U.S. high-tech products should do well in Spain

U.S. High-Tech Products Should Do Well In Spain

American high-tech, high-value-added products should do well in the Spanish market throughout 1985. Although a stunning 35 percent depreciation of the peseta against the dollar over the past two years will probably result in a 10 percent drop in total U.S. exports for 1984 to $2.5 billion, most of the decline is being absorbed by price-sensitive agricultural and mineral products that are being sourced from other countries.

Spain will generate about 2.5 percent growth in its GDP during 1984, an impressive accomplishment compared to its past several years' average of zero. Foreign exchange holdings have also increased dramatically, rising in the first eight months alone by 40 percent to $15.6 billion. These gains, however, are the result only of increases in exports and tourist receipts. Domestic demand remains weak and unemployment high.

For 1985, the Spanish government is targeting economic growth of 3 percent, but only 1 percent is expected to be derived from exports per se. The socialist government expects to achieve the balance of its target by fostering an impressive growth in domestic investments of 5.5 percent, primarily in export-oriented industries. This is to be accomplished by making available a variety of financial incentives, by adjusting monetary policies, and by revising labor legislation.

Thus, Sapin offers American firms attractive opportunities for the sale of products and services needed by Spanish firms to improve their international competitiveness, as well as for investments and joint ventures, tapping the many incentives available for establishing operations there. The market segments discussed below warrant careful scretiny by U.S. exporters.

Computers, Peripheral Equipment and Parts--In 1984, Spain initiated a five-year program (the National Development Plan for Electronics and Informatics, known as the PEIN) that provides special tax benefits and financial assistance for the creation of an internationally competitive electronics industry. Special efforts will focus on computers (as well as electronic components, consumer electronic products, telecommunications, defense electronics, information processing, and medical electronics.) Both domestic and foreign firms are eligible for participation in the plan.

Nonetheless, imports will continue to dominate the fast growing computer, peripherals and parts market for the next several years. Imports, which should amount to $770 million for 1984, will probably reach $1.3 billion by 1987.

Because of the excellent reputation and capabilities of American-made equipment, U.S. computers and peripherals remain in demand, even with significant peseta price increases. The United States is Spain's leading supplier, enjoying a 29 percent share of the market. U.S. shipments could reach $227 million for 1984, and may touch $373 million by 1987.

Spain is, however, a very competitive market, and manufacturers from Germany, France, and Japan are trying hard to increase sales. U.S. firms will probably have to increase their marketing efforts in order to maintain their positions.

Electronic Components--Even though Spain hopes to increase local production of electronic components, the PEIN targets a 21 percent annual growth in electronic component imports to supply the near-term needs of the new electronic industry. Consequently, imports of components should total about $435 million in 1984, with the U.S. share expected to reach 13 percent, or $57 million. By 1987 the import market could be worth $780 million, with 20 percent ($155 million) of the total obtained from American suppliers.

Advanced U.S. technology should aid in combating competition from Germany, which has an 18 percent share of imports, and from Japan, which has rapidly increased its share to 14 percent.

Medical Equipment--Improving the quality of medical care is one of the Spanish socialist government's major objectives, leading the government to initiate a National Health Plan that is to last for the next several years. Although to government hopes to increase the share of the market supplied by local manufacturers, there will be ample opportunity over the next several years for American firms to export products, license technology, or to undertake manufacturing in Spain.

The medical equipment market enjoyed strong growth during the seven-year period ending in 1982, reaching a total of $177 million. By 1988 the market should be worth $247 million (in constant 1982 dollars), an increase of 40 percent.

Industrial Process Controls-- Spain is negotiating for entry into the European Economic Community on Jan. 1, 1986, and from that point will begin to lower tariffs to zero on products imported from EEC firms. These reductions will take several years to complete, and in the process should develop a healthy market for IPCs, since Spanish manufacturers must undertake major improvements in product quality and productivity, if they are to compete at home on equal pricing terms with firms from the EEC. Spain's 1984 consumption of process control instruments (broadly defined) will reach about $350 million. A total of $90 million will be obtained from the United States, 31 percent of all imports.

Demand in 1987 could reach $580 million (in constant dollars), with 30 percent ($170 million) obtained from American firms. Spanish needs will continue to be supplied primarily by imports for the next several years. Major competition comes from Germany, with a 20 percent import share, and the United Kingdom, with 10 percent. Increased marketing support is needed to defend the U.S. share, as the greater depreciation of the peseta against the dollar is placing American offerings at an additional disadvantage.

Additional information on these markets and on doing business in Spain is available by writing the Spain Desk, Office of Western Europe, Room 3411, U.S. Department of Commerce, Wash., D.C. 20230, tel. (202) 377-4509.

COPYRIGHT 1985 U.S. Government Printing Office
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