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Spanish officials didn’t use the words, “Si lo construyes, vendr�n,” but they might as well have borrowed the signature phrase from the movie Field of Dreams. Five years ago civic leaders from Madrid wagered that a Hollywood-oriented theme park would convert a semirural outpost 12 miles southeast of Spain’s capital city into a thriving suburb. Preliminary studies showed that tens of millions of tourists might visit the park, which could bring thousands of jobs to the depressed region. Madrid prepared a road show to prove that little San Mart�n de la Vega could become a popular entertainment destination. There were already theme parks in the south of Spain. But civic officials believed that there was room for another one based exclusively on movie characters. “People prefer it if the product is very much linked to Hollywood and the movies. That is the fashion,” says Alberto Nunez-Lagos, a partner at Madrid’s Ur�a & Men�ndez. He now serves as secretary of the board of directors for the amusement park. The Spanish contingent made its pitch to industry leaders, including Universal Studios, Inc., and Paramount Parks. But the European officials were most persuasive to Warner Bros. The American entertainment company already had two international theme parks in Australia and Germany and was looking to expand in Europe. What’s more, Madrid presented an attractive joint venture scenario. The regional government would put up 40 percent of the financing (Caja Madrid, Spain’s second-largest savings bank, and Grupo Fadesa S.A., one of the country’s most successful property developers, would be the other major backers). Local partners would finesse zoning issues and develop the transportation and infrastructure. In an atypical move, Warner Bros. wouldn’t have to provide any start-up capital. Instead, it would contribute the know-how to design and manage the park, and oversee its intellectual property; in return, the U.S. company would receive a fee and royalties for these duties. On April 5, at a total cost of $378 million, Warner Bros. Movie World Madrid opened its doors. “We were impressed with the community of Madrid. We were impressed by the amount of construction and new investment here-the number of cranes and the changes taking place here in Spain. It spoke to a very healthy economy,” said the park’s general director Thomas Mehrmann. His impressions were on the mark. Since 1996, the year conservative, pro-business, pro-privatization, and pro-deregulation prime minister Jos� Maria Aznar came to office, Spain has grown faster than any large nation in the European Union. Last year the country grew 2.8 percent as compared to 1.5 percent growth for all of Europe. Interest rates and inflation in Spain are at all-time lows. Unemployment fell from 20 percent in the early 1990s to about 11 percent last year. That transformation to a thriving first-world economy has been a boon to the Spanish consumer. Disposable income jumped from $9,217 per person in 1996 to $12,356 last year, according to Spain’s ministry of the economy. More euros on hand have led to an increased consumption of goods-ranging from homes to automobiles to clothing-and to more dining out, travel, and entertainment. In fact, consumer spending accounted for 60 percent of Spain’s GDP last year. Sales of non-durable consumer goods will continue to thrive if the economy stays strong, predicts Manuel Balmaseda, chief economist for Banco Bilbao Vizcaya Argentaria, S.A. (BBVA), one of Spain’s biggest banks. That’s good news for the dozens of U.S. consumer companies that began doing business in Spain over the last few years. While there are myriad pitfalls for these corporations-including massive red tape, cultural barriers, and plenty of European competition, many blue-chip U.S. consumer businesses have surmounted those problems. Those companies include Starbucks Corporation of Seattle, which started rolling out a chain of 10-15 coffee houses in April with joint venture partners Grupo Vips in Madrid and El Moli Vell in Barcelona; Modesto, California-based E. & J. Gallo Winery, which began distributing its New World wines through Barcelona-based Cordoniu in March; Paramus, New Jersey retailer Toys “R” Us, Inc. which recently expanded its presence in the country; Kansas City, Missouri-headquartered movie theater company AMC Entertainment Inc., which is opening its fourth multiplex in Spain this fall; and the retail arm of Hallmark Cards, Inc., also based in Kansas City, which has opened more stores in Spain. The American businesses are capitalizing on a significant cultural shift [see "The New World," page 85]. The Spanish middle class wants to view itself as having a level of accomplishment and sophistication that compares with working professionals in other wealthy countries, say economists. As Spain has advanced from an underdeveloped country to the eighth-largest economy in the world, Spaniards have become increasingly cosmopolitan. This worldliness appears in a number of ways. “Until now the Spanish people were very conservative and proud of Spanish wines and thought they were the best in the world. But Spain is becoming more international. There are more foreigners coming to Spain, and they are opening up people’s curiosity and changing their habits,” says Marielle Scheepers. At Cordoniu, a producer of sparkling wines since 1551, Scheepers oversees the distribution of Gallo wines to restaurants and high-end retailers in Spain. For many years the world’s big consumer businesses found other markets. Ruled by the totalitarian regime of right-wing generalissimo Francisco Franco and his military cronies, foreign companies typically thought of Spain as nothing more than a low-cost producer of industrial goods. Moreover, Franco’s centralized administration insisted