Ferrovial: In Spain, You Don’t Cry. In Spain, You Earn.

José Moisés Martín

6 mins - 4 de Marzo de 2023, 07:00

Ferrovial’s decision to move its legal headquarters to the Netherlands has not sat well with many. The company, born under the umbrella of Francoism, made its fortune in the construction and management of infrastructures, becoming one of the national champions. In the 1990s and early 2000s, with low interest rates, and accompanying the wave of multinationalisation of Spanish service and infrastructure companies, Ferrovial accelerated its international expansion, winning major international concessions, such as international airports in the United Kingdom, including the legendary Heathrow. These were the years when the 'Marca España' (Spanish Brand) was strolling around the world boasting of its international presence in Latin America, the United States and the European Union. Things went rather awry in the 2008 crisis, with the construction and infrastructure market having completely collapsed, and with all the debt incurred still to be digested in the long term. The result has been a decade of high debt in many of our large companies, various strategic divestments, and a slowing growth. Ferrovial has been no stranger to this movement and, just six months ago, negotiations for the sale of part of its airport business in the UK were made public.

The decision to exit Spain has taken the economic community by surprise. The reasons: better access to financing in a country with a better rating – something that affects the rating of companies quite a lot – and deeper financial markets, with more players and better access to them, and a lower tax bill – but not by much. The company states that its goal is to end up listed in the United States and that this is best done from the Netherlands. Although it is moving its legal headquarters, something that will affect its tax payments and dividend taxes, the operational headquarters will remain in Spain, where it will continue to maintain, at least initially, thousands of jobs. The decision is taken by a company where the shareholding is internationalised, as is its market and the origin of its profits. In short, a decision, perhaps not optimal, but certainly a reasoned one in a context of growing internationalisation.

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So much for the mere economic-financial account. And from here, the political and reputational interpretations. Ferrovial’s exit represents a major setback for the Spanish brand internationally and has been received by the government as a disloyalty to the country that made it grow. Nor has there been a shortage of those who have thrown darts at the government’s supposedly ‘anti-business’ policy – in a country where companies have seen their profits grow six times more than salaries over the last year, it is a rather shocking accusation – and at the freedom of action of private companies.

Now, let us ponder some considerations to bear in mind. First, Ferrovial’s owners are free to set up wherever the best financial, economic and fiscal advantages are offered. There are dozens of national champions that have ended up in foreign hands, especially after the privatisations of the 1980s and 1990s. To name but a few: SEAT, Ebro, ENDESA, Everis (today NTT) Spanish companies – some of public origin – that today are subsidiaries of an international company that is neither listed nor interested in being listed in Spain. Although it is not exactly the same situation, Ferrovial’s exit from Spain, while maintaining its operational headquarters in Spain, points in the same direction. In other words, it is neither the first nor the last ‘big deal’ involving Spanish companies. While this is happening, other decision-making centres are moving to our cities, something we welcome, because the road is heading in the opposite direction. Santander, BBVA, Telefónica, Aguas de Barcelona, to name but a few, have important international businesses and have achieved this to a large extent by buying national companies, many of which are in the privatisation phase. In global markets, these things happen, and, in the European internal market, which guarantees freedom of movement and establishment, even more so.

And now, the second consideration: the European single market is not symmetrical and is designed so that the waters always end up in the same countries. The European Union should take tax harmonisation seriously, because, without being considered tax havens – at least legally – we have a group of members that live by sucking the profits out of their partners, and there is something of that in the tax policy of the Netherlands.

A third consideration: it would be wise not to overreact to this decision. Ferrovial maintains more than 5,000 jobs in Spain, which should be protected. It continues to be an important company for our country, and its ripple effect on our economy is considerable. It is a mistake to amplify a campaign of discredit and spite, as if it were a matter of infidelity. The solution cannot be to intimidate Spanish companies, but to seduce them and to entice more companies to set up in our country. And it is not necessary to become a tax haven: investing in innovation, in training human capital, improving financing conditions through a prudent public finance policy, and avoiding unnecessary regulations would help much more than spouting slogans about grievances, disloyalty, jingoism, and greed.

The most competitive region in Spain (Madrid), as measured by the European Union’s regional competitiveness index, is less competitive than the least competitive region in the Netherlands. Some of this divergence in competitiveness has more to do with geography and access to the European market than with economic policy decisions, but investment in education, innovation and business support in the Netherlands is far ahead of our own. Perhaps, instead of making this a political case in which we will all end up hurting ourselves, or generating the umpteenth crisis of national self-esteem, we should take note and accelerate the improvement of our business environment, something that can hopefully culminate in the proper implementation of Next Generation investments and reforms. Hopefully we will soon be able to say that in Spain we do not cry, in Spain we earn.
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