Foreign Direct Investment:: Country Risk Assessment of Spain

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Table of Contents

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A.Introduction 3
B.Political Indicators 4-11

C.Economic Indicators 12-18

D.Social Indicators 19-23

E. Overall County Total 24

F.Works Cited 25

A. Introcution

Spain's powerful world empire of the 16th and 17th centuries ultimately yielded command of the seas to England. Subsequent failure to embrace the mercantile and industrial revolutions caused the country to fall behind Britain, France, and Germany in economic and political power. Spain remained neutral in World Wars I and II, but suffered through a devastating Civil War (1936-39). In the second half of the 20th century, it has played a catch-up role in the western international community. Continuing concerns are large-scale unemployment and the Basque separatist movement.

Spain's population density, lower than that of most European countries, is roughly equivalent to New England's population density. In recent years, following a longstanding pattern in the rest of Europe, rural populations are moving to cities. Spain has no official religion. The constitution of 1978 disestablished the Roman Catholic Church as the official state religion, but still recognizing the role, it plays in Spanish society. More than 90% of the population is at least nominally Catholic.

Through out the risk assessment, ratings are given before the risk indicator summary. These rating are given for current status and a status five years from now. Please keep in mind that the scale is measured from 1 – 7, 1 being the best and 7 being the worst.

B. Political Indicators
1.Political StabilityCurrent Rating:2
Forecast 5 Years:3
Right now under the Jose Maria Aznar Lopez's administration free market enterprises are being advocated to boost the economy. The government intends to make further progress in changing labor laws and reforming pension schemes, which are key to the sustainability of both Spain's internal economic advances and its competitiveness in a single currency area. Adjusting to the monetary and other economic policies of an integrated Europe - and further reducing unemployment - will pose challenges to Spain in the next few years.

Political tension in the Basque Country has eased tangibly since the mainstream Basque Nationalist Party (PNV) achieved its greatest ever victory in the regional election on May 13th. The mainstream political parties have acknowledged the PNV's unequivocal victory and have signalled a more conciliatory approach to addressing the region's problems, raising hopes of a gradual return to political "normality" over the next few years.

In the coming years many stabilty issues may or may not be worked out. The biggest might be the Basque question. Jose Maria Anzar is not really going after that like a real leader should but excels in other areas. Their rating will decrease some in the comping years when a new president is elected.

2.Public Policy Imapcting Foreign Direct InvestmentCurrent Rating: 3 Forecast 5 Years:3
Policies and regulations regarding domestinc and foreign businesses have a major impact. Recently Spain has been moving to open up so competition can thrive and help markets grow. Prime Minister Jose Maria Aznar set the stage by trimming the role of the state, embracing free markets, and privatizing state companies over the past four years. His all-out effort to slash Spain's soaring budget deficit and join the single European currency has paid rich dividends in access to capital markets. With Spain in the euro zone, the country's corporate chiefs can tap the bourses of an entire continent to finance their big foreign acquisitions. That was impossible before the euro's launch, when Spanish companies were bound to the volatile peseta and domestic exchanges.

Depending on who is elected in the next election will determine if programs that were implemted now will contiue or not. Policy that...
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