Tourism industry reeling from Spanish crisis
For economies, no winners from Catalan standoff
MADRID: Xavier Gabriel can take some credit if the tiny Catalan mountain town of Sort is one of the most famous in Spain. He runs a lottery shop called La Bruja de Oro, or The Golden Witch, in a town whose name, aptly, means “Luck” in Catalan. Its fortune in having sold many prizewinning tickets has made it a household name and a successful online business.
But the crisis surrounding Catalonia’s push for independence has changed life for 60-year-old Gabriel. He joined more than 1,500 companies in moving their official headquarters out of the wealthy region in recent weeks. Their main fear: that they would no longer be covered by Spanish and European Union laws if Catalonia manages to break away, dragging their businesses into unknown territory.
“The time had come to make a decision,” said Gabriel, who employs 16 people and describes himself as a proud Catalan.
Like Gabriel’s, the vast majority of companies that moved their headquarters didn’t transfer workers or assets, such as bank holdings or production equipment. So far, it’s mainly a form of legal insurance. But as the political crisis escalates, the risk is that companies are deferring investments and hiring. There is evidence that tourists are holding off booking, perhaps frightened by images in the media of police crackdowns, street demonstrations and strikes.
And the situation risks getting worse before it improves: the central government’s decision on Friday to take control of the region could spiral out of control if there is popular resistance, whether by citizens or local authorities like the Catalan police force.
“There is absolutely no doubt that the crisis is having a very damaging effect on the economy,” said Javier Diaz Gimenez, an economics professor at Spain’s prestigious IESE Business School. Financial markets in Spain have so far fallen only modestly, reflecting investors’ apparent belief that the tensions will eventually
Markets decline modestly
be resolved. The Spanish government has called a regional election in Catalonia for Dec. 21 and could later consider revisions to the constitution that might placate some of the independence supporters. But that could take some time, Diaz Gimenez says, given how confrontational both sides have been. The list of businesses moving headquarters includes Catalonia’s top two banks, Caixabank and Sabadell, which are among Spain’s top five lenders.
Then there is the Codorniu cava sparkling wine maker for which Catalonia is famous. Another wellknown cava maker, Freixenet, is also planning to follow if the independence drive continues. Publishing giant Planeta, the world’s leading Spanish-language publisher and second biggest publisher in France, has also moved its official address out of Catalonia. Caixabank says it suffered a “moderate” but temporary run on deposits because of the crisis, but said it has since recovered and was adamant the move was permanent. Shares for Caixabank, Sabadell and some other companies have been volatile, falling after the Oct. 1 vote for independence and jumping sharply when they announced their decision to move headquarters. Lottery shop owner Gabriel says ticket sales this month are up nearly 300 percent on last year, a rise he attributed to popular support for his decision to move his business.
Diaz Gimenez said the decisions to move headquarters, while not immediately affecting jobs, were “just the tip of the iceberg.” “Plans to relocate firms or invest elsewhere are going to accelerate and some of it is going to go to, say, Poland, and it’s never going to come back,” he said. “People that were thinking about investing in Spain and Barcelona are starting to think again,” he said. “It’s not just Catalonia. It’s the mismanagement by Spain, which is proving that it’s not a serious country because it cannot solve this thing.”