Barometer of the

Business Climate in Spain

2010 results
Index

Introduction 3

Executive Summary 5

Background 7

General results 9

4.1. Overview 10

4.2. Main strengths and weaknesses 11

4.3. Comparison 2010-2009 12

4.4. Main areas for improvement 13

Foreign companies’ perceptions in Spain 14

5.1. Investment perceptions 15

5.2. Employment perceptions 16

5.3. Turnover perceptions 17

5.4. Export perceptions 17

Results by areas 18

6.1. Labor market 19

6.2. Taxation 20

6.3. Regulatory Environment 21

6.4. Infrastructures 22

6.5. Costs 23

6.6. Financing 24

6.7. Human capital 25

6.8. Innovation 26

6.9. Market size 27

6.10. Quality of life 28

Methodology 29

Annex 1 30

Barometer of the Business Climate in Spain, 2010 results

Index
2
Introduction

Barometer of the Business Climate in Spain, 2010 results

Introduction
3
1.  Introduction

1.  INTRODUCTION

The 4th edition of the “Barometer of the Business Climate in Spain”, published this year, has become a flagship publication in Spain.

Important new changes in terms of methodology have been introduced in the 2010 Barometer, thereby improving the clarity of the
questions companies were asked in the survey, as well an extension of the number of areas considered.

As far as the results for 2010 are concerned, and despite being affected by the international crisis for the second year running, the overall
assessment made of the business climate in Spain remains positive, highlighted by the better forecasts, both in terms of investment and
employment creation, for next year from foreign companies operating in Spain.

The Barometer comprises the ratings on different aspects of the business climate in Spain awarded by over 300 foreign companies,
identifying the strengths that need to be maintained and empowered, together with the main areas for improvement.

Moreover, the aim of this survey is to serve as a support tool for analysis into the reasons why foreign investors are attracted or
discouraged to make investments in Spain.

The 2010 Barometer has been conducted jointly by INVEST IN SPAIN and the International Center for Competitiveness (ICC) at the IESE
Business School, backed this year by close collaboration from the leading foreign Chambers of Commerce in Spain.

INVEST IN SPAIN is the Government agency dedicated to promoting and attracting foreign investment, part of the State Department for
Tourism and Trade of the Ministry of Industry, Tourism and Trade. Its mission is to promote, attract and maintain foreign investment in
Spain, serving as the reference point for foreign investors and the point of contact for all state, regional and local institutions engaged in
promoting and attracting investment.

The ICC (International Center for Competitiveness) is one the research centers of the IESE (Instituto de Estudios Superiores de la Empresa)
business school. Its mission is to promote scientific knowledge and rigorous learning in the area of competitiveness. The ICC is directed
by IESE Prof. Antonio Subirá. The center was created in cooperation with the Institute for Strategy and Competitiveness (ISC), led by Prof.
Michael Porter at Harvard Business School and places special emphasis on the European Union and creating a favorable business climate.

Barometer of the Business Climate in Spain, 2010 results

Introduction
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Executive Summary

Barometer of the Business Climate in Spain, 2010 results

Executive Summary
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2.  Executive Summary

2.  EXECUTIVE SUMMARY

Spain’s overall rating is still positive in 2010 despite the international crisis

The results of the Barometer of the Business Climate in Spain 2010 still reflect, just as in 2009, the international economic crisis, hence they
need to be interpreted in such context. Despite this, Spain’s rating from foreign investors is positive again, albeit with a slight drop on the
previous year (2.9 in 2010 as opposed to 3.1 in 2009).

The best rated areas in the Barometer on the Business Climate in Spain are Infrastructures, Market size, Costs and Quality
of life

Investors have valued very positively aspects relating to infrastructures, quality of life and costs in Spain, as well as the size of the market
and the access provided to other markets. The Barometer has enabled us to identify the areas where investors believe there is room for
improvement, which include taxation and others relating to the labor market, such as increasing flexibility and reducing labor costs, and in
particular dismissal costs. Other aspects relative to the labor force that investors deem of great importance that also need to be improved
include language skills and assumption of responsibilities and objectives. Moreover, Spain’s commitment to investment in R&D&I should
continue to be developed, as well as its efforts to adapt incentives aligned with foreign companies’ needs.

