SPANISH LESSONS

Jose Maria Aznar engineered Spain's economic miracle. Can it last? You bet.

  Artículo de Stryker McGuire en “Newsweek” del 26-1-04

Newsweek International

Feb. 2 issue - Forty years ago, Spain looked a lot like Mexico, only worse. The average worker earned just $443 a year, less than the average Mexican. In the countryside of Andalucia and Extremadura, women scrubbed laundry in riverbeds. Spaniards who could leave left; those who stayed behind faced bleak prospects. Between 1970 and 1995, not a single net new job was created; half the economy was agriculture. "In 1979 we had the same per capita income as Iraq," says Finance Minister Rodrigo Rato. "That should tell you something."

It does, especially if you're sitting with Rato in the Madrid of 2004.

The capital's broad boulevards are home to some of the globe's most dynamic financial institutions, including two of Europe's largest, Banco Santander Central Hispano and BBVA. Bars and restaurants burst with prosperity. The picture is similarly rosy in Spain's second city, Barcelona, one of Europe's most stylish—and most fun—metropolises (following story). With the economy booming—in stark contrast to the rest of Europe—it's no wonder Spaniards these days are the most optimistic consumers on the Continent, according to surveys. Columnist Raul del Pozo of the newspaper El Mundo argues that Spain's new golden age is an epic achievement—the greatest European economic leap forward since postwar France and Germany.

The man behind the good times, Prime Minister Jose Maria Aznar, is now set to leave the scene. (As a candidate in 1996 he vowed to serve no more than two four-year terms.) Elections are on March 14. Aznar's time is up—but not Spain's. Stability, both political and economic, was the hallmark of his era. It's also likely to distinguish what comes next, whoever wins the election. The opposition Socialist Party has largely embraced Aznar's pro-business reforms. And if his own Popular Party should win, as polls suggest, Aznar's handpicked successor, Mariano Rajoy, will carry on. "Don't worry," says the political columnist Felipe Sahagun, jokingly. "Spain will be open for business."

That means Aznar will likely be a happy retiree. Once dismissed as Don Nadie, Mr. Nobody, he took an economy that was just lifting off and made it soar. How? "There are no miracle recipes," says Juan Iranzo, director of the Institute of Economic Studies. "There's only economic orthodoxy." And Aznar was nothing if not orthodox. He privatized nearly every publicly owned enterprise. He slashed taxes, twice. He cut public spending from 48 percent of GDP to 40 percent, reshaping a welfare state that ended up looking more British than Franco-German. And he balanced the budget by 2001, again —in contrast to others in the European Union.

Spain under Aznar has been the fastest-growing big economy in Europe. During the bullish "matador years," as Spaniards took to calling Aznar's tenure of the late 1990s, Spain grew an average of 4 percent a year. Today, it's down slightly, to 2.4 percent, but that's still four times as fast as the rest of the EU. Half the new jobs created in the Union last year were in Spain—and a third of the jobs created over the past eight years, a remarkable 4.5 million. Attracted to this new Spain, expats are returning and, perhaps more tellingly, other Europeans are seeing their neighbor in a new light. Says Jan Randolph, chief economist at the World Markets Research Centre in London: "Spain is the new princely peacock, after being looked down on by the northern Europeans as a poor Mediterranean country."

Aznar could never have imposed his economic regimen if the country hadn't been ready to accept it. Having endured Gen. Francisco Franco's autocracy from 1939 until his death in 1975, says Rato, Spain has been "predisposed to change" ever since. "Because we have such a traumatic past, we're very future-oriented," adds Juan Iranzo, director of the Institute of Economic Studies in Madrid. Change has come in waves, beginning with a measure of economic liberalization under the first Socialist Prime Minister Felipe Gonzalez in the'80s and early '90s.

If Spain weren't so open to innovation and change, the country's post-Aznar prognosis would be less upbeat. Just last week the European Commission gave Spain a "poor" competitiveness rating. Inflation runs consistently higher than in neighboring countries. Per capita income still lags 13 percent behind the EU average. Despite the impressive number of jobs created, unemployment remains the highest in the Union—11.3 percent, though that compares with 24 percent a decade ago. Job-protection and income-guarantee clauses have made employers hesitant to hire. As a result, temporary jobs make up almost a third of total employment. Other medium- and long-term weaknesses tick away like time bombs: an aging population, inadequate investment in R&D, subpar secondary and university education.

