FOREIGN DIRECT INVESTMENTIN SPAIN

GEOGBAPHICAL BREAKDOWN 2OO2

" 5:iti".- ,':iit" 2.#% Thé Nethedands13.79%2.aa%

Germany8.08%

Belg¡um3.57yo

Source: M¡nistry of Economy.

Spain: the ldeal Locationfor US Gompanies

ver lhe last few years, Spa n hasbeen one of lhe pfim¿ry destinat¡o¡sof Foreqn D rcci ¡vestmenl lFDl).

Accord ng to ilre UNCTADS rwordlnvestnre¡i Beport 2003' Spa¡n is globallythe éighth larqest receiver of investment,and boasts the third mostfore¡gncompan¡es' afll¡ates in the EuropeanlJnion Arhough the EU ls the are¿ wih ¡hehglrest vo l r ¡e oÍ FD¡ n Spain. in regonaierms, rhe US s the colnry w ll-r rnost¡vestme¡r n 2002 t nvested over 15,000r¡ lon euros n Sp¿¡¡, wh ch s 50.5% of lot¿FD r€ceved.Th s is refec ied in o! ¡ businesscommunity, where aboLrt 600 compani€s a¡eei ther¿f f ia tes or !n ls of US corporatons

The imfroúance of iJS ¡nvestmentl i ] fhe Spanish e¡4non1y

Accord ng to a siudy by rlr€ AmericanChamber oÍ Commerce,l¡ lvl¿y 2003 oi asampe of the 140 !aGeSt US cornpanesoperatng in Spa ¡ , 71" /o of o l r GDP is

5p¡ i ¡ : ihe lCe¡ l Loc¿¡ ion 1r¡ r lJS C.¡ 'p¿nies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 '3

l {ey aconrmic Indic¡ú$r l l ie Spi ¡ i i l t to¡on¡1¡ t 0310{13. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . : i

lJa l iar fa abaselor l25r"k l t i ¡o t ion¡¡ r . . . . . . . . . . . . . . . . . . . . . . . . . . .

ll0ú¡ llhe:¡¡cal, ler.ile{i Páci(a¡d ani Nes¡lé SS¿, ¡t¡l;0

r :ú ror ' r ' " ' L rn r r , , . ' L r ; r r "c ̂ , s r '¿ , I ah oad

' * ";.';:"' l;:l '+:J "' " tC=X." ,,." "",ii1'ái;?%-.'""--"* illlt'ül ifilj!," ".

generated by these lfms, wh ch aso accou¡tlor 5.15% of totala¡nua expods.Consutanrs Gr€¿t Place ioWork and lheESADE Busl¡ess Schoo cared out a slrveyln 2003 on ilre lref cor¡p¿n es io work ior nSpal¡ five ofthe ten best compan¡es towo lor are aff¡liates of US coQorations{Eli L¡lly ánd Company, Generál Elect¡ic,Accenture, ComputerAssociates and théRitz-Cadton Hotelcompány) US f rms colldbe sad to not ony play ¿¡ .nportr¡I foe nour economy. blt they ¿re a so h ghy !6luedby their empoyees here n Sp¿in

Why ¡s Spai . is a per fect pJace

for US companies?-Bus¡ness opportunitiesWth GDP at 548,000 mi lon euros a year ¿ndover 40 m llo¡ ¡habtants, Spa¡n ¡s curentlythe worldt eighth largest economY and its¡argest investor ¡n Lat¡nAmer¡ca. Spa n isaso ihe second most pop! ar tourstdestinatlon in ihe word a¡d the srxth arg€sl

Busi ress [ ] r ¡vs ; ) gr ie{r f l ; 'd ,

fofÍtrriiúr' anü Pepsi[o ... .

caf manutuctufer Nevertlreess, our economyls srilqrowing fasterthan the EIJ on average.This nrakes Spain a market for US cornpanies'goods and servlces whici offers the sameopportu¡ities for g¡owth and deveopr¡ent asthe US nside Europe.-Availab¡e qualif¡ed labour ar competit¡ve

