Closing meeting of forum: Latin America, Spain and the United States in the Global Economy

New York (United States)

PEDRO SÁNCHEZ, Acting President of the Government.

Good afternoon, dear friends, ladies and gentlemen,

I want to sincerely thank the Chamber of Commerce of the United States and also the daily newspaper 'El País', of the Prisa group, for their work in organising this event.

Events such as this one help in something crucial in international business, which is opening doors, allowing greater mutual knowledge of each other's country, also their institutions and, above all, bringing down obstacles and burdens to trade. In short, building trust, which is necessary in today's global politics, something particularly valuable in this time of protectionist tensions as those we are presently seeing affecting global politics and economics.

This year, moreover, this US Chamber of Commerce celebrates its 60th anniversary. That is why I wish to convey, first of all, a message of gratitude on behalf of the people and Government of Spain. We are grateful and extend our thanks to the Chamber of Commerce of Spain and its president, José Luis, who is sat there in the front row.

Thank you and congratulations on six decades of work to ensure that two countries united by so many things, as the ambassador reminded us earlier, can find each day MORE reasons to share this future and also economic development.

Moving on to the subject at hand, you know that today the Bank of Spain and, moreover, we have had the chance to listen to the speech by the Governor of the Bank of Spain, has revised the economic outlook for Spain and its growth for this year and next. This outlook for growth is now more similar to what the Government of Spain has maintained since the start of this year. And just a week ago, the OECD also decided to lower its global growth forecast for this year and for 2020.

This is an interim revision and hence does not affect or lower the level of the country, to put it better. And yet, the Chief Economist of the OECD remarked during his presentation of the report, and I quote this textually, that Spain is better withstanding the slowdown than Eurozone as a whole.

This opinion, however positive it may be - which it undoubtedly is - reaffirms the will of the Government of Spain to work to offer two decisive values to the European economy, which is stability and certainty.

As Acting President of the Government, I wish to make a realistic diagnosis of this context; not to minimise the risks, which are clear. And I am convinced that over the course of today you will have had the chance to share some of these risks. And nor do I wish to exaggerate the strengths and weaknesses of our economy. So we should be neither complacent nor pessimistic, but show responsibility and confidence in its potential, not only that of the Spanish economy, and it has a great deal of potential, but of the whole of Spanish society - its large corporations, present here, its small- and medium-sized enterprises, which must become much more international, our entrepreneurs and those who have taken steps into new areas with innovative ideas to face the challenges that lie ahead of us.

Since the end of 2017, we have been facing a particularly complex global scenario, and one which is becoming increasingly more complex. An environment with major uncertainties, probably, although not certainly, more closely tied in to politics than economics, as pointed to by leading corporations and agencies on a repeated basis.

I would like to focus on three of them. Firstly, we have borne witness to an unprecedented protectionist drive in recent years, in recent decades, with growing tensions between the United States and China, the two superpowers, that translates into a no win game in which, unfortunately, there will be many losers, including the United States and China.

We must trust, at least that is what the Government of Spain is doing, in the resolution of this conflict in the best way possible in the short term. Should this not happen, the only certain consequences will be a slowdown in global trade of which there are already more than clear signs.

Secondly, we are seeing a genuine change in the roadmap of the main central banks in the world. The Federal Reserve has lowered its interest rates for the second time, while the European Central Bank, for its part, has stopped raising interest rates which, until just a short time ago, as we were reminded by specialised economic journals, it was going to raise. Hence, it was expected that this would happen towards the end of this year, and also of the next few years.

And it has once again implemented a raft of unconventional measures including the reactivation of the public debt purchase programme that has so strongly characterised the mandate of [Mario] Draghi and which some of the more orthodox stalwarts, particularly Germany, have been so opposed to.

We continue to expect that inflation will normalise. In my opinion, and that of the Government of Spain, this is a clear symptom that the global economy is still suffering the side effects of the last great international financial crisis whereby, more than a decade on, the levels of global debt continue to remain high and consequently limit the possibility of corrective actions by public powers, as the European Central Bank recently reminded us.

Thirdly, together with these two issues I raised before, and within the framework of the European Union, we are facing a real risk of the United Kingdom leaving the European Union without an agreement - a hard Brexit - which could take place on 31 October.

I have referred on many occasions, both publicly and in private talks with the British Prime Minister, that Brexit is a decision that goes against the logic of our times. We live in a time that requires greater integration. I also say this to the pro-independence Catalans. At any event, we continue working through the European institutions to seek a solution.

