ITALY

COUNTRY OVERVIEW

LOCATION AND SIZE.

Located in southern Europe, Italy is a peninsula extending into the Central Mediterranean Sea. It is shaped like a high-heeled boot kicking a "triangle"—the island of Sicily. Italy borders France to the west, Switzerland and Austria to the north, and Slovenia to the east. The country also shares a border with 2 tiny independent states, San Marino and the Vatican, both of which are entirely surrounded by Italian territory. Italy has an area of 301,230 square kilometers (116,304 square miles) and a coastline of 7,600 kilometers (4,722 miles), including the islands of Sicily and Sardinia. Comparatively, Italy is slightly larger than the state of Arizona. Rome, the capital city, is on the country's western coast at the heart of the peninsula. Other major cities include Milan, Naples, Genoa, Florence, Venice, Palermo, Bologna, and Bari.

POPULATION.

In July 2000 the population of Italy was estimated at 57,634,327. In the same year the birth rate stood at 9.13 per 1,000 people while the death rate was 9.99 per 1,000 people. Thanks to the annual arrival of immigrants, the projected growth rate is 0.09 percent. The data clearly show that without the influx of foreign immigrants the Italian population would suffer a steady decline. More restrictive immigration policies are being adopted, and it is expected that by 2010 the population will decrease to 56,484,000.

According to 1996 statistics, just over 67 percent of Italians live in an urban setting; the rest live in the countryside. The regions with the highest density are Campania (with 426 people per square kilometer, or 1,103 per square mile, in 1998) and Lombardy (378 people per square kilometer, or 979 per square mile). The regions with the lowest density are Val d'Aosta (37 people per square kilometer, or 96 per square mile) and Basilicata (61 people per square kilometer, or 158 per square mile). The biggest city is Rome, with 2,646,000 inhabitants, followed by Milan (1,308,000), Naples (1,020,000), Turin (910,000), Palermo (687,000), and Genoa (641,000).

Ethnic Italians form 97 percent of the population, but there are small ethnic minorities such as German-Italian, French-Italian, Slovene-Italian, and Albanian-Italian, while foreign immigrants make up 1.8 percent of the population. The largest immigrant groups are Moroccans, Albanians, Filipinos, Americans, Tunisians, and Chinese. Italy—home to Vatican City, the seat of the Pope—is a predominantly Roman Catholic country, even though church attendance has been progressively falling. There are small Protestant and Jewish communities, but, as a consequence of the growing number of North

African, Bosnian, and Albanian immigrants, the second religion of Italy today is Islam. With 18 percent of people over 65 and only 14 percent below the age of 14, there is widespread concern about the rapid rate at which Italy's population is aging. With average life expectancy at 79.03 years, the government is worried about the financial costs, such as health care and pensions, associated with an aging population.

Contrary to popular perception, Italian families are no longer as large as they once were, and it is becoming common for couples to have only 1 child. Economic well-being, a high cost of living, and the entrance of women into the workforce have had a tremendous influence on family structure. In 1961, about 14.4 percent of families had 4 or more children, compared to 1998 when only 1.4 percent of families had 4 or more. Without the arrival of immigrants, the Italian population would have fallen over the last decade. To reverse the negative trend, the government has adopted family-friendly policies. The government encourages families to have more children through tax breaks and direct grants. The policy has not been too successful, however, because people do not consider the financial incentives to be enough.

OLIVES.

Olives are one of the country's most lucrative exports. In 1999 production reached a record 7.243 million quintals (a quintal is a unit of weight equal to 100 kilograms, or about 220 pounds), confirming Italy as the leading producer in the world. The hot Mediterranean climate makes the southern region of Italy well suited for olive production, with most olives produced in Puglia. The industry changed considerably during the 1990s, moving away from traditional farming methods to more intensive and mechanized production. Thus, half of the olive-producing land excludes other types of cultivation and small producers are being driven out as large companies take over processing and distribution in the olive industry. Italy's main international competitors in olive production are Greece and Spain. In 2000, due to poor weather conditions, Italy's output decreased to 4.929 million quintals and Italian olive production was outstripped by Spain.

WINE.