on approving every business venture. The government left little power to local provinces, a practice that spawned regional chauvinism, bitterness, and competition. That enmity exists to this day in the form of the Basque terrorist group ETA (Euskal Ta Askatasuna) and in intense economic rivalry between autonomous regions like Catalonia, Galicia, and Madrid. But with the death of Franco in 1975, Spain adopted a democratic constitution and more liberal laws. Greater freedom was given to the country’s 17 autonomous regions and municipalities. Since property development, building, and the issuance of business activity licenses comprise an important part of regional revenues, those ventures must now be approved by regional and local governments. What’s more, all large retail establishments require a license granted by both regional and municipal authorities. And those groups can be seriously interventionist. “Since democracy,” asserts Ramon Lopez de Haro, an associate at Garrigues, Abogados y Asesores Tributarios in Madrid, “regional governments have more and more power.” For evidence of this clout, look no further than Diagonal Mar, an $800 million shopping, apartment, and hotel complex off the Mediterranean coast, built by Hines Interests L.P. of Houston. The American real estate developer bought the property at the edge of a large urban development sector of Barcelona from Zurich Financial Services in 1996. Zurich’s subsidiary, Kemper Insurance Companies, working with a retail developer, spent eight years trying to get permission to build the structure from the city of Barcelona and the province of Catalonia. Kemper was stymied because it didn’t know how to navigate the region’s political minefields and, because, at that time, resistance to foreign developers was high, say Hines execs. But by the time Hines bought the property, that attitude, coupled with the rise of the country’s consumer class and the economic outlook, had changed. Hines decided to construct 1,400 luxury apartments instead of several office buildings. “There was a need for apartments. We saw the start of upward mobility, the emergence of the new Barcelonese, who in some cases didn’t want to go into the family business, and who have worked abroad or were educated abroad,” and were able to afford the upscale abodes, says Scott Murray, director of asset management for Hines Espa�a. Hines wanted to avoid making the same mistakes that Kemper had made. To change its blueprints from offices to apartments, the U.S. developer needed approval from the city and provincial governments. In Barcelona and the province of Catalonia there are five or six political parties that don’t see eye to eye. The city, on Spain’s eastern coast, is dominated by the socialist party in coalition with the old communist party and the green party. Catalonia is ruled by a coalition of Catalan nationalist parties. When Hines submitted its new proposal to the government agencies, most political parties liked the company’s decision to hire a world-class architect, Robert A.M. Stern, to design the complex. Stern is the dean of the Yale School of Architecture. Barcelona, which has a skyline dotted by buildings designed by Antonio Gaudi and other architectural legends, insisted on a development that would add to the city’s cultural reputation. But other parts of the Hines plan didn’t pass muster. Barcelona’s left-wing political factions took offense at Hines’s plan for a residents-only private park for the apartment owners. According to Oriol Clos I Costa, the urban planner who heads Barcelona’s redevelopment organization, “We had a problem because the (Hines) project was too American. The relationship between public and private is different here. Ideologically, people felt that the park was too private.” The conflict ended when Hines offered to open the park to the public. In late 2001 the Diagonal Mar complex opened. Two-income families paid the $180,000 and more for the first 500 luxury apartments. Presales of the apartments scheduled for completion in 2004 are priced 50 percent higher. On the top floor of the 270-store shopping center, young couples stroll through the food court, where they can pick up a Ben & Jerry’s cone on their way to the 18-screen AMC cinema complex-the biggest multiplex in southern Europe. Young children drag moms and grandparents to a nearby Toys “R” Us. While American companies have made inroads into many areas of Spain’s consumer market, one sector is still out of their reach. Retailers like The Gap, Inc., and Wal-Mart Stores, Inc., which sell their clothes in other European countries, have avoided Spain, and for good reason. Spanish retailers are leaner and meaner than their competitors, says one expert. “They have a low-cost source of textile manufacturing from the north of Spain, and they have a relatively low cost for retail space,” explains Nathan Cockerill, European retail analyst at Credit Suisse First Boston Corporation in London. He adds that Spanish retailers are “not supernormally profitable; but they are supernormally competitive.” That means that local chains like Zara, owned by Inditex, and department store chain El Corte Ingl�s provide some of the cheapest high fashion in Europe. But as long as the country’s economy stays strong and its citizens have a pocket full of euros, American consumer businesses will likely find more ways to reach Spanish customers. According to one expert, U.S. companies have a competitive edge over their European rivals. “Their advantage,” says Balmaseda of BBVA, “is that they are applying what they know from the United States. They think of Europe as a country [ready to embrace American products] instead of a group of countries,” with disparate consumer tastes. And, for now, that makes all the difference.

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