U.S. firms: 'get serious about Spain.'

U.S. Firms: "Get Serious About Spain'

I arrived in Madrid to take up my position as commercial counselor in early September. In the three busy months I've been in Spain I have received some striking "first impressions' of this truly surprising market-- surprising because, despite extensive commercial experience in many countries around the globe, I still was not prepared for the excitement of the Spanish market today. Nor do I believe that the American business community is sufficiently aware of the tremendous opportunities for U.S. products and services in Spain.

Construction cranes dot the skyline of every major city--and many smaller ones--in Spain. After stagnating for more than a decade, the economy took off in mid-1985 and registered 3.6 percent GNP growth last year. Official estimates of economic growth for 1987 have been raised repeatedly, with the latest figure set at 4.3 percent--the highest growth rate in Europe--as Spain rushes to catch up with the more developed members of the European Community. Spain joined the EC on Jan. 1, 1986, with a seven-year transition period through 1992 when the Spanish economy must be ready to compete with the rest of Europe. With 1992 in mind-- the year of the Summer Olympics in Barcelona and the World's Fair in Seville to celebrate the 500th anniversary of the discovery of the Americas--Spanish industry and business are racing to modernize their operations, upgrade services, and increase output.

Tariffs are coming down as a result of EC accession; consequently, imports have risen sharply--up 33 percent in the first eight months of this year. Imports of capital goods increased 50 percent during the first half of 1987, reflecting increased investment in plant modernization and new projects. Imports of consumer goods also are benefiting, as higher real wages and increased employment have boosted consumer purchasing power. Spanish consumers are demanding greater variety and higher quality products to fit their changing lifestyles. Although traditional values remain strong, Spanish society is undergoing many of the same changes (smaller families, working couples, etc.), experienced in other developed countries, creating opportunities for new products and services.

The Foreign Commercial Service in Spain hosted a franchising trade mission in Madrid during the first week of October and a Matchmaker mission in Barcelona for the computer and electronic components sector ten days later. Both missions drew a tremendous response from the Spanish. The companies that participated in each mission found their appointment schedules fully booked with serious Spanish businessmen, some of whom were ready to sign contracts on the spot.

Local business organizations, especially the Madrid and Barcelona Chambers of Commerce and Industry, bent over backwards to support our trade initiatives, including assistance in promoting the events, briefings, and receptions for mission participants. In Barcelona, the program included dinner in a 13th century palace; the dinner was particularly dramatic as it was held by candlelight because of a freak power outage. Overall, the reception in both cities could not have been warmer; most importantly, business was excellent. Several members of the Matchmaker had to stay on an extra day in order to satisfy the demand for appointments. The depth of interest in the franchising mission, which included businesses as diverse as cookies and aircraft parts, also was impressive, especially since franchising was virtually an unknown concept in Spain when FCS Madrid began promoting it only two years ago.

The Matchmaker and franchising trade missions are only two examples. The extensive use by American businessmen of our "repfind service' and the number of inquiries at our stand at the recent HOSTELCO (hotel equipment) trade fair in Barcelona provided further evidence of the tremendous potential of this market.

American business visitors coming to Spain expecting the "manana' mentality--siestas after lunch, and plenty of free time to visit the Prado museum--will be disappointed. The Spanish business community is serious. U.S. businessmen should come prepared to discuss their products, including specifications and price, with potential customers and agents. The competition, especially European and Japanese, is stiff. U.S. products, particularly in high-technology sectors, have a strong reputation; with the decline of the dollar they are once again price competitive. However, U.S. firms must offer competitive delivery, after-sales servicing and credit terms. These may sound like the basics but unfortunately they are all too frequently missing. A Spanish importer frustrated at lack of followthrough by a U.S. supplier recently asked me, "Are you Americans really serious about exporting?'

American business visitors also stumble on two other characteristics of the Spanish business scene: the language and the business lunch. Spain is not northern Europe. One can not expect a Spanish business contact to speak English. Although someone in the firm probably can decipher the product literature, especially in the technical fields, the key decisionmaker may not speak English or feel comfortable doing business in it.

Americans who rule out contacts with non-Englishspeaking businessmen risk losing their best customers, usually to European or Japanese competition. The expense of an interpreter is small in comparison with the reward.

The use of the business lunch--also drinks or dinner-- is another feature of doing business in Spain. The Spanish businessmen usually wants to know who he is doing business with, not just his contact's credit rating. The business lunch serves this purpose. Actual business, however, is never discussed until after the meal. The conversation initially may range from wine to sports-- the American wonders if this really is a serious customer; when the coffee comes, the Spaniard gets down to business. Lunches, consequently, are long but productive if one is patient. As with the interpreter, business visitors must budget their time and expenses for such "hospitality,' if they wish to establish good working relationships in Spain.

Americans should take note of the Spanish business calendar. No matter how serious and hard-charging, the Spanish businessman will not sacrifice his summer and Christmas vacations. From mid-December through about Jan. 10 and mid-July to mid-September, business life almost comes to a halt. An American who insists on appointments during those periods is clearly--to a Spaniard --not serious and is probably wasting his time.

Spain is the tenth largest industrial power in the world with an economy comparable in size to that of California. Madrid and Barcelona vie with each other to be the business center of the country--the competition between the two is remarkable. In most cases, business visitors should visit both cities, since there are key contacts for almost every sector in both locations. In addition, there are growing opportunities outside these two cities. With the gradual devolution of political and economic power to regional governments, decisions on major projects representing significant sales and investment opportunities will increasingly be made in Seville, Bilbao, Valencia, Zaragoza, and other regional capitals.

As I have come to appreciate the tremendous opportunities in Spain for American products, I have been struck by the relative absence of American businessmen in the marketplace. Most U.S. multinationals, of course, are well established in Spain. Medium-size U.S. firms, however, are still conspicuous by their absence. Although U.S. exports to Spain have increased 16.5 percent in dollar terms in the first eight months of 1987, we continue to lose market share to the Europeans and the Japanese who are more aggressively taking advantage of the Spanish import boom. The word may be slowly getting out--our Matchmaker was oversubscribed--but far too many opportunities remain untapped. FCS is here in Spain waiting to help you.

Photo: Construction cranes dot the skyline of every major city in Spain, but the country's cultural heritage has been preserved in its traditional architecture. New structures have blended in well with the old in Madrid.

COPYRIGHT 1987 U.S. Government Printing Office
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