Today, furthermore, I wish to send out a message of confidence, because it is true that the Government of Spain has done its homework. We are ready although, clearly, if a hard Brexit takes place, we will be venturing into the unknown and hence will need to play close attention to the challenge that may unfold.

At any event, the government has taken the necessary contingency measures and has been ready for some months for any outcome. In fact, this very week we will meet through the Conference for Affairs Related to the European Union with the different regional governments and also local authorities in some of the regions that would be worst hit by a hard Brexit to grease the cogs, let's say, in the event of this outcome.

Consequently, in recent weeks we have strengthened the coordination mechanisms and re-evaluated all the parameters for response, I stress, to any outcome. I have briefly mentioned the situation we are facing and I would like to now focus on those actions which, in my opinion, should serve to address the perspective of a global economic slowdown in the short and medium term. And I will do so with an initial consideration, which is that there is no reason for the slowdown of the cycle. Or rather, there is no reason for the slowdown of the cycle to turn in to something more serious.

Spanish society is pro-European. The government is proud of resuming this pro-European drive, as the ambassador mentioned earlier, and it does so with conviction, but also with a renewed desire to see Spain taking part in the major debates pending and which, from my perspective, all point in the same direction, something we have always advocated at the European Councils, which is strengthening the Economic and Monetary Union.

Spain wishes to strengthen and protect the European ideal to build a Europe that protects both its citizens and its business owners.

At a Eurozone level, it is necessary to complete the monetary action of the European Central Bank with structural reforms that raise productivity and, in particular, with a fiscal policy that helps sustain demand, as pointed to by the President of the European Central Bank.

Spain has been arguing this for some now before the European institutions. For example, through the creation, once and for all - let's see if we can achieve this over the next five-year period - of a genuine European Budget with anti-cyclical and stabilising functions, while also complementing this with an idea advocated by the Government of Spain, which is the creation of a European Unemployment Scheme that would also act as a stabilising factor as well in the Eurozone and which would obviously also complement what each Member State can offer by way of unemployment protection.

It is true that the Fiscal Council is concentrated in certain countries, the paradigm of which is Germany, while others lack this element. But the situation of the Eurozone as a whole allows room to act under conditions of exceptional financing. I believe that we must take advantage of this. Now is perhaps the best time to recall that international economic governance should be based on multilateralism and I believe that this week, and precisely in this city, we should advocate multilateralism as fundamental, above all, after listening to some speeches yesterday by some political leaders at the United Nations General Assembly. I don't want to name names.

The response to the major global challenges cannot be based on anything else, particularly not on a return to unilateralism. Challenges such as global trade, international taxation, migration - which is so present in European policy, albeit somewhat less in Spanish policy, but we are a diverse and integrating society - and, above all, climate change and what it represents. And here I also wish to advocate the positive work by large business owners who have seen this from the start and have looked at this as a long-term project, and which are now also benchmarks, not only Spanish business owners but also international business owners. Climate change and the other matters I have mentioned are global challenges that require a coordinated and constructive response.

I have referred to Spain's role in the European Union based on the idea of promoting a renewed leading role from our country. And I wish to extend this goal to the main multilateral forums that we are active members of. We are ready to play a more active role in the main areas of global governance. That is, I believe, the idea, and the role that is worth consolidating by our country. We are a country that, as all great entrepreneurs appreciate, overcame a tough economic recession, believing in its own possibilities, conquering new markets and opening up new frontiers that would have seemed unthinkable in the past.

Hence, strengthening the institutional architecture of the Eurozone - I believe that this is one of the main thoughts I would like to leave with you - and, above all, the commitment of the Government of Spain over the next four years; of having, in short, an institutional architecture in the Eurozone that allows us to respond to potential crises from a supranational perspective.

Secondly, as I said before, trust in multilateral forums and a more active role in them.

And lastly, a crucial goal in this context - stability to responsibly address the major challenges facing our country.