Spain has app€ared as an atractve loca¡onfor US compani€s compared io the (classrc'locations n countres such ¿s the IJK and theNetherlands, not just bec¿use oi ¡tscompetitive labour costs, but also because otthe ava ab lty of sk ed Eng lsh-speak nglabourlhe US Bureau of Labour Statistics'l¿lest worldwide sttrdy on ¿bour costsproves spai¡s cor.p¿ratve ¿dvantage in thisfespect. Acco¡d ng 1o the study, the hourlywágé in the Spanish manufactudng sectolin 2002 was 12.04 $US comparcd ro 17.47$US in the UK and 21.74$US ¡r theNethe ands.Companes do nof have pfobeñrs n f ndingyoung gfaduates, as ovef 15 mil on sturdents¿re cLrentyattending unlversity in Spa n.According to ( Eu¡ostat Yearbaok 2002', 94vrof secondary school pup s study Enqlish,compéred to 90vo in the Netherla nds, 91 70 l¡Germ¿ny and 797" in lt¡ y.T¡e pubicat¡on asoranks Spain as hav¡ng the h¡ghestpercentage of studefts with furthe¡educat¡on in the EU after Finland,with4.5% of the total population lsee graph)Dupont is operating severa plants in Asluras,Norrhern Sp¿in, r¡aki¡g the regon one of th-óóemic€l companyb most importanlproduction c€ntres wo¡ld wide. Duponi lbérica

Ministry! lNestnrent's in nírasfuctur€ isseen reaching €bout 102,700 ¡¡ilion euros for240V2014.-A gove¡nment in favour of pdvareenteryrise: rax ánd incentivesAl¿n Dlffe , Cltqroup's Serv¡ce Cenfelvanager n Spain consders Span a (very probusiness country the telecommunicalions are¿s good as most of Europe, for th€ time b€ingreal estate s re€sonably prjced, and thelabour markel ls rnore f ex ble ihan the rest ofconr nenral Europ€ ' The glob¿lised wof d ihatwe live in has led Spa¡nt táx sYstem toundergo a series of relorms aimed atcrcating competit¡ve advantages for foreigncompanies oper.ting ¡n Spain. An €xampleof this is the scrapp¡g ofthe tax oncornmercialand proless ona activites for90?o ol lable firms, orthe sreat numberoitax rebates for expenses, investr¡ent ¿¡dvocatona trainjng.30% of R&D costs overthe taxyearare deductbe ¿nd I ounays€xceed the average costs ncurfed over thepfeviols two yeafs, the excess wlll be taxedat 50vo Spáin also boasts one ofthe mostfavourable t.x regimes for holdingcompanies among developed countÍes.That is why US coporat¡ons present n severalEuropean cou¡tres are settng up holdings tomanage these operatlonsffom Sp¿i¡. n t¿ct,these kinds of compani€s arethe prnraryd€stination of IJS fvestm€nt i¡ Spa n (7890 ofrhe tot¿l in 2002).Spain ofers gÉnts and ¡ncent¡ves forforcign ¡nvest¡nent incentives Jor traininqand iob creat¡on, slate ¡ncenltves for specificafeas ol ¡nduslry and incentives to invest ¡n

S.A. Plant lvla¡agerTomThompson said: (What

makes Ast!¡ias speclafor Dupont is, list and

avaiabi l ly of h qhlyi¡telligent, capable, and

!tilties readlly availab e

pefectly suiled for us'.-A bridge to Europe:modem ¡nÍÍastructurcThe 53 Spanish ports and 39 intern€tio¡alarrpofts,33 ol whjch carry cargo facilti€s,guarantee commu¡icalon with the fest ofEu¡ope and the world. Spain aso boasls amodern ¿nd extens ve netwo* of molorw¿ysand is currenty furrher deve oping its h¡ghspeed rai neÍwofk to connecl allthe rnostmportant cties.This h ghly advanc€dnf.asfucture is continung to be deveopedand modernised lo attend to the growingneeds ol a dynamic country.The Deveopment

certain r€gions. Thes€incentives cover mostof the Spanish

reach up to 50% of

together wth changes

Span €s its gatew¿y to the Europeaf market.-Ouality of lifeAccord ng to a study m¿de by 1iTheFconomisb', Spa¡n ¡stherhird best countryro live in-tems of qualiiy ol life in theworld.Thát ¡swhywe are hometo about2m¡ll¡on overseas residents.lh s has led¡¡any US companies to set up lheirsharedservces and Eufopean customer service

