</td>
<td width=84 colspan=2 valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>8.7</span></p>
</td>
<td width=84 valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>9.1</span></p>
</td>
<td width=96 colspan=2 valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>15</span></p>
</td>
<td width=84 valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>14</span></p>
</td>
</tr>
<tr class="MsoNormalTable">
<td width=217 valign=top class="Normal">
<p><span lang=EN-GB style='font-size:9.0pt;font-family:Arial'>Taxes</span></p>
</td>
<td width=84 colspan=2 valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>5.6</span></p>
</td>
<td width=84 valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>6.3</span></p>
</td>
<td width=96 colspan=2 valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>42</span></p>
</td>
<td width=84 valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>42</span></p>
</td>
</tr>
<tr class="MsoNormalTable">
<td width=217 valign=top class="Normal">
<p><span lang=EN-GB style='font-size:9.0pt;font-family:Arial'>Financing</span></p>
</td>
<td width=84 colspan=2 valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>7.8</span></p>
</td>
<td width=84 valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>8.9</span></p>
</td>
<td width=96 colspan=2 valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>20</span></p>
</td>
<td width=84 valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>18</span></p>
</td>
</tr>
<tr class="MsoNormalTable">
<td width=217 valign=top class="Normal">
<p><span lang=EN-GB style='font-size:9.0pt;font-family:Arial'>Labour market</span></p>
</td>
<td width=84 colspan=2 valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>6.5</span></p>
</td>
<td width=84 valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>7.2</span></p>
</td>
<td width=96 colspan=2 valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>38</span></p>
</td>
<td width=84 valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>28</span></p>
</td>
</tr>
<tr class="MsoNormalTable">
<td width=217 valign=top class="Normal">
<p><span lang=EN-GB style='font-size:9.0pt;font-family:Arial'>Infrastructure</span></p>
</td>
<td width=84 colspan=2 valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>7.5</span></p>
</td>
<td width=84 valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>8.2</span></p>
</td>
<td width=96 colspan=2 valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>24</span></p>
</td>
<td width=84 valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>22</span></p>
</td>
</tr>
</table>
<p style='text-align:justify'><span lang=EN-GB
style='font-size:8.0pt;font-family:Arial'>Source: Economist Intelligence Unit.</span></p>
<p class=Wm><span lang=EN-GB
style='font-size:11.0pt'>Spain’s seemingly bright inward FDI prospects and its
business environment ranking, both on the basis of EIU reports, are at considerable
variance with the country’s low ranking in the Ease of Doing Business Index,
an annual report published by the World Bank. Spain was ranked 38<sup>th</sup>
out of 178 countries in 2007 (39<sup>th</sup> in 2006) and was placed very
low (118<sup>th</sup>) in the ranking for starting a business (see Figures
17 and 18). It takes 47 days in Spain to satisfy the authorities that you
are fit to establish and register a legal business compared with seven in
France, 18 in Germany and 13 in the UK. However, this is nothing compared
with the 152 days in Brazil.</span></p>
<p class=MsoHeading7 style='text-align:justify'><b><span
lang=EN-GB style='font-size:9.0pt;font-family:Arial'>Figure 17. Ease of Doing
Business Overall Index, Selected Rankings (1)</span></b></p>
<table width="70%" border="1" cellspacing="0" cellpadding="0">
<tr class="MsoNormalTable">
<td width=141 valign=top bgcolor="#E5E5E5" class="Normal"> </td>
<td width=141 valign=top bgcolor="#E5E5E5" class="Normal"> </td>
<td width=141 valign=top bgcolor="#E5E5E5" class="Normal"> </td>
