Doing Business in THE BASQUE COUNTRY FINANCIAL TIMES SPECIAL REPORT | Tuesday March 27 2012 www.ft.com/basque­country­2012 | twitter.com/ftreports Inside this issue Energy A new wave- Peace shifts power plant at Mutriku (right) highlights a big push in alternative technologies the focus to Page 2 Interview Gamesa chief Jorge Calvet has put global expansion on the agenda at Spain’s leading wind turbine maker Page 2 Profile Mondragon, one of growth and Spain’s 10 biggest companies, is a co-operative – and proud of it Page 2 Food and tourism Basque cuisine is important as a cultural export but is also a big attraction investment for tourists, who account for 5 per cent of GDP Page 3 Financial sector A three-way With Eta abandoning its foreign investors and seen as a tri- merger has strengthened Basque umph in Madrid, is regarded in the savings banks, bringing a stability armed struggle, the region Basque country itself as one more to match local prosperity Page 3 enters a new era in better step in a long peace process. “It’s fantastic news, though in day- Interview Socialist premier shape than the rest of to-day life of course there’s no big Patxi López says the end of Eta’s change,” says Mercedes Oleaga of armed struggle could unleash the Spain, writes Victor Mallet region’s full potential Page 3 Naider, a consulting firm. Ignacio Sánchez-Asiaín, director-general of Motor industry The Basque undreds of employees made Kutxabank, agrees. “Things have region is home to every part of redundant sounds like bad been changing for a while – it’s a the car production process and news for any economy, but process,” he says. “I think the declara- output includes the in this case it is a sign of tion of peace had more impact in Mercedes-Benz Vito light van Hpolitical progress: the Spanish interior Madrid than here.” (pictured) from ministry, following the example of the There remains a risk that extremist a plant at Basque regional government, has this splinter groups from Eta, akin to the Vitoria month laid off more than half the 789 “Real IRA” in Northern Ireland, will Page 4 bodyguards who protected officials try to launch bomb attacks or shoot- from the threat of assassination by the ings in defiance of the Eta leadership militant Basque separatist group Eta. and so maintain one of western To the delight of most of the 2.2m Europe’s last remaining separatist Bilbao by night: the Basque economy, though small, has proved remarkably resilient Dreamstime residents of the Basque country in conflicts. northern Spain, and to the relief of Basque politicians, however, are investors and business people once already shifting their focus from anti- In previous crises, the Basque econ- suffered less when it ended in 2007. high proportion of small and medium- Europe, was an early participant in menaced with death if they failed to terrorism to the new landscape of omy did not fare so well, sometimes “Up to now, it’s been a little less sized industrial companies in special- the industrial revolution, and boasts pay “revolutionary taxes”, Eta on democratic politics, in which radical, recording unemployment higher than serious, because exports have done ised areas such as machine tools, strong companies with local roots October 20 2011 announced the “defin- pro-independence groups – know as the rest of Spain. Today, however, the well,” says Mr Sánchez-Asiaín. Basque industry is comparable to the such as BBVA (banking), Iberdrola itive cessation” of its military opera- the izquierda abertzale or “patriotic post-Franco conversion of an economy Basques take pride in their culture much larger German Mittelstand, and (electricity), CAF (trains) and Gamesa tions after more than 800 killings in left”– are expected to build on earlier based on heavy industries such as of hard work and entrepreneurialism, indeed has many commercial ties to (wind turbines) – and the big Mon- half a century. successes now they are no longer steel and shipbuilding to one focused and are not averse to comparing its German counterparts. dragon co-operative group – in both Patxi López, lehendakari or premier banned for having links to Eta. on high technology and services is themselves favourably with those It helps that the Basque country, industry and finance. of the region, calls it “a new era” and And then there is the economic cri- largely complete. they regard as the more feckless linked by the port of Bilbao and the says: “We had 30 years in which abso- sis. By the standards of northern Bernabé Unda, regional industry inhabitants of southern Spain. With a nearby iron mines to northern Continued on Page 4 lutely everything was contaminated – Europe, unemployment in the Basque secretary, was once head of the big the economy and investment were country of more than 11 per cent of shipyard in Bilbao and recalls the threatened by the existence of the the workforce is worryingly high, but time when it had 