Foreign companies’ forecasts for next year in Spain improve with regard to both employment and investment

In general, foreign investors rate the business climate in Spain positively, as manifested by their future plans for investment and employment
in Spain, which are slightly higher than those for last year.

Over 72% of the foreign companies consulted plan to increase or maintain employment in Spain in 2011, as opposed to 65% last year. As far
as investment is concerned, again over 70% of companies plan to increase or maintain their investments in Spain, which is also above the
figure for 2009.

Therefore, it can be concluded that Spain fulfills investors’ expectations as regards the business climate, although the areas marked for
improvement should be noted by public and private authorities in order to ensure that Spain continues to be a major destination for foreign
investments of high added value.

Barometer of the Business Climate in Spain, 2010 results

Executive Summary
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Background

Barometer of the Business Climate in Spain, 2010 results

Background
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3.  Background

3.  BACKGROUND

Foreign investment in Spain: Evolution over 2009

The foreign companies present in Spain play a key role as regards promoting the competitiveness of the local economy. The over 10,500
foreign companies established in Spain directly employ over 1.37 million people and produce 40% of Spanish exports. Moreover, inflows of
foreign direct investment (FDI) to Spain in 2009 accounted for 31.8% of the finance needs generated by the current account.

The difficult global economic situation over 2009 led to a significant fall (-38.7%) in world flows of FDI, which shrunk by USD 1.04 trillion,
according to preliminary data from UNCTAD. This drop was particularly marked in developed countries where a 41.2% decrease was recorded.

In Spain, and according to data from the Foreign Investment Register at the Ministry of Industry, Tourism and Trade, FDI inflows in 2009
amounted to 14.694 billion euros, which represents a drop of 62% on the previous year.

The quarterly evolution of FDI flows during 2009 shows a more positive trend in the 2nd semester than in the first 6 months, sustained in
the 1st quarter of 2010, in comparison to the same period of the previous year. This, together with the gradual recovery of the financial and
capital markets on an international scale and the signs of economic recovery that are beginning to emerge in several countries, could act as
key factors to improve FDI flows in 2010, in line with the recovery in investment and employment forecasts given by companies surveyed in the
Barometer.

As far as greenfield projects are concerned, and according to the consulting firm Ernst & Young, in 2009 Spain was still the 4th most attractive
country regarding this form of investment, garnering a total of 173 projects (5% of the total), although it dropped 18% on the previous year.
These projects created 5,212 jobs, 3% more than in 2008.

Barometer of the Business Climate in Spain, 2010 results

Background
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General results

Barometer of the Business Climate in Spain, 2010 results Barómetro del clima de negocios en España, Resultados 2010
General results Introducción
9 9
4.  General results

4.  GENERAL RESULTS

4.1. Overview

Figure 1 displays the level of importance and rating that foreign investors have ascribed to all 10 areas covered in the Barometer 2010.

This year, the areas investors deem most important for their companies are those relating to Human Capital and Market Size.

Costs, labor market and infrastructures play a secondary role but are still highly significant.

As far as the year 2009 is concerned, no significant differences can be observed, with a similar general level of importance, topped by issues
relating to human capital whereas finance is at the bottom of the scale.

The rating foreign investors award to each of the areas is positive in all instances, as most areas score close to 3 or above 3, and none fall
below 2.5.

The areas that receive the highest ratings are Infrastructures, Costs and Quality of Life. Human capital and market size also receive good
scores. In contrast, the areas with the lowest ratings are aspects relating to Labor Market, Finance and Innovation.

In general, the areas awarded the highest ratings are key aspects for investors, which is very positive. However, this is not the case of the Labor
Market, an area investors value highly and where Spain fails to fulfill expectations.

As far as Finance is concerned, the rating awarded is not as positive, in consonance with the international finance crisis, but this is considered
one of the least important aspects by foreign investors in Spain.

