(Bloomberg) — Close to Bilbao in Northern Spain, biotech firm Biolan designs and manufactures diagnostic products that are being used in more than 60 countries, including at factories owned by dairy giant Groupe Lactalis and Thai fish processor Thai Union Group Pcl.
It wasn’t always this way. When Asier Albizu co-founded the firm, it was a three-person business that supplied grape quality assessments to Spain’s wine industry. But as the domestic economy got stuck in a long-running slump after the collapse of a property bubble in 2008, domestic demand suffered, so Biolan looked elsewhere for business.
That international expansion is part of a transformation that’s taken place across Spain. For thousands of companies like Biolan, trade emerged as a glimmer of light after the crash left the country mired in recession and the banking system in need of a bailout.
Now, a decade and a half later, what started as a desperate reaction to an unprecedented crisis has led to a permanent shift. The number of firms engaging in regular cross-border trade has grown almost 30% over the last decade, according to government figures. More recently, services exports have picked up, adding to the resilience of the economy. Spain is forecast to grow faster than the euro area this year, extending a run of outperformance over the past decade.
“In the first years of the crisis, economists questioned, myself included, whether the increase in exports was permanent,” said María Jesús Fernández, a senior economist at think tank Funcas. “But then when the domestic economy revived, the exports were not lost, and that gain has been maintained.”
Spain’s economy is still heavily reliant on tourism, though exports of other services have improved, including areas like engineering, IT and cultural services, which have seen a take-off since the pandemic. Personal, cultural and government services are up about 70% since 2019, while financial services have risen more than 40%.
The trade performance has helped to correct long-term imbalances. The current account is back in the black after decades in deficit. And figures last month showed non-tourist goods and services also posted a surplus in 2023.
El Ranchito, a visual effects firm based in Madrid, saw revenues boom in 2022, as movie and TV production rebounded after the pandemic.
The company, which worked mostly on Spanish film, TV and advertising when it was founded two decades ago, now does 80% of its work internationally. It’s portfolio includes high-profile shows “The Mandalorian,” “Game of Thrones” and “Stranger Things.”
Gonzalo Carrión, El Ranchito’s finance director, said better tax rebates “helped attract big producers like Netflix and HBO.”
Support from the government to encourage investment is key to further progress, particularly if Spain is to improve productivity and living standards, areas where it still lags behind many of its peers.
Because while Spain exported itself out of a crisis, it was partly built on the back of painful austerity.
And many are frustrated that they’re not sharing in the economy’s recovery, particularly after the post-pandemic inflation spike. Unemployment is close to 12%, relatively low investment has meant chronically weak productivity, and GDP per capita is below the euro-area average.
Such weaknesses are among the reasons Spain has been one of the biggest recipients of the European Union’s recovery aid — known as NextGenerationEU. Those funds will boost the economy, Bloomberg Intelligence forecasts, “if channeled to the right projects.”
Lucky Break
Biolan’s export success after the financial crisis was a mix of design and luck. As it saw customers cutting back on tests that weren’t deemed essential, it looked abroad for opportunity.
Then, after a winery visit in Chile, a chance meeting with a fish meal producer led to an unexpected alliance. The company was looking to upgrade its analysis equipment, and Albizu realized Biolan could supply it by making just a few tweaks to its existing technology.
He now sells to businesses across the fish supply chain, from tuna catchers in the Philippines to sardine exporters in Morocco. Last year, 85% of Biolan’s revenue came from outside Europe.
“Over the years we’ve greatly diversified in food markets,’ Albizu said. “From a sales point of view, we exported zero the first and second years, now we export 92% of our production.”
Other companies that were already geared towards foreign markets leaned more in that direction after 2008. Ormazabal, a maker of equipment for electric grids that began working abroad in the late 1980s, said this helped it as the domestic economy tanked.
“We accelerated our internationalization process, and that saved us,” Chief Executive Officer Jorge Gonzalez told Bloomberg. “We compensated for the drop in the national market.”
Since 2015, Spain has outpaced the euro area in economic growth every year bar one. The outlier is 2020, when the pandemic wiped out tourism, dealing a particularly heavy blow to the economy.
Expansion is forecast to slow this year, in line with a broad cooling across Europe and the globe. But at 1.7%, according to the latest Bloomberg survey of economists, Spain will still grow far faster than the euro region.
Meanwhile, the country’s trade success was highlighted recently by Luis de Guindos, who was economy minister during the early years of the post-crisis turnaround.
“The export capacity of the Spanish economy is surprising, how it has changed,” de Guindos, now vice president of the European Central Bank, told RNE radio. “Traditionally, Spain always had a trade balance deficit, and has had a continuous surplus since 2013, which shows that we are competitive, that we export.”
–With assistance from Thomas Hall and Macarena Muñoz.
©2024 Bloomberg L.P.
