Coface Group
Spain

Spain

Population 46.5 million
GDP per capita 30,272 US$
A4
Country risk assessment
A1
Business Climate
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Synthesis

major macro economic indicators

  2013 2014 2015(f)  2016(f)
GDP growth (%) -1.7 1.4 3.1 2.6
Inflation (yearly average) (%) 1.5 -0.2 -0.6 0.5
Budget balance (% GDP) -6.9 -5.9 -4.4 -3.2
Current account balance (% GDP) 1.5 1.0 1.5 1.3
Public debt (% GDP) 93.7 99.3 100.6 100.8

 

(f) Forecast

STRENGTHS

  • Reform efforts (labour market, banking sector, insolvency, etc…)
  • Improved competitiveness and strengthened export sectors
  • Improved financial situation of businesses
  • High-quality infrastructure
  • Significant tourism potential

WEAKNESSES

  • Still high level of private and public debts, very negative net external position
  • Duality of labour market, high level of structural unemployment
  • Large number of relatively unproductive small companies
  • Unity of the country threatened by separatist movements

RISK ASSESSMENT

Domestic demand remains strong, in a context of restored confidence

In 2015, consumption proved very vigorous, driven by job creation, deflation and strengthening household confidence. Improved credit terms, lower oil prices, the recovery in Europe, the depreciation of the euro and the implementation of reforms also helped restore business confidence, which boosted investment. The contribution to growth from domestic demand easily took over from that of external demand, with the help of import growth. However, exports also performed well, picking up slightly thanks to stronger external demand and competitiveness gains.

Whilst remaining vigorous, activity is expected to slow slightly in 2016, with the positive effects of lower oil prices and the depreciation of the euro wearing off. Lower interest rates should however help boost investment and consumption, with the latter again feeling the benefits of a stronger job market and a recent reduction in income tax. The negative effect on internal demand of the private sector deleveraging should also wear off somewhat. However, whilst it was almost 20% lower than its pre-crisis level, private debt still amounted to 235% of GDP at the end of 2014.

The fall in the unemployment rate (currently at 21%) is expected to continue thanks to new job creation. Property prices, after falling by 37% between the third quarter 2007 and the first quarter 2014, have risen by 7% since. Inflation, which remained in negative territory in 2015, thanks to falling oil prices, is expected to rise slightly in 2016, with energy prices not falling much more.

External account deficits turned into a surplus in 2013 as a result of improved competitiveness, made possible by the fall in the cost of labour, and decreasing imports. These latter have since picked up but the vitality of exports, driven in particular by the automotive sector, has not waned. In addition, tourism is breaking records. Demand from the EU is likely to remain relatively strong in 2016. However, the positive impact of the weak euro and low oil prices will wear off.

 

Stronger businesses and banks, high public debt

Exporting companies have been able to hold their own during the crisis. Those focused on the domestic market are now also beginning to get their heads above the water, such as for example the car dealers (the Spanish automotive market grew by more than 20% in 2015). Even the civil engineering and construction sector is looking healthier. Companies’ gross margins, whilst they have tended to stabilise since 2014, recovered. Finally, insolvencies have continued to diminish (-24% in 2015, after -27% in 2014).

The bank rescue programme of mid-2012, required in return for financial assistance from the European Stability Mechanism, has been successful and enabled the return to a solid footing of a financial sector devastated by the bursting of the property bubble in 2007 and then the recession. The stress tests carried out by the ECB in autumn 2014 confirmed this improvement. The sector has improved its solvency and increased the quality of its asset portfolio, even if levels of non-performing loans remain high (11.2% of the total in August 2015). The contraction of domestic private sector credit has slowed significantly.

The sovereign risk has greatly improved, as demonstrated by the fall in borrowing costs on the bond market, dropping from a peak of 7.6% in July 2012 to 1.5% at the beginning of December 2015 (10 year yield). The public deficit continued to shrink in 2015 thanks to solid growth and low interest rates, a trend that is expected to continue in 2016. However, whilst its increase has slowed, the public debt ratio is running at a high level.

 

A fragmented political landscape, with threats to the unity of the kingdom

Weakened by the austerity policies and corruption cases, the traditional political class has to face the increase in the anti-establishment vote. It was already the case in theMay 2015 regional and municipal elections. It was confirmed by the 20 December 2015 general elections which marked the end of the two-party system and plunged the country into a period of political uncertainty. The incumbent Popular Party came top of the polls but lost its absolute majority. Podemos (alternative left), close behind the PSOE (Socialists), and Ciudadanos (centre-right)entered the Parliament. Due to this fragmentation and incompatibilities between political parties, it will be difficult to set up a governing coalition. This bout of uncertainty, if protracted, could affect to some extent economic recovery.

The pressure from Catalan separatists is also building. They won the early regional Catalan elections in September 2015 and remain mobilised, even if the Constitutional Court rescinded, early December 2015, the resolution of the Catalan Parliament to formally start the independence process.

 

Last update : January 2016

Payment

 

The Spanish law of late payments in commercial transactions (Ley contra la morosidad en operaciones comerciales) states a general payment terms, which are generally unfulfilled by the companies as well as by the government.   The usual terms of payment in commercial transactions exceed the legal terms, being globally accepted by market players. 