Figure 1 Labor Market

5 Taxation
Importance and ratings Quality of Life
4
by areas 2010 3
2 Regulatory
Innovation Environment
1
0

Human
Capital Infrastructures

Market Size Costs Importance

Finance Ratings

Barometer of the Business Climate in Spain, 2010 results

General results
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4.  General results

4.2. Main strengths and weaknesses

The main strengths that emerge from the survey of foreign investors’ views are displayed in Figure 2.

The strengths highlighted include infrastructures, including airports, roads and high-speed train links. Like last year, leisure and culture is the
aspect investors rate the highest and is clearly one of Spain’s main attractions.

Finally, other positive aspects relating to Human Capital are worth pinpointing, such as the quality of business schools, which helps to provide
a highly skilled quality labor force, which is a very important factor for investors, as shown below. In line with this, skilled labor costs, another of
the key aspects for investors, also obtains high ratings and is another of the main strengths Spain has to offer. It is particularly significant that a
number of Spain’s strengths lie in Human Capital as this area is key to maintaining a country’s competitiveness in the medium and long term.

Some of the aspects awarded the lowest ratings from investors include several relating to Finance, such as Business Angels and the Alternative
Equity Market. However, as indicated previously, these issues do not concern investors unduly. The total volume of public expenditure on R&D&I
is not considered particularly important either by investors, although clearly Spain’s rating in this category is not positive.

Conversely, other aspects that have received negative ratings are important to investors, such as dismissal costs, the speed and efficiency of
commercial courts and the bureaucratic burden in running a company, hence these aspects should be considered priority areas of action.

Figure 2

Main strengths

Airports

Leisure and Culture

Quality of Business Schools

High-speed train links

Roads

Cost of skilled labor

3,2 3,3 3,4 3,5 3,6 3,7 3,8

Fuente: UNCTAD y páginas web de las Agencias de Promoción de Inversiones . 10

Figure 3

Main weaknesses

Business Angels

Dismissal Cost

Speed and efficiency of commercial courts

Total volume of public expenditure in R&D&I

Alternative Equity Market

Bureaucratic burden in running a company

2,2 2,3 2,4 2,5 2,6 2,7 2,8

Fuente: UNCTAD y páginas web de las Agencias de Promoción de Inversiones10.

Barometer of the Business Climate in Spain, 2010 results
General results
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4.  General results

4.3. Comparison 2010-2009

As mentioned above, a comparison of the results obtained in 2010 with the year 2009 is not straightforward as, on the one hand, new
questions have been included and, on the other, methodological changes have been adopted in order to make the Barometer more
thoroughgoing and ensure it reflects the interests of foreign investors in Spain.

However, some of the areas do coincide and the evolution with regard to 2009 can be seen in Figure 4. The orange colored bars show the
rating obtained in 2010, the intensity of the color indicating greater or lesser similarity between the questions for the two years.

As can be observed, in general and aggregate terms, there is not a significant variation in the ratings, although it is worth noting the drop
in Finance, a corollary of the international crisis. There are moderate decreases in the areas of Quality of Life and Human Capital. As far
as the regulatory environment is concerned, the comparison could not drawn accurately as the composition of this section has changed
substantially but some of the aspects that have remained the same, such as the bureaucratic burden and functioning of commercial courts
have decreased.

Finally, it is worth mentioning the improvement on 2009 in terms of Infrastructures, principally due to high-speed train links and airports.

Figure 4

Comparison of ratings 2010-2009

Labor Market
2009
Taxation
2010

Regulatory Environment

Infrastructures

Costs

Finance

Market Size

Human Capital

Innovation

Quality of Life

0,0 0,50 1,00 1,50 2,00 2,50 3,00 3,50 4,00

Fuente: UNCTAD y páginas web de las Agencias de Promoción de Inversiones10.

Barometer of the Business Climate in Spain, 2010 results

General results
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4.  General results

4.4. Main areas for improvement

The priority areas of action have been selected based on the size of the gap between the importance investors attribute to them and the
rating they have awarded them. These include the following:

1. Language skills

Foreign investors once again place language skills in the Spanish labor force as the second most important aspect of the whole survey and,
just like last year, expectations are not fulfilled in this respect as they award Spain a very low rating in this area.

