Doing Business In Navarre

The investor in Navarre benefits from Spain's rapid growth, vigorous exports and stable prices, as well as from participating in Spain's fastest growing region.

Sparking Spain's growth is the nation's all-out effort to qualify for Europe's single market currency. The undertaking has reduced government deficits, stabilized the value of the peseta and toppled interest rates, all critical to a healthy economy. With a growth rate well above the EU average, Spain is the envy of Europe, given the pale economic performance of most continental European nations.

Many observers feel Spain's progress toward a solvent and stable economy has pushed it to the ranks of Europe's strongest economies. The nation has reduced its interest rates by 6.25 percent since 1993. This year's projected budget deficit of 3.8 percent of GDP is a nice improvement over the rate of 7.3 percent just four years ago. Inflation is projected at 2.9 percent this year, a remarkable 29-year low. Public debt is just a trace over the limit of 60 percent of GDP imposed for entry into the single-currency club.

Since 1986, the year of its entry into the European Economic Community, Spain has witnessed a net inflow of foreign investment. In the 1986-1996 period, Spain ranked fourth among OECD countries for foreign direct investment, surpassed only by the USA, the UK and France. Spain ranked first, however, in terms of profitability of investment, as measured by rates of return on capital in the business sector. The rate of return in Spain in 1996 was 18.9 percent, 50 percent higher than the UK and 25 percent higher than France.

Real GDP Growth Projections
1997: 2.7%
1998: 3.0%

Inflation Forecast
1997: 2.9%
1998: 2.5%

Business Organization Structures
• A corporation, called Sociedad Anonima (S.A.). This is the most common form of business organization. Minimum capital is 10 million pesetas. Shareholders can be individuals or companies of any nationality or residence.

•A limited liability company, called Sociedad de Responsbilidad Limitada (S.L. or S.R.L.) This structure is seeing increasing popularity because of the low minimum capital requirement (500,000 pesetas) and the absence of a maximum capital limit.

•A general partnership, called Sociedad Regular Colectiva (S.R.C. or S.C.)

•Limited Partnership, called Sociedad en Comandita (S. en Com. or S. Com.)

•Some companies may elect to establish a branch, which must have a legal representative empowered by the home office to administer the affairs of the branch.

Investment Conditions

Exchange controls: Deregulated.

Bank accounts: Nonresident individuals and legal entities can hold bank accounts under the same terms as a Spanish citizen.

Prior authorization for direct investment, real estate investment, joint ventures, etc.: Required only if the foreign holding exceeds 50 percent of the capital stock of a Spanish company and an investment exceeds 500 million pesetas, or if the foreign investor is a resident of a territory considered a tax haven.

Prior authorization is required for investments by non-EU residents in certain business sectors, including gaming, television, radio, air transport and activities related to national defense.

Capital movement: Foreign investors can freely remit abroad, without any restrictions or limitations, the invested capital and capital gains resulting from disposal of investments in Spain. They also have the right to remit abroad dividends and profits arising from their investments

National Tax Rates

•Corporate: 35%

•Capital gains: 35%

•VAT: 16% on most goods and services, with reduced rates applicable to such goods as pharmaceuticals and certain food items.

Navarre Snapshot

Population

Navarre: 540,000 (1.4% of Spain)

Spain: 39.27 million

Official language: Spanish. Basque is also considered an official language in the Basque-speaking parts of Navarre. The availability of three universities means there is no problem getting well-trained workers and engineers, many of them with multiple language capabilities.

Education levels: 42% of Navarre's population over 16 has an Ordinary or Higher National Diploma. Ten percent of Navarrese have a university degree.

Life expectancy: 77.5 years

Navarre's Economy

Gross Domestic Product (1995) US$7.8 billion (1.6% of Spain)

GDP per Capita: US$14,914 (16% higher than Spain's average of US$12,886)

Index of Industrial Value Added per Inhabitant (Spain = 100): 184.9, highest of any region in Spain.

Exports (1996): US$ 4.0 billion

Imports (1996): US$2.29 billion

Exports as a % of GDP: 42%. The percentage for Spain is 16%.

Navarre Exports as a % of Spain: 4.2% of the national total

Navarre Imports as a % of Spain: 2.1% of the national total

Unemployment rate: 9.8%, less than half of the Spanish average.