Ironically, the greatest challenge could be the very process that helped launch Spain's transformation: EU enlargement. Come May 1, 10 new countries will join the EU, just as Spain did in 1986. They will be eligible for subsidies that, for Spain, account over time for roughly 1 percent of GDP. Spain, meanwhile, will get less. Most economists are not concerned. "Subsidies do not explain why Spain has grown faster than Germany," says Antonio Ciccone of the Centre for Economic Policy Research in London. He does worry, however, that manufacturing jobs will be lost to the new EU members of Eastern Europe, with their skilled work force and lower wages. Already companies such as Samsung and the automaker SEAT have begun to make the move. "You're going to see a parade of those stories," says one economic attache in Madrid. "Spain is now the fifth largest automobile manufacturer in the EU. That's not going to be true in five years."

Alejandra Kindelan, chief economist for Banco Santander, is far more sanguine: "Spanish companies have demonstrated creativity and strategic thinking in the past. They will again." Not so long ago, such cool confidence would have been unthinkable in Spain. "In one generation this country has turned itself completely upside down," says Rato. It's important to remember, he adds, that Spain's rebirth came not through turmoil but from what economists call "dynamic stability." That was the great triumph of the former Don Nadie. If Spain is lucky, it will be his legacy.

With Liat Radcliffe in London

THE BARCELONA MODEL

It's the coolest city in Europe. Its secret? Sheer imagination.

  Artículo de Melissa Rossi en “Newsweek” del 26.01.2004

Feb. 2 issue - Barcelona's gothic quarter is a tangle of narrow stone streets winding around the old cathedral. Morning begins with a loud clanging of metal as the gasman rumbles along, pushing a cart of dusty orange cans and bellowing "Bu-ta-noooo!" He passes cafes, outdoor cheese markets and fountained squares where, later in the day, old men read newspapers and string quartets play Vivaldi. "Bu-ta-noooo!" Hearing his call, people pop onto their balconies and yell down orders for the butane that powers most of the neighborhood's furnaces, stoves and hot-water heaters.

The daily ritual recalls a distant past. But slip around the corner, past the Roman wall, dart into the sparkling subway station and 12 minutes later you emerge in the future. Here in the farthest reaches of the city, a huge photovoltaic pergola stretches along the Mediterranean Sea, generating solar energy. Public trash cans whisk garbage underground through pneumatic tubes. The Big Blue Triangle, a three-sided building with shafts of sunlight beaming through to its open-air lobby, is cooled by cascades of recycled water. Next to it, lush gardens insulate the roof of the city's flashy new convention center, southern Europe's largest.

Come May 9, this innovative architectural ensemble will host the Universal Cultural Forum, a 141-day culture and design expo that city fathers hope will stamp Barcelona's image even more vividly on the world map. Until recently, this area where the Besos River spills into the Mediterranean was so polluted, locals dubbed it "Chernobyl." Now, atop an upgraded water-treatment plant, a seaside plaza stretches for 20 football fields, the world's largest public square outside of Tiananmen. A park wraps around a renovated waste-recycling center, and, thanks to some 30 million euro from the European Union, the polluted Besos is coming back to life. Along the once nauseating coastline, a kinetic work of art has unfolded: long, undulating sculptures of artificial sand dunes enfold a man-made beach with seawater swimming pools, a marina, a sailing center and a diving school.The construction has created 5,000 jobs, says Montse Prats of Barcelona's Infrastructures del Levant, the company overseeing what has become the biggest municipal-renovation project in Europe. "And of the $3 billion spent here," adds Mayor Joan Clos, president of the forum, "two thirds is private money."

The forum is only a part of an urban renaissance that has made Barcelona one of Europe's most dynamic and innovative cities. Showered with prestigious awards from the likes of the Royal Institute of British Architects and the Harvard School of Design, Barcelona has become a magnet for city planners from Shanghai to Santiago. Next month 20 mayors from across Europe will meet there to discuss ways of injecting a bit of Barcelona's vitality into their own cities. So successful is this "capital of the Mediterranean" in creatively regenerating itself that there's even a buzz phrase for how to do it: the Barcelona model.

It's shorthand for a whole new approach to urban design—inventing fresh uses for the old, juxtaposing it with the new and creating loads of eye-pleasing public spaces (small parks, walkways, gardens and museums) to attract private development to previously dodgy areas. Couple that with a flair for staging high-profile international events to market the projects, and voila. "It's hard to overestimate the influence of the Barcelona model," says Uwe Brandes, project manager for the Anacostia Waterfront Initiative in Washington, D.C., one of many urban-renewal projects that have taken a page from Barcelona.

