Immigrant-Rich Spain Creates Half of Euro Countries' New Jobs

[Strengthandhonour]

Immigrant-Rich Spain Creates Half of Euro Countries' New Jobs
By Ben Sills
Feb. 28 (Bloomberg) -- Vartan Avakyan, his wife and 18-year-old son arrived in Spain five years ago on tourist visas from Ukraine. They had no desire to see the Prado museum or sun themselves on the Costa del Sol.
Vartan, 43, says he went right to work as a bricklayer on a Madrid construction project. He's been moving from one building job to another ever since.
The Avakyans and thousands of other Ukrainian immigrants are just one of the streams running into Spain's river of immigrants. About 4.3 million foreigners now live in Spain, according to Prime Minister Jose Luis Rodriguez Zapatero's economic research office, with 3.6 million of them arriving in the past 10 years. That makes them 10 percent of Spain's population of 44 million. About 600,000 arrived in 2006 alone, the office says.
Since the government says only 3 million of Spain's residents are registered as foreign born, that means 30 percent of the immigrants are in Spain illegally.
They come from Eastern Europe and Russia, northern Africa and, in the greatest numbers, from Latin America. Like Avakyan, they are eager to take advantage of job opportunities in the country that has contributed 21 percent of the euro region's economic growth over the past six years.
The Spanish government and business community, strapped for both skilled and unskilled workers, have embraced the immigrants; Madrid gave more than a half million of them legal status in 2005.
The Spanish public has been less welcoming. In an October poll by Madrid newspaper El Mundo, more than two-thirds said the flow of new immigrants should stop. And 68 percent said African boat people seeking refuge in Spain should be intercepted by the Spanish Navy and sent home.
Immigrants Drive Growth
Foreign-born workers haven't just benefited from Spain's rapid expansion. According to a recent study, they created it. Miguel Sebastian, Zapatero's chief economic adviser, estimated in a report released in November that immigrants were responsible for more than half of Spain's 3.1 percent average annual growth during the past five years. Gross domestic product was up 3.9 percent in 2006.
Without the immigrants' contribution, Sebastian's report says, Spain would have merely matched the 0 to 2 percent rates of European Union countries like France and Germany.
As late as 1995, Spain was the sick man of Europe, with 23 percent unemployment. In 1993, the economy contracted 1 percent. Today, Spain is the continent's economic champion. Since 2002, it has created more than half of the 5 million new jobs in the 13-nation euro area, according to Eurostat, the EU's Luxembourg-based statistics office.
Growth Champion
Spain contributed more to growth in the euro zone in 2005 than any other country, adding 65 billion euros ($85 billion) to the economy compared with France's 51 billion euros and Germany's 34 billion. In 2006, Spain generated the second-highest growth, after France.
Rapid expansion creates booming financial markets. The Ibex 35, Spain's benchmark stock index, was the best performer among 18 West European indexes in 2006, gaining 31 percent. As of Feb. 27, the Ibex was up 1.9 percent this year.
Immigrants provide cheap labor for Spain's booming construction and services industries, Sebastian found. And as they work their way into Spain's middle class, they boost the economy by spending their savings on homes, cars, electronics and washing machines.
The Avakyans are good examples. Last year, the government awarded Vartan legal residency, and he was given a formal work contract for the first time by a local construction firm. He now earns about 1,000 euros a month, enough that he can begin to enjoy the benefits of Spain's boom economy.
Ukraine Out of Mind
He and his family rent a 30-year-old, three-bedroom apartment in Aluche, an immigrant-packed neighborhood near the Madrid zoo. They have a washing machine, dishwasher and microwave oven, items they never could have afforded in Ukraine. Vartan's wife, Lesia, 40, also works, as a cleaner, and the family is saving to buy an apartment.
The immigrant wave and the growth it has engendered have their economic downside, says Rafael Pampillon, head of the economics department at Madrid's Institute of Business. Spain's overheated economy, he says, has produced the third-highest inflation in the euro region, at 2.7 percent.
And because of its low-wage workforce, it ranks ahead of only Portugal and Slovenia in labor productivity. Spain's output-per-hour- worked was 89 percent of the European Union average in 2004 and 2005, according to Eurostat.