Genera Nlotors has set up a iointvent!re inBarcelona with Affilated Compuler Services

to deveop and m¿nage a Shared ServlcesCe¡úe for is E!fopean oper¿to¡s. Spa nwas chosen from a selectior of co!¡t¡esncud ¡g Ffance and the uK.The pro lectwas f na ly esiablshed ln spa n tharls toolr qLralty of ife, wh ch helps to attractand m¡inta n foregnefs Accordi¡g 1o Jord[r]arsá, Execullve D rectol "Barceona waschosen for severa |easons: iax a¡d abourcost, infr¿strlctLrre, I )¿¡d most¡¡porianty, a¡.ppea l¡g siandard oirv¡9, .

Ug c() i i lFanies in Spain

Spa rh service sector s the o¡e wh¡chhas attract€d llre largest ¡úmber oi thenearly 600 US con'rP¿n es operal¡g nSpa ¡ wth the T¿¡d consul t ng afeas 1r :besi represented Tum¡ng to industry,the chem¡cal products, automotivecomponents, phahaceuticals and¡ndust al€quipment sectoE boast théhighest pres€nce of US companies.Accord ng to fLrfther dala ironr iheAmerc¿¡ Chambe' o i Com¡re 'c : n

co¡stfucton sector and the positivecontr brtlon from nvenio¡iesThe ¡eg¿ive contr b l ton f rom theexternal sectof incre€s€d I perce¡1¿g€po ¡i 3s expofi grolltlr s o\red more ih¿nimpor:s . ¿¿d.g io ye¿' ¡ . yeaf GDPorolv i ¡ o i 2 r : : or 0 l : : rore t l ren i ¡ the

Household consumption ncre¿seds ghiy n the seco¡d qLra.t€r oi 2003 iogrow 3 I % ye¿r on year a.d co. l .ued toexpand ln the th rd qlan€r to reach 3 2%n the seco¡d q! ¡ . t€r f nalconsumplon

Írom pub c ¿dmlnis t r¿ lons ! rew ai 3.6%a¡nla l ly , 0 3% less than n the f rs i Thiss ght s owdown cont nued I tlre thúdq!arter, reflect nq the contro of personnel

¡¡ the second qlart€r oi 2003, grossfixed cap¡talfomation gfew 3 4% from¿ yeareaf leror 0.3% qlar teron qu€rter ,continu n! the recovery wlriclr started insu¡¡mer 2002 Invésrñent growlhoccufed in a l larcas: i ¡veslm€nt ncap¡ta lgoods i ¡cr€ased 3.1%, whie lnconstruct¡on it w.s lrp ro 3 8%,n.fe¿s ¡g 0.4% irom rhe fist qu¡fterHowever, over the th rd qLr¿rle¡ th s year-on ye¿f growtlr slowed, pafticLr ary n thecase of cap ta goods, dle to tlrecomp.rson w1¡ l ¡e s l ro¡g recovery nthis area of nveslment n the th rd qLrarlero12002 on the one hand, and dLre to

Spa ¡ , US companes account for a th i rdof vehicles assembled ¡n our countyand 14.4olo of our automotivecomponents are from us companies.Fod Motor Company, Generál Motorsand Daimlerchrysler Corporation hav€prcduction lines in Spain, wh ch has €dco¡rpanies ke Arv¡ [']eflor Dan¿Corpo¡¡t on, Johnso¡ Contro s orTennecoArionrotve, amo¡g oihers, set upafii ¿tes ln o!f coLr¡lfytooIn the phamáceutical sector,US companies ¡ccount for over 38%of total sales, 20ol¡ ol lh€ secior's jobsand l60/0 of R&D i¡vestme¡ls.Tlrese companes ncllrje AbbottLaboratoñes. Bristol-Myers SquibbCompany, EliLilly and Company,Jassen-Cilas, Merck & Co. and Pfizer,

