The Value Case For Spain [PRESENTATION]

In October 2012, Arcano published “The Case for Spain: it’s the fundamentals, stupid!” positioning itself as the first research house to provide clear and reasoned analysis advising investment in Spain. Since then, fundamental indicators of the Spanish economy have improved, and other banks have begun changing their view on the country, giving positive recommendations.

Also see this great article – Why Spanish Real Estate has Become so Popular all of a Sudden

In this second edition of “The Case for Spain,” we analyze the parallels between Spain and Germany, the imminent recovery of private investment and consumption, and the enormous potential of the Spanish economy in the mid-term. After its unification, Germany experienced a profound economic crisis; investors named it the “Sick man of Europe,” even as late as 2005. However, the country implemented a series of reforms beginning in 2002, which soon began to bear fruit: Germany established itself as an export-led economy, ended its recession in 2004, and saw consumption rates turn positive even though credit did not expand. These factors quickly reduced the risk of investing in Germany.

Spain is now entering 2014 with similar prospects to those of Germany in 2004. Following recently implemented reforms, Spain has become an export powerhouse, and it will fully leave the recession behind in 2014, with private investment and consumption growth turning positive after three years of decline and credit levels stabilizing. Spanish systemic risk is decreasing at an accelerated rate even though a number of myths about the economy remain widespread.

Though Spain still faces clear risks, which are discussed in this report, it presents a strong potential for upside in the years 2015 to 2020, and this upside is still not well measured by many investors.

The Case for Spain II October 2013 Why Spain in 2014 is similar to Germany in 2004 Ignacio de la Torre, Ph. D. idelatorre@arcanogroup.com Current Account forecast Source: IMF. A country’s Current Account balance measures the difference between its savings and investments. It can be positive (in the case of a Current Account surplus), enabling it to finance other nations, or negative (in the case of a deficit), which creates a dependence on foreign capital.