Ximo Puig, of the Spanish Socialist Party’s Valencian branch (PSPV-PSOE), took office in June 2015, ending two decades of rule by the conservative Popular Party. Since then, his administration’s prime goal has been to improve the international reputation of a major tourist destination with great potential for growth in other economic sectors.
How important are foreign markets to the Valencian region?
The Autonomous Community of Valencia is the fourth-largest region in Spain, with a population of five million. We are the region that posted the greatest growth last year, with a 3.6% rise in GDP, and this is also the part of Spain where exports grew the most. This region has always been very focused on foreign markets; it’s practically part of our DNA to go out and sell. Our tradition of trade began with oranges: in the middle of Spain’s autarchy under Franco and up until the mid-1960s, 25% of all Spanish exports were Valencian oranges. And during these recent crisis years, it was our focus on exports that saved us again in a very difficult economic context, compounded by a profound institutional crisis in the Valencian region.
What is the economy based on?
Our business fabric has diversified through the years, shifting from an almost purely agrarian model to a more industrialised one with numerous SMEs working in a variety of sectors, from ceramics to toys to footwear and textiles. This varied and productive ecosystem later shifted its focus to real estate development. Tourism also plays a major role, of course. This is a region with great potential, and we want to encourage a new kind of economy through intelligent reindustrialisation, and a focus on some of our stronger sectors such as agro-food.
After 20 years of Popular Party (PP) administrations, how would you describe the differences between that period and the new era that opened up in June 2015 when your government came to power?
Our starting point was that the Valencian region’s reputation was in a profound crisis. The future of a region with great potential had been mortgaged by a series of governments steeped in corruption, and by an economic model based on a speculative capitalism that had abandoned the old notion of personal effort in favour of a get-rich-quick culture. It was a completely unproductive model focused on property development. We once used to be referred to as “El Levante feliz” (the Happy Levant or east coast), although it turned out to be one big lie. Our per-capita income is 12 pointsbelow the national average, partly due to yawning gaps in education – we have school dropout rates above the national average – and significant social exclusion.
How did you deal with this non-economic crisis?
There was an urgent need for change, and this past year our work has fundamentally been to create a stable, honest government. Stability and honesty have led to a renewed trust in government from economic sectors and foreign investors. Some multinationals that had left the region are coming back, such as Thyssen Group. During the campaign race, some voices warned that a social-democratic government such as ours would endanger economic recovery, but it’s been the other way around: all the economic indicators have improved. I’m not so presumptuous as to believe that it’s exclusively because of the change in government, but it is true that our administration has paved the way for a new scenario.
When you took office, you set out five clear goals for yourself: a “bailout” for society, “rescuing” democracy, fighting corruption, encouraging a new production model, and clearer, fairer finances for the region. Which of these goals have been met?
This administration has set very high standards for itself. Besides working on improving the government’s reputation, our second big task has been to address the social emergency in our region, recovering rights that had been lost under the PP. We took measures such as eliminating co-payment in prescription drugs for pensioners, some of whom had found themselves unable to continue their medical treatments. Households with income of under €1,000 a month are also exempt from co-payment. We have also eliminated social co-payment, which had resulted in people with disabilities no longer attending occupational therapy. On the education front, we raised the number of scholarships and made schoolbooks free. And we introduced programmes against energy poverty.
How hard is it to change this region’s image as a symbol of everything that went wrong with Spain’s property boom and bust?
We are shifting away from that image of the Happy Levant as a place of cunning and corruption, but there is still a lot of work to do to wipe out the traces of previous mismanagement. We are now deactivating all the mines within the Valencian government structure itself. We’ve had quite a few white elephants to deal with, such as buildings and projects without any real purpose that we are trying to put to good use. We also inherited many cases of EU disciplinary sanctions against the Valencian government over past projects, such as the Ciudad de la Luz (City of Light) movie studios, which were targeted for breaking fair competition rules. We are now trying to salvage what we can so that so much taxpayers’ money is not completely wasted.
Spain’s macroeconomic indicators have been improving for the last two years, but there is still persistent unemployment and household income remains low. As head of the Valencian region, what are you doing to create quality jobs and encourage wealth creation?
We want to transform our production model, to encourage internationalisation and to get our businesses to grow in size. The Valencian region’s problems are closely linked to low productivity. We therefore need more technology and better training for our human resources. Only a new economy can guarantee better wages and quality jobs. It’s true that tourism is an essential sector here in the Valencian region, but it needs to innovate because this is still a sector that creates a lot of sub-par employment.
You have also talked about intelligent reindustrialisation in the Valencian region. What areas of activity do you think would be good candidates?
We have a particularly strong agro-food sector. Spain’s major supermarkets and retail distributors are from Valencia: Mercadona, Consum, Másymás. There was a time when this sector was viewed as past its prime, a time when agriculture was considered an activity that should be basically left to developing countries. This has proven to be a mistaken view. But there is still a lot of room for growth and improvement in management techniques to ensure that growers and livestock breeders receive enough of an income to stay in business.