2. Assumption of responsibilities and objectives

This is the most important aspect of the whole survey for foreign investors, and although the rating obtained by the Spanish labor force as
regards assumption of responsibilities and objectives is positive and noticeably higher than that relating to language skills, it is not sufficient
to fulfill the expectations of investors, and, moreover, has dropped since last year, which makes it a clear area for improvement.

3. Dismissal costs

Dismissal costs receive the lowest rating out of the whole survey and are one of the main causes for concern aired by investors. This fact is
consistent with other prestigious international rankings such as the Global Competitiveness Report issued by the World Economic Forum or
Doing Business released by the World Bank which also rank Spain very low as regards dismissal costs.

4. Labor legislation meeting the needs of companies

This is also one of the recurring issues over recent years. Foreign investors consider it is one of the most important aspects and the rating
Spain receives is not positive. Surveys such as the Global Competitiveness Report place Spain in very low positions as regards labor legislation,
as well as in terms of employment flexibility and hiring and dismissal practices.

5. Bureaucratic burden in running a company

Although it is not one of the most important issues for foreign investors in Spain, the rating is not positive and fails to fulfill expectations,
dropping in relation to last year’s rating too.

6. Speed and efficiency of commercial courts

The functioning of commercial courts is not a priority either for foreign investors, but the low rating awarded to Spain in this respect means it
should be considered as an area for improvement.

7. Social insurance contributions for workers

Again new aspects relating to the labor market are considered far from adequate by investors, whom in this instance award a low rating to
Spain regarding Social Security contributions for workers, which is noticeably below the importance they ascribe to this aspect.

Barometer of the Business Climate in Spain, 2010 results

General results
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Foreign companies’
prospects in Spain

Barometer
Barómetro of
delthe Business
clima ClimateeninEspaña,
de negocios Spain, Resultados
2010 results2010
Foreign companies’ prospects in Spain
Introducción
14
5.  Foreign companies’ prospects in Spain

5. FOREIGN COMPANIES’ PROSPECTS IN SPAIN

5.1. Investment plans

Foreign companies’ investment forecasts in Spain are positive and have improved noticeably with regard to 2009, which is particularly
significant if we take into account the current global recession.

Over 70% of foreign companies plan to increase or maintain their investments in Spain next year, besides, over 5% of companies plan to
increase their investments by over 50%, as shown in Figure 6.

Figure 5 Figure 6

Investment comparison 2009-2010 Investment plans 2010

2009 over 50%

60% 60%
2010 25-50%
50% 50% under 25%

40% 40%

30% 30%

20% 20%

10% 10%

0,00 0,00
Increase Maintain Decrease Increase Maintain Decrease

Barometer of the Business Climate in Spain, 2010 results

Foreign companies’ prospects in Spain
15
5.  Foreign companies’ prospects in Spain

5.2. Employment plans

Improvements can also be observed in terms of the number of employees in foreign investors’ plans. 21% of foreign companies in Spain plan
to increase staff numbers, as opposed to 17% in 2009. As far as reducing the number of workers is concerned, the percentage of companies
that intend to make staff cutbacks is 27%, as opposed to 36% in 2009.

Figure 8 shows foreign companies’ plans as regards the number of employees in greater detail. It is worth noting the fact that the vast
majority of companies that plan to reduce staff numbers next year intend to make cutbacks of under 25%, and only 1.36% of foreign
companies that invest in Spain plan to make reductions of over 50% in this respect.

Figure 7 Figure 8

Comparison of number of employees 2009-2010 Staff numbers plans 2010

2009 over 50%

60% 60%
2010 25-50%
50% 50% under 25%

40% 40%

30% 30%

20% 20%

10% 10%

0,00 0,00
Increase Maintain Decrease Increase Maintain Decrease

Barometer of the Business Climate in Spain, 2010 results

Foreign companies’ prospects in Spain
16
5.  Foreign companies’ prospects in Spain

5.3. Turnover forecasts

Foreign companies forecasts for 2010 as regards Turnover are very positive, with over 47% of companies expecting to increase their earnings
in contrast to 19% that expect this to shrink.