<td width=141 valign=top bgcolor="#E5E5E5" class="Normal"> </td>
</tr>
<tr class="MsoNormalTable">
<td width=141 valign=top class="Normal">
<p><span lang=EN-GB style='font-size:9.0pt;font-family:Arial'>1. Singapore</span></p>
</td>
<td width=141 valign=top class="Normal">
<p><span lang=EN-GB style='font-size:9.0pt;font-family:Arial'>8. Ireland</span></p>
</td>
<td width=141 valign=top class="Normal">
<p><span lang=EN-GB style='font-size:9.0pt;font-family:Arial'>33. Chile</span></p>
</td>
<td width=141 valign=top class="Normal">
<p><span lang=EN-GB style='font-size:9.0pt;font-family:Arial'>83. China</span></p>
</td>
</tr>
<tr class="MsoNormalTable">
<td width=141 valign=top class="Normal">
<p><span lang=EN-GB style='font-size:9.0pt;font-family:Arial'>2. New Zealand</span></p>
</td>
<td width=141 valign=top class="Normal">
<p><span lang=EN-GB style='font-size:9.0pt;font-family:Arial'>12. Japan</span></p>
</td>
<td width=141 valign=top class="Normal">
<p><b><span lang=EN-GB style='font-size:9.0pt;font-family:
Arial'>38. Spain</span></b></p>
</td>
<td width=141 valign=top class="Normal">
<p><span lang=EN-GB style='font-size:9.0pt;font-family:Arial'>106. Russia</span></p>
</td>
</tr>
<tr class="MsoNormalTable">
<td width=141 valign=top class="Normal">
<p><span lang=EN-GB style='font-size:9.0pt;font-family:Arial'>3. US</span></p>
</td>
<td width=141 valign=top class="Normal">
<p><span lang=EN-GB style='font-size:9.0pt;font-family:Arial'>20. Germany</span></p>
</td>
<td width=141 valign=top class="Normal">
<p><span lang=EN-GB style='font-size:9.0pt;font-family:Arial'>44. Mexico</span></p>
</td>
<td width=141 valign=top class="Normal">
<p><span lang=EN-GB style='font-size:9.0pt;font-family:Arial'>122. Brazil</span></p>
</td>
</tr>
<tr class="MsoNormalTable">
<td width=141 valign=top class="Normal">
<p><span lang=EN-GB style='font-size:9.0pt;font-family:Arial'>6. UK</span></p>
</td>
<td width=141 valign=top class="Normal">
<p><span lang=EN-GB style='font-size:9.0pt;font-family:Arial'>31. France</span></p>
</td>
<td width=141 valign=top class="Normal">
<p><span lang=EN-GB style='font-size:9.0pt;font-family:Arial'>53. Italy</span></p>
</td>
<td width=141 valign=top class="Normal">
<p><span lang=EN-GB style='font-size:9.0pt;font-family:Arial'>178. Dem.
Rep. Congo</span></p>
</td>
</tr>
</table>
<p style='text-align:justify'><span lang=EN-GB
style='font-size:8.0pt;font-family:Arial'>(1) Out of 178 countries.<br>
</span><span lang=EN-GB
style='font-size:8.0pt;font-family:Arial'>Source: Doing Business 2008, World Bank.</span></p>
<p class=MsoHeading7 style='text-align:justify'><b><span
lang=EN-GB style='font-size:9.0pt;font-family:Arial'>Figure 18. Ease of Doing
Business Index: Spain</span></b></p>
<table width="70%" border="1" cellspacing="0" cellpadding="0">
<tr class="MsoNormalTable">
<td width=141 valign=top bgcolor="#E5E5E5" class="Normal">
<p><b><span lang=EN-GB style='font-size:9.0pt;font-family:
Arial'>Ease of…</span></b></p>
</td>
<td width=141 valign=top bgcolor="#E5E5E5" class="Normal">
<p align=right style='text-align:right'><b><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>2007 Rank (1)</span></b></p>
</td>
<td width=141 valign=top bgcolor="#E5E5E5" class="Normal">
<p align=right style='text-align:right'><b><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>2006 Rank (2)</span></b></p>
</td>
<td width=141 valign=top bgcolor="#E5E5E5" class="Normal">
<p align=right style='text-align:right'><b><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>Change in Rank</span></b></p>
</td>
</tr>
<tr class="MsoNormalTable">
<td width=141 valign=top class="Normal">
<p><span lang=EN-GB style='font-size:9.0pt;font-family:Arial'>Doing business
(overall)</span></p>
</td>
<td width=141 valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>38</span></p>
</td>
<td width=141 valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>39</span></p>
</td>
<td width=141 valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>-1</span></p>
</td>
</tr>
<tr class="MsoNormalTable">
