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A sound investment
The Euro Zone

A sound investment

Foreign investors have become so accustomed to governmental deadlocks and zombie administrations in Spain that they simply don't notice them anymore, writes Mark Nayler

Mark Nayler


Friday, 19 January 2024, 17:43


Pedro Sánchez was in the Swiss mountain town of Davos this week, to attend the World Economic Forum - a five-day conference during which business leaders and politicians talk about money, the environment and technology, sometimes while walking about in the snow. The PSOE leader gave a fairly bland speech (although delivered in excellent English), but one imagines the real purpose of his trip was to assure Bill Gates and the CEOs of Siemens, Sanofi and Fujitsu, all of whom he met on Wednesday, that his self-serving amnesty deal with Catalan separatists shouldn't put investors off Spain.

Foreign investment in Spain reached 34 billion euros in 2022, the second-highest it's been since the relevant records were started in 1993. The country's minority, Socialist-led government wields this statistic as proof that nothing it has done since coming to power in 2018 has put companies and High Net Worth individuals off pumping their cash into the Spanish economy - which up until 2022 was not an unreasonable claim to make. But now we're in 2024 and things have changed - or have they?

Last summer, Sánchez held a snap election, which he lost to the Conservatives. Spain then entered another prolonged period without a government, which only came to an end in November, when 'Mr Handsome', as he's often cringingly called by foreign media, struck a deal with Catalan separatists. The amnesty pact caused protests all over the country - 70% of Spaniards thought it was a bad idea - and was criticised by the PP and EU. Spain, you might think, must have looked like a dodgy place in which to invest throughout the latter half of 2023. You'd be wrong.

During the first nine months of last year, a period which spanned the general election and its messy aftermath, foreign investment in Spain amounted to 21 billion euros, representing a growth of 7% compared to the 2018-2022 average. In the third quarter, during which Sánchez began negotiations with Catalan separatists, investment grew by 54% compared to Q2. It seems that the most recent bout of political chaos has not dented Spain's reputation as a safe place for investment at all.

On its website, the government offers one possible explanation for this remarkable state of affairs. "Spain offers security and certainty," it says, "thanks to the roll out of the ambitious investment and reform agenda that [it has] set in motion." Maybe, but during Q3 2023, when no-one knew whether that government was returning for a second term, hundreds of investors were happily embarking on new Spanish ventures.

I have an alternative explanation. Foreign investors, whether companies or individuals, have become so accustomed to governmental deadlocks and zombie administrations in Spain that they simply don't notice them anymore.





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