Institute for Galician Economic Promotion: Pilgrim’s Progress – Joaquin Varela

Galicia in Spain has always been a magnet for Catholic pilgrims and European tourists. Joaquin Varela, general director of the Institute for Galician Economic Promotion, explains how, over the past decade, the area has transformed into an attractive destination for corporate visitors looking to tap into local production capabilities.

The region of Galicia, on the north-west tip of Spain, is known for its rich agriculture, fishing and natural resources. However, in the past ten years, a drive to increase industrial productivity has created local corporate champions, while its location on the Atlantic coast has attracted foreign business investment.

Joaquin Varela, general director of the Galician Institute for Economic Promotion (IGAPE), would be the first to point out that Galicia's natural resources and skilled workforce characterise the new local economy. "In the last decade the Galician economy has been characterised by an accelerated rate of growth greater than the Spanish and European average, and by fast progressive internationalisation," he says.

Much of Galicia's success comes from its Convergence objective status with the European Union (EU). In the 1990s the region's GDP hovered 75% below the EU average and it was given special status as an impoverished area. But the rating turned out to be a powerful stimulus for the local economy and Galicia is now racing ahead of the average continental level of GDP. Sustainable growth and investment have modernised the region from a struggling agricultural area to a dynamic multi-industrial economy.

The service sector represents 65% of the economy, according to IGAPE, and the industrial sector 18%. Natural resources drive the region's industries. Galicia produces food and drink, wood products, car and ship parts, and textiles. Biotech, information and communications technology, and renewable energy markets are also thriving.

The Inditex Group is one Galicia's best-known success stories. The textiles corporation, which includes the Zara brand, stocks more than 4,350 stores around the world but its headquarters and manufacturing operations are based in the municipality of Arteixo. 

And it's not just the fashion giant that has seen its profits skyrocket. "As a result of a process of internationalisation based on excellent planning, a large number of Galician companies are having great success at an international level," Varela explains.

In order to support more foreign investment, IGAPE offers a competitive financial support framework for any company spending over €500,000 in the area. Up to 30% of this support can take the form of grants, while the rest can include loans with little or no interest. In Galicia's 'priority support zones' investments over €200,000 are guaranteed to get a fifth of their funding, while the remaining four fifths are eligible for interest-free loans.

Local resources, global success

The regional government, the Xunta, has its own public risk capital company, Xesgalicia, through which the regional Ministry of Economy and Industry can provide risk capital or participative loans. The European Investment Bank offers further options for competitive corporate finance.

The Xunta has adopted a proactive expansion project and owns promotion centres in Germany, China, Poland, Japan and the US. "One of our basic and strategic goals is the internationalisation of our companies," Varela declares. IGAPE has demonstrated this by increasing support for programmes to support international expansion by 57% in its 2010 budget. The global centres were originally created to draw foreign investment to the region and advise financial directors; now they support Galician-based businesses that are operating in the worldwide market.

IGAPE helps to forge relationships between enterprises and potential partners in the region. In the past it oversaw collaborations between large corporates, such as Citroen, and their component-making partners. At present, clusters and sectoral associations are springing up throughout Galicia among industries as diverse as shipbuilding, textiles and agriculture. After being classed as one of Europe's stragglers, Galicia has come a long way to prove the region's natural wealth and resourcefulness. Now the rest of the world has realised that a pilgrimage to Galicia can often be a crucial next step on the road to global expansion