About the payment means, the bill of exchange is used for commercial transactions in Spain. In the event of default, it offers creditors certain safeguards, including access to the “exchange procedure” (juicio cambiario) introduced by the civil procedure rules under which, based on his appraisal of the documents submitted, a first instance judge (juzgado de primera instancia)will check the “exchange title” has correctly been set up and then will order the payment from the debtor of the principal amount, the late interests and costs, within 10 days and will order a seizure for security (embargo preventivo) on the debtor’s assets up to the outstanding amount. The debtor has 10 days to dispute the ruling.

 

Without payment or opposition in the prescribed time, the judge will order enforcement measures and if necessary, the judicial representative will carry out attachment.

 

Where a claim is contested, a court hearing is held to examine both parties’ arguments and a judgement handed down within 10 additional days of said hearing. This is the legal times but really there are delays due to the Court doesn´t carry out this deadline.

 

Widely accepted though somewhat difficult to obtain, bill of exchange guaranteed by a bank limits the risk of payment default by offering creditor additional recourse to the endorser of the bill of exchange.

 

The cheque offers similar legal safeguards under the “exchange procedure” (juicio cambiario), in the event of default. The same is true of the promissory note (pagaré), which, like bill of exchange and cheque, is an instrument enforceable by law and, being unpaid, is also recorded in the RAI (Registro de Aceptationes Impagadas).

 

An outgrowth of the Centre for Interbank Cooperation, the RAI is the most important registry at the national level, where the payment defaults, above 300 €, of commercial companies, are recorded and where banks and other deposit institutions can check a company’s payment record before extending credit.

 

Electronic transfers via the SWIFT network, widely used by Spanish banks, are a quick, fairly reliable, and cheap instrument, provided the purchaser, in good faith, orders payment. If the buyer fails to order a transfer, the legal remedy consists in instituting ordinary proceedings, or summary proceedings based simply on an unpaid invoice (according Spanish law in order to start this proceedings It should submit original documents: invoices, delivery notes, CMRs, contracts…)

 

Debt collection

 

Special clauses included in the commercial contract, the applicable rate since 31st December 2004, is the interest rate applied by the European Central Bank in its most recent refinancing operation performed prior to the first calendar day of the half year concerned, fixed 8,05 percentage points.

Semi-annually, the Finance Minister publishes the rate thus determined in theBoletín Oficial del Estado.

 

Where there is a lack of settlement agreement with the customer, the creditor will initiate a legal collection process by reference to the law on civil procedure (ley de Enjuiciamento civil) which came into force on 8 January 2001  amendment by:

 

- The Act 13/2009 on 3 November 2009 on the reform of the judicial procedure (ley de reforma de la legislación procesal), in force on 4 May 2010.

This Act granted a higher competency to the judicial representatives (secretarios judiciales) and increased the threshold of monitory and verbal proceedings.

 

- The Act. 37/2011 on 10 October 2011 (ley de medidas de agilización procesal) effective as of 31st October 2011

 

The rules cut the time taken up by litigation significantly and gave oral arguments priority over written submissions – the cornerstone of the previous system – even though the authentication of large numbers of documents remains a requirement.

 

Besides the “exchange procedure”, a seller unable to settle with a buyer out of court may enforce his right to payment through the civil procedure (juicio declarativo), divided into ordinary proceedings (juicio ordinario)for claims over 6,000 € and oral proceedings (juicio verbal),simplified system,for smaller claims.

 

The aim of this legislation  was to speed up delivery of enforcement orders by reducing and simplifying the stages of the old procedure.

 

The claimant has to explain the facts on which he exercises its right and to support all case documents, in original or certified copies by public Notary, when he files its initial petition.

Prior to the investigation of the case, the judge will summon the parties, during a previous hearing (audiencia previa) just in ordinary proceeding, to attempt at conciliation. In default, the lawsuit will be pursued.

 

In addition, for monetary, liquid and overdue claims whatever is the outstanding amount, since 31st October 2011 (previously up to 250,000 €), the creditor now benefits from a more flexible special process, the monitory or injunctive procedure, named “juicio monitorio”.

 

This summary procedure does not require the presence of a barrister or solicitor to file a “petición inicial” prepared with a pre-printed form and submitted to the judge of first instance (juzgado de primera instancia) where the debtor is located, and who may, after reviewing the supporting documents, order the debtor to pay within 20 days.

 

Without debtor’s answer, the judicial representative will inform the judge in order to confirm the decision which decides in favour of the initial request. The judicial representative will hand down a ruling stating the monitory proceedings closed and passes it on the creditor in order to allow contact the Enforcement Office.

 

If the debtor disputes the ruling with motivated arguments into a written statement signed by a barrister and a solicitor, the procedure has to be change to ordinary or oral procedure, depending on  the outstanding amount.

 

Established in April 2003, the judicial tax relating to commercial companies, applies, since April 2011, to any sort of civil procedure and contains a fix rate depending on the sort of procedure filed (rate from 100 € to 1,200 €), as well as a variable rate depending on the amount involved (from 1 € to 1 million € a 0, 5 % of the amount and above 1 million € a 0, 25 % of the amount) with a maximum of 10,000 €. Since February 2015 individuals must not pay this tax. 

Insolvency trend Spain
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