Environmental Technologies Industries
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Market Plans

Spain Environmental Export Market Plan
Chapter 7


Spain in the European Marketplace

The combined population of the 15 countries of the European Union (EU) is 373.4 million, and the aggregate gross domestic product is $8.6 trillion. Spain is the fifth largest economy in the EU after Germany, France, Italy, and the United Kingdom. With 39.5 million people, Spain has more than 10 percent of the EU’s population and is an important political and economic player.

The environment is a growing political and economic concern in the EU. Environmental issues attract wide media attention, and public opinion in the EU strongly favors pro-environmental policies. In fact, public opinion was the catalyst for the nature and volume of European Commission regulations and directives affecting the environment. As already mentioned in this report, the EU has earmarked funds for environmental projects in certain EU countries, including Spain.

As a result of public interest and investment in the environment, the U.S. and Foreign Commercial Service offices at the U.S. Embassies consider the environmental sector a best prospect market in almost every country of the EU.

Additionally, according to an analysis of the top 200 environmental firms in the United States conducted by ENR Engineering News-Record and published in July 1997, the European market continues to be the top revenue-draw for the largest American companies in the environmental field. Europe accounts for an estimated 36 percent of all international sales. Despite strong competition from European companies, American know-how is competing well in the Spanish environmental technologies market.

Even though the European environmental market offers many opportunities for U.S. companies, it is very difficult to penetrate. Environmental operations and sanitation have long been a local business, a community business. Thus, it is important for American firms to have community ties to counteract parochialism that favors local Spanish companies or European suppliers.

The European Union Factor

In previous chapters of this market analysis, it has been pointed out that the Spanish environmental sector is heavily influenced by EU directives. American companies interested in selling environmental technology, goods, and services in Spain or any other EU member country should become familiar with EU standards and common European business practices.

This familiarization has to encompass more than the directives that apply to the environmental sector, since this important and growing sector is intertwined with many other areas, from power generation to food processing and packaging. For example, after December 31, 1999, all products sold in the EU will be required to have only the metric system of measurement, also known as the International System of Units (SI), on their labels, manuals, product descriptions, etc. Dual labeling will not be allowed. For many U.S. companies this requirement means that special labels, manuals, etc. will have to be prepared, printed, and distributed for products targeted for EU countries.

Although the U. S. Omnibus Trade and Competitive Act of 1988 designated the metric system as the preferred system of measurements and weights in the United States, little progress has been made in its adoption. Dual use of both metric and the old British Imperial System of measurements in the United States has been the practice. Compliance with European rules is essential to future successful marketing of American environmental technology in Spain.

A good source U.S. companies can use to keep up with major Spanish Government environmental projects is the EU Journal-Supplement. The EU requires procurement notices for contracts of $4.5 million or more to be published in this publication at least 40 calendar days before bids are due. This publication comes out nearly every day. The notice can also be assessed via the EU’s Internet home page for the Tenders Electronic Daily: http://www.2echo.lu/ted/tedhome.htm/.

While the Spanish market contains good sales opportunities for U.S. environmental technologies, U.S. firms should develop marketing strategies for all of Europe and focus on EU-wide opportunities that could lead to joint agreements. To learn about such opportunities, U.S. companies should obtain copies of the following publications from EU resources:
--Green Paper on Public Procurement in the EU;
--The Bidder's Guide;
--Glossary of Terms Used in Public Procurement and Purchasing;
--EC - European Public Procurement Directives; and
--Guidelines for the Creation of an European R&D Consortium.

Opportunities may exist for American companies to help develop proposals. In some areas, Spain has failed to make full use of EU funds. Smaller communities in Spain may not have the expertise to develop the necessary proposals to request EU funding for infrastructure projects. A possible strategy for American companies is to find a Spanish joint-venture partner who is interested in assisting municipal governments with preparing the necessary applications.

Familiarity with Spanish Public Procurement and Private Purchasing Practices

A thorough understanding of Spanish public procurement rules and regulations and private purchasing practices is important to be successful in the market. Companies seeking government contracts need to register with the government as a potential supplier with the Registro Oficial de Contratistas. The best way to accomplish this is by obtaining local legal assistance for prequalification and registration. American companies should register with this office even if their local venture
partners are registered. American companies can obtain a list of law firms that can assist in complying with
Spanish regulations from the U.S. and Foreign Commercial Service staff at the American Embassy in Madrid.

Municipal governments in Spain, as in the rest of the world, are key players in the delivery of environmental services. Among the close to 8,000 municipal governments in Spain, there are some that have acquired a reputation for not paying bills on time due to their lack of appropriate accounting systems and expertise. U.S. companies should have local partners and legal representation to sort out potential business opportunities and assist in deciding which municipal governments are more likely to proceed without financial problems. Nevertheless, it is possible to complete projects successfully and profitably. However, project bidders need to take all factors into consideration for assessing the cost of doing
business and allow sufficient margins to cover costs.