5,000 employees. terrorist gang.” that is less than half the jobless rate Now it employs 5 per cent of that The defeat of Eta by Spanish and in Spain as a whole. number, relying on flexible subcon- French security forces has in fact The Basque economy, though small, tractors and specialising in complex, been inflicted on the separatists over has proved remarkably resilient since one-off vessels such as dredgers and many years. the collapse of Lehman Brothers back pipe layers. “People feel relief and satisfaction, in 2008, in spite of its dependence on “Our economic situation isn’t great, but not an explosion of happiness or the vulnerable automotive and renew- but it’s much, much better than that emotion,” says Iñigo Urkullu, leader able energy industries. Exports of the rest of Spain,” says Juan Carlos of the moderate Basque Nationalist reached a record €21bn last year. Martínez, editor of El Correo, the party or PNV. “In the past three The small but growing tourism Bilbao-based newspaper. years, we’ve lived without visible industry – with visitor arrivals of The parts of Spain most stricken by attacks, and with the belief that more than 2m – also broke records. the crisis are those where the housing things were moving towards the end Per capita income in the region in bubble was biggest, mostly on the of Eta, though there was extortion.” 2010, on a purchasing power parity Mediterranean coast. The Basque The October announcement, while basis, was 133 per cent of the Euro- country on the Bay of Biscay avoided obviously attractive to potential pean Union average. the home construction frenzy and so Global networking sharpens businesses’ foreign focus Delegations are now With one of its aims of the South American Overseas links accepted by the Spanish being to “strengthen rela- country’s leading electricity government, but when the tionships between US and providers. Embassy-like Basque community first Basque institutions, both BBVA, a bank with delegations go tried to establish the Brus- private and public”, the US Basque roots, has estab- sels office in the 1980s, the delegation noted in its lished itself as one of Mex- beyond forging region’s right to have repre- founding description that ico’s largest retail banks, cultural ties, says sentation overseas was the existence of the Bilbao while also owning a stake challenged in the national Guggenheim museum, and in Turkey’s Garanti bank. Miles Johnson constitutional court. its ties with New York’s Meanwhile, Gamesa, the This resulted in a de facto Guggenheim would be used wind turbine manufacturer, delegation being opened to build broader relation- and the workers’ collective The Basque country’s high that used a Basque govern- ships with the US city. conglomerate Mondragon, level of autonomy within ment-established company “This is an important way have significant operations Spain, which extends to col- called Interbask, which had to expand abroad,” Mr in China, among other lecting its own taxes, is also an office in Brussels. Echenique says. countries. reflected in its government’s By 1994, the challenge in “In the past few years, we A recent example of the separate foreign policy. the Spanish constitutional have sent representatives of region’s overseas promo- This is designed to pro- court had been rejected, the Basque government, tional activities was a trip mote the region’s political and the Basque regional with the support of the by the Basque government and business interests government was permitted Spanish government, to in October last year to abroad. to establish a formal delega- emerging market countries Texas. One of the most impor- tion in the Belgian capital. Patxi López, the lehen- tant planks in this strategy, Mr Echenique says that dakari or Basque regional adopted by the region’s suc- the all-time high figure for Delegations offer leader, announced a discov- cessive governments, has Basque exports, of €21bn in infrastructure to ery of shale gas in the been a network of embassy- 2011, is evidence that the Basque country of a possi- like permanent delegations region is succeeding in its businesses that ble 180,000 cubic metres, or in cities around the world. international strategy for want to expand enough to supply the region Serving to establish con- business. for 60 years at today’s con- nections with Basque While France remains the abroad or attract sumption levels. diasporas, and promote the largest foreign market for Two survey wells will be region’s culture and lan- the region, buying €4bn of inward investment drilled this year, to assess guage, these delegations products last year, Brazil the commercial and envi- also help to provide infra- and China are in the top 10, along with businesses, as ronmental viability of the structure to Basque busi- while Turkey, Mexico and well as to the Middle East shale gas reserves, by nesses that are seeking to Poland are in the top 20.