Will construction still play a role in your new economy?
The reason we need to reindustrialise the region is because earlier administrations embraced a model based on real estate speculation. Investors were told that construction was the one activity that would bring in quick profits. So even capital that had always been invested in traditional sectors such as toys, ceramics and textiles was switched to real estate. Construction remains an important industry that we don’t want to ignore, but it needs to have a realistic weight within the Valencian economy. And property development needs to be sustainable, as opposed to the unchecked construction of the past which has damaged our coastline and natural spaces.
Are there any examples of good industrial practices in the region?
If the food sector has Mercadona and the rest, industry has Ford with its assembly line in Almussafes, besides the automotive auxiliary industry. And in the footwear sector there is a strong company called Tempe, which is a unit of Inditex, the parent company of Zara, Massimo Dutti and other major fashion brands. All of Inditex’s footwear is distributed worldwide from Elche, in Alicante province. And textiles have experienced some degree of reshoring in recent years after a long period of offshoring. This reverse trend is even more noticeable with footwear, where good quality, Spanish-made shoes are even being exported to China these days.
What will the goals of the Valencian Innovation Agency be, and when will it start to operate?
The agency will become a reality next year and we want to house it in one of the buildings inside the City of Light. The agency’s main mission will be to channel energies and synergies in order to pursue clear strategies to help our business sectors, modernising our companies and directing them towards a knowledge economy. We want universities and technology centres to join the effort to make Valencian businesses more dynamic. There is great consensus among business leaders and unions over this issue. What we need now is a next-generation industrial policy based on innovation. I am very keen to use the agency to disseminate an “innovative gene” throughout our industries. Competitiveness cannot simply mean lower salaries.
How can British investors partner with the Valencian region to promote this positive growth?
Our exports to Britain are in the range of €3 billion a year. The UK is a very important partner, and we want to intensify our links in the coming years. Our strongest relationships are in food, the automotive industry and tourism. But we want to create ties in other sectors as well, and turn Brexit into an opportunity.
How could Brexit be turned into an opportunity?
We currently have serious opportunities on the table that would reinforce our ties with Britain as a result of the Brexit vote. And there is an emotional component to it, which is the large British community living in our region. We call them our 100,000 British Valencianos.
What reassurances have you given to the British expat community?
Following the Brexit vote, we met with community representatives here and guaranteed that they will continue to enjoy the same rights as any other European citizen, including healthcare issues, which is a matter of great concern for senior residents. We have sent out a very powerful message of calm to the community, and in turn we have received shows of support from British citizens who live here and who are greatly concerned about their country’s decision to exit the EU.
Why should a foreign investor seeking opportunities in southern Europe choose the Valencian region?
There are very positive structural reasons: we have very decent infrastructure, including two major airports in Alicante and Valencia. We will be the first region to be fully equipped with fibre optic by 2019, and of course we have magnificent weather. And some of our institutions are our best calling cards: we have the European Union Intellectual Property Office (EUIPO) in Alicante, with over 2,000 employees.
How much leeway do you have as regional premier to make the Valencian economy more attractive for global players?
Everyone makes big speeches, but not everything is possible. Taxation is one of these issues. Because Madrid is the capital and has so much infrastructure, most multinationals end up there and the government in that region can afford to do things like eliminate the wealth tax. But I can’t do that, because I am dealing with a public debt of €43 billion. And this is also why the Valencia region cannot offer investors any tax incentives. But we can develop other types of cooperation policies as we are already doing with Ford, on issues such as streamlining the paperwork in its dealings with Valencian agencies. And we are also working on legislation to create an Investment Promotion Agency.
There is an ongoing debate in Spain about the pros and cons of mass tourism, and about the possibility of “death by tourism.” What model are you banking on?
This sector employs 14% of the labour force so it is very important for us. And innovation is our key guideline here as well. We want to see improvements in management, training and so on. This year has seen a boom in foreign tourism due to the instability in other tourist destinations in north Africa and in Turkey. So now we have to create loyalty among these new visitors to our region. We have to permanently improve our quality models and modernise our hotels. But we also want to stop the overexploitation of our territory. We are a magnificent destination for British tourists – Benidorm is practically an English city, and we want visitors to discover other parts of our region. On this score, our fundamental allies are the British people themselves.
What is it that makes your administration credible?
The best cure for corruption is transparency, and we are a fully transparent government. Information about procurement, officials’ personal assets and more are just a click away. We are being audited by Transparency International. This is how we are crafting a new credibility for the region after decades of corruption and bad practices that are still generating media headlines through current and upcoming criminal trials. We are sending out the message that things have changed, that we are responsible people, and that we are going to prove with facts that the past will never return.
This interview was carried out under the initiative of The Report Company, which paid for this content
