Until the 1950s, most agricultural products like olive oil and wine sustained Spain’s economy, which stood well below most of Western Europe in terms of GDP. Then, following several reforms implemented in the 1950s, Spain’s economy surged to become relevant in the global scale of economies. Following the fall of General Franco, a dictator who led the country for the better part of four decades, Spain integrated to become a part of the European Union. Although there turned out to be some bumps in the road, by 2008 Spain had become the 5th largest economy in Europe and nearly on par with its Western European neighbors.
Since then, Spain has been one of the hardest hit by the global economic crisis, suffering from crippling unemployment and multiple large bank bailouts. In 2013, the Spanish economy is showing signs of turning around by breaking out of the recession, but it is still struggling with poor economic factors. According to the 2014 “Ease of Doing Business Report” Spain dropped six spots to 52nd in the world, placing it in the bottom five of the high-income countries. After further looking into the subcategories of factors that caused this drop, the three that stood out were starting a business, protecting investors, and paying taxes.

The Factors that make it Difficult to Do Business in Spain

The first subcategory that Spain lags other countries is Starting a Business, where it ranks 142nd globally and 2nd to last among high-income countries. It is proven that one of the best ways to grow a struggling economy is by starting businesses and creating opportunities for employment, however there was just one reform passed in the past 5 years to help encourage new business formation in Spain and much more could be done.
There are three specific measures that affect starting a Business: the number of procedures that firms must go through; the official time required to complete the process; and the official cost. In these three indicators, Spain ranks last, last and second to last, respectively, amongst similar countries in Europe. With 10 procedures and almost double the average number of days of getting a permit in comparison to these countries (France, Germany, Italy, Portugal, Switzerland and United Kingdom), something must be done to further reform these processors.
Although Spain has done a fair amount of reforms to reduce the cost and time that it takes to start a business, there is one procedure that seems to severely inhibit the process: Procedure number seven, legalizing the company’s books, which takes 10 days. As seen in many other countries like France, this can be reduced to one day by changing over to an electronic system. Although the process is involves a slightly more complicated form, if Spain were to switch over the entirety of its company form requirements to an electronic format they would almost surely cut several days out of that process.
The second subcategory that really sticks out is Spain’s ability to protect investors from director’s misuse of corporate assets for personal gain. We have seen multiple exposures like this during the recession in the United States, and we now know exactly how big of a detriment this can really be. Just last year J.P Morgan had to pay 20 Million for misusing Lehman Brothers Funds, but at least they were held accountable. The Three indicators used by the Doing Business website to measure protection of investors are transparency of party-related actions, liability for self-dealing and shareholders ability to sue officers and directors for misconduct. In the 2014 rankings, Spain ranks 98th globally, and 2nd to last among the similar European countries previously mentioned. For a country that is considered developed and ranking amongst the highest of GDPs, this number is way too high to attract the investors needed to help them get out of a recession.
In the three subcategories stated in the paragraph above, each country is given a rating on a scale of