Friday, August 01, 2008

Are Migrants In Spain Now Working Twenty Hours A Day Just To Keep Their Homes?

Well, this is a claim Bloomberg are making today (they just don't seem to want to let up on Spain over at Bloomberg right now), and they have a video interview to back it up:

Immigrants like Fanny Palacios, drawn by Spain's once-booming construction and service industries, helped sustain the decade- long surge in house prices by scrimping and sometimes lying to qualify for mortgages. Now those last on the property ladder are losing the lives they built as the global credit shortage pushes interest rates higher. The single mother of two from Ecuador worked 12-hour night shifts caring for an elderly woman on top of her day job at a nursing home to meet her bank's deadline for 3,000 euros ($4,720) in mortgage arrears. "This is desperation," says Palacios, 30. "I have to pay whatever it takes. I won't let them take my home."

This is a typical TV interview, and is just as superficial as might be expected, and it is also obviously a case of the interviewee giving the interviewer what they wanted to hear, namely that there are a lot of migrants in Spain now struggling to pay their mortgages in situations which make default likely (you know, it's another part of their Spain IS Sub-Prime picture).

Possibly "Fanny" is exaggerating, but not necessarily by that much. A lot of migrants have bought flats, often with a view to renting to other migrants (who may themselves now be leaving). The locutorios in Barcelona are now full of "room to let" stickers, but there are ever fewer takers, as a whole business model steadily crumbles.

The Raval district of Barcelona, home to the largest Pakistani migrant population in Continental Europe ( ie outside the UK, possibly 10,000 strong), who have bought property extensively, is, according to the July survey of consultants Aguirre Newman, the district in Barcelona which has seen the sharpest declines in prices - 12% - over the last 12 months.

Also, I visited, with my colleague La Dona Arruinada, the Fondo district of Barelona recently, and here are some of the photos we took.

As you can see, Fondo is a district which grew during the strong waves of internal Spanish migration in the 60s and 70s. The main Spanish population remaining are now old (Los Abuelos), and the younger generations have sold and moved, to sattelite towns like Olesa de Montserrat, and those who have bought in their place are either migrants or those who rent to migrants.

The photos were taken on a Wednesday morning, and these Chinese construction workers evidently don't have a full order book at the moment.

So basically, I would say that the Bloomberg video is very much to the point, and one of my big queries is what is going to happen to the Ecuadorian and Columbian communities here, given that the men are mainly about to lose their jobs, while the women will largely continued to be needed, in jobs with low pay and long hours, but there will be work for them caring for Spain's rapidly growing elderly population.

Dire Manufacturing PMI in Spain in July

Meantime the conditions in Spain's real economy continue to deteriorate. Spain's manufacturing economy shrank in July at the fastest rate ever seen in any European Union survey of the sector conducted by Markit, the research organisation said on Friday. The Purchasing Managers Index for Spain slipped to its lowest level since the survey began in February 1998, Markit said. The Markit Research Manufacturing PMI index contracted for the eighth consecutive month to 39.2, down from 40.6 in June. Any PMI figure below 50.0 shows contraction while figures over 50.0 show growth.

Eurostat figures show that May unemployment in Spain was the highest in the 27-member bloc after Slovakia, and the government said it expected it to rise to 12.5 percent by the end of 2009. The Markit figures indicate a continued rise in unemployment to the end of the year, with the index's employment rating falling to 38.8 from 39.3. Staffing levels contracted for the 11th month running and the rate of decline has accelerated in each month so far in 2008, the survey showed.

Spain's Inflation Hits A 12 Year High In July

Rising energy costs pushed Spain's EU harmonised inflation to a record 5.3 percent in July, higher than expected, according to the flash estimate from the IME yesterday.The data preceded overall euro zone consumer price data out this morning and which showed inflation in the 15-member currency bloc rose to a record 4.1 percent in July from 4 percent in June.

Spanish consumer price growth, among the highest in the 15-member currency bloc, rose to 5.3 percent from 5.1 percent in June.

It is now quite probable that Spanish inflation has peaked, and could even ease back slightly in August before falling considerably between now and year-end as the severe economic slowdown bites and generally lower oil prices arrive.

Gas Natural Rating Watch Placed On Negative By Fitch

Fitch Ratings has today placed Gas Natural SDG's (Gas Natural) Long-term Issuer Default rating of 'A' and Short-term IDR of 'F1' on Rating Watch Negative (RWN). Gas Natural Finance BV's senior unsecured rating (issues under its EMTN programme are guaranteed by Gas Natural) of 'A+' and the 'F1' rating for its Euro commercial paper programme are also placed on RWN.

The background to this is that Spanish utility Gas Natural have announced they are borrowing 17 billion euros in a syndicated loan provided by ten banks that were mandated yesterday to finance the acquisition of rival Union Fenosa. Barclays, BNP Paribas, Caja Madrid, Citigroup, ING, La Caixa, Royal Bank of Scotland, Santander, Societe Generale and UBS are to lead the loan backing the purchase.

Spanish utility Gas Natural agreed to buy a 45 percent stake in rival Union Fenosa from the debt-ridden builder ACS in a deal worth.

This sale enables ACS (Actividades de Construccion y Servicios SA) to cut debt after booking a net financial gain of 2.73 billion euros ($4.26 billion) from the sale of its stake in Union Fenosa SA. In other words my impression is that simply no one here now has any spare money. Gas Natural helps out ex-Real Madrid president Florentino Perez and his property company, and for their kindness they themselves are put on RWN by Fitch.

The background to all this is that, as can be seen from the chart below, the indebtedness (or leverage) of Spanish corporates (including non-construction corporates) is even greater than the indebtedness of Spanish households, and is way above the average for the other eurozone countries.

Also, according to INE data yesterday, Bankruptcies were up in Q2 by 172% when compared with Q2 2007. On and on we go then, until, of course, the day comes when we don't.

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