<td width=141 valign=top class="Normal">
<p><span lang=EN-GB style='font-size:9.0pt;font-family:Arial'>Starting
a business</span></p>
</td>
<td width=141 valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>118</span></p>
</td>
<td width=141 valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>108</span></p>
</td>
<td width=141 valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>-10</span></p>
</td>
</tr>
<tr class="MsoNormalTable">
<td width=141 valign=top class="Normal">
<p><span lang=EN-GB style='font-size:9.0pt;font-family:Arial'>Dealing
with licences</span></p>
</td>
<td width=141 valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>46</span></p>
</td>
<td width=141 valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>48</span></p>
</td>
<td width=141 valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>+2</span></p>
</td>
</tr>
<tr class="MsoNormalTable">
<td width=141 valign=top class="Normal">
<p><span lang=EN-GB style='font-size:9.0pt;font-family:Arial'>Employing
workers</span></p>
</td>
<td width=141 valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>154</span></p>
</td>
<td width=141 valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>152</span></p>
</td>
<td width=141 valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>-2</span></p>
</td>
</tr>
<tr class="MsoNormalTable">
<td width=141 valign=top class="Normal">
<p><span lang=EN-GB style='font-size:9.0pt;font-family:Arial'>Registering
property</span></p>
</td>
<td width=141 valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>42</span></p>
</td>
<td width=141 valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>41</span></p>
</td>
<td width=141 valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>-1</span></p>
</td>
</tr>
<tr class="MsoNormalTable">
<td width=141 valign=top class="Normal">
<p><span lang=EN-GB style='font-size:9.0pt;font-family:Arial'>Getting
credit</span></p>
</td>
<td width=141 valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>13</span></p>
</td>
<td width=141 valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>12</span></p>
</td>
<td width=141 valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>-1</span></p>
</td>
</tr>
<tr class="MsoNormalTable">
<td width=141 valign=top class="Normal">
<p><span lang=EN-GB style='font-size:9.0pt;font-family:Arial'>Protecting
investors</span></p>
</td>
<td width=141 valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>83</span></p>
</td>
<td width=141 valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>81</span></p>
</td>
<td width=141 valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>-2</span></p>
</td>
</tr>
<tr class="MsoNormalTable">
<td width=141 valign=top class="Normal">
<p><span lang=EN-GB style='font-size:9.0pt;font-family:Arial'>Paying taxes</span></p>
</td>
<td width=141 valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>93</span></p>
</td>
<td width=141 valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>91</span></p>
</td>
<td width=141 valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>-2</span></p>
</td>
</tr>
<tr class="MsoNormalTable">
<td width=141 valign=top class="Normal">
<p><span lang=EN-GB style='font-size:9.0pt;font-family:Arial'>Trading
across borders</span></p>
</td>
<td width=141 valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>47</span></p>
</td>
<td width=141 valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>43</span></p>
</td>
<td width=141 valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>-4</span></p>
</td>
</tr>
<tr class="MsoNormalTable">
<td width=141 valign=top class="Normal">
<p><span lang=EN-GB style='font-size:9.0pt;font-family:Arial'>Enforcing
contracts</span></p>
</td>
<td width=141 valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>55</span></p>
</td>
<td width=141 valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>59</span></p>
</td>
<td width=141 valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>+4</span></p>
</td>
</tr>
