An Economic and Social Revival How Spain Thrives on Immigration

The open-border policy under Prime Minister José Luis Zapatero is driving a Spanish economic and social revival.
Von Carol Matlack

Imagine what would happen if a prosperous Western nation threw open its borders, allowing immigrants to flood in virtually unchecked. Soaring unemployment, overstretched social services, rising crime, even rioting in the streets? Not in Spain.

Over the past decade, the traditionally homogeneous country has become a sort of open-door laboratory on immigration. Spain has absorbed more than 3 million foreigners from places as diverse as Romania, Morocco, and South America. More than 11 percent of the country's 44 million residents are now foreign-born, one of the highest proportions in Europe. With hundreds of thousands more arriving each year, Spain could soon match the US rate of 12.9 percent.

And it doesn't seem to have hurt much. Spain is Europe's best-performing major economy, with growth averaging 3.1 percent over the past five years. Since 2002, the country has created half the new jobs in the euro zone. Unemployment has plummeted from more than 20 percent in the 1990s to 8.6 percent, within shooting distance of the 7.2 percent euro zone average. The government attributes more than half this stellar performance to immigration. "We are very thankful for all these people who have come here to work with us," says Javier Vallés, economic policy chief for Prime Minister José Luis Zapatero.

Many Benefits

If anything, the worry is that Spain is a bubble waiting to burst. Construction, which accounts for 18 percent of the economy and is a major employer of immigrants, is slowing noticeably after a decade-long boom. A steep decline could trigger social conflict, which so far has been minimal -- perhaps because about three-fourths of immigrants come from Latin American and European countries with languages and cultures similar to Spain's.

For now, Spain is keeping the welcome mat out. Besides providing muscle for construction, immigrants care for children and the elderly, allowing more Spanish women to take jobs outside the home. They do backbreaking agricultural labor and take minimum-wage positions in restaurants and hotels. "Spanish workers don't want these jobs," says Marta Martín, who has recruited immigrant employees for the Madrid-based hotel chain NH Hoteles. And the government says immigrants' tax and social security contributions exceed by more than 20 percent the cost of the public services they use.

Immigrants are weaving vitality into Spanish society, too. Stroll through Tetuán, a vibrant multiethnic neighborhood in north-central Madrid, and you'll find an Ecuadoran bakery, a Moroccan furniture shop, and an everything-for-€1 store called Los Chinos because its owners are Chinese. On Calle Bravo Murillo, Tetuán's main drag, mobile-phone stores and bank branches beckon with discounts on international calls and wire transfers.

A Model for Globalization

"They understand now that we are a good market for them," Ecuadoran immigrant Mercedes Factos says over lunch at San Francisco de Quito, a Tetuán café that serves Ecuadoran specialties such as fried yucca and toasted corn. Like many immigrant women, Factos arrived on her own and found a job as a domestic worker, sharing a room with a cousin until she saved enough to get her own apartment and send for her child.

Could Spain be a model for invigorating aging, slow-growth societies in Western Europe and elsewhere? Many economists say yes. "If you make your labor market more open and flexible, in a world where populations are more mobile and economies are globalizing, you attract people who want to work," says Eric Chaney, chief economist for Europe at Morgan Stanley in London.

Yet in much of the developed world, immigration is seen as a threat. Anti-immigrant politicians have gained strength even in tolerant nations such as Denmark and the Netherlands. Nicolas Sarkozy, elected President of France on May 6, ran on a platform calling for stricter border controls. A recent poll by Harris Interactive shows that only 19 percent of British and French think immigration is helping their countries, vs. 42 percent of Spaniards.

New Demand for Workers

Certainly, Spain has some anxieties about immigration. A deadly 2004 train bombing in Madrid, blamed on a Moroccan-led terrorist group, underscored the risk of Islamic extremism, although there have been no major attacks since then. More recently, Spaniards have been alarmed by news reports showing African boat people trying to reach Spain's Canary Islands. And there have been scattered incidents of anti-immigrant violence.

Compared to its neighbors, though, Spain has had special reasons to welcome outsiders. As recently as the mid-1990s it was an economic backwater with an aging population and per-capita income only 80 percent of the EU average, vs. 96 percent now. But lower interest rates and a healthy dose of aid from Brussels sparked a demand for labor.

To fill jobs, Spain looked abroad. Immigration rose from 57,000 in 1998 to more than 600,000 for each of the past two years. The biggest influx, about 800,000 since the mid-1990s, came from Ecuador, followed by Morocco and Romania. Spain, unlike France and Germany, places no restrictions on immigration from the EU's new members in the old Soviet Bloc.

Many from other countries arrived under the radar: An estimated 25 percent to 35 percent of the current immigrant population is undocumented. But Spain has been generous with amnesty, granting legal status since 2000 to more than 1 million who could prove that they were employed.

Getting Ahead

Many found work in the booming construction sector. Across the suburbs of Madrid, armies of hard-hatted workers speaking a babel of languages are building row upon row of apartment high-rises on freshly bulldozed hillsides. "If you work well, you always have work," says Constantin Nitu, a Romanian who arrived in Spain in 1999 to work as a day laborer and now runs his own small construction business which employs other Romanian immigrants.

Now budding entrepreneurs are branching out into other sectors. Take Luminita Tecu, who runs a thriving bakery in the Madrid suburb of Coslada where she sells poppy seed pastries and other specialties of her native Romania. Trained as a nurse, she arrived in Spain in 1997 with little more than a suitcase, and took a job caring for an elderly Spanish woman while her husband did construction work.

By 2001, they had saved and borrowed enough from friends to open the bakery. When they wanted to expand the business two years ago, they easily got a $55,000 loan from a local bank. "At first my idea was to stay here for a year, earn money, and go back, but now I know I won't leave," she says. "I work hard, but my life is like a fairy tale."

Matlack is BusinessWeek's Paris bureau chief.

With Joan Tarzian in Madrid

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