Figure 9

Turnover plans 2010

over 50%
60%
25-50%
50% under 25%

40%
Figure 9
30%
Turnover plans 2010
20%

10% over 50%

60%
25-50%
0,00
50% under 25%
Increase Maintain Decrease
40%

Figure
30% 10

Export
20%
5.4. Exportvolume
forecastsplans 2010
10%
over 50%
As 60%
far as export volume is concerned, more than 90% of companies forecast to increase or maintain the volume of their exports, in contrast
0,00
to 9% of companies that expect this volume to shrink, 25-50%by under 25%.
most
Increase Maintain Decrease
50% under 25%

40%
Figure 10
30%
Export volume plans 2010
20%

10% over 50%

60%
25-50%
0,00
50% under 25%
Increase Maintain Decrease
40%

30%

20%

10%

0,00
Increase Maintain Decrease

Barometer of the Business Climate in Spain, 2010 results

Foreign companies’ prospects in Spain
17
Results
by areas

Barometer of the Business Climate in Spain, 2010 results

Results by areas
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6.  Results by areas

6. RESULTS BY AREAS

6.1. Labor market

The Labor Market is evidently more problematic from the standpoint of investors. Issues relating to the lack of labor flexibility stand out in this
respect, demonstrated by the ratings awarded to areas such as adjusting labor legislation to meet company needs, mobility, the collective
agreements system and even flexibility of working hours.

The difficulties that investors encounter as regards labor costs, both in terms of dismissal costs and the absence of hiring incentives or
subsidies, should also be pinpointed.

These are recurring issues, which also emerge as some of the main problems for doing business in Spain in other international surveys such
as the Global Competitiveness Report or Doing Business mentioned above.

Figure 11

Labor market

Dismissal costs

Labor legislation meeting company needs

Hiring incentives and subsidies

Flexibility of working hours

Geographic mobility

Collective agreements system

Ease of obtaining visas to attract workers Rating

Importance
Ease of obtaining work permit and/or residency permit

0 1 2 3 4 5

Fuente: UNCTAD y páginas web de las Agencias de Promoción de Inversiones .

10

Barometer of the Business Climate in Spain, 2010 results

Results by areas
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6.  Results by areas

6.2. Taxation

As far as taxation is concerned, foreign investors believe that measures should be implemented to reduce Corporation Tax, as well as the
social security contributions per worker.

In contrast, the utility of double tax agreements and taxation on non-residents are rated highly. Nor are there any problems regarding VAT
and special duties on products and services.

Figure 12

Taxation

Social security contributions per worker

Tax burden on companies

VAT burden and special duties on products and services

Utility of double taxation agreements Rating

Importance
Taxation on non-residents

0 1 2 3 4 5

Fuente: UNCTAD y páginas web de las Agencias de Promoción de Inversiones .

10

Barometer of the Business Climate in Spain, 2010 results

Results by areas
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6.  Results by areas

6.3. Regulatory environment

As far as the regulatory environment is concerned, the aspect speed and efficiency of commercial courts is problematic as it receives a
very low rating in comparison to the importance that investors ascribe to it, and the same is true of the bureaucratic burden on company
procedures and this slows down operations and project development. It is also worth highlighting that the ratings for these two aspects have
dropped significantly in comparison to the last financial year.

However, investors do not view the impact of the underground economy on business as problematic and this indicates that this is not an issue
in present-day Spain.

Figure 13

Regulatory environment

Speed and efficiency of commercial courts

Bureaucratic burden on running a company

Stability of regulatory framework

Development and application of competition legislation

Protection of Intellectual Property Rights Rating

Importance
Impact of Underground Economy on your Business

0 1 2 3 4 5

Fuente: UNCTAD y páginas web de las Agencias de Promoción de Inversiones .

10

Barometer of the Business Climate in Spain, 2010 results

Results by areas
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6.  Results by areas

6.4. Infrastructures
Infrastructures in Spain are a clear attraction for investors and foreign companies rate this aspect the highest out of all areas included in the
survey.
Nearly all the aspects included in this section received very positive ratings, particularly airports and high-speed train links, followed by roads
and ports. The availability of industrial land is another aspect rated highly in relation to the importance companies ascribe to it.
The only aspects in which, despite receiving positive ratings, there is a gap between rating and importance are broadband penetration and
roads.

