Spain
As of late 2010, rumors in the financial community persist that Spain is going to be the next Eurozone nation to suffer an economic crisis. Spain's high unemployment rate, coupled with a lack of economic recovery and being unable to adjust interest rates due to its participation in the euro, has resulted in a rapid appreciation of interest rates in Spanish sovereign debt in recent weeks amid speculation in the bond markets that Spain will be unable to meet its obligations (Krugman, 2010; Krause, 2010). The Spanish economy, it would seem, has been suffering in recent years and that suffering is not expected to end any time soon.
For a company looking to do business in Spain, the current situation is certainly cause for alarm. The economic fundamentals of the country look troubling, and there are significant structural reasons why Spain will not be a good place in which to invest any time soon. However, in order to truly assess the situation, one must move beyond the headlines and get involved in a deeper analysis of the country and its economic circumstances. This paper will do just that. Spain will be analyzed in terms of both the big picture and its current economic situation. The intimation that Spain is overpriced as a place to invest will be addressed in this analysis, as will a number of other concerns. The perspective for this report will be that of an American firm seeking to invest in Spain. Economic, cultural and political elements of Spain and its society will be considered, so that an American firm looking to invest in Spain will be able to gain the full knowledge required in order to make the right decision for its business. At the core of the report will be a PEST analysis, in which four specific components are analyzed. Each will receive both a historical analysis and an interpretation of the present landscape. The four components of the PEST are the political environment, the economic environment, the social environment and the technological environment. Each of these plays an important role in the decision as to whether or not to invest in Spain at present, so each will be given due consideration.
The components of this paper, in order, are going to be the history of Spain, its government, the current climate, its culture, its employment and labor conditions, education, taxes, foreign investment climate, business practices and freedoms and the corruption climate. Lastly, the paper will bring all of this knowledge and insight together to come to a conclusion with respect to investing in Spain.
History
After emerging from Muslim rule in 1492, the Kingdom of Spain immediately became a colonial power with the Columbus expedition. This period saw Spain as one of the world's leading economic powers, a position it occupied for several hundred years through a series of dynasties, culminating the first republic in the late 19th century. Just before the Second World War, Spain's republic fell and the country became a dictatorship under Francisco Franco. After Franco died, the country began a transition to democracy that ushered in the country's modern age. Spain joined the European Union in 1986 and was one of the founding adopters of the euro in 1999, setting the stage for the country's current economic climate.
Today Spain is one of the largest and most important countries in Europe. The country has 46 million people in total. Of these, 74% are the majority Castilian ethnic group, 17% are Catalan, 7% are Galician and 2% are Basque. Among the Castilians are further breakdowns such as Asturian, Aragonese and Andalusian among others, each with distinct regional culture and dialect (CIA World Factbook, 2010).
Government
The current structure of the Spanish government is as a parliamentary monarchy. The royal family of Spain only has nominal control of the country, for the part it is run by elected officials in a parliamentary system. The country is governed by the National Assembly, which consists of a 264 person Senate, of which 208 are elected, and a 350-seat Congress. The structure of the Congress is unusual in that it costs of 248 representatives elected under a proportional representation system and a further 2 members from each of the fifty provinces, plus a single member each from the African enclaves of Ceuta and Melilla. There are a number of different political parties participating in Spanish government, including a number of regional parties representing Basque Country, Catalonia, the Canary Islands and a number of parties representing the Castillian population along different ends of the political spectrum. There are a significant...
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