One danger behind Spain's immigrant deluge came dramatically to light on the morning of March 11, 2004, when terrorists bombed Madrid commuter trains, killing 191 people. Fifteen of the 29 men now on trial for carrying out the bombing are from Morocco, according to the Spanish National Court.
Terror Arrests
Seven men who blew themselves up when they were cornered by police after the attack were also from North Africa. Spanish police say they've arrested 268 Arabs since then on terror-related charges.
About 29 percent of Spain's prison population is made up of foreigners, up from 17 percent in 1996, the government says. Sebastian, now the Socialist candidate for mayor of Madrid, has made immigrants a campaign issue.
``All those that commit crimes should be deported,'' he said at a January campaign event in Aluche.
In the El Mundo poll, 72 percent of the 800 people surveyed said the number of immigrants was ``excessive.'' That compares with 60 percent in a November 2005 poll of 2,485 people by the Center for Sociological Research. The figure in a May 2003 Sociology Center survey, the last before the March 11 attacks, was 48 percent.
`Too Many Immigrants'
``There are too many immigrants coming for my taste,'' says Millan Lopez, 46, as he pours cement at the site of a new tunnel for Madrid's inner ring road. His fellow workers include Dominicans, Ecuadorians, Guineans, Moroccans and a Portuguese. ``It's positive now because there's work for everyone,'' Lopez says. ``The problem will come when we're short of work.''
The single most important engine of Spanish growth has been construction. The Ibex's 2006 gains were led by Metrovacesa SA, Spain's biggest property developer, which shot up 129 percent, and Sacyr Vallehermoso SA, its fifth-largest construction company, which rose 124 percent.
Spanish builders started work on 800,000 new homes last year, according to a report by JPMorgan Chase & Co. That's almost three times the EU average, the bank says. Spain is also Europe's biggest cement market, consuming 66 percent more than Germany, whose economy is almost three times as large, the Spanish cement makers' association says.
Cash-Rich Companies
``There is so much money around that everybody wants to invest in everything,'' says Jose Falgas, a partner at investment bank Socios Financieros SA. ``We're seeing people who had a large weight in construction switching to other sectors.''
Cash-rich Spanish companies capitalized on historically low interest rates to spend $281 billion during the past three years on mergers and acquisitions, according to data compiled by Bloomberg. As a result, local, family-controlled companies such as Acciona SA and Grupo Ferrovial SA have morphed into diversified multinational businesses.
Ferrovial used a long chain of acquisitions to increase its revenue to 3.9 billion euros in the third quarter of 2006, from 1.1 billion euros in the same period five years earlier, company reports say. Last year, it bought U.K. airport manager BAA Plc. In the past four years, it has also bought Zurich-based Swiss airport operator Swissport International AG, London-based consultant and transport services provider Amey Plc and Barcelona-based waste disposal firm Cespa SA.
Global Wind Power
In January 2006, Acciona bought 93 percent of Alava-based wind power company Corporacion Eolica Cesa SA for 973 million euros, making Acciona the world's biggest developer and builder of wind farms. It's also expanding into Australia and China. In the third quarter of 2006, its revenue was 1.7 billion euros compared with 863 million for the same quarter of 2002.
``There's a lot more vibrancy in Spain than in other European countries,'' says Sandra Petcov, an economist at Lehman Brothers Holdings Inc. in London. ``Spain has managed to implement a lot of reforms. It's a much more dynamic environment.''
The immigrants have followed the jobs to Spain. Some, like the Avakyans, come on tourist or student visas and overstay. Thousands more pour onto the beaches of southern Spain after making a perilous trip across the Mediterranean on rickety boats from Africa. In 2006, at least 1,167 would-be immigrants died in the attempt, according to the Andalucian Association for Human Rights.
In 2005, hundreds made a desperate effort to crash through border fences separating Morocco from Spain's two remaining African enclaves, Ceuta and Melilla.
Reversal of Fortune
It wasn't long ago that it was Spanish workers making the trek to foreign lands. Under dictator Francisco Franco, who ruled from 1939 until he died in 1975, the state-controlled economy was a backwater, and tens of thousands of Spanish men flooded across the Pyrenees to find work, settling in France, Germany, Switzerland and beyond, wrote Nieves Ortega, a researcher at Granada University, in a February 2003 paper.