Grapes are to be found in every Italian region. Winemaking has a very long tradition in the country, and Italy enjoys a positive trade balance in this sector. The vines yield 9,459,000 metric tons of grapes and 62,618,000 hectoliters of wine (a hectoliter is 100 liters). Until the mid-1980s, wine production was not generally of a high standard and, indeed, much table wine was cheap and of very poor quality. The industry then went through a series of reforms that introduced strict quality controls, and standards rose to a level whereby Italian wines can compete at international level with French wines. Italy's best-known wines are Chianti (produced in Tuscany), Barolo (produced in Piedmont), Soave (produced in the Veneto), and the white wines of Collio (produced in Friuli), Marsala (from Sicily), and Brunello (produced in Tuscany).

MANUFACTURING.

The backbone of the manufacturing sector is a few internationally known multinationals, operating in company with large numbers of small and medium enterprises. The most noteworthy manufactured products include machine tools, textiles and clothing, motorized road vehicles, domestic appliances, arms, fertilizers, and petrochemicals. Most manufacturing firms are located in the north of the country, with very few large factories in southern Italy. When Italy experienced its economic miracle in the 1950s and 1960s, the manufacturing heart of the country was the industrial triangle of Milan, Genoa, and Turin. However, this area has lost its predominant role due to the demise of the steel mills and other heavy industry. The northeast of the country, mainly the regions of Lombardy, the Veneto, and Friuli, is now the engine of the Italian economy. Certain large enterprises have relocated some of their operations to southern Italy to benefit from tax breaks and a more flexible workforce, but the region still has a very poor concentration of factories. Furthermore, large state-owned factories shut down in Taranto, Crotone, Terni, and Naples in the late 1980s, causing the loss of thousands of jobs. This action was part of a rationalization plan that required either the closure or the privatization of state-owned companies, and the public sector workforce was encouraged to seek employment in the growing service sector.

The most important, and probably best known, Italian manufacturing business is FIAT. This multinational company, headquartered in Turin and headed by the Agnelli family, has been a major force in Italian economic life since the beginning of the 20th century. FIAT is mainly involved in the production of Fiat cars and has a number of plants in Italy and abroad. It also owns Alfa-Romeo, Lancia, and Ferrari. FIAT's combined operations produce 3 million cars per year in Italy. While its export market is reasonably healthy, FIAT's large share of the Italian market allows it to compete in the European market. The Italian government is still influenced by the idea that "what is good for FIAT is good for Italy," so it lends its support to the car manufacturing company. In recent years, the government has subsidized the purchase of brand new cars (in most cases, Fiats) from car owners who want to trade in their old model. Thanks to this scheme, FIAT was able to make the Punto, one of the best-selling small cars in the company's history. Many FIAT operations are headquartered abroad, with cars and trucks made in countries such as Poland, Russia, Brazil, and Spain. Finally, the year 2000 alliance with General Motors allowed FIAT to re-discover its U.S. market, which was abandoned when Japanese car manufacturers began exporting to the United States. FIAT is also heavily involved in many other sectors of the manufacturing industry: car components, trucks, motorcycles, industrial vehicles, weapons, and engineering machinery.

TEXTILES AND CLOTHING.

Another very important sub-sector in the manufacturing industry is textiles and clothing, which boasts some of the world's best known fashion designer labels, such as Valentino, Armani, Versace, Gianfranco Ferré, and Krizia. However, the more casual clothing market accounts for the financial success of this sector. The design, quality, and relatively inexpensive prices of its products have made textile manufacturing Italy's third largest business after engineering and construction. Almost 1 million workers are employed by the textile industry, which is a leading exporter of clothes and shoes. There are very few large enterprises in this industry; most producers have small or medium-sized factories. The real strength of the sector lies in the efficiency of its distribution networks, and in the fame they enjoy, particularly in newer markets like the United States and Asia where the top labels are status symbols.

One big name known throughout the world caters to customers of average income: Benetton. In recent years almost as well known for its controversial advertising as for its clothes, Benetton is a family-owned business located in the Veneto. In the 1980s and early 1990s, Benetton's annual sales figures passed the US$1 billion mark, with most of the income derived from export. By addressing the casual market rather than the high fashion market, Benetton was able to combine quality with affordable prices. The strategy paid off and helped other Italian manufacturers by creating a niche market from which they could all profit. However, currently, Benetton is not as strong as it was in the clothing market, and it has diversified into construction and communications. Nevertheless, the industry remains a vibrant cornerstone of Italian export.

