Key Facts

Country and capital : Full name Capital city Government : Government type Head of state Head of government Population : Currency : GDP per capita (PPP) : Demographic details : Ethnic composition Major religions Country area Language : Exports :
Mediterranean and Nordics Roman Catholic (94%) and Others (6%) 499,542 sq km Castilian Spanish (official), Catalan, Galician and Basque. Machinery, motor vehicles, foodstuffs, pharmaceuticals, medicines, and other consumer goods Machinery and equipment, fuels, chemicals, semi-finished goods, foodstuffs, consumer goods, measuring and medical control instruments Parliamentary monarchy King Juan Carlos I Prime Minister Jose Luis Rodriguez Zapatero 40.5 million Euro $33,700 Kingdom of Spain Madrid

Imports :

Map of Spain

Introduction
The country analysis report on Spain provides a wide array of analytical inputs to analyze the countrys performance, and the objective is to help the reader to make business decisions and prepare for the future. The report on Spain analyzes the political, economic, social, technological, legal and environmental (PESTLE) structure of Spain. The report provides a holistic view of Spain from historical, current and future perspective. Insightful analysis on critical current and future issues is presented through detailed SCPT (strengths, challenges, prospects and threats /risks) analysis for each of the PESTLE segments. EU membership has given the country an opportunity to undertake measures to meet the environmental and technological standards of its EU peers. The countrys performance on environmental indicators, despite lagging behind other EU nations, has shown improvement. PESTLE analysis of Spain identifies issues that affect the countrys performance through the prism of current strengths (strengths), current challenges (weaknesses), future prospects (opportunities) and future risks (threats).

PESTLE Analysis

P E S T L E

olitical Factors conomical Factors ocial Factors echnological Factors egal Factors nvironmental Factors

Political Analysis
Spains transition from monarchy to democratic nation involved numerous political upheavals. After the French and British rule, the nation passed into a dictatorial regime under the leadership of a fascist dictator, General Francisco Franco. After Francos death, Spain embarked on the path to democracy, and a modern constitution based on rules of law was promulgated in 1978. The initial years of democracy were dominated by two distinct ideologies; those of the center right PP, and those of the center left PSOE. The PSOE received popular support in the early years of democracy as it was seen as a viable alternative to the PP, whose image was sullied because of its perceived closeness to Francos regime. After failing to win in first four consecutive elections, the PP emerged as the largest single grouping in 1996 elections, allowing it to form a coalition government with some smaller regional parties. In 2000, leveraging strong economic growth, the PP returned to power with an absolute majority. Despite its economic successes, the PPs two-term Prime Minister Jose Maria Aznar has seen his domestic popularity decline due to his support for the USs Iraq policy. The PSOE came to power in the 2004 and 2008 elections under the leadership of Jose Zapatero. The new government initiated policies for economic reforms along with the process of fiscal discipline. The economic recession of the country has put tremendous pressure on the survival of the government because of declining public support. The ruling partys relation with its coalition partners has been under strain too. In order to tackle the deteriorating scenario as a result of credit crisis, Prime Minister Zapatero took direct control of the economic policies, which is likely to continue for some time.

Spain key political events since 1935

Spain has been successful in overcoming its dictatorial past and now has well established democratic principles in place. The country's EU membership has bound the government to reform its economic and social policies. The country assumed the EU presidency in January 2010 and got off to an inauspicious start. In early January 2010, Prime Minister Zapatero launched a proposal that the EU should consider imposing "corrective measures" on countries that fail to meet commonly agreed economic objectives. This met with a dismissive response from a number of EU member countries and widespread skepticism from international media, which have questioned whether it is appropriate that Zapatero should be leading plans for an economic recovery program for Europe, given the poor state of the Spanish economy.

Economical Analysis
Spains economy, which was underdeveloped until the 1980s, began a period of growth when the country became a member of the EU in 1986. Subsequently, the government initiated a number of economic reform programs and initiated fiscal discipline measures to meet the objectives set under the Maastricht Treaty. Spains economy has shown steady progress since the 1990s, driven primarily by mass tourism and European subsidies. In fact, since the mid-1990s Spain outperformed the rest of the Eurozone, particularly the larger countries. Economic growth between 1997 and 2000 was above 4%, but declined to 3.5% in each of the years during 200103, before recovering again. Despite the growth the country has not been able to create enough employment opportunities and the level of unemployment remains one of the highest in the Eurozone. The economy lost its momentum and began to decline in 2008. Its dependence on real estate aggravated the impact of global financial turbulence, which started with the US sub-prime crisis. The speculative price rises in the real estate market and the property boom came to an end in 2007. The economic crisis deepened in 200910 following weak domestic demand and rising inflation. The government has taken a number of initiatives, including increased public sector spending to revive the sliding economy. However, there is a need for large scale structural reforms or else the government will be in deficit once again.

