Spain and the United States - Real Instituto Elcano

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CHAPTER 2 THE US PLAYERS IN SPAIN The United States has been a significant investor in Spain since the 1960s (see Chapter 1). Since Spain’s accession to the European Union in 1986, however, the relative weight of US investment in total inward investment has declined in favour of European countries. Net direct investment by the United States in Spain, on the basis of the immediate and not the ultimate investing country, amounted to only 3.73 billion between 1993 and 2004 – 7.6% of the 49.09 billion total – compared with 20.92 billion by the United Kingdom and 5.71 billion by France (see Appendix 3). 1 During that period, US net investment represented between 2% and 21% of total annual net investment flows. There are more than 500 US inward investor companies in Spain, compared with over 13,000 in the United Kingdom. Most US companies in Spain are in the industrial sector, especially auto parts, pharmaceuticals and chemical products, and industrial equipment and supplies. However, in recent years their presence in the service sector has been increasing steadily, mainly in information technology and consulting services. US companies account for more than one-third of total production of new passenger cars, around 15% of auto components and close to 40% of the sales of pharmaceuticals. Some of the companies are among the largest in the country (see Exhibit 2.1). They include Opel (part of General Motors) and Ford in the motor industry, IBM and Hewlett-Packard (+ Compaq) in information technology, General Electric (plastics), Dow Chemical and DuPont in chemicals, Alcoa in metals and Procter & Gamble in consumer products. There are around 600 US-owned companies or subsidiaries in Spain. 2 1. These figures exclude investments in special-purpose entities (SPEs), whose only function or activity is to hold foreign equity. They are regulated by specific legislation and give international companies tax advantages if certain conditions are met. Net US investment in Spain between 1993 and 2004 including SPEs was 49.17 billion, 13 times higher than the figure for “pure” direct investment. The value added of SPEs to the Spanish economy is close to zero and typically they involve large sums. 2. Appendix 1 lists many of these companies.
48 SPAIN AND THE UNITED STATES Exhibit 2.1. Largest US Companies in Spain* As a result of a new way of drawing up Spain’s statistics, the real size of US direct investment flows is much clearer. The figures for the United States before 2002 understated the true dimension of its investment in Spain because the figures were provided on the basis of the immediate investing countries and not the ultimate investing countries. This particularly affected US companies, as they often invest in Spain via “transit” countries with favourable tax treaties, such as Luxembourg, the Netherlands and Gibraltar, or through other European subsidiaries located in the European Union, typically the United Kingdom or Germany. The Foreign Investments Registry now gives the investment structure by both immediate and ultimate investing companies. The differences between the two sets of figures can be quite significant (see Exhibits 2.2 and 2.3). Gross US investment on the basis of immediate countries amounted to 1,475 million between 2002 and 2004, but the real figure was 4,099 million – in other words, 2,624 million (the difference between the two figures) came via “transit” countries.
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