Spain - Future trends

Spain is likely to experience further liberalization of markets and privatization in the sectors of telecommunications, defense, energy, transportation, and aerospace. In order to attract more foreign investors, the government will likely institute more labor law reform with the aim of increasing the flexibility of the labor market. Such reforms would result in lower salaries and more precarious forms of employment, which may also have negative social repercussions. Given increased economic and monetary integration in the European Union, it is likely that Spain will benefit in terms of its growth. In fact, economists project growth in telecommunication equipment, service markets, environmental services, and equipment and agriculture. Moreover, linguistic and historical links to Central and South America could increase the influence of Spanish firms in these geographical areas, with reciprocal investment by Latin American business leaders in Spain. Spanish representatives in the European Commission will play a key role in negotiating trade agreements between the EU and Latin America.

There are 3 main challenges that Spain faces in the next decade: 2 are at the domestic level and one at the EU level. First, illegal immigration and the high unemployment rate will continue to offer serious problems. Illegal immigration from Northern Africa to the South of Spain has become an increased focus of attention, especially considering that many die in their attempt to come to Spain. This, coupled with the fact that many illegal immigrants work in the black market, will continue to increase social tensions in a country that already has one of the highest unemployment rates in the industrialized world.

The second main challenge deals with eradicating the Basque terrorist group ETA. The group's activities are not contained to the Basque Country, which means that businesses in targeted metropolitan areas like Madrid, Seville, and Barcelona, are significantly and negatively affected. The threat of terrorist activity may likewise discourage foreign investors from locating their business in Spain. Although the Interior Ministry has made recent attempts to crack-down on ETA's activities, the terrorists' strong infrastructure and continued activities make it doubtful that an indefinite ceasefire is on the horizon.

The third main challenge facing Spain relates to its compliance with future EU initiatives. Spain has generally accepted EU deregulatory policies (that is, policies which attempt to discourage barriers to trade and prevent anti-competitive practices in the free-market) and economic and monetary policies (that is, Economic and Monetary Union and the Single Currency). However, EU policies which attempt to replace national legislation in areas such as the environment may continue to offer challenges. Further, policies which attempt to increase the size of the Union may be met with caution by Spain; enlargement may mean a slow down in structural funds flowing into Spain and movement of foreign investors presently in Spain to other low-paying, better educated, labor markets in Eastern Europe. Notwithstanding these potential challenges, Spain will continue to be one of the engines behind deeper integration and, along with Germany and France, will attempt to ensure that the EU remains an important player in the world economy.

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