He's not alone in praising the city of 1.5 million famed for the soft, swirling buildings of Antonio Gaudi. "What is happening in Barcelona is absolutely a phenomenon," says Ricky Burdett, director of the Cities Programme at the London School of Economics and adviser to London Mayor Ken Livingstone. "Barcelona is the jewel in the crown of urban regeneration," adds architect Lord Richard Rogers, who headed a task force for the British government recommending that England embrace more than 100 measures first tried here. Tourists and business people all but swoon over the city these days. Barcelona is the world's most popular convention site. Cushman & Wakefield's international business surveys consistently rank the city No. 1 in the world in terms of quality of life. Some 20 million tourists visit each year; 9 million or so stay overnight, five times the figure in 1992, when the city played host to the Olympic Games.

The Olympics first brought Barcelona to tourists' attention. It also yanked the heads of urban designers everywhere. The reason: the event spurred an orgy of spending on huge infrastructure projects—airport expansion, highway rings, telecommunications and sewage upgrades, and the creation of miles of sandy beaches that entirely reoriented a city famous for "turning its back to —the sea." Twenty-five years' worth of infrastructure upgrades were crammed into five years, says the city's chief architect, Jose Antonio Acebillo.

Aware that the Games often leave host cities with dozens of abandoned and costly structures, Barcelona's design team engineered its creations for the future. Football games are still played in the Olympic stadium, but it doubles as a venue for concerts and shows. Athletes' dorms were built as full-fledged apartments, then sold for a tidy profit. The beachfront Olympic Village—a maze of modern architecture and sculpture that includes Frank Gehry's huge metal "Fish"—became a magnet for trendy restaurants, art galleries and hotels, among them the swanky Ritz-Carlton Hotel Arts. Tourism, which previously generated only 2 percent of the city's annual revenues, now accounts for 14 percent. And Mayor Clos believes publicity from the forum—organizers tout it as an "intellectual Olympiad," offering everything from seminars on world peace to edgy theater performances—will boost tourism by a third.

Preparations for the event have spurred yet another wave of innovation, building on a decade of what experts call "layered multiple use" of land. Across the city, parks spread out atop new highway tunnels. Parking lots hide under squares. Seventeenth-century convents are turned into libraries and cultural centers, palaces are transformed into hotels, museums sprout from former textile factories. "Here you have neighbors living and hanging out their clothes," says Burdett, gesturing to the laundry fluttering from a Gothic Quarter balcony, "and there you have a four-star hotel, a public square and a school."

Barcelona's appetite for beautiful public spaces, none of which exist by happenstance, figures large in these developments. Such places might be as simple as three benches under a palm or a tree-lined walkway. Or a grand square that can accommodate concerts or a parade. Forbidden under Franco's 36-year rule, these espacios publicos elicit more than just civic pride: they bring new life and development. Take Raval, the barrio next to the old docks, long known for prostitutes and drug dealers. "Private developers wouldn't touch it," says Derek Geary of the Barcelona Field Studies Center. But since the city put in a rambla (pedestrian walkway), a contemporary-art museum and more squares, businesses and restaurants are flocking.

What's now happening around the forum illustrates the power of Barcelona's formula—and mirrors the broader success of Prime Minister Jose Maria Aznar's pro- business policies for Spain. Its essence is a dynamic partnership between local government and private companies, each trusting the other to act in their (and the city's) mutual interest. Thanks to strong civic backing, investors can confidently undertake projects that might not otherwise be feasible—or profitable. Not far from the city's new beachfront, for example, private developers are erecting a mini-city, complete with a shopping center, university campus, 13 hotels and 800 new apartments. A two-bedroom goes for 400,000 euro—or more.

For some in the city, the pace of renewal has grown almost too frenetic. A new train station is being built for the high-speed AVE. The port is being refurbished. So is the bullring. Foreign high-tech companies are being lured to renovated enterprise zones that mix business and housing. Property values have skyrocketed. Slipped under the door of most every building are notes from foreigners wanting to buy. "Barcelona is becoming a city just for tourists," says Albert Gonzalez, owner of the wine bar Vinissim, shaking his head at the dizzying transformation.

Clos views all this as signs of "a successful city operating in a free market," and he may be right. Certainly the delegation from Seattle, strolling along Barcelona's new manmade beach and seeking inspiration for their efforts to create a "people-friendly waterfront" back home, would agree. If imitation is the highest form of flattery, Barcelona will soon be swimming in praise.