A multi-billion-euro plan to turn Madrid into one of the world’s top financial centres has moved a step closer to becoming a reality, after it received the go-ahead from city administrators at the end of last year. A final approval, following additional public consultations, is expected sometime this year.
What remains unclear, observers say, is the extent to which recession-hammered Spain is prepared to make significant changes to its tax code, immigration rules and other regulatory structures in order to lure businesses from rival jurisdictions to its new centre once it is built.
Such changes were key in helping to ensure the success of Dublin’s International Financial Services Centre, built in the late 1980s and early 1990s in a derelict part of that city’s waterfront.
‘Spanish Canary Wharf’
The plan to turn a 1.2 sq mi plot of land north of Madrid’s main business district into a Spanish version of Canary Wharf calls for the construction of as many as 20 office towers, including four of more than 60 storeys each, and has been under debate for years.
Some €11bn has been earmarked for the development, which would involve extending the Paseo de la Castellana and rebuilding the Chamartin railway station underground, where it would link up with a high-speed train network running to Barcelona and France.
In addition to boosting Spain’s presence in the world of global finance, the ambitious project, known as Operacion Chamartin, is seen as providing years of employment for many of the thousands of Spanish builders who have lost their jobs in the economic downturn.
Figures released on Friday showed Spain had the eurozone’s highest unemployment rate in November, with 19.4% of its workforce idle. This compares with an average unemployment rate for the 16 countries that use the euro of 10%, the first time it has been that high since the currency was introduced in 1999.
South American links
The latest green light for Operation Chamartin also comes as Madrid and Lisbon – the capital of Portugal – have gained slightly in world financial centre league tables because of their links with increasingly important Spanish- and Portuguese-speaking former colonies in South America, such as Brazil and Argentina, according to Michael Mainelli, chairman and co-founder of Z/Yen, a London-based think-tank.
Mainelli, whose company compiles the twice-yearly Global Financial Centres Index for the City of London, notes that both Madrid and Lisbon have been rising in Z/Yen’s rankings, which he says partly reflects the fact that “everybody is looking anew at South America and its increasingly vibrant economies”, as well as its vast raw material wealth.
In Z/Yen’s most recent index, published in September, Madrid ranked 40th, with a “GFCI rating” of 560, up seven places and 54 rating points from six months earlier. Lisbon came in at 66th place – beneath Prague and above Moscow – but its rating rose 68 points to 477, even though it fell 9 places in the league table.
The top five financial centres in order, according to Z/Yen, are London, New York, Hong Kong, Singapore and Shenzhen.
“Historically Madrid has not had a lot to offer, except, potentially, as a Hispanic gateway for Europe,” Mainelli notes. “And in fact, London arguably has been the traditional centre for outward-focused European financial services, for example, in Latin America.
“But there has always been a recognition that if Latin America could get its act together, it could do well, and we are detecting a definite new interest in investment there.
“The thing is, projects like Operation Chamartin can help to create a world class financial centre, but alone they don’t do the job.”
In addition to building towers and calling them a “financial district”, Mainelli says Spain might seek to “lower its personal tax rates, make it easier to set up a business, improve on its regulations, make visa access to Spain easier” and otherwise ensure that barriers to competition in such areas of financial services as banking and insurance do not exist.
If Spain were to improve its business environment this way, Operation Chamartin would increase its chances of success – particularly as London has recently been seen to “do the opposite” with respect to regulations, taxes and other elements of its package for financial services businesses, Mainelli notes.
Indeed, he adds, “there’s the potential that we may see more centres in Europe wondering whether they should try to seize more international financial services market share, given London’s ambiguous messages about its desire to retain [its] lead”.
Language issues
While Spain’s linguistic links with the Spanish-speaking world may be one of its advantages relative to other financial centres, the fact that Spanish is still the dominant language by far in Madrid could be a problem when it comes to doing business with the non-Spanish speaking world.
Of the five cities that top Z/Yen’s most recent index of financial centres, the top four are either English speaking or, as in the case of Singapore and Hong Kong, are former colonies that have retained English as one of their official languages.
By contrast, in reporting this story International Adviser dealt with people answering phones in Madrid who were unable to take a message in English.
If businesses potentially interested in opening an office or relocating to the new Chamartin financial district encounter similar problems, filling 20 office towers with international financial services businesses could prove a challenge.
