Spain’s positive investment paradox

foreign investors, prosperity, corporate tax, exports, economy, Spanish corporate debt, optimism, corporate law firm, Argali Abogados, That Spain may have some way to go before it can claim full financial recovery could be exactly what makes it so attractive to foreign investors.

It’s something of a paradox but one very much worth looking at. It’s precisely because Spain is taking measures to continue to fight its way back to full prosperity that it is being looked upon so favourably.

The country attracted attention for all the wrong reasons when its debt to DCG more than doubled to 90 per cent in 2013 from 40 per cent in 2008. But now it’s gaining increasing respect for how it’s pushing back in a highly pro-active manner.

Huge overhauls have been the order of the day and Spain hasn’t shirked from the task. It has been rewarded with GDP growth rate of 3.2 per cent, far outstripping the rest of Europe and very close to what it was enjoying in 2006 when the GDP rate of growth was at a little over four per cent.

MARKET REFORMS

In 2012, Spain’s labour market was reformed by Rajoy with the effect that, for better or worse, it became less expensive for companies to fire permanent workers. He also put tax reforms in place to give a big hand to Spain’s competitiveness which saw corporate tax lowered from 30 per cent to 25 per cent this year.

However, not all the credit can be placed in the government’s hands as external forces have meant a weaker Euro which has helped Spain in its exports while lower oil prices also helped as all products of this type are imported.

Risks are still around but Spain has attractive opportunities in government bonds, equities and corporate debt while the overall economy is continuing to perform well. Not only that, but given the growth discussed, the economy is in a good position to respond quickly to any improvements in growth in other countries. Such growth could see Spanish firms benefit almost immediately.

Corporate bond funds and global bond funds usually carry some aspects of Spanish corporate debt. Much of this is issued in some way by the mega-corporations of Banco Santander, BBVA and Telefonica which all feature on NASDAQ. These are all highly rated and so the corporate debt they have hold of, which is accessible to foreign investors, can be good places in which to find positive results, mostly through mutual funds.

UNMUDDYING THE WATERS

However, moving forward, uncertainty is not something which usually attracts investors and with the Spanish government still not yet entirely fully formed following the recent elections, many may well be waiting for things to settle down and to know which way the country is going to go before deciding to take up any opportunities. But once the way has become a little clearer, investors could jump in to add to their portfolios, continuing Spain’s upward trend of investment. Santander believes flexibility and adaptability are two of Spain’s most attractive qualities in the financial field which, if true, gives cause for optimism.

For more information, please contact corporate law firm Argali Abogados.

 

 

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