Spain: Seeking New Worlds to Conquer

Flush with cash and facing hard times at home, Spanish companies are again looking abroad

Mango's Casi. The retailer sees the crisis as an opportunity to expand Mark Gregory Peters

By Mark Scott

Barcelona - The Great Recession has been easy on Enric Casi. In fact, the general manager of Mango, Spain's No. 2 fashion retailer, can barely keep up with business. The 53-year-old Barcelona native has inaugurated 225 stores since the crisis began and anticipates launching an additional 200 annually in coming years, mostly abroad. Since January he has traveled repeatedly to Asia to open outlets and cut deals with suppliers. And in May he jetted off to Munich to celebrate a promotional deal with Scarlett Johansson. "The crisis has affected us, especially in Spain, but it's an opportunity to expand into other global markets," says Casi. The frenetic pace has paid off: Sales are on track to jump 10% this year, to some $2.3 billion.

Mango's story isn't a one-off. Spanish companies from windmill makers to banks to bicycle manufacturers have been flexing their financial muscle just as American and European rivals cut back. Last year, Madrid's Banco Santander (STD), Europe's second-largest financial house, paid $1.9 billion for Sovereign Bancorp in the U.S. and $16 billion for Brazil's Banco Real. Retail giant Inditex, owner of fashion brand Zara, in February penned a deal with India's Tata Group to open stores across the subcontinent. And Iberdrola Renovables, already America's No. 2 wind farm developer, has won $546 million in U.S. federal grants—more than half of Washington's stimulus spending for green-energy projects.

It's a return to form for Iberia Inc. Two decades ago, Spain's biggest companies roared onto the global stage, expanding their operations and buying up rivals, initially in Latin America and later across Europe, Asia, and North America. But as the Spanish economy blossomed over the past eight years, many key players refocused their energy at home, where easy credit fueled consumer spending and a housing boom. Now, with unemployment at 19.3% and Spain's economy expected to contract 3.2% this year, the cream of the corporate crop is again looking abroad to jump-start growth. "Large Spanish companies know how to win overseas," says Xavier Vives, a professor at IESE Business School in Barcelona. "The Spanish economy won't pick up anytime soon, so they have little choice but to focus on international markets."

FEWER TOXIC ASSETS

Despite the turmoil at home, Spain's biggest companies are in surprisingly good shape. Most dodged the worst excesses of the pre-credit-crunch era, so they have stronger balance sheets and fewer toxic assets than do international rivals. And a long track record in developing markets will likely be an advantage as these outfits look farther afield for growth. Investors agree. The IBEX 35 index of Spain's leading stocks has risen 24% this year, vs. 16% for the Standard & Poor's 500-stock index. And the foreign investments of Spanish multi-nationals have averaged $87 billion annually since 2007. That's 5.8% of Spain's gross domestic product, roughly the same level as in the late 1990s, vs. 4.3% earlier this decade.

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