I mentioned at the start of my speech that the Spanish economy is coping well with the worsening global economic context. But that does not mean that we are immune, of course, to the slowdown of the global economy. But there is one unquestionable figure - out of the main Eurozone economies, the Spanish economy is that one that is best resisting the turbulence. The figures coming out of international bodies are clear in this regard. And our economy, in my opinion, is withstanding well for three reasons. The first, because the cycle has not reached an end. Our recovery, if we look back, began later than in other countries. In France and Germany, for example, they took just three years to recover their Gross Domestic Product from before the crisis, while Spain needed almost a decade. Three years for France and Germany, and almost a decade for Spain. That not only evidences the depth of the crisis we have suffered from for all these years, but also the capacity we still have to prolong this economic cycle we are currently experiencing.

We are growing more than these economies, but for less time. And it thus makes sense that our expansive cycle should still have some way to go.

Secondly, because we are not only growing, but, thanks also to the contribution from companies in the foreign trade sector, we are doing this in a more balanced fashion, without internal or external imbalances; there is no real estate bubble as in the past, and hence, we do not have any imbalances that need correcting in the short time as we did on other occasions.

Economic cycles do not simply run out, this takes place due to the impact of external factors, the contagion of a crisis such as the sub-prime, or due to the accumulation of excessive imbalances. The recurring and high foreign trade deficit has been one of the Achilles heels of the Spanish economy for the last 30 or 40 years.

But not now. We have been growing for several years at rates of above 2%, with a foreign trade surplus, with a positive financing capacity and with a balanced contribution from several sectors.

And the third reason why our economy resists comparatively better is that we have accumulated a series of competitive edges over the last decade that will not decline in the short term. The gradual rise in salaries is helping families improve their levels of consumption, without this being passed on to prices, as we can see with inflation, which is growing by less than the Eurozone average.

Furthermore, our companies have cleaned up their accounts and today their level of indebtedness is less than the European average. Spanish households have also completed their process of getting out of debt in general.

In short, Spain continues to inspire confidence. And three indicators clearly evidence this: the risk premium, the success of debt auctions and direct foreign investment.

I am not being complacent, nor a conformist. Don't get me wrong. You better than anyone know that aping the past does not guarantee success in the future; we have a lot to do to overcome our political stalemate in order to implement these transformations. It is a case of what we must do going forward: continue growing in a balanced fashion. And I am certain, and I stress this again, that nothing contributes to this more clearly than stability. Stability to undertake reforms, as I said before, that cannot be put off indefinitely; stability to clear away the uncertainties that condition the decision-making of some investors while waiting for a government to be formed. And stability, in short, to look to the future with optimism and confidence in our own abilities, which are many. Today, Spain is growing and creating jobs and we must continue to do so. However, the worsening of the international environment means we should be prudent.

I said before that the Spanish economy has been growing by at least 2% and everything points to it maintaining its rate of growth at close to this level in the next few quarters. We will continue to create jobs at a sound rate - 480,000 jobs have been created in the last 12 months. The unemployment rate will fall to 13.8% this year and to 12.3% next year, according to forecasts.

And, as regards the public finances, the Government of Spain's commitment is firm. The reduction in the public deficit in 2018 allowed Spain to exit the corrective arm of the Excessive Deficit Procedure that we had been subject to since 2009. We maintain the goal of reducing the public deficit to 2% this year, compared with 3.1%, which was the level of our economy when we came to power in June 2018. Everything points to this being achieved, as recently indicated by the Independent Fiscal Responsibility Authority in its latest report.

Earlier, I alluded to something that has gone unnoticed in the media but which seems to be an important event to me, which is the issue of public debt as an indicator of confidence.

Last week, the ratings agency Standard & Poor's raised our debt rating to its highest level in seven years. This is a significant improvement that further extends the last upwards revision in March 2018. And in the latest report, in which the agency justifies its decision, it quotes such aspects as I mentioned earlier: balanced growth, a reduction in public debt, also in private debt, and the performance by the Spanish foreign trade sector.

In short, Spain inspires confidence, as can be seen in the fact that our issue of public debt has recently been publicly recognised. In addition, this year we are going to issue a lower volume than previously expected and, for the first time since 2012, this will stand at below the figure of 200 billion euros.

The aim of this is clear - to continue reducing the debt ratio, in accordance with our European commitments.

Spain is posting buoyant economic figures, but, beyond that, we are accumulating structural strengths that make our country particularly attractive. We are one of the 20 fullest democracies in the world, according to the highly influential British journal 'The Economist', and one of the freest countries in the world, as maintained in the 2019 annual report entitled 'Freedom in the World'. In addition, according to the OECD, Spain is the ninth ranked country in the world in terms of the fewest regulatory restrictions on foreign capital.