While many of the more famous brand names are situated in northern Italy, the textile sector is reasonably strong in southern Italy, where an increasing number of producers have relocated some of their manufacturing. Fashion houses in particular tend to outsource their production to small, family-run businesses in the area of Naples or in Puglia, where workers are more flexible. They specialize in the manufacture of leather, from which clothes, handbags, wallets, and purses are made.

FOOD PROCESSING.

The development of the food processing industry in Italy has been similar to that of textiles. While its contribution to the GDP is far less substantial, it is nevertheless a significant economic sector. Fragmented and small-scale until the 1980s, the sector became more competitive by the 1990s through privatization and rationalization. Very powerful food manufacturing groups such as Barilla (makers of pasta) and Parmalat (dairy products) are dominant in their respective fields, not only in Italy but also abroad. Swiss-owned Nestlé acquired Buitoni pasta and Perugina chocolate in 1987 and thus has an important presence in Italy. As well as these main players, a wide range of small firms produce traditional Italian fare such as mozzarella cheese, Parma ham, and Calabrian sausages, without much recourse to modern technology. Most of the food products are destined for local consumption, but many are also exported. The widespread network of Italian restaurants abroad contributes to the increasing reputation and popularity of Italian foods throughout the world, and processed food exports represent a major element of numerous businesses in the sector.

TOURISM.

Italy competes with the United States, France, and Spain as one of the most popular destinations for international tourists, who flock to it in huge numbers. Approximately 30 million tourists visited the country in 1999 and, thanks to the Catholic Jubileum (a celebration of Catholic heritage) over 40 million visited in 2000. Surprisingly, tourism was not a priority for the country until the late 1980s. Then a coherent promotion program emerged and led to general improvements in transport, hotels and other tourist accommodations, museums, and monuments. The turning point was the 1990 soccer World Cup, when tourists descended on Italy for that event and rediscovered the country's other attractions.

Italy is extraordinarily rich in history, classical art and architecture, ancient cities and villages, glorious landscapes, and a coastline well served by beaches. The vast western historical and artistic heritage draws large numbers of visitors to Rome, Venice, and Florence, while the smaller cities such as Siena, Pisa, Naples, the Isle of Capri, and Taormina in Sicily are increasingly popular. The region of Emilia-Romagna is a favorite spot for those, such as the east Europeans, on a limited budget, while Sardinia and Sicily are more upscale destinations. In 1996, receipts from tourism amounted to over US$28 billion. If those working in the transport sector were to be included in the statistics for the tourist sector, almost half of the working population would be connected with tourism. However, as with so much else in Italy, tourism is highly concentrated in the center-north, where most of the hotels and accommodations are located. In recent years, however, both central government and local administrations have begun to invest heavily in tourist services in the southern regions. Potentially, tourism can bring hard currency and employment to the south, encouraging development in its comparatively neglected regions of the country.

The working conditions in the tourist industry vary considerably from region to region and from business to business. Many hotels, restaurants, and bars are family owned, and extra labor is hired at a low cost during the busy months. Conditions are better for workers in state-owned museums, tourist offices, and transport. An almost unlimited supply of labor from the informal economy is available to the tourist sector, and it is needy foreign immigrants who take the lowest paid and least pleasant jobs.

RETAIL.

Italy has a highly developed retail system. Mass outlets in the form of supermarkets, malls, and multiple stores are becoming increasingly popular, and distribution is very well organized, particularly in the northern regions. The main chains are Standa, COOP, Esselunga, Sigma, and SPAR. Nevertheless, the retail sector is largely made up small, family-owned shops, and these remain the primary sales outlets for goods and services in the south. The shop-owners' association, a very powerful lobbying group, was able to convince government to withhold licenses for supermarkets and malls for 2 years so that small shop owners could claim back some business. Working conditions are decent in family-owned shops, where employers tend to treat outside help as if they belonged to the family. Italian shop assistants, unlike those in many other countries, are professionals who are likely to stay with their jobs for life.

FINANCIAL SERVICES.

