Budget Crisis Prompts Spain to Ask Former Colonies to Invest

By Minder, Raphael | International Herald Tribune, November 20, 2012 | Go to article overview

Budget Crisis Prompts Spain to Ask Former Colonies to Invest


Minder, Raphael, International Herald Tribune


The investment plea underlines the extent to which Spain and Portugal are scrambling to find new ways to exploit their historical and cultural ties with Latin America.

Starting in the late 1990s, Spanish companies began a drive into Latin America that resulted in their taking over some of the region's most prized assets. Now, Prime Minister Mariano Rajoy of Spain wants the investment to flow in the other direction.

Mr. Rajoy used a weekend summit meeting here to try to persuade Latin American leaders to invest more in recession-hit Spain, suggesting that his country could be "the closest platform" for companies to make forays into the rest of Europe, and even North Africa.

"Spain receives Latin American investment with open arms," he said Saturday in a speech.

Mr. Rajoy's investment plea underlines the extent to which Spain and Portugal, among those hit hardest by the European debt crisis, are scrambling to find new ways to exploit their historical and cultural ties with Latin America.

The International Monetary Fund forecast last month that growth in Latin America would accelerate to 3.9 percent next year from 3.2 percent this year, with Brazil's economy growing 4 percent.

Luis Alberto Moreno, the president of the Inter-American Development Bank, said during an interview that "for years you had capital going from north to south and immigration going from south to north and what we are increasingly going to see is a reverse of the flows."

In fact, some of the participants in the two-day summit meeting suggested that Spain and other European countries should pay closer attention to Latin America's recent recipes for economic success to help them emerge from their own economic quagmire.

"I think Latin America now has a lot more to show Spain and others in Europe than the other way round," said Heraldo Munoz Valenzuela, a former member of the Chilean government who is now assistant secretary general at the United Nations Development Program.

One of the lessons from Latin America's ability to overcome several rounds of financial crisis, he suggested during an interview, is that "the idea cannot simply be to tighten the belt."

"I'm very concerned by the tendency now in Europe to dismantle the welfare state and the social gains that have been achieved," Mr. Munoz said.

While Mr. Rajoy maintains that Spain can meet the budgetary targets that it told its European Union counterparts it would meet, his administration has been debating since September whether to seek further European rescue funds amid concerns in Madrid that such help would require Spain to introduce further austerity measures.

"To get out of the crisis, austerity is necessary but not sufficient," Jose Manuel Garcia-Margallo y Marfil, the Spanish foreign minister, said at a news conference Friday. "Growth is the key."

For now, however, the economies of Spain and Portugal are expected to contract through next year. And with unemployment already at 25 percent in Spain and nearly 16 percent in Portugal, expectations of a prolonged recession are helping to fuel an exodus to Latin America and other growth markets. Mr. Rajoy, for instance, noted Saturday that already more than one million Spaniards lived in Latin America.

To strengthen their presence in Latin America, Spanish companies will increasingly have to be "bringing people over, given the scarcity of local talent, particularly in the engineering and technical fields," said Javier Garcia-Ramos, a Spanish investment banker who moved to Sao Paulo this year to work for VGL Financas Corporativas, an advisory firm specializing in mergers and acquisitions. …

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