<tr class="MsoNormalTable">
<td width=141 valign=top class="Normal">
<p><span lang=EN-GB style='font-size:9.0pt;font-family:Arial'>Closing
a business</span></p>
</td>
<td width=141 valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>17</span></p>
</td>
<td width=141 valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>15</span></p>
</td>
<td width=141 valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>-2</span></p>
</td>
</tr>
</table>
<p style='text-align:justify'><span lang=EN-GB
style='font-size:8.0pt;font-family:Arial'>(1) Out of 178 countries. (2) Out of
175 countries.<br>
</span><span lang=EN-GB
style='font-size:8.0pt;font-family:Arial'>Source: Doing Business 2008, World Bank.</span></p>
<p class=Wm><span lang=EN-GB
style='font-size:11.0pt'>Spain’s employment protection is one of the highest in
the OECD. For example, the average number of weeks of wages for someone on
a permanent contract who is fired is 56 in Spain, higher than France (32),
Italy (2) and the UK (22), but lower than Germany (69, see Figure 19).</span></p>
<p class=MsoHeading7 style='text-align:justify'><b><span
lang=EN-GB style='font-size:9.0pt;font-family:Arial'>Figure 19. Employing Workers</span></b></p>
<table width="70%" border="1" cellspacing="0" cellpadding="0">
<tr class="MsoNormalTable">
<td width="37%" valign=top bgcolor="#E5E5E5" class="Normal">
<p><b><span lang=EN-GB style='font-size:9.0pt;font-family:
Arial'>Indicator (1)</span></b></p>
</td>
<td width="12%" valign=top bgcolor="#E5E5E5" class="Normal">
<p align=right style='text-align:right'><b><span lang=EN-GB style='font-size:9.0pt;font-family:Arial'>Spain</span></b></p>
</td>
<td width="12%" valign=top bgcolor="#E5E5E5" class="Normal">
<p align=right style='text-align:right'><b><span lang=EN-GB style='font-size:9.0pt;font-family:Arial'>France</span></b></p>
</td>
<td width="12%" valign=top bgcolor="#E5E5E5" class="Normal">
<p align=right style='text-align:right'><b><span lang=EN-GB style='font-size:9.0pt;font-family:Arial'>Germany</span></b></p>
</td>
<td width="12%" valign=top bgcolor="#E5E5E5" class="Normal">
<p align=right style='text-align:right'><b><span lang=EN-GB style='font-size:9.0pt;font-family:Arial'>Italy</span></b></p>
</td>
<td width="12%" valign=top bgcolor="#E5E5E5" class="Normal">
<p align=right style='text-align:right'><b><span lang=EN-GB style='font-size:9.0pt;font-family:Arial'>UK</span></b></p>
</td>
</tr>
<tr class="MsoNormalTable">
<td width="37%" valign=top class="Normal">
<p><span lang=EN-GB style='font-size:9.0pt;font-family:Arial'>Difficulty
of Hiring Index</span></p>
</td>
<td width="12%" valign=top class="Normal">
<p align=right style='text-align:right'><b><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>78</span></b></p>
</td>
<td width="12%" valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>67</span></p>
</td>
<td width="12%" valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>33</span></p>
</td>
<td width="12%" valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>33</span></p>
</td>
<td width="12%" valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>11</span></p>
</td>
</tr>
<tr class="MsoNormalTable">
<td width="37%" valign=top class="Normal">
<p><span lang=EN-GB style='font-size:9.0pt;font-family:Arial'>Rigidity
of Hours Index</span></p>
</td>
<td width="12%" valign=top class="Normal">
<p align=right style='text-align:right'><b><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>60</span></b></p>
</td>
<td width="12%" valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>60</span></p>
</td>
<td width="12%" valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>60</span></p>
</td>
<td width="12%" valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>40</span></p>
</td>
<td width="12%" valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>0</span></p>
</td>
</tr>
<tr class="MsoNormalTable">
<td width="37%" valign=top class="Normal">
<p><span lang=EN-GB style='font-size:9.0pt;font-family:Arial'>Difficulty
