Running head: Italy & Spain
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MNG 414 (International Management) Term Project – Italy & Spain
Following the American Psychological Association’s (APA) Guidelines
Stephen DiMarco
Iona College, Hagan School of Business
Due: Monday, November 21, 2016
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Table of Contents
Title Page…………………………………………………………………………….….…….pg. 1
I. Abstract…………………………….……………………………………………..………. pg. 3
II. Current State of Globalization…………………………………………………………… pg. 4-5
III. National Differences in Political Economy (Political, Economic, and Legal Risk)……. pg. 5-7
IV. Differences in Culture……………………………………………………………………… pg. 7
V. Each Country’s Leader …………….….…….…….…….…….………….…….……… pg. 7-11
VI. Level of Trade Between Italy & Spain……….…….………….…….……………… pg. 11-12
VII. Regional Economic Integration……………….…….……..………………..……… pg. 12-13
VIII. The Currency of Italy & Spain………….…….…….…….………..…….…………… pg. 13
IX. Levels of Trade the U.S. & Italy/the U.S. & Spain………….……….……………… pg. 13-16
X. Trade Barriers Between Italy, Spain, and the U.S. …………….…….……………… pg. 16-17
XI. Starting a Business in Either Italy or Spain……………….…….……….……..…… pg. 18-20
XII. Conclusion………….…….…….…….…….…….…….…….…….…….………….… pg. 20
XIII. References………….…….…….…….…….…….…….……….…….…………… pg. 21-22
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Abstract
I. The process of Italy’s unification took approximately fifty-six years. It began in 1815 and
was not considered fully complete until 1871. After this unification took place, both Spain and
Italy established formal diplomatic relations with each other. The political, cultural, and historic
connections between Italy and Spain have served as the backbone for a strong interstate
relationship that has spanned centuries. Both Italy and Spain are full members of NATO, the
Union for the Mediterranean, European Union, and the Eurozone. As far as their presence in each
other’s countries – Italy has an embassy in Madrid and Spain has an embassy in Rome. However,
both jointly and individually, Italy and Spain have had a large impact on the globalization,
economic, political, and overall culture of Europe and even throughout the world. This research
will take a closer look at Italy & Spain’s globalization, economic, and political characteristics from
their respective economies all the way to the each country’s leadership.
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II. Italy is currently the eighth-largest economy in the world, with a GDP of $1.85 Billion as
of 2015. When it comes to Italy’s role in the global economy, there is often much debate. Italy is
not extremely wealthy in natural resources. One of the natural resources that Italy lacks is wood.
Only 20% of Italy is made up of wooded area. As a result of this, they have to import a lot of
good, specifically natural resources, from other countries. This interdependence on other countries
is somewhat helpful for Italy’s economy. Not only can Italy sell these products in their own land,
but the goods that they receive from other countries are able to be manufactured in their factories.
As a result of this, they don’t have to outsource labor, which creates and keeps jobs in Italy. They
are also able to manufacture and export goods in their own land that are seen as very valuable to
other countries such as cars and clothing. However, Italy has accumulated a high national debt as
a result of trade. In recent years, the effects of globalization have impacted Italy more negatively
than positively and have hindered the country’s overall economic development.
On the other hand, there is Spain. Globalization has impacted Spain in several ways. Spain
is no exception to the political, economic, social, or cultural effects of globalization. Spain’s
economy is clearly the aspect of globalization that has been most effected in recent years, for better
and for worse. With the rapid growth of globalization, several countries around the world have
participated in outsourcing. While outsourcing does have its advantages (cheaper labor, more
workers, more products more quickly, greater efficiency and productivity), it also has its
disadvantages. One main disadvantage of outsourcing is a decrease in the number jobs that are
available in the country that is outsourcing work. This is Spain’s biggest problem with
globalization as their unemployment rate is 20%. (Eavis) However, it should be noted that many
people in Spain have “off-the-book” jobs. Additionally, unemployment is down 5% from 25%
just five years ago, which can be the source of limited optimism.
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Globalization in Spain has not been totally negative. Spain’s economy has also been able
to benefit from the effects of globalization. Since 1975, the Real GDP capita in Span has increased
by more than 10% and continues to rise. This means that Spain is catching up with its European
counterparts and ultimately positioning themselves ahead of many other European countries.
(Aninat) The economy of Spain has also greatly benefitted from the level of interest, as well as
interactions, with the banking industries and large corporate sectors of other countries. In fact,
Spain is now in control of approximately 20% of Latin America’s banking sector. The subsidiaries
of this bank are some of the largest in South American nations such as Argentina, Venezuela,
Mexico, and Chile.
III. Political strains have risen in all of the euro zone’s four largest countries, according to the
Global Forecasting Service. According to the GFS:
“Germany and France face important elections in 2017, but there are more
immediate pressures in Italy and Spain. Italy has emerged as the next pressure point
in the EU, owing to the combination of banking-sector problems and evidence that
the country’s prime minister, Matteo Renzi, is increasingly vulnerable ahead of a
crucial constitutional referendum; this is due to be held later this year, but the date
has yet to be announced. (GFS)”
Similarly, in Spain,
“the country’s political parties continue to struggle to adapt to a parliamentary
environment that has been transformed by the fragmentation of voters’ preferences.
The parties have been unable to form a new government following two general
elections. Our view is that a new administration will be formed during the current
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window for doing so, which runs for 60 days from August 31st. However, there is
a risk that the parties’ negotiators will fail, which would trigger a third election in
late December this year. (GFS)”
Economically, according to Coface:
“After a prolonged recession, the Italian economy returned to moderate growth.
However, the recovery remains weakened by the subdued world growth, as well as
the rise of uncertainty and financial market volatility on the back of the UK vote to
leave the European Union (EU).”
Italy’s weaknesses are currently: “Weak profitability of small companies and banks, inadequate
private and public investment, high level of structural unemployment (9%), particularly among the
young (40%), low participation rate of women/lack of facilities for early childhood, Sizeable
informal economy (20%), inefficient public sector, and backward Mezzogiorno region.
Additionally, massive public debt and delayed budgetary reform is also negatively affecting the
legal and economic environment of Italy.” (Coface)
Similarly, in Spain, according to Coface:
Spanish economic activity recovered strongly in 2015, partly reflecting the depth
of the recession following the financial crisis. Growth was driven by domestic
demand, which was underpinned by an improvement in the labor market and
restored consumer confidence, combined with lower oil prices and looser credit
conditions. Deleveraging in the private sector had only a limited impact on
domestic demand (corporate and household debt decreased from 218% to 169% of
GDP between Q2 2010 and Q1 2016).
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Spain’s current weaknesses include: “A high level of private and public debts, very negative net
external position, duality of labor market, high level of structural unemployment, large number of
relatively unproductive small companies, and fragmented political landscape with national unity
weakened by the rise in separatism. (Coface)” While the health of companies and banks has
improved as of late, Spain’s economy is still being hampered by a heavy public debt.
IV. Italy and Spain are not direct geographic neighbors. They are separated by France.
However, culturally, they have several similarities. For example, the native languages of Italy and
Spain, Italian and Spanish, respectively, sound very similar and both originated from Latin. They
are also extremely similar in religious beliefs and practices as both Italy and Spain are
predominantly Roman Catholic countries. Additionally, as members of the European Union, both
