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Spain Foreign Investment
Since the late 1950s, foreign investment has played an
increasingly crucial role in Spain's economic
modernization. One
of the first and most significant steps included in the
Stabilization Plan of 1959 was granting foreigners
permission to
buy Spanish securities. In 1963 this measure was
supplemented by
allowing foreigners the right to secure majority interest
in
Spanish companies, except those engaged in fields deemed
to have
strategic importance. As a result of these actions, there
was a
large influx of foreign capital into Spain.
Spain was attractive to foreign investors not merely
because
it offered opportunities for participating in a rapidly
expanding
domestic market, but also because it served as a base for
further
export and trade with EC countries. This was a leading
factor in
Ford Motor Company's 1974 decision to build an assembly
plant
near Valencia, and in General Motors' entry into the
Spanish
market. Japanese companies also intensified their
investments and
presence in Spain with similar goals in mind. Low-cost
labor was
another attraction for foreign investors, though not to
the same
extent as in the 1960s and the 1970s.
In compliance with the EC accession agreement, rules
governing foreign investment in Spain were adapted to EC
standards in 1986. The new measures streamlined
administrative
procedures and reduced the number of sectors in which
foreign
ownership was restricted. The requirement for prior
authorization
of investments was replaced by one calling merely for
prior
notification. Notification had to be given when the
investment
was for more than 50 percent of a Spanish enterprise, when
it
constituted a re-investment by foreigners, or when its
goal was
the establishment of branches of foreign companies on
Spanish
soil.
The influx of foreign investment was extremely large
during
the 1980s, almost tripling between 1982 and 1987. Some of
it took
the form of speculative investment, attracted by high
Spanish
interest rates. More than half of all new foreign
investments in
Spain represented an expansion of previously existing
investments; nearly one-third were in the chemical
industry and
in the nonfuel mineral processing sector. EC countries
became the
most important source of investment (see
table 12,
Appendix). The
United States, nonetheless, still accounted for about 20
percent
of the cumulative foreign investment total. It was
expected that,
if negotiations being conducted in 1988 for a United
States-Spain
treaty to avoid double taxation were successful, United
States
investment might increase.
Spanish direct investment abroad, for which regulatory
restrictions were liberalized in 1986, doubled to 101
billion
pesetas in 1987. EC countries accounted for 64 percent of
the
total, with the Netherlands, West Germany, and Portugal
being the
largest recipients. Investments in the United States fell
to 8
percent of the total. Spanish investments in Latin
America,
especially in Mexico and in Argentina, declined sharply
because
of heavy debt burdens in that region. By the late 1980s,
analysts
estimated that Latin America accounted for only 4 percent
of
Spain's foreign investments.
Data as of December 1988
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