Environmental Technologies Industries

Environmental Technologies Industries

Market Plans

Spain Environmental Export Market Plan

Chapter 1

INTRODUCTION

Politics and Geography
Spain is a constitutional monarchy with a hereditary monarch as both head of state and commander-in-chief of the armed forces. The three components of the national government are an executive branch led by the President (Prime Minister), the two-chamber Parliament, and the
Cabinet or Council of Ministers. The lower chamber of the Parliament, with 350 members or deputies, elects the President (Prime Minister) from among its members. The upper chamber of the Parliament has 208 members. Spain has been a member of the European Union (EU) since 1986.

In addition to the national government, Spain has 17 geographic regions that enjoy administrative autonomy (see table 1). Each region has a unicameral legislative assembly, which elects one of its members to serve as president of the autonomous regional government. Within the regions, there are 50 provinces, which have a legislative council. The legislative council is elected by council members of the municipal governments in each province and a representative of the central government appointed by the Minister of the Interior. There are also about 8,000 municipal governments that provide basic services to local communities. Each of the municipalities has its own elected council, whose members elect one of their own as mayor.

Table 1: Spanish Regions: Key Economic Data

Region	GDP (share of total in 1994-%)	Per capita GDP (ratio of national average-%)	Unemployment (Q 2 1996-%)
Andalucía	13.5	75.1	32.4
Aragón	3.4	110.3	15.2
Asturias	2.5	89.8	22.2
Baleric Islands	2.5	137.5	13.8
Basque Country	6.3	115.7	21.5
Canary Islands	3.7	95.8	21.7
Cantabria	1.3	97.2	24.5
Castilla-La Mancha	3.6	84.1	20.0
Castilla-Leon	6.0	91.4	20.2
Catalonia	19.2	122.9	18.6
Extremadura	1.9	69.3	30.2
Galicia	5.5	77.8	19.0
La Rioja	0.8	112.8	14.5
Madrid	16.0	125.0	20.5
Murcia	2.5	90.9	24.2
Navarra	1.6	120.2	11.0
Valencia	9.8	98.5	21.5
Total Spain	100	100	22.3

Note: The first column shows the level of economic development by region of Spain through each region's contribution to the national GDP. The second column shows the ratio of national average of the GDP per capita. For instance, in Andalucía, per capita GDP is almost 25 percentage points below Spain's average. The poorest regions (those below 100) have access to special EU funding for regional economic development, as well as subsidies for environmental projects. At the same time, the richest regions are the ones investing more in new projects.
Source: Statistics Bulletin, Bank of Spain, National Institute of Statistics.

Spain is one of the largest European countries, with a total area of 505,000 square kilometers (km2) (194,900 square miles) and over 2,370 km (1,470 miles) of coastline. Located in southwest Europe, Spain occupies about 85 percent of the Iberian Peninsula, which it shares with Portugal. In addition, the Canary Islands in the Atlantic Ocean, off the West Coast of Africa, and the Balearic Islands in the Mediterranean Sea are Spanish provinces with autonomous governments. Spain also has small enclaves in North Africa (Ceuta and Melilla), which have elected representatives in the national Parliament.

Spain has approximately 39.5 million people, 3 million of whom live in Madrid, the capital. Barcelona is the second largest city, with almost 2 million people in the greater metropolitan area. Spain's climate often suffers temperature extremes in the summer and the winter, and insufficient rainfall, with extended periods of drought followed by periods of heavy rains.

The Economy
The Spanish economy, the fifth largest of the EU, made considerable headway towards macroeconomic stability in 1996 and 1997 demonstrated by it's membership status in the Economic and Monetary Union (EMU). Inflation was contained, the budget deficit reduced, and the economy grew at a moderate rate. All economic indicators show that Spain is moving towards convergence with the levels of stability prevailing in the core EU countries. (See table 2 on Spanish key economic indicators, which compares EU targets with results achieved by Spain in 1997). Spanish gross domestic product (GDP) grew 2.3 percent in 1996 and 3.3 in 1997. The inflation rate in 1997 was 2.0 percent, and interest rates were the lowest in over 40 years.

The Spanish economy has strong agricultural and agro-industrial sectors. Its manufacturing sector is widely diversified, with the leading manufactured goods being textiles, apparel, steel, iron, motor vehicles, ships, airplane parts, chemicals, footwear, refined petroleum products, and computer equipment. The principal exports are machinery, motor vehicles, chemicals, iron and steel, clothing, textiles, and agricultural products. Spain's major trading partners are France, Germany, the United States, Great Britain, Portugal, and Italy.

About 48 percent of Spanish electricity is generated by conventional thermal energy fueled by local coal and imported petroleum products. Approximately 17 percent of the electricity is generated by hydroelectric plants and roughly 35 percent by nuclear energy. A growing number of wind energy farms are being installed.

Spain receives over 60 million tourists per year, making it one of the top three tourism destinations in the world. Spanish environmental concerns are in part the result of a strong economic interest in protecting the country's natural resources that attract so many tourists every year.

Procurement
Government procurement practices are regulated by legislation enacted in May 1995 (Ley de Contratos del Estado). This legislation governs procurement practices at all levels, from purchases by municipal and regional governments to purchases by the national government. It also covers procurement by state-owned or -controlled companies or institutions, such as the national railroad Red Nacional de Ferrocarriles Españoles (RENFE), the state-controlled electric utility Empresa Nacional de Electricidad Sociedad Anónima (ENDESA), the state airline Iberia; and airports throughout the country. All of
these institutions are primary buyers of environmental technology.

