The Potential Effects of Catalan Independence

By Michael Jones (michael.jones@tsiglobalconsulting.com)

Spain has received quite a bit of bad press lately. Of course, some of it is deserved: the Euro Crisis did significantly weaken this European power’s economy and it has been struggling ever since, held up only by other European nations who were not hit as hard. However, many who have made these criticisms have also written Spain off as a lost cause or a has-been; this could not be further from the truth. Despite Spain’s economic woes, it still remains the 14th largest economy in the world on its own, and is a world leader and economic power in fields such as automobiles, renewable energy, and shipbuilding/shipping. Since Spain plays much more of an important role than many give it credit for, it is especially important for those in the international business arena to analyze major trends that are occurring within its borders. In the particular case of Spain, the issue of Catalan Independence is certainly worth a look.

For those who are unaware, Catalonia is a largely autonomous “community” of provinces in the northeast corner of Spain. As many Catalans will tell you, this regions shares little in common with the rest of the country; they are a different ethnicity, speak a different language (although the two are mutually intelligible), and have their own unique culture. In recent years, many of the inhabitants of this area have spoken up, believing that these differences are enough that they should be allowed to formally separate from Spain. This movement came to a head in 2012, with the elections of the Catalan parliament. These elections saw the rise of a majority within parliament that supported a referendum for independence from Spain, and since then, this party has had major activism to see this referendum go through. While the rest of Spain has been against the idea of an independent Catalonia, the fact that it remains a possibility in the eyes of many Catalans does pose the question: what would happen if Catalan Independence did occur?

One of the most drastic effects that Catalan Independence could have on the Spanish and European economies, as well as the economies of several other world powers, has to do with the Catalan capital city, Barcelona. Of course, as many of you know, Barcelona is one of the largest cities in Europe, and is a hub for many Spanish industries, such as tourism. However, what many are less aware of is Barcelona’s importance as an international shipping hub. Within the city, there are 3 major ports, with the largest, the Port of Barcelona, serving as the 9th largest shipping port in Europe, dealing with goods from countries all around the Mediterranean. Additionally, Barcelona is the largest cruise port in all of Europe, with a majority of European tourists stopping at least one here on their travels. Should Catalonia attain its independence, Spain would lose the considerable revenue this port’s shipping and cargo activities provide, fwhich could potentially have huge effects on Spanish domestic industry, since it would become harder for Spain to export its products abroad. Spanish tourism would also suffer, as the money from vacationers would only stay within Catalonia.

Tying into the economic loss from Barcelona’s ports, Spain would likely also suffer from more general economic effects should Catalonia attain its independence. Currently, Catalonia is considered to be one of the leading economic regions in Spain, and is home to very large banking sectors, alongside a strong stock market. As these assets would likely be converted over to Catalonia in the event of its independence, Spain stands to lose a considerable amount of productivity. Conversely, by keeping these sectors, and thus, its growth rate afloat, Catalonia stands to gain a lot in terms of general economics should it gain its independence.

Two other, less economic factors also stand to influence Spain should Catalan independence be achieved: the fate of other Spanish provinces, and Catalonia’s membership in the EU. In addition to Catalonia, there are several other Spanish provinces with distinct languages and cultures from the pervading Spanish culture. One of which, the Basque Country, has historically been very vocal about obtaining its independence, and could take a successful Catalan Independence movement to mean that their movement is in need of revival. Should these provinces with potential independence claims all rise up at once in wake of a successful movement, Spain could risk fragmenting even further. In terms of EU membership, while Catalonia would likely have no trouble ascending to the EU given its current economic status, the initial confusion immediately after a breakaway could lead more problems in the already fragile Eurozone. Additionally, should Spain lose even more of its economic output, its own status in the EU could be in jeopardy as well.

While currently it seems somewhat unlikely that Catalonia will achieve its independence, it is important for international analysts to occasionally play the “what-if” game. Without it, the entire international community risks being blindsided by such events. If you are curious as to the ramifications of other, similar global events, or are curious about doing business in Spain or Catalonia, please give TSI Global Consulting a call at 210-757-0618 to schedule a consultation.

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