Standard due diligence should be carried out before signing sales contracts with Spanish private clients. Spanish law does not specifically regulate distribution contracts. Use of credit is widely accepted and banks compete aggressively to offer coverage for commercial transactions. The private sector market in Spain procures goods and services based on standard business practices (that is, quality, delivery time, price, and after-sale service). Normal payment terms can be up to 60 days from delivery. American companies, such as Dunn & Bradstreet, are present in Spain and can provide financial background information on potential clients on a fee basis.

Spanish importers generally obtain financing from commercial banks. The most important types of short-term financing are made through loan agreements, discounting of commercial bills, and loans made against bills drawn on the borrowing company to the order of the bank.

Under a loan agreement (the usual term is six months), the borrower has access to credit up to the maximum amount negotiated in the loan agreement. Spanish borrowers prefer this agreement to loans made against bills because the later are subject to stamp taxes. Commercial bills and other trade instruments are generally discounted under an overall credit line agreed upon by the bank and its client. Banks usually offer these lines for one year and prefer that short-term paper (30, 45, or 90 days) be passed through the financial trading system. Local companies that wish to raise their discount ceilings can normally do so by opening term or savings accounts equal to 5-20 percent of their drawings. Opening irrevocable letters of credit is a straightforward process in Spain. Importers can also insure exchange risk at their banks. American suppliers should become familiar with these practices.

Physical Presence in Spain

A key component of an American company's marketing strategy in the environmental field should be a physical presence in Spain. Frequently, a physical presence is needed to react quickly to private and public sector requests for proposals (RFPs). It is particularly important for successful competition in the major projects area, where suppliers need to nurture clients, present credentials, and influence the drafting of the RFPs well ahead of their publication. Presence can be achieved either through the opening of a branch office; a joint-venture agreement; or through a distribution, an agency, or representative agreement with a Spanish firm.

An American company may benefit from EU funding by partnering with a local firm that has been awarded an EU project. (An exception to this would be when the American company is the sale supplier of an advanced environmental technologies.) The EU favors European suppliers of services and equipment. With high unemployment throughout Europe, public institutions have a very difficult time justifying public funding to procure equipment outside the EU. Spain has the largest unemployment rate in the EU, about 20 percent as of January 1998. American firms may also enhance their opportunities by bidding for EU-funded projects directly through their subsidiaries or indirectly through representatives or distributors; jointly with European companies that could be temporary joint-venture partners or permanent associates; and by partial manufacturing or assembly in Europe.

Partnering with a reliable Spanish firm is often a good way to operate effectively in Spain. Large banks, electric utilities, construction companies, large industrial companies, and new investment trusts or groups are investing overseas and winning important contracts. Many times it makes sense to team up with one of these groups, not only to penetrate the Spanish domestic market, but also as a way to pursue other European, African, and Latin American opportunities. Some of the large electric utilities that have been privatized or are in the process of privatization could be among the best potential partners for large projects. Since most of them are traded on the New York Stock Exchange, they tend to operate similar to American companies.

To illustrate the potential business opportunities for American companies working with Spanish partners in third countries, the case of Spanish-Morocco cooperation can be cited. Both countries are cooperating in water management, waste disposal, erosion prevention, biodiversity, energy planning, and education. These programs are supported by both Spanish and EU development funds. Major projects recently completed include a pipeline to deliver natural gas from North Africa to Spain and the construction of an underwater cable to deliver Spanish electricity to North Africa. These projects
will be followed by other important ones, such as the construction of a gas liquefaction plant in Spain.

By entering into a partnership with a Spanish company, a U.S. company may be able to obtain loans and loan guarantees from the EU, the European Bank for Reconstruction and Development, and other European institutions that fund projects in Central Europe, Africa, or other parts of the world receiving European economic assistance. These projects in some cases could also receive support from the U.S. Overseas Private Investment Corporation or the Agency for International Development.

Many American companies have successfully entered the European market by purchasing European companies. However, American investors should carry out due diligence to identify any potential liabilities associated with the European labor force. A reduction in the number of employees to achieve greater efficiency or to reduce cost can be difficult, time-consuming, and expensive.

Spanish Environmental and Professional Associations and Chambers of Commerce

Spain has several active professional organizations in the environmental field. Their activities include seminars, trade events, and the publication of technical magazines. These organizations are potential mechanisms for networking and finding business opportunities. They include:
--ADECAGUA (Spanish Water Environment Federation)
--AERPA (Association of Spanish Environmental Companies)
--Asociación de Profesionales del Medio Ambiente (Association of Environmental Professionals)
--Asociación Técnica para la Gestión de Residuos Sólidos (Technical Association for the Treatment
of Solid Waste)
--Federación de Reciclado y Medio Ambiente Española (Spanish Recycling and Environmental
--Asociación Nacional de Recicladores de Plástico ANARPLA (National Association of Plastic Recycling Industry)

There are several strategies that American companies can use to promote and sell environmental technologies in the Spanish market. For example, they can publish articles in a range of Spanish and other European journals. Those publications offer firms a way to introduce their products to a Europe-wide audience of environmental professionals.