Figure 14

Infrastructures

Broadband penetration

Roads

Availability and quality of providers

Availability and quality of distribution networks

Airports

Extension of logistic centers

Rail networks

Ports

High-speed train links Rating

Importance
Availability of industrial land

0 1 2 3 4 5

Fuente: UNCTAD y páginas web de las Agencias de Promoción de Inversiones .

10

INFRASTRUCTURE NETWORK

The availability of extensive and modern infrastructures is a key factor in swaying multinational companies’ investment decision
processes.
The good rating that foreign investors award to infrastructures in Spain reflects the significant efforts made in recent years by the
various different Governments and Administrations.
Moreover, Spain’s infrastructure network serves as a strategic asset not just today but also in the medium and long term future hence
continuing to attract new investments:
High-speed trains: Spain has the 2nd largest network in Europe (1,600 kilometers).
Airports: Spain has two of the top ten airports in Europe in terms of passenger numbers.
Road network: Spain has the second largest network of major roads in Europe (14,689 km of highways).
Sea transport: Spain has 3 of the top ten container ports in Europe (Barcelona, Algeciras and Valencia).

Source: Spanish Ministry of Public Works

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6.  Results by areas

6.5. Costs

Investors award aspects relating to costs in Spain a good rating, scoring slightly better results than in the financial year 2009.

The varying importance that investors ascribe to the costs of skilled and unskilled labor is very significant, the former being more important,
which indicates an inflow of foreign investments of high added value. The rating is positive is both cases, but due to the high importance that
skilled workers are given, this area needs to be developed even further.

Fuel and office rental costs are rated highly and investors expectations as regards gas and industrial land costs are met amply. However,
further efforts are needed as regards broadband, transport, telephone and electricity costs.

Figure 15

Costs

Skilled labor costs

Broadband costs

Transport costs

Telephone costs

Electricity costs

Costs of adapting to regional and local regulation

Raw materials costs

Costs of adapting to environmental regulations

Unskilled labor costs

Gasoline-diesel costs

Officine rental costs

Gas costs Rating

Importance
Industrial land costs

0 1 2 3 4 5

Fuente: UNCTAD y páginas web de las Agencias de Promoción de Inversiones10.

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6.  Results by areas

6.6. Finance

Finance generally obtains a low rating as a result of the international financial crisis, although it is worth pointing out that the aspects
covered in this section, broadly speaking, are less important for investors.

The main problems lie in commercial bank finance, as well as in access to investment incentives and subsidies. As regards alternative forms of
finance, such as ICO finance lines, risk capital, mutual guarantee companies or the alternative equity market, although ratings are low, they
are clearly above the importance that investors ascribe to them, hence are not deemed priority areas of action.

Figure 16

Finance

Availability of investment incentives and subsidies

Availability of commercial bank finance

Costs of commercial bank finance

Availability of other forms of finance

ICO finance lines

Risk Capital

Business Angels

Mutual Guarantee Companies Rating

Importance
Alternative Equity Market

0 1 2 3 4 5

Fuente: UNCTAD y páginas web de las Agencias de Promoción de Inversiones10.

Entrepreneurship and the resulting applications for finance for new projects, have dropped in Spain in 2009 with regard to 2007,
reaching an Entrepreneurship Activity Rate of 5.10% as opposed to 7.62% in 2007. (GEM 2009)
Business Angels: There is a Spanish network of Business Angels (ESBAN). In addition, the Madrid and Catalonia governments promote
investment in new projects by applying up to 20% tax relief for personal income tax. Besides, there are several different private
initiatives to foster business angel investment, such as the IESE Business Angels Network.
ICO Finance Lines: During 2009 the Official Credit Institute (Instituto Oficial de Crédito-ICO) carried out 360,000 operations in which it
lent 15 billion euros to various different sectors, out of which 200 million were channeled into company internationalization.
Risk capital: In 2009 risk capital companies’ investment in Spain has decreased by 46% with regard to 2008, with total investment
amounting to 1.669 billion euros in 2009. This investment has gone to companies in expansion.
Mutual Guarantee Companies: Finance associated with Mutual Guarantee Companies during 2008 generated approximately
700,000 associated jobs. Guarantees amounting to 21 billion euros were given.
Alternative Equity Market: The national innovation agency (ENISA) runs a program to promote the entry of companies into the
alternative equity market by defraying flotation costs. In Madrid, Catalonia, Galicia and Murcia there are a range of incentives to help
SMEs enter the alternative equity market.