GDP and GDP growth rate in Spain, 2003 (real GDP at constant 2000 prices) :

GDP composition by sector : The services sector is the major contributor to the economy. Its share of GDP was around 70.7% in 2009. This is also the fastest growing segment, followed by manufacturing and agriculture. During the same year, the industrial sector contributed around 26.8% of GDP and agriculture contributed the remainder.

GDP composition by sectors, 2009 :

Agriculture Agriculture was a dominant sector of the Spanish economy until 1945. Its significance gradually declined in the aftermath of industrialization. During the 1950s, there was large scale migration to cities as food prices increased rapidly and the surplus labor pool began to shrink. With increasing industrialization, the share of agriculture declined. Agriculture accounted for 23% of GDP in 1960, 15% in 1970 and for 5% by 1990. In 2009, its share stood at 2.5%.

Industry The industrial sector accounted for around 26.5% of GDP in 2009. After a decline in 200102, the industrial growth picked up during 200306. Industrial activities slid in 2007. Initially, the focus was on the production of goods for domestic consumption, and on intermediate products linked to the infrastructure and construction services, but gradually the sector became broad based, with the inclusion of goods for export and capital goods. Since the last quarter of 2007, there has been a reduction in capacity utilization in the manufacturing sector, which is an indication of a slowdown in investment. Industrial output grew at a rate of 3.15% in 2008 compared to a peak of 10% in 2006. In 2009, the industrial sector was hit due to recession and the industrial output contracted by 2.75%. Services The services segment is the most significant sector of the Spanish economy, contributing around 70% of the GDP. In the services sector, retailing, tourism, banking and telecommunications are the most important contributors. The tourism sector is the largest foreign exchange revenue earner for the Spanish economy. The services sector growth trend was similar to manufacturing, as it consistently grew during 200105, with the exception of 2003, when the growth rate declined. Services sector growth during the decade reached its peak in 2005, at a growth rate of 8.4%. However, with the global slowdown conditions deteriorated and the services sector began to slow in 2008, recording a growth of only 4.5%. The services sector contracted by 4.3% in 2009.

Social Analysis
The social issues in Spain are similar to many European nations as it is facing the key challenges of an aging population and unemployment. The birth rate has been continuously declining and there are fewer people entering the work force. The Spanish education system has undergone significant reform processes, which has led to its above average performance in terms of tertiary education. Furthermore, the economic recession of the country will lead to deterioration of its social security expenditures as the government finds its finances coming under pressure. Education

Spain has a literacy rate of 97.9% for the total population. While the male literacy rate is at 98.7%, the female literacy rate is slightly lower at 97.2%.

Healthcare

Spain spent around 7.37% of GDP on healthcare in 2008, which is below the 9% average level within the EU. In 2009, it increased to 7.99%. The country's expenditure on healthcare in absolute terms and as a percentage of GDP has been increasing. Healthcare is being financed mainly through the public and private sectors; however, the public sector is still the dominant player, with nearly 70% of the total contribution. Private healthcare represents 30% of the health sector in Spain with a total of 445 hospitals in the country.

Technological Analysis
Spain has been slow to adopt technological advancements compared to the other EU countries, although policy measures have been undertaken in this regard. Spain ranks 16th on the European innovation index in a list of 27 nations. Although it performs well in terms of knowledge creation, the innovation climate is not particularly productive. The situation has arisen because of the larger role of the public sector with respect to R&D. The private sector has limited participation in enhancing R&D levels.

The total expenditure on R&D as a percentage of GDP in 2008 stood at around 1.2%. Spain aims to reach a level of 2% by 2010, which is well below the 3% target fixed by the Lisbon agreement for the EU nations. It is expected that the government's initiative under the INGENIO 2010 program will help in raising private sector expenditure on R&D to 55% of the total investment by 2010, as well as improving the overall innovation climate of the nation. Information, communication and technology (ICT) The usage of IT communications has been picking up in Spain. The Spanish communications equipment market generated total revenues of $521.2 billion in 2008, representing a compound annual growth rate (CAGR) of 9.7% for the period spanning 200408. In 2013, the Spanish communications equipment market is forecast to have a value of $577 million, an increase of 10.7% since 2008. Electricals and electronics retailers proved the most lucrative distributors for the Spanish communications equipment market in 2008, generating total revenues of $249.8 million, equivalent to 47.9% of the market's overall value. The Spanish software market generated total revenues of $4.8 billion in 2009, representing a compound annual growth rate (CAGR) of 7.8% for the period spanning 20052009. Cross-industry and vertical application sales proved the most lucrative for the Spanish software market in 2009,