Consequently, we offer a sound institutional environment, the foundations of our rule of law provide physical security and legal certainty for businesses and we enjoy an entrenched framework for social dialogue. I believe it is important to once more underline and recover this; rebuilding social dialogue which guarantees, in short, social stability and a good climate for entrepreneurship. We have one of the best networks of physical and digital infrastructures in the world. A network rolled out over many decades that has turned Spain into the European country with the largest cover of fibre optic in households, at 77.4%. To put this figure in context to give us an idea of the magnitude of the progress made in this field, this is a higher amount than all of the large European economies together.

In addition, we have a powerful business fabric that spans large corporations, small and medium-sized enterprises, represented here, which have withstood the crisis with their capacity for self-financing, with a great growth potential and also with international projection.

This last aspect of international projection seems to me a key value in this new economic landscape in which we move.

Spain is not only attractive as a result of foreign investment or for foreign investment due to the potential of the domestic market. This is also true due to its ability to project itself as an international business and investment platform to different regions, such as Latin America and the United States.

In short, Spain has the best credentials to be at the forefront in areas related to the technological revolution. We have international companies in such sectors as banking, energy, infrastructures, publishing… But perhaps the performance of many small- and medium-sized enterprises is less well-known which, through their innovation, head up areas that are going to change everything radically, and in fact are already doing so.

A few days ago, I quoted in a speech the example of a 3D printing company from Vitoria that is creating ultra-customised medical prosthesis with cutting-edge bio-technology, and there are many other such examples. Companies capable of manufacturing smart mattresses that contain information on how people rest and evaluate how to improve this. Companies that combine tradition with modernity, such as the Ribera de Duero wine cellars, which use big data, or artificial intelligence to take decisions on how to enhance productivity. In short, I could quote many examples, such as our audio-visual content industry - pure creativity that expands our culture and our global language, and creates wealth and quality through new platforms.

Over recent months, believe me, I have had the privilege to see first-hand Spanish entrepreneurs whose work leads us to feel legitimately proud.

Spain is a great country; and we don't say this often enough. When we do say it, we say it outside Spain. But we live in a great country; we belong to a great country, with unique conditions where those who wish to become entrepreneurs can do so in a favourable environment. This is something that the government I head up, and which I intend to form if I obtain the confidence of our citizens once again on 10 November, will always have clear.

I would like to end with an appropriate reference in a week in which the global agenda has been focused on the challenge of climate change. Or climate emergency, as the Secretary-General of the United Nations described it, who, I believe it is worthy of mention to underline his leadership in everything related to climate change.

Over the course of these last 15 months of government, Spain has shown a clear commitment to the fight against global warming. The ecological transition of the economy is the right response. Acting is not only an obligation to show our accountability to future generations, starting with that of our own sons and daughters. It is also, and that is what I wish to call for at this forum, a tremendous opportunity. A tremendous opportunity to build, if you will allow me the idea, a brand image for Spain of an open and supportive country, committed to other global causes such as equality, diversity, feminism… And which moves millions of young people, and the not so young, from all over the planet.

A country that is committed to the electrification of the energy sector, a pioneer in the development of renewable energies, as we are; that makes progress in the transformation of the mobility and building sectors; a country which, in short, combines environmental awareness with fostering innovation to promote an ecological transition that must be fair and just.

Over the next 12 years, we will activate more than 200 billion euros, of which 80% will come from private capital. I am consequently speaking, together with the technological revolution, of a genuine lever for the economic and social transformation of our country. A Green New Deal, a new ecological illustration based on reason and knowledge. I believe, and am convinced, that this may be a turning point for our country.

At an event like this, I would like to reaffirm Spain's disposition to forge affinities, particularly with investors and companies in North America that share our vision and our ambition. You are not only welcome, you are essential for carrying this out. We want you and we need you. To that end, you can count on our full support.

I said, ladies and gentlemen, at the start of my speech, that forums like this serve as a key meeting point for building trust. Trust is the foundation of businesses and today I want to offer this on behalf of Spain, a country worth believing in and that looks decisively with optimism to the future; a country that is proud of its unique ties with the whole continent of America and with the United States, a country with which we have ties that date back to the birth of this great nation.

Let us use that to build a more prosperous future for our societies together.

Thank you very much for your attention.

(Transcript revised by the State Secretariat for Communication)

Non official translation