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18 // iberian.propery / 2017
dossier// ISSUE: TOP IBERIAN Investors
And now, what’s
next in Iberia?
One of the most influential economists in the world, Daniel Lacalle spoke
with Iberian Property on the current macroeconomic scenario of Iberia,
sharing some tips on what the path to a more robust economy should be.
Why is the Iberian economy out-performing
in Europe ?
Numerous factors. On one hand, averysuccessful
set of structural reforms in the financial sector,
labourmarket and public finances. Spain reduced
its deficit 40%, and has been creating more than
500,000 jobs per annum. Additionally, looking
at the Iberian economy as a whole, it has finally
reduced its external imbalances and has reduced
its trade deficit, thus reaching record-high exports.
This record in exports has been achieved despite
the weakness in key trading partner economies
likeBrazil orMexico. Finally, there have been some
positive external factors, including low oil prices,
although these external factors weigh less than
the positive impact of the massive reduction in
corporate and household debt.
Iberian economic activity is picking upwith a
long-awaited cyclical recovery, but the truth
is that the Spanish and the Portuguese econ-
omies are still evolving at different paces. Do
you believe that in the short-term there will
be a more convergent economic pace?Why?
I do not believe in convergence. I believe in
positive differences. Portugal has a tremendous
potential and needs to acknowledge its opportu-
nities and reduce imbalances. The same is with
Spain. Both can learn fromeach othermaking the
best out of the differences of each country and
the varied exposures to a wide set of economic
factors. Theway I see it, it’s not as a convergence
path, but as a strengthening collaboration, so as
to make the most out of each other’s strengths.
It is almost a decade since the financial crisis
of 2008 broke in Iberia: first in Spain and then in
Portugal. In the intervening years so much has
changed in the economic and financial back-
ground... Havewe learnt thenecessary lessons?
I do not like the term
“financial crisis”
as it gives
the impression that it was a crisis of only one
sector, when it was a crisis of an entire eco-
nomic model based on ignoring debt, spending
and cost of capital, believing that everything
could be justified with optimistic long-term
assumptions. Families and businesses have
reacted admirably, and the fact that the public
opinion is sceptical about the recovery while
strengthening their position, is a great thing.
Families and businesses have lowered their
debt to 2006 levels, focused on a consump-
tion and investment pattern that does not rely
anymore on massive debt, and those are very
positive lessons. Unfortunately, in Iberia, the
rise of populist messages and magic solutions
driven by totalitarians that promise heaven and
deliver hell is a concern. Populists are promoting
the idea that fiscal irresponsibility and massive
imbalances are the solution to the economy.
Repeating the mistakes of the previous years,
would only lead us to yet another crisis.
And are these economies investing enough
in R&D and in the transactional side of the
economy?
In Europe we talk a lot about
“spending”
in R&D
as if it were a magic potion. Investment in R&D
is needed, of course, but we need to monitor its
effectiveness, and not just howmuch we spend.
Alreadybefore the crisis, Iberian economies spent
more than Brazil, for example, in R&D in relation to
GDP. However, the number of registered patents
wasmassively lower, and the number of compa-
nies created from those patents even less. The
Iberian economy needs to change the mindset
from R&D as a
“public Investment”
and think like
Finland or South Korea, where more than 65% of
investment in R&D comes from the private sector
and it is focused on patents and job creation.