Spain’s Economic Transformation (1960-1973): International Reintegration and Modernization
Item 8. International Reintegration (1960-1973)
1. Reintegration into the International Economy
Conducted through progressive liberalization, barriers to international marketing were removed sequentially. However, tariffs remained a significant brake.
While global efforts aimed for more flexible markets, tariffs hindered incoming goods. Tools used to manage this included:
- Trade schemes for imports: Articles were treated differently, progressively eliminating intervention.
In 1958, this scheme covered 7% of production, increasing to 80% by 1973. The government no longer controlled imported goods; operators took over. While a protective tariff remained, it was a significant step. Tariffs varied by industry, allowing domestic production at higher prices than international ones, enabling exports.
Protection was extreme for durable consumer goods and intermediates, moderate for recently developed machinery and transport equipment. Consequently, foreign companies primarily accessed Spanish trade through investment.
The 1970 agreement with the EEC, initiated by France, opened the Spanish market to unrestricted goods. The EEC offered compensation: Spain could easily sell products in the EEC market, although Spain initially showed limited interest due to low domestic competition. In return, Spain lowered tariff barriers. Spain benefited from this agreement through increased industrial capacity and productivity gains from consuming more efficient industrial goods.
2. Financial Apertura
Initially, the Franco government banned foreign investment to nationalize the economy. Later, it adopted an ultra-liberal policy, considering foreign investments necessary. In 1959, a decree-law freed investment up to 50% of capital, removing obstacles to repatriation, and allowing 100% with government permission (excluding press and education to maintain state control). Legal rights to property and profit transferability were guaranteed for foreign capital. Insufficient domestic savings necessitated addressing low productivity and technological backwardness. Foreign exchange was needed to balance trade, and technology was acquired through investment benefits. This led to a dramatic expansion in previously underdeveloped trade sectors.
3. New Processes of Integration into the International Economy
Exports grew to 11.5% and imports to 12.9%. The trade balance remained negative, as Spanish exports couldn’t offset imports, reducing the degree of coverage. Foreign tourism and emigrant remittances (money sent to Spanish families) resolved this.
In the 1960s, tourism and emigration partially offset the trade imbalance. Migrants mainly went to France for seasonal work like grape harvesting. By 1980-1989, Spain achieved a trade surplus. The growth of neighboring countries absorbed surplus agricultural labor, reducing unemployment and increasing foreign exchange earnings from agricultural exports, tourism, and foreign investment. Migrant remittances accounted for a quarter of the balance. Rural populations migrated to cities, providing labor for industry but straining agriculture.
Between 1960-1975, tourism increased, driven by cheap labor and attractive landscapes. However, it began to decline in 1975 due to increased competition. Foreign investment surged between 1959-1973, reaching 6.1 billion (primarily private), with the U.S., Switzerland, and Germany leading. Foreign investments constituted 20% of the economy.
4. Modernization of Agriculture (1960s)
Agriculture underwent a transformation driven by a decrease in labor supply. As industry modernized, industrial wages became more attractive, leading to rural-urban migration. Demand for sophisticated products also increased. Cereal production lost its labor advantage, increasing agricultural wages and driving mechanization. The focus shifted from exploiting low wages to capitalized production, using fertilizers and machinery to replace farm workers. Mechanization was financed through debt. Productivity doubled, and access to external markets motivated these changes.