Spain became a favorite immigrant destination itself in the years before it joined the EU in 1986. Today, the Spanish government and the business community argue that the strong flow of outsiders is crucial to continued economic growth. In 2005, Zapatero gave a six-month amnesty to immigrants working illegally in Spain; as a result, about 600,000 won work permits.
Anti-immigrant politicians in Spain and France have denounced the amnesty. In France, the lead critic is former interior minister and presidential candidate Nicolas Sarkozy of the Union for a Popular Movement, who has complained repeatedly that Spain's immigration policy means thousands of Spain's illegal aliens end up in France.
Risk Takers
Angel Estrada, an economic adviser to Zapatero who helped prepare last year's report on immigration, says the government's strategy is to try to capitalize on the economic potential of the immigrant population.
``They are the most entrepreneurial; they are people who are capable of taking risk,'' he says. ``Those who've arrived tend to improve their position, and the second generation normally achieves a level of training much higher than their parents.''
The Avakyans fit the pattern. Vartan's son, Armand, spent last summer painting apartments side by side with his father, earning 50 euros a day. He's studying computer network engineering at a local vocational college and plans to pursue a career in information technology.
``I love computers,'' Armand says. ``Within 10 years, I want to have my own business.'' He spent some of his summer earnings on a digital camera and laptop computer.
Labor Shortage
The government is actively searching for workers to address Spain's labor shortages in construction and agriculture. The cabinet announced a plan on Jan. 12 to set up recruitment offices in Ecuador and Ukraine to send economic migrants through legal channels. Local officials and farmers in the southern province of Huelva are recruiting Moroccan women for the strawberry harvest.
Companies are pursuing a similar strategy. Grupo Corporativo Ono SA, a Spanish phone company, is recruiting Argentines to work in sales and customer support. Banco Popular Espanol SA, Spain's third- largest bank, is opening 40 new branches aimed at foreign-born clients, and is recruiting immigrants to staff them.
Government and business leaders say key indicators suggest that Spain's boom will continue this year and next. Exports jumped 11 percent in 2006 from a year earlier, according to government statistics.
Productivity growth, as measured by output per hour worked, accelerated to 1 percent in the fourth quarter from 0.8 percent in the third quarter and 0.4 percent at the end of 2005. Manufacturers' investments in new equipment grew at an 11 percent annual pace in the fourth quarter after holding at around 9 percent for nine quarters.
Flawed Economic Model
The Institute of Business's Pampillon finds Spain's immigrant-driven strategy flawed. ``It's a third-world economic model,'' he says. ``Growth based on immigration doesn't allow space for growth based on technology because businessmen have little incentive to substitute technology for labor.''
Pampillon argues that the ``virtuous circle'' of Spain's economy -- employment boosts spending, spending fuels growth and growth generates employment -- could easily be thrown into reverse if the construction boom slows.
Diana Choyleva, an economist at Lombard Street Research Ltd. in London, predicts that the end of the housing boom will also be the end of Spain's boom. ``You don't even need house prices to fall to have a big correction,'' she says. ``All you need is house prices to stop growing. Most likely, things are going to begin to unravel in 2007. We've already had a slowdown in house price inflation.''
Last In, First Out
Should Choyleva prove correct, it will probably be the immigrants who suffer most. ``We don't need to look very far to see that when things start to go wrong, the last entrants will be rejected,'' says Ana Maria Corral, head of the immigration department at the General Workers' Union, one of Spain's two biggest labor organizations. ``We need to work quickly and intensively on integrating society.''
For now, thousands of Latin Americans, Moroccans and Ukrainians continue to pour into Spain. And it's that diversity that's giving the country its economic strength.




source: Bloomberg.com: Exclusive

[Marulus]

A typical modern worldview: Ökonomie über alles.