L¿si ! . ¿ccord.g ro e\oetrs o. :h¿sLbeci aro! .o 100 US c. - ¡¿ ' .s ia le: . ¿ ' E J r o o e ¿ . i r o d . ! . . - . ¿ r ! . S o a _ .

a- . .9 . . . i , cr iea i ! :e _;a:s (¿ Gi ! ]Dr¡c1i ¿.0 : L v

Lcokit\g aheatl

FDldaia l rom the f |s t haf of 2003indc¡ ted th¿t the uS is s t i l l the má¡ninvestor ¡n spáin with 45% ofthe total,comparcd to thé EuroPean Un¡on,which accounts for41.4% of lotal¡nvestment.Th s daia púves thai the USbusl¡essperson É stl opti¡gto nvest nour cou¡try as ihe dea ocaton for ihe ropef¿ro¡s llrith n tre Europe¿¡ union.n co¡c !son, t can be s¡ld ihat spa n isexpeded to cont nle to be the linadest naiion fof l.lS ¡vestme¡is n c¿ptainte¡sive seclors and/or sectors need nq ask ed workforc€ US l¡vest.nenis n¡ünlfactur nq ovefth-e next iew years a¡esee¡ foc ls ng on the phaÍ¡aceutca,úenrc¿ ¿nd pastics fdlstrles nvesheftsn |re servce seclor are expecled ioioc ls on shared servces and B&D, ¡otior!€11]¡g SD¿ rs standlnq as the pefectlcEion ior n\restrnent In ioursi seclor t'

Wntten by rhe Investment Departñentof Spain! Econoñ¡c and ComnercialOfi¡ce

year earlier, well below the 3 8o/o seen inrhe f fs t . cPlstab sed n t l re th id qLrar ter1(r 2.91c th¿nks to the s ovrdown n tsmost vo at € col.¡ponents, wlr ch h¿sofset the rses i ¡ prces of other tems ¡the basket Spa¡ sh níat ion as measLrredby the harnronised CP ¡creased 0 I % nthe rh rd quatr-e¡ lom the secofd to a r¡t€oí 39b (year on year). a¡ lncrease s m ar toihat oí tlr€ euro zone as ¿ who€ wlrchm¿¡nla¡ned the nf a lon g¿p wi th the festoí Eufope ai o¡€ percentage polntn the s€cond q!¿rrer, the re. có¡trbLrt¡on

ifom the extern¿ sector saw a Taster yearon-Yea¡ grou4lr Exporis oi goodsincreased l0 I %, conlr blting io the¡ecovery rlr¿r beg¿n n m d 2002, wh eimport growth rema n€d stab e at 11.3% Inthe thid quarter there was a considerabemoder¿tlon ¡ the growth In comr¡erce,wilh the inc¡e€se i¡ exports ess lhan hafof that fepo¡ted i¡ the second q!¿rtef ¿¡dimport growth at 78%, a qLrarlerly decl¡neol three percentage po nis This slowdownc¿¡ be expa ned io a ¡rge exte¡t by thecompa¡iso¡ with the stfong increase nexpo¡ls and mports repoñed ¡ tlresLr¡rmef oi 2002.Employment has seen si¿be growth,ncreasing 1.7% year on year the s¡me asn the second quarle¡.The Sp€n sheconomys capirc ry 10 ge¡er¿leer¡ploymenl s st h gh. i

Over the f rsr tlrree qLr¿.ters oí 2003. the growth rate oi theSp¡n sh eco¡omy reached 2 3%.Th rd-qu¿arer domest¡cdemand ¡cfeased 3.4% Jrom lhe s€cond ihanks to hlgherholsehod consumpton, cont nued act lve spend ng n the

Kev Econom¡c Ind¡catorsTHE SPANISH ECONOMY IN 03 2OO3

,,.!lEnxEDg!A{9¡1¡I1!tl9!!q

gfeater c¿uron . rea s ng n les imenl ¡ rans l i ih€ co¡ iext ofthe ientative rec!pefa¡ion of rhe euro zone econonry ¿nd lhe

The CPI increased 2 9% n lhe second q!¿ner of 2003 from a