Investors give Spain thumbs down on economy concerns

14th February 2008, Comments 0 comments

Country drops from top 10 to 35th place in consultant ranking

14 February 2008

MADRID - In just four years, Spain fell from being one of the 10-most attractive countries globally for foreign investors to 35th place in 2006, according to a latest survey of top investment destinations drawn up annually by US management consulting firm A.T. Kearney.

The rapid decline is attributable to concerns over the health of the Spanish economy, the rising importance of emerging market economies and Spain's transition towards being a net exporter of investment capital versus a net importer.

"Spain has experienced a progressive decline since 2002, when it achieved its best position at seventh place," Martin Walker, the author of A. T. Kearney's Foreign Direct Investment Confidence Index, said Wednesday. "Investors think that Spain is ok, but they don't see it as a country they have to be present in such as the United States, the United Kingdom or China."

Spain's decline on the list has been rapid, from seventh place in 2002 to 35th place. The most popular country for foreign investment in 2006 was China.

Walker noted that it was European investors that gave Spain the lowest marks. They put the country 47th on their list, while Americans placed it in 22nd and Asians in 33rd. "Spain should pay closer attention to what investors want," Walker said.

Notably, the surveys used to compile the index coincided with German energy giant E.ON's abortive attempt to acquire Spanish power company Endesa. The acquisition was fiercely opposed by the Spanish government.

Walker said that investors seek a predictable tax regime, equal conditions for local and foreign firms, investment guarantees and little state intervention. He said that Spain suffers from geographic disadvantages as well.

"[Spain] is not a natural focus for investors," said Walker, adding that Spain should not overlook opportunities to benefit from the growth of North African economies.

While Spain is attracting less foreign investment it is spending more abroad. The bulk of such investments are going to financial services and renewable energy sector.

"In 2006, Spain received USD 20 billion in investment inflows and exported USD 89 billion," he said.

[Copyright EL PAÍS / A. EATWELL 2008]

Subject: Spanish news

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