Italy is a highly developed economy, and the financial and banking sector is similar to that of all other Western European countries. The Bank of Italy is the central bank, but with EMU now in place, the country's monetary policy is overseen by the European Central Bank. However, the Bank of Italy remains in charge of credit control and functions as the ultimate guarantor of other banks. The number of banks in Italy has always been high, with a wide range of financial institutions operating at different levels. There are national banks, both public and private, popular co-operative banks, savings banks, and chartered banks. Most of the co-operative and savings banks operate within a limited territory (provincial or regional). In general, banks are concentrated in the north. A notable exception to this is Sicily, where a large number of banks and other financial institutions are located for the less than healthy reason that organized crime requires money-laundering institutions under its control.

In recent years, mergers and takeovers have increased in order to strengthen and stabilize the banking system. Privatization has also helped to streamline the sector. Investment institutions, both public and private, are becoming increasingly important, with many people turning to investments to supplement their income. Since 1998, the banking system has been almost fully liberalized and most banks offer a wide range of financial services to their customers. Italian families have been traditionally very keen to save money, and, in 1999, the total deposits held in Italian banks amounted to US$450 billion. According to 1999 data, European banks use 53 percent of their available reserves to service individual loans, such as mortgages, with only 46.3 percent directed towards financing private sector businesses. Italy, however, does not conform to this pattern. Italian banks invest 66.7 percent of their resources in private enterprise, while only 18.3 percent is given to private consumers.

DEPENDENCIES

Italy has no territories or colonies.

BIBLIOGRAPHY

Banca d'Italia. <http://www.bancaditalia.it> . Accessed October 2001.

Confederazione Generale Italiana Lavoratori. <http://www.cgil.it> . Accessed October 2001.

Diamanti, Ilvo. Il Male del Nord . Rome: Donzelli, 1996.

Economist Intelligence Unit. Country Profile: Italy. London: Economist Intelligence Unit, 2001.

Embassy of Italy in the United States. <http://www.italyemb.org> . Accessed October 2001.

ISTAT. Rapporto sull'Italia. Bologna: Il Mulino, 2000.

Permanent Mission of Italy to the United Nations. <http://www.italyun.org> . Accessed October 2001.

Randlesome, Collin. Business Cultures in Europe. Oxford: Butterworth-Heinemann, 1993.

Sassoon, Don. Contemporary Italy: Economy, Society, and Politics since 1945. London and New York: Longman, 1997.

Sechi, Salvatore, editor. Deconstructing Italy: Italy in the Nineties. Berkeley: University of California Press, 1995.

U.S. Central Intelligence Agency. World Factbook 2001. <http://www.odci.gov/cia/publications/factbook/index.html> . Accessed September 2001.

U.S. Department of State. Background Notes: Italy, July 2000. <http://www.state.gov/www/background_notes/italy_0007_bgn.html> . Accessed October 2001.

U.S. Department of State. FY 2001 Country Commercial Guide: Italy. <http://www.state.gov/www/about_state/business/com_guides/2001/europe/index.html> . Accessed October 2001.

Welcome to the Italian Trade Commission Web Site. <http://www.italtrade.com/ice/index.html> . Accessed October 2001.

—Francesco Cavatorta

CAPITAL:

Rome.

MONETARY UNIT:

Italian Lira (L). One lira equals 100 centesimi. There are coins of 5, 10, 20, 50, 100, 200, 500, and 1,000 lire. There are notes of 1,000, 2,000, 5,000, 10,000, 50,000, and 100,000 lire. The lira will be replaced in January 2002 by the euro, the new unified currency of the European Union (EU). One euro will be worth 1,936.27 lira at a fixed exchange rate. All lira coins and bills will disappear, and by June 2002 only euros will be in circulation.

CHIEF EXPORTS:

Engineering products, textiles, clothing, production machinery, motor vehicles, transport equipment, chemicals, food, beverages, tobacco, minerals, non-ferrous metals.

CHIEF IMPORTS:

Engineering products, chemicals, transport equipment, energy products, minerals, non-ferrous metals, textiles, clothing, food, beverages, tobacco.

GROSS DOMESTIC PRODUCT:

US$1.273 trillion (purchasing power parity, 2000 est.).

BALANCE OF TRADE:

Exports: US$241.1 billion (f.o.b., 2000). Imports: US$231.4 billion (f.o.b., 2000).