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Results by areas
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6.  Results by areas

6.7. Human Capital

The overall rating for Human Capital is positive but there are significant imbalances in certain aspects. One the one hand, investors see the
availability of unskilled labor as well as the quality of the business schools in Spain, home to three of the top twenty schools in the world, as
very positive.

On the other hand, major efforts need to be made as regards learning languages, the second most important aspect in the whole survey for
investors and in which the rating is not only negative but has also dropped with regard to 2009. Moreover, other aspects that receive very
positive ratings should also be considered as areas for improvement as they are below the importance ascribed to them by investors. This
includes assumption of responsibilities and objectives, learning capacity or math skills.

Efforts are also needed to ensure that foreign investors find skilled labor, as this section indicates again that this type of labor is really
important for companies.

Figure 17

Human Capital

Language skills

Assumption of responsibilities and objectives

Availability of Skilled Labor

Rating of higher education system (University)

Learning capacity

Oral and written skills

Math skills

Quality of business Rating

Importance
Availability of non skilled labor

0 1 2 3 4 5

Fuente: UNCTAD y páginas web de las Agencias de Promoción de Inversiones10.

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6.  Results by areas

6.8. Innovation

Investors value the existence of science and technology parks in Spain very positively and there are no problems regarding the availability of
researchers.

However, there is room for improvement regarding the business application of R&D&I, as well as the total volume of public expenditure on
R&D&I. As regards the latter, Spain is making a considerable effort, having increased progressively the annual percentages dedicated to
R&D&I investment by 64.3% in the period 2004-2008, taking the figure up to 1.37% of the GDP.

Figure 18

Innovation

Business application of R&D&I

Total volume of public expenditure on R&D&I

Incentives and subsidies for R&D&I

Availability of researchers Rating

Importance
Existence of science and technology parks

0 1 2 3 4 5

Fuente: UNCTAD y páginas web de las Agencias de Promoción de Inversiones .

10

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6.  Results by areas

6.9. Market size

The size of the Spanish market, as well as access to foreign markets are key factors for foreign investors and represent some of the main
reasons why they decide to invest in Spain.

Although the ratings are positive in these two aspects, there is room for improvement and this is leading to a range of actions, such as signing
bilateral and investment protection agreements.

Figure 19

Market size

Size of Spanish market Rating

Importance
Access to foreign markets

0 1 2 3 4 5

Fuente: UNCTAD y páginas web de las Agencias de Promoción de Inversiones10.

GATEWAY TO MARKETS

Spain offers foreign investors a market with a high level of purchasing power and sophistication, which not only includes its 45 million
inhabitants but also, thanks to its privileged geo-strategic location, serves as a gateway to other markets with over 1.3 billion potential
consumers in the EMEA (Europe, North Africa and the Middle East) region and Latin America.

In this respect, the existence of double taxation treaties and investment protection agreements between Spain and these countries
has facilitated European, Asian and Latin American companies setting up their business decision centers or technology departments in
Spain.

Bilateral agreements signed with Latin America

• 11 Agreements to avoid double taxation (Argentina, Bolivia, Brazil, Chile, Colombia, Cuba, El Salvador, Ecuador, Mexico, Trinidad
and Tobago and Venezuela).
• 19 Mutual agreements to promote and protect investment (Argentina, Bolivia, Colombia, Costa Rica, Cuba, Chile, Ecuador, El
Salvador, Guatemala, Honduras, Mexico, Nicaragua, Panama, Paraguay, Peru, Dominican Republic, Trinidad and Tobago, Uruguay
and Venezuela).