of Firing Index</span></p>
</td>
<td width="12%" valign=top class="Normal">
<p align=right style='text-align:right'><b><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>30</span></b></p>
</td>
<td width="12%" valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>40</span></p>
</td>
<td width="12%" valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>40</span></p>
</td>
<td width="12%" valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>40</span></p>
</td>
<td width="12%" valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>10</span></p>
</td>
</tr>
<tr class="MsoNormalTable">
<td width="37%" valign=top class="Normal">
<p><span lang=EN-GB style='font-size:9.0pt;font-family:Arial'>Rigidity
of Employment Index</span></p>
</td>
<td width="12%" valign=top class="Normal">
<p align=right style='text-align:right'><b><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>56</span></b></p>
</td>
<td width="12%" valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>56</span></p>
</td>
<td width="12%" valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>44</span></p>
</td>
<td width="12%" valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>38</span></p>
</td>
<td width="12%" valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>7</span></p>
</td>
</tr>
<tr class="MsoNormalTable">
<td width="37%" valign=top class="Normal">
<p><span lang=EN-GB style='font-size:9.0pt;font-family:Arial'>Non-wage
labour cost (% of salary)</span></p>
</td>
<td width="12%" valign=top class="Normal">
<p align=right style='text-align:right'><b><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>33</span></b></p>
</td>
<td width="12%" valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>47</span></p>
</td>
<td width="12%" valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>19</span></p>
</td>
<td width="12%" valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>37</span></p>
</td>
<td width="12%" valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>11</span></p>
</td>
</tr>
<tr class="MsoNormalTable">
<td width="37%" valign=top class="Normal">
<p><span lang=EN-GB style='font-size:9.0pt;font-family:Arial'>Firing Costs
(weeks of wages)</span></p>
</td>
<td width="12%" valign=top class="Normal">
<p align=right style='text-align:right'><b><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>56</span></b></p>
</td>
<td width="12%" valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>32</span></p>
</td>
<td width="12%" valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>69</span></p>
</td>
<td width="12%" valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>2</span></p>
</td>
<td width="12%" valign=top class="Normal">
<p align=right style='text-align:right'><span lang=EN-GB
style='font-size:9.0pt;font-family:Arial'>22</span></p>
</td>
</tr>
</table>
<p class=MsoHeading7 style='text-align:justify'><span lang=EN-GB
style='font-size:8.0pt;font-family:Arial'>(1) Each index assigns values between
0 and 100, with higher values representing more rigid regulations. The Rigidity
of Employment Index is an average of the three indices.<br>
</span><span lang=EN-GB
style='font-size:8.0pt;font-family:Arial'>Source: Doing Business 2008, World Bank.</span></p>
<p class=Wm><span lang=EN-GB
style='font-size:11.0pt'>INTERES, the central government’s inward foreign investment
agency, takes issue with the World Bank’s rankings. It points out that the
Doing Business overall ranking is based on 38 indicators compared with the
323 used by the Swiss business school IMD in its equally well-known World
Competitiveness Yearbook (which ranked Spain 30<sup>th</sup> out of 55 countries
in 2007). According to the Doing Business ranking, it is easier to do business
in Georgia than in Germany, France, the Netherlands and Spain, something that
is hard to believe. The ranking does not take into account such important
variables for investors as the size of the domestic market, the proximity
to other markets or macroeconomic stability. Nevertheless, it does expose
