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Spain National Industrial Institute
Spain's industrial sector was marked by the presence of
a
major subsector controlled by the government. Some of this
subsector was under the control of the Directorate General
for
State Assest (Direccion General del Patrimonio del
Estado--DGPE--see
Role of Government
, this ch.). By far the largest
component
of the public sector, however, was contained within the
National
Industrial Institute (Instituto Nacional de
Industria--INI),
which, since 1968, had been under the supervision of the
Ministry
of Industry and Energy. The Franco regime adopted
extremely
protectionist policies early, and it opted for a high
level of
direct state intervention in the economy. When INI was
founded in
1941, it was intended to create or to subsidize industries
in key
sectors of the economy where private enterprise alone was
insufficient to achieve self-sufficiency. INI, which used
both
direct investments and collaboration with sources of
private
capital, studiously avoided any involvement in the banking
sector; it especially favored industries related to
national
defense. INI was granted powers to take over existing
enterprises
and to create new ones when necessary.
Few of INI's original purposes were realized. With the
signing of base agreements with the United States, the
armed
forces, beginning in 1953, became dependent on the United
States
for arms equipment. INI's efforts to fill gaps in the
economy
were not very effective. Instead of creating efficient new
industries, it tended to establish inefficient ones and to
hamper
the activities of private enterprise. Political favorites
of the
regime were permitted to unload badly run,
deficit-producing
firms on INI, and many of its top positions were political
sinecures.
Efforts were periodically undertaken to bring INI more
into
line with the rest of Spanish industry, and, as a result,
a more
realistic approach toward the financing of industrial
companies
was instituted. Government subsidies were permitted to
cover the
deficits of those INI firms that were considered to have
incurred
losses unavoidably. For example, the coal-mining
conglomerate,
Empresa Nacional Hulleras del Norte (HUNOSA), which was
set up by
INI in 1967 to reorganize the coal industry, was still
losing
money in the late 1980s. In general, however, firms were
expected
to become economically viable, although many did not.
A policy change took place in 1974, however. It was
decided
that INI, rather than remaining in the background of the
industrial sector, was to serve as the linchpin of basic
industries, such as ironmaking, steelmaking, and
petrochemical
production, and that it was to become the prime promoter
of
development in high technology areas, such as electronics
and
aircraft manufacture.
By the mid-1980s, the companies directly controlled by
INI
formed the single largest industrial group in the country,
responsible for 10 percent of Spain's GDP and for the
employment
of 200,000 workers. INI directed more than 60
firms--sometimes
having 100 percent ownership in them--as well as more than
100 of
their subsidiaries. INI firms produced all of the
country's
aluminum; most of its ships; much of its steel, other
metals,
paper and pulp, and transportation equipment; and many of
its
commercial vehicles. It also controlled most of the
country's two
largest airlines: Iberia, Lineas Aereas de Espana; and
Aviacion y
Comercio (AVIACO).
A restructuring and investment program was launched in
1984
and 1985 to reduce INI's huge losses and to refocus
industrial
investment and expansion. The overhaul was prompted in
part by a
need to end INI's reliance on payments from the central
government, which would no longer be permitted when Spain
completed its transition into the EC. The program had some
successes. In 1983 INI posted a record loss of 204 billion
pesetas, but by the late 1980s the restructuring program
had
steadily reduced the shortfall. In its best performance
since the
late 1970s, the loss was cut to 45 billion pesetas (US$421
million) in 1987. INI's improved performance was partly
the
result of the 1985 sale of the auto assembly company,
Sociedad
Espanola de Automoviles de Turismo (SEAT), which had lost
37
billion pesetas that year. The INI concerns that
registered
profits were the national airline, Iberia, the electric
power
utilities, food processing plants, and enterprises
producing
electronics, aluminum, paper, and fertilizers. Among the
leading
contributors to the deficit were Construcciones
Aeronauticas
(CASA), Empresa Nacional de Santa Barbara de Industrias
Militares
(Santa Barbara), and the coal company, HUNOSA.
INI's losses had traditionally been the largest in the
"rust
belt" industries--steelmaking, shipbuilding, and mining.
In each
of these areas, the restructuring program downgraded INI's
large
holdings through personnel cutbacks and the closing down
of some
old, inefficient plants, production yards, and mines.
Investments
were undertaken to upgrade industrial facilities, such as
those
used in a new continuous casting plant scheduled to begin
operations by mid-1989. The large steel company, Empresa
Nacional
Siderurgica (ENSIDESA), was expected to reach the
financial
break-even point by the end of 1988. In addition, the
shipbuilding industry gradually was beginning to reemerge
from
its protracted slump.
Although INI intended to liberate itself from much of
its
customary heavy reliance on government subsidies, massive
government support would continue to sustain the ailing
shipyard
and coal-mining industries. Government allocations in 1987
amounted to 150 billion pesetas (US$1.4 billion). Aid to
government-supported firms was designed to keep them
operating in
order to maintain employment.
Of particular note in INI's renovation was its partial
privatization. In the mid-1980s, INI sold a 51 percent
interest
in SEAT to Volkswagen (SEAT lost US $231 million in 1984).
Minority interests, ranging from 25 to 45 percent, were
being
sold in the more profitable public-sector companies
through
public stock offerings. Shares in two electric power
companies
and a pulp-paper firm were offered, and observers expected
that
shares in Iberia and in two electric power companies would
be
offered in 1989. INI spokesmen, however, were quick to
point out
that such developments should not be interpreted as an
ideological or policy-oriented commitment to
privatization. They
were conceived of as part of an effort to improve
management of
public-sector companies and to use private-sector
resources to
invest in modernization and expansion. The funds gained
from the
sale of stock in INI companies were to be used for
strengthening
them financially, for expanding existing programs, and for
embarking on new investment strategies.
Another part of INI's restructuring strategy called for
a
major expansion of research and development. In the late
1980s,
1.6 percent of INI's revenues went to research and
development,
which was well above the overall Spanish corporate average
of 0.5
percent, but far below that of foreign technologically
oriented
companies. The goal was to bring research and development
expenditures up to 3 percent of INI's income by 1992. The
plan
also emphasized training and retraining for both
white-collar and
blue-collar workers.
Data as of December 1988
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