Firms should also consider participating in Spanish and other European trade shows, as a method of penetrating the market. Although these events may be used to find an agent/distributor or joint-venture partners, U.S. companies should secure a European or Spanish agent/distributor prior to taking part in such an event. An in-country representative can provide adequate follow-up of trade leads developed during a trade show.

Spain also has a well-established and active national network of chambers of commerce. Companies in Spain are required to join a chamber and pay dues based on size and sales. Spanish chambers of commerce offer many services to their members, including assistance in identifying business opportunities funded by the EU and other organizations.

Many of the American companies that operate in Spain as well as Spanish companies belong to the American Chamber of Commerce of Spain (AMCHAM) based in Barcelona. This organization provides networking opportunities as well as a potential client database. In addition to the AMCHAM, a select group of about three dozen of the largest American companies belong to the American Business Council (ABC) in Madrid. Many of these companies are also active in the AMCHAM. Participation in the activities of the AMCHAM and ABC can enhance networking activities and open doors in Spain. For more information on how to become a member or about their activities, U.S. firms can contact these
organizations directly at:
American Chamber of Commerce
Avda. Diagonal 477
08036 Barcelona, Spain
Tel: (34-3) 405-1266
Fax: (34-3) 405-3124
Contact: Jose A. Manrique, Executive Dir.

American Business Council
Nuñez de Balboa 31, 2-2
28001 Madrid, Spain
Tel: (34-1) 575-5352
Fax: (34-1) 431-2789
Contact: Luis de Asua, Secretary

U. S. Government Assistance

The U.S. and Commercial Service (US&FCS) office at the U.S. Mission to the European Union (USEU) in Brussels, Belgium, monitors EU procurement notices, published in the EU Journal-Supplement and the Tenders Electronic Daily (TED) at the EU website. The US&FCS selects tenders that are open to American companies and places them in the National Trade Data Bank (NTDB). This important and time-sensitive procurement information can also be obtained by calling the USEU at (322) 508-2746 or by faxing to the number (322) 513-1228.

International Mail Address:
The U.S. and Foreign Commercial Service
U.S. Mission to the European Union
Blvd. du Regent 40
B-1000 Brussels, Belgium

U.S. Mail Address:

The U.S. and Foreign Commercial Service
U.S. Mission to the European Union
PSC 82 Box 002
APO AE 09724

Finally, as part of the Department of Commerce worldwide network, the US&FCS staff at the American Embassy in Madrid or the American Consulate in Barcelona can assist American companies seeking agent/distributors and up-to-date market information. They also perform a range of market research, including industrial sector analysis and alert reports, which are entered into the NTDB.

Countless hours and expense in research and travel can be saved by using the NTDB as a source of international trade information. In addition to the US&FCS, the Department of State's Economic and
Science Sections at the American Embassy in Madrid also contribute information to the NTDB covering the environmental sector in Spain. For additional information about the NTDB, contact the U.S. Department of Commerce, Office of Business Analysis, HCHB Room 4885, Washington, D.C. 20230. Information on the NTDB can also be obtained through the U.S. Department of Commerce Internet home page, or by contacting one of the U.S. Export Assistance Centers of the US&FCS located throughout the United States listed in Appendix G.

The US&FCS also maintains a database of information on business opportunities in Spain, and other European countries, under the program Showcase Europe. This database can be consulted at the following home page address: www.sce.doc.gov.

For guidance on the U.S. Government resources available to the American business community to
assist in exporting American goods and services, see Appendix F.

Best Prospects: The Spanish Environmental Industry's View

Several key specialists on Spain's environmental market were asked about the market and best prospects for American companies. This is a summary of their answers. No reliable estimates were obtained about the size of the market for areas of deficiency in local production and/or know-how. The purpose of this exercise was to determine industry's general perception of areas in need of imported technology.
--The elimination of urban waste is an important challenge for Spain, particularly due to the policy of the government to avoid using incineration technology. Spanish companies need advanced technology to replace traditional incineration methods.
--Spanish companies lack equipment to eliminate low and medium nuclear contamination.
--Advanced technology for industrial wastewater treatment is needed.
--Technology is needed to deal with the challenge of eliminating sludge (slush, mud) produced by urban wastewater treatment plants.
--Landfill sites are causing serious contamination of groundwater due to inadequate equipment and technology to deal with this problem. Advanced remedial technology is needed.
--Spain needs advanced equipment to recycle and/or to treat solid urban waste, industrial waste, and hospital waste.
--Spain suffers from a deficiency in the technology needed to treat contaminated soil. This is also a
problem for the six large spanish business organizations active in the environmental services area when they compete for contracts overseas.
--Spain needs technology for dealing with agro-industrial and agricultural pollution. The meat and milk products processing plants in particular need technical assistance to eliminate polluting discharges.
--Spain needs technology to recover contaminated beaches and other coastal zones, as well as for the recovery of contaminated rivers.
--Very little has been done and limited technology and/or know-how is available in Spain for reducing noise and air pollution.

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