North Africa
• 4 Agreements to avoid double taxation (Egypt, Morocco, Algeria and Tunisia).
• 5 Mutual agreements to promote and protect investment (APPRIS). (Algeria, Egypt, Libya, Morocco and Tunisia).
• Euro-Mediterranean Association Agreements with Egypt, Israel, Jordan, Lebanon, Morocco, Tunisia and Algeria.

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6.  Results by areas

6.10. Quality of life

Although it has dropped slightly with regard to last year, the rating that foreign investors award to Quality of Life in Spain is very positive. The
HSBC Expat Explorer Survey ranks Spain second in the EU in this respect.

Spain’s geographic location, climate, cultural events, health system and the availability of international schools are key factors for the
integration of expats and their families. Leisure and culture is the highest rated aspect and a clear strength in Spain. The same is true of the
quality of the health system, ranked the best according to the aforementioned HSBC survey.

The main area for improvement is cost of living, which unsurprisingly has dropped and needs to be read in the context of the recession.

Figure 20

Quality of life

Cost of living

Safety

Availability of international schools

Quality of health system

Integration of expats Rating

Importance
Leisure and culture

0 1 2 3 4 5

Fuente: UNCTAD y páginas web de las Agencias de Promoción de Inversiones .

10

Barometer of the Business Climate in Spain, 2010 results

Results by areas
28
1.  Introducción

Methodology
The Barometer has been conducted jointly by INVEST IN SPAIN and the IESE International Center for Competitiveness (ICC).

This year the areas covered by the Barometer have been extended, aiming to include more aspects that interest foreign investors. Although
this makes a comparison with previous years more complex, especially in certain aspects, in the short term, it serves to provide new
information, which is key to understanding the motivations and concerns of foreign investors in Spain.

The methodology followed, as in previous years, involves asking over 300 foreign companies that operate in Spain to fill out a questionnaire.

The various different areas included in the questionnaire have been grouped under four headings since 2007 in order to ensure continuity:
Overview in Spain, Costs, Infrastructures and Resources and Quality of Life. The average rating for Spain is obtained by calculating the average
of the various ratings obtained in each of these four groups.

1) OVERVIEW IN SPAIN
Labor Market
Regulatory Environment
Market Size

2) COSTS
Costs
Taxation
Finance

3) INFRASTRUCTURES AND RESOURCES

Infrastructures
Human capital
Innovation

4) QUALITY OF LIFE

The questionnaires show the rating that companies award Spain in each area together with the importance they ascribe thereto in order to
reflect what companies are really interested in.

Foreign investors were asked to rate the importance of each area using a score of 1-5 then rate Spain in this respect. Questions where the
answers indicate the biggest gap between importance and the rating awarded by investors have been marked as priority action areas, as it is
understood that Spain is not meeting foreign investors’ expectations in these cases.

Barometer of the Business Climate in Spain, 2010 results Barómetro del clima de negocios en España, Resultados 2010
Methodology Introducción
29 29
Annex
ANNEX 1 : PROFILE OF COMPANIES SURVEYED Figure 21: Number of employees

Most of the companies that have taken part in this survey have fewer 10000 to 25000

than 500 employees, another significant profile (20%) consists of

1000 to 10000
companies with between 1,000 and 10,000 employees.

The sectors represented in the sample are very varied, which avoids
any bias from over-representation of any given sector.

500 to 1000

Under 500

Figure 22: Sectors

Chemical, pharmaceutical products, biotechnology

and life sciences and healthcare
Automobiles and components

Retail and consumer goods

Construction and Engineering services

Electronics, IT and Telecommunications

Professional Services

Food and beverages

Logistics and transport

Banking, insurance and other financial services

Agriculture, forestry and fishing

Renewable energy

Travel, tourism and leisure

Environment, water, water treatment and waste

Aerospace and aviation

Energy

Media and entertainment

Elevators

Mining

Other

0 2% 4% 6% 8% 10 % 12 % 14 % 20.3%

Barometer of
Barómetro delthe
clima
Business
de negocios
ClimateeninEspaña,
Spain, Resultados
2010 results2010
Introducción
Annex
30
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