(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.
OTTAWA – The parliamentary budget officer says the federal government likely failed to keep its deficit below its promised $40 billion cap in the last fiscal year.
However the PBO also projects in its latest economic and fiscal outlook today that weak economic growth this year will begin to rebound in 2025.
The budget watchdog estimates in its report that the federal government posted a $46.8 billion deficit for the 2023-24 fiscal year.
Finance Minister Chrystia Freeland pledged a year ago to keep the deficit capped at $40 billion and in her spring budget said the deficit for 2023-24 stayed in line with that promise.
The final tally of the last year’s deficit will be confirmed when the government publishes its annual public accounts report this fall.
The PBO says economic growth will remain tepid this year but will rebound in 2025 as the Bank of Canada’s interest rate cuts stimulate spending and business investment.
This report by The Canadian Press was first published Oct. 17, 2024.
OTTAWA – Statistics Canada says the level of food insecurity increased in 2022 as inflation hit peak levels.
In a report using data from the Canadian community health survey, the agency says 15.6 per cent of households experienced some level of food insecurity in 2022 after being relatively stable from 2017 to 2021.
The reading was up from 9.6 per cent in 2017 and 11.6 per cent in 2018.
Statistics Canada says the prevalence of household food insecurity was slightly lower and stable during the pandemic years as it fell to 8.5 per cent in the fall of 2020 and 9.1 per cent in 2021.
In addition to an increase in the prevalence of food insecurity in 2022, the agency says there was an increase in the severity as more households reported moderate or severe food insecurity.
It also noted an increase in the number of Canadians living in moderately or severely food insecure households was also seen in the Canadian income survey data collected in the first half of 2023.
This report by The Canadian Press was first published Oct 16, 2024.
OTTAWA – Statistics Canada says manufacturing sales in August fell to their lowest level since January 2022 as sales in the primary metal and petroleum and coal product subsectors fell.
The agency says manufacturing sales fell 1.3 per cent to $69.4 billion in August, after rising 1.1 per cent in July.
The drop came as sales in the primary metal subsector dropped 6.4 per cent to $5.3 billion in August, on lower prices and lower volumes.
Sales in the petroleum and coal product subsector fell 3.7 per cent to $7.8 billion in August on lower prices.
Meanwhile, sales of aerospace products and parts rose 7.3 per cent to $2.7 billion in August and wood product sales increased 3.8 per cent to $3.1 billion.
Overall manufacturing sales in constant dollars fell 0.8 per cent in August.
This report by The Canadian Press was first published Oct. 16, 2024.