Renewable energy Spain is second in the world after Germany in terms of total installed wind capacity and is fourth in Europe in terms of the use of solar energy, having a 6% market share on the continent. With respect to bioenergy, Spain is first in bioethanol production, fourth in biogas production and fifth in terms of biofuel consumption in Europe. The government shifted its focus to renewable energy under the Promotion of Renewable Energy plan (200510). The government also approved the Action Plan for the Spanish Strategy of Energy Efficiency to increase investment in renewable energy technology. The government was working towards achieving the target whereby renewable energy will account for 29% of total power generated by 2010. It succeeded in achieving its target by 2009. R&D expenditure The R&D expenditure in Spain was 1.26% of GDP in 2007 and the government aims to reach 2% by 2010. The INGENIO 2010 program also encourages the private sector to increase its contribution to R&D expenditure to 55% of total investment by 2010. The level of expenditure on ICT as a percentage of GDP is targeted to reach 7% by end of 2010. In October 2009, the Ministry of Science and Technology allocated E50 million ($73 million) for bio-medicine R&D projects within six different campuses in Madrid, Cataluna, Andalucia, Comunidad Valenciana and Galicia. The main objective is to improve Spain's position as an R&D leader within the EU. Projects are expected to emphasize synergies between the sectors of education, investigation, innovation and production. According to the EIS 2008, Spain was ranked 16th within the EU in terms of innovation.

Legal Analysis
The Spanish legal system owes its origin to the constitution of 1978. The country has an independent judiciary, which is free from other branches of government. There are four categories of courts: civil, criminal, court and social. The federal system of governance is also reflected in the judiciary structure. For jurisdictional purposes, Spanish territory is divided into municipalities, judicial districts, provinces and ACs. The ACs have wide-ranging legislative and executive powers. After assuming EU membership, the Spanish government initiated legal reforms to ensure integration with the union. Rates of taxes have been reduced, investment regulations have been eased out and hitherto restricted sectors are being opened up to encourage private investment. Nevertheless, the government interference in economic matters continues to exist, which makes economic decision making rigid. Income tax Individual residents in Spain have to pay personal income tax. A taxpayer is considered to reside in Spain if he or she spends more than 183 days in the country during a calendar year, or if employed there. For tax rates, there is both a general scale and a regional scale. The minimum combined rate for income up to E17,707.20 is 24%, while the marginal combined rate for income from E53,407.20 and above is 43%. Spain has entered into double taxation agreements with all European nations.

Structure of the system The Supreme Court is the highest body in the judicial pyramid, with authority over all legal issues except constitutional questions. The judicial system is controlled by the General Council of the Judiciary (CGPJ; Consejo General del Poder Judicial,). The CGPJ is an independent government body responsible for the power of the judiciary and it has jurisdiction over the whole country. It comprises 20 members and the president, who is also appointed as the president of the Supreme Court. The members are proposed by Congress and the Senate. Twelve of its members are judges and magistrates of all judicial categories, and eight members are lawyers and other jurists of acknowledged competence with more than 15 years of professional practice.

Environmental Analysis
In the policy-making process, the environment emerged as an important topic after Spain became a member of the EU. The associated legislative process gained momentum after the formation of the ministry of environment in 1996. Spain has participated in important environmental agreements and is committed to meeting its obligations. The country has increased its international commitments to help improve the climatic conditions of underdeveloped countries, particularly in the Latin American region. Both the national and regional governments are responsible for the legislation and implementation of environmental directives. After the continued efforts of the government coupled with participation from the private sector, the country has met with only partial success in improving its environmental conditions. The new strategy for sustainable development is intended to speed up the process of meeting the countrys Kyoto Protocol targets, which require it to limit its emissions by a maximum of 15% during 200812, compared with 1990 levels. In the absence of more stringent measures and the current level of high emissions, the government may fail to achieve the target. Environmental impact Spain has failed to perform impressively on environmental indicators; its GHG emissions increased by 49% during 199004, which was one of the highest rates among the signatories of the Kyoto Protocol. After increasing for a long period, GHG emissions fell by around 4% in 2006. Spain accounts for 1.1% of global emissions, which implies an average of 7.6 tons of CO2 per person.

Carbon dioxide emissions in Spain, 200203.

Copenhagen conference on climate change The United Nations Framework Convention on Climate Change (UNFCCC) sets an overall framework for intergovernmental efforts to tackle the challenge posed by climate change. It recognizes that the climate system is a shared resource whose stability can be affected by industrial and other emissions of carbon dioxide and other greenhouse gases. The convention has a universal membership, with 192 countries having ratified the convention. The EU remains firm in its commitment to cut greenhouse gas emissions by 20% by 2020 and will stick its promise to provide E7.2 billion to aid developing nations in their efforts to fight climate change.

A Project report on

PESTLE ANALYSIS OF SPAIN

Submitted to

SINHGAD INSTITUTE OF MANAGEMENT, PUNE

By

NEHA BHATNAGAR (Roll no. 18)

Index
1. 2. 3. 4. 5. 6. 7. 8. 9. Introduction Key Facts Map of Spain Political Analysis Economical Analysis Social Analysis Technological Analysis Legal Analysis Environmental Analysis