Spain’s weak areas which need to be improved.</span></p>
<p class=MsoBodyText style='text-align:
justify'><i><span lang=EN-GB style='font-size:11.0pt;color:black'>William Chislett</span></i></p>
<p class=MsoBodyText style='text-align:
justify'><i><span lang=EN-GB style='font-size:11.0pt;color:black'>Author of three
books for the Elcano Royal Institute and former correspondent of The Times
in Madrid (1975-78) and the Financial Times in Mexico (1978-84)</span></i></p>
<p class=Wm><b><span
lang=EN-GB style='font-size:11.0pt'>Bibliography</span></b></p>
<p><span
lang=EN-GB style='font-size:11.0pt;color:black'>Chislett, William (2002), <i>The
Internationalisation of the Spanish Economy</i>, Elcano Royal Institute, Madrid,
(<i><a
href="http://www.realinstitutoelcano.org/publicaciones/libros/wchislett.pdf">www.realinstitutoelcano.org/publicaciones/libros/wchislett.pdf</a>)</i>.</span></p>
<p><span
lang=EN-GB style='font-size:11.0pt;color:black'>Chislett, William (2005), <i>Spain
and the United States: The Quest for Mutual Rediscovery</i>, Elcano Royal
Institute, Madrid, (<i><a href="www.realinstitutoelcano.org/publicaciones/libros/ChislettEsp-EEUU-ingles.pdf">www.realinstitutoelcano.org/publicaciones/libros/ChislettEsp-EEUU-ingles.pdf</a></i>).</span></p>
<p><span
lang=EN-GB style='font-size:11.0pt'>Economist Intelligence Unit (2007), <i>World
Investment Prospects to 2011, </i>London, EIU.</span></p>
<p><span
lang=EN-GB style='font-size:11.0pt'>Cynthia Graber (2007), ‘Spain’s Biotech Revolution’,
<i>Technology Review</i>, 4 May, (<i><a
href="http://www.technologyreview.com/microsites/spain/biotech/docs/Spain_biotech.pdf">www.technologyreview.com/microsites/spain/biotech/docs/Spain_biotech.pdf</a></i>).</span></p>
<p><span
lang=EN-GB style='font-size:11.0pt'>Guillén, Mauro (2005), <i>The Rise of Spanish
Multinationals</i>, Cambridge University Press, Cambridge.</span></p>
<p class=Wm align=left style='text-align:left;'><span
lang=EN-GB style='font-size:11.0pt'>Guillén, Mauro, Emilio Ontiveros & Javier
Santiso, ‘España: un “hub” latinoamericano incompleto’, <i>El País</i>, 14/XI/2006.</span></p>
<p class=Wm align=left style='text-align:left;'><span
lang=EN-GB style='font-size:11.0pt'>UNCTAD, <i>World Investment Report 2007</i>
and other years.</span></p>
<p class=Wm align=left style='text-align:left;'><span
lang=EN-GB style='font-size:11.0pt'>Wright, Alison (1976), <i>The Spanish Economy</i>
<i>1959-1976</i>, Macmillan, London.</span><br clear=all>
</p>
</div>
<hr align=left size=1 width="33%">
<div id=ftn1>
<p><a href="#_ftnref1" name="_ftn1" title=""><span lang=EN-GB
style='font-size:9.0pt'><span lang=EN-GB style='font-size:9.0pt;font-family:
"Times New Roman"'>[1]</span></span></a><span lang=EN-GB style='font-size:9.0pt'>
This paper draws on information from a book on Spain by William Chislett to
be published by Telefónica in 2008.</span></p>
</div>
<div id=ftn2>
<p><a href="#_ftnref2" name="_ftn2" title=""><span lang=EN-GB
style='font-size:9.0pt'><span lang=EN-GB style='font-size:9.0pt;font-family:
"Times New Roman"'>[2]</span></span></a><span lang=EN-GB style='font-size:9.0pt'>
Spain’s missing out on the Marshall Plan was amusingly satirised in Luis García
Berlanga’s famous 1953 film Bienvenido Mr. Marshall, whose subtleties escaped
Franco’s censors. One of the scenes shows a large American car carrying a
Mr Marshall speeding through a village and passing crowds, leaving nothing
in its trail but dust and dashed hopes. The Allied powers also imposed a trade
embargo that remained in place until the late 1940s.</span></p>
</div>
<div id=ftn3>
<p><a href="#_ftnref3" name="_ftn3" title=""><span lang=EN-GB
style='font-size:9.0pt'><span lang=EN-GB style='font-size:9.0pt;font-family:
"Times New Roman"'>[3]</span></span></a><span lang=EN-GB style='font-size:9.0pt'>
Eximbank provided a US$62.5 million credit line between 1953 and 1959 which
was used to purchase food, coal, cotton, machinery and other capital goods.
