4.- DOES SPAIN KNOW HOW TO SELL?

(Escrito en English)

This post is related to macroeconomics. I guess we have all heard about GDP (Gross Domestic Product). It is the main indicator to quantify the economic activity of a country. It is defined as “the market value of all officially recognized final goods and services produced within a country in a given period of time (usually a year)”. Well, although there are several methods to calculate the GDP of a country, one of them tells us that it can be calculated as follows:

PIB = C + I + G + (X – M)

'C' is private consumption, i.e., the amount of goods and services purchased by households in that time period.

'I' represents investment. Or, in other words, they are the goods purchased by businesses to incorporate them into their production processes.

'G' is public spending. It is the amount of public money spent on consumption or investment in goods and services in that time period.

'(X – M)' is the difference between what a country exports (what it sells to other countries ) and what a country imports(what it has to buy from other countries). Exports are 'X' and imports are 'M'.

That said, let's get down to business. Our starting point is that, nowadays,  Spain has a serious problem. GDP growth rates in Japan for the last five years have been close to '0' and even negative and this has caused many problems (need to increase its public debt and high unemployment rates). Let's do a brief analysis of the situation and we will try to find a solution.

Our objective is to increase the GDP. To do this, if we look at the above formula, we have several options:

1.- We could increase 'C', i.e., private consumption. The problem is that families are heavily in debt and their capacity to save has been in freefall in recent years (except the record high of 2009 due to rising unemployment and fear of losing employment). Currently, I think that an increase in 'C' in the short term is really difficult.

2.- We could increase 'I'. The economic situation or the low domestic consumption, as well as the lack of credit does not allow an increase in investment. It is not feasible to increase 'I'. Really?. We will see a bit later.

3.- We could increase 'G'. Do I need to explain to you this point?. I do not think so. The increase in public spending will have to wait a few years because of the  current government policy of cuts.

4.- We could increase '(X – M)'. Let's see. This means reduce imports, increase exports or both. The problem is that in Spain, historically, imports have always been greater than exports. Considering that it is very difficult to reduce our imports because of our dependence on imported energy and industrial technology, I have one question: 'Why we can not increase our exports?'. Do not we know how to sell?. Is there no one to buy our products?. What are we doing to promote our exports?. Do Spanish companies know how to export?. Is Spain underutilizing agencies related to foreign trade?.

If we got an increase in exports, Spanish GDP would increase, and this would create a favorable situation so that companies could increase their production and, therefore, they could increase their investments, which would generate an increase in GDP. Is it easy?. Apparently not. We have one of the largest potential markets in the world, Latin America, with an average unemployment rate of 6.5% and estimated growth of 4% for 2013 in which Spanish products are appreciated but we are not taking advantage; we are the gateway to Africa and we are its link with Europe; Spain is a country with more than 3,000 kilometres of coastline and it has some of the most important ports of Europe; Spain has 52 airports (13 more than Germany). But we only know how to sell sun and beaches because it requieres no effort. I think the government should take this a little more seriously because this could be one of the few solutions to  overcome this situation.

I would sum this up by saying that Spain is the first world producer of olive oil but when you travel to another country and ask people, 'what do you know about Spain?', they answer: 'Almost nothing'. And you tell them: 'Do you know our olive oil?. And they answer: 'But, olive oil is Italian, isn't it?'.