In Spain, each level of government has contracting authority. At the municipal level, contracting authority rests with the mayor. At the autonomous regional community level, contracting authority rests with the president of the autonomous community. At the national level, members of the Cabinet have procurement authority for their own ministries. They delegate procurement authority to their subcabinet section heads, normally the undersecretaries. For contracts at the national level involving major projects whose budgets are spread over multiple fiscal years, the Cabinet has to provide approval. Cabinet approval is required for all projects valued over $13 million (at the prevailing exchange rate in October 1997 of $1 = 150 Spanish pesetas).

Table 2: Spanish Key Economic Indicators

1997 Economic Indicators
Inflation 2.0%
Discount Rate 4.75%
Government Deficit 3% of GDP
Public Debt 67.3 % of GDP

Maastricht Treaty Targets
Inflation 2.5%
Discount Rate 8%
Government Deficit 3%
Public Debt 60% of GDP

Note: This table compares Maastricht Treaty targets for EU members for Economic and Monetary Union (EMU) in 1999, with results achieved by Spain in 1997.
Source: December Economic Issues Round-up, Economic Section, U.S. Embassy Spain, pp. 3 and 11.

To bid on Spanish Government contracts, all potential suppliers of goods and services need to register with the Ministry of the Economy, in the Registro Oficial de Contratistas. This requirement applies to all levels of government: national, regional, and municipal. Prior registration and prequalification applies to all suppliers, both foreign and domestic. In some cases, regional autonomous communities may have their own register of potential bidders for government contracts.

All requests for proposals (RFPs) for major government projects must be published in the Official
State Bulletin, a publication similar to the American Federal Register or the Commerce Business Daily.
Invitations to bid on government contracts are published at least 26 calendar days before the due date of bids. In addition, all contracts above approximately $4.5 million are published at least 40 calendar days before the due date of bids in the European Community Bulletin.

Government agencies can also prequalify foreign and domestic companies and invite them for a restricted procurement. Although this is a practice that governments usually use for military and other sensitive procurement, it can also be applied in the environmental technology field.

All foreign firms must have a legal entity or legal presence in Spain. American firms seeking to sell to the Spanish Government or Spanish-controlled companies must acquire a formal agency agreement, distributor, branch office, or subsidiary in Spain before bidding on contracts. American companies also have to accept the ruling of Spanish courts in legal issues that may result from a contract with the Spanish Government.

Regional Decentralization
Since the Constitution of 1978, Spain has experienced one of the most rapid moves to fiscal decentralization among industrialized countries. The regions have increased their spending power (see table 3) and their revenue-raising responsibilities. As a result of a 1996 political agreement by which the national minority government gained the support of the regional parties in Parliament, the regions have also gained more control over their fiscal policies. At the regional and municipal level, there is greater participation of private companies in the delivery of public services (for example, waste collection) than in the past.

The regions receive capital transfers from the central government and the EU. With the view of ensuring the regions’ ability to provide their people with minimum standards of services, the central government allocates a share of tax revenues to the regions. The revenues are distributed using variables such as per capita income, population density, and fiscal responsibility exercised by the regional government. Borrowing by the regions is subject to central government controls, which include prior approval for all bond issues and liabilities in foreign currencies.

Table 3: General Expenditure by National, Regional and Local Governments
(In percent of total government expenditure)

	1976	1980	1984	1987	1990	1993
National	89	89	82	77	70	70
Regional	0	0	7	11	17	18
Local	11	11	11	12	13	12

Source: Government Finance Statistics Yearbook, International Monetary Fund, 1996.

Trade Relations with the United States
Political and trade relations between the United States and Spain are excellent. In recent years, the United States has enjoyed consistent trade surpluses with Spain. According to the U.S. Department of Commerce, Bureau of the Census in 1995 U.S. exports to Spain were valued at $5.5 billion and in 1996 at $5.4 billion. U.S. imports from Spain in 1995 and 1996 respectively were valued at $3.9 and $4.3 billion. (Spain's largest trading partners are other EU members. EU members have about 66 percent of the Spanish total import market (see table 4).)

The leading U.S. exports to Spain are automated data processing (ADP) equipment, bituminous coal; airplanes; and parts and components; vehicles and parts; wood products; new and refurbished military equipment, turbines; scrap and waste steel for recycling; agricultural equipment; including irrigation equipment and tractors; nuclear fuel in the form of uranium oxide enriched in U235;
telecommunications equipment; aluminum castings; compressors; chemicals; medical equipment;
pharmaceuticals; and all types of machines and mechanical appliances.

American private sector investment in Spain is substantial. There are approximately 500 American
companies in Spain, employing close to 100,000 workers and accounting for over $6 billion in Spanish exports. Many important American companies in the environmental field are physically present in Spain. They include Foster Wheeler, Fluor Daniel, Dames & Moore, Bechtel, and Montgomery Watson, Inc.

Table 4: Percent of Spanish Import Market Share by Country

	1995	1996
France	16.7	17.8
Germany	15.3	14.8
Italy	9.0	9.5
United Kingdom	7.9	8.3
Benelux	7.7	7.4
United States	6.5	6.3
Portugal	3.0	2.9
Japan	3.4	2.8
EU members	64.9	66.3
Non-EU members	35.1	33.7

Note: These figures reflect all imports into Spain.
Source: Sintesis de Indicadores Económicos, June 1997, Spain's Ministry of Economy.

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