Economic aid ceased as of 1963 and funds were restricted to military assistance.
There were major differences between Spain’s US aid and the Marshall Plan
assistance. While Spain’s aid was spread out over 14 years, the Marshall Plan
lasted four years. Much of Spain’s aid was given in the form of concessional
loans, while the bulk of the Marshall Plan consisted of grants.</span></p>
</div>
<div id=ftn4>
<p><a href="#_ftnref4" name="_ftn4" title=""><span lang=EN-GB
style='font-size:9.0pt'><span lang=EN-GB style='font-size:9.0pt;font-family:
"Times New Roman"'>[4]</span></span></a><span lang=EN-GB style='font-size:9.0pt'>
See p. 36 of Wright (1976).</span></p>
</div>
<div id=ftn5>
<p><a href="#_ftnref5" name="_ftn5" title=""><span lang=EN-GB
style='font-size:9.0pt'><span lang=EN-GB style='font-size:9.0pt;font-family:
"Times New Roman"'>[5]</span></span></a><span lang=EN-GB style='font-size:9.0pt'>
See p. 9-11 of Guillén (2005).</span></p>
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<div id=ftn6>
<p><a href="#_ftnref6" name="_ftn6" title=""><span lang=EN-GB
style='font-size:9.0pt'><span lang=EN-GB style='font-size:9.0pt;font-family:
"Times New Roman"'>[6]</span></span></a><span lang=EN-GB style='font-size:9.0pt'>
The first car under the SEAT logo appeared in 1982 (the SEAT Ronda) and sparked
a lawsuit from Fiat which claimed that it was too similar to its Ritmo model.
The then president of SEAT, Juan Miguel Antoñanzas, showed a Ronda to the
press with all the parts different from the Ritmo painted in bright yellow,
to highlight the differences. This ended the dispute. Rumour at the time had
it that Fiat was angry because the Ronda restyling was in fact too close to
their own planned restyling for the Fiat Ritmo, which they had to scrap.</span></p>
</div>
<div id=ftn7>
<p><a href="#_ftnref7" name="_ftn7" title=""><span lang=EN-GB
style='font-size:9.0pt'><span lang=EN-GB style='font-size:9.0pt;font-family:
"Times New Roman"'>[7]</span></span></a><span lang=EN-GB style='font-size:9.0pt'>
See Graber (2007).</span></p>
</div>
<div id=ftn8>
<p><a href="#_ftnref8" name="_ftn8" title=""><span lang=EN-GB
style='font-size:9.0pt'><span lang=EN-GB style='font-size:9.0pt;font-family:
"Times New Roman"'>[8]</span></span></a><span lang=EN-GB style='font-size:9.0pt'>
See Guillén, Ontiveros & Santiso (2006).</span></p>
</div>
<div id=ftn9>
<p><a href="#_ftnref9" name="_ftn9" title=""><span lang=EN-GB
style='font-size:9.0pt'><span lang=EN-GB style='font-size:9.0pt;font-family:
"Times New Roman"'>[9]</span></span></a><span lang=EN-GB style='font-size:9.0pt'>
Ibid.</span></p>
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<div id=ftn10>
<p><a href="#_ftnref10" name="_ftn10" title=""><span
lang=EN-GB style='font-size:9.0pt'><span lang=EN-GB style='font-size:9.0pt;
font-family:"Times New Roman"'>[10]</span></span></a><span lang=EN-GB
style='font-size:9.0pt'> See Economist Intelligence Unit (2007). Written with
the Columbia Program on International Investment.</span></p>
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