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                     Key Economic Indicators
        (Billions of U.S. dollars, unless otherwise noted)

                                  1991      1992      1993 /1
Income, Production,
 and Employment

Real GDP (1986 prices) /2         382.7     393.2     318.2
Real GDP Growth (Pct.)              2.2       0.8      -1.0
GDP (at current prices) /2        526.6     576.3     481.9
By Sector:
  Agriculture                      21.4      20.3      17.0
  Industry                        129.1     133.8     110.0
  Construction                     49.1      49.5      40.0
  Services                        294.3     334.9     288.0
Net exports of
 Goods and Services                90.4     101.4      90.0
Labor Force (000's)               15,125    15,193    15,300
Unemployment Rate (percent)        17.0      20.1      23.0

Money and Prices
(annual percentage growth)

Money Supply (M2)                  12.9      -0.3      -1.2
Base Interest Rate /3              14.0      13.5      10.0
Personal Saving Rate (pct.)        21.4      19.6      19.0
Retail Inflation (pct.)             5.9       5.9       4.5
Wholesale Inflation (pct.)          1.5       1.4       1.7
Consumer Price Index               94.8     100.4     104.2
Exchange Rate (Pta/US$)
  Official                        104.1     102.1     125.0

Balance of Payments and Trade

Total Exports FOB 4/               59.8      64.7      72.8
  Exports to U.S.                   2.9       3.1       3.3
Total Imports CIF 4/               92.9      99.9      95.2
  Imports from U.S.                 7.4       7.4       6.8
External public debt               58.0      79.8      90.0
Debt service payments (paid)       81.2     214.1       N/A
Gold and FOREX Reserves            66.3      50.5      50.0
Trade Balance 4/                  -33.1     -35.2     -22.4
  Balance with U.S.                -4.5      -4.3      -3.5


1/  1993 Figures are all estimates based on available monthly
    data in October 1993.
2/  GDP at factor cost.
3/  Figures are actual, average annual interest rates, not
    changes in them.
4/  Merchandise trade.
5/  Exchange rate: 1991 - 104.10 pta/Dols 1.00
                   1992 - 102.12 pta/Dols 1.00
                   1993 - 125.00 pta/Dols 1.00

1.  General Policy Framework

    Following the economic boom of 1986-1990, the Spanish
economy has slowed along with that of other EU member state
economies.  Real GDP barely grew in 1992, and is likely to
decline by close to one percent in 1993.  Unemployment has
mushroomed to nearly 23 percent of the work force, contributing
(along with collapsing business investment) to a decline in
domestic demand.  Devaluation of the peseta since September
1992 has made Spanish exports more competitive, but an
export-led recovery in 1994 will depend largely on economic
recovery in Spain's major market -- the rest of the EU.  A
solid recovery will also require appropriate domestic policy
actions, including control of the budget deficit, labor market
reform and wage moderation, and possibly some additional
loosening of monetary policy.

    Spain's accession to the EC (now known as the EU) in 1986
established the framework for its subsequent economic
performance.  EU membership has required Spain to open its
economy; modernize its industrial base; improve infrastructure;
and revise economic legislation to conform to EU guidelines. 
Furthermore, the EU's Maastricht Treaty, calling for eventual
Economic and Monetary Union (EMU) among the 12 EU member
states, later established specific criteria for economic
performance which now serve as official objectives for the
Spanish government.  In particular, these criteria call for
reduced government deficits, lower inflation and foreign
exchange stability.  Foreign investors, principally from other
EU countries, have invested over $60 billion in Spain since

    Inflation continues to be a problem despite the recession,
with the underlying rate of inflation unlikely to fall much
below five percent for 1993.  The main source of inflationary
pressure is the fiscal deficit, which may exceed seven percent
of GDP (for the entire public sector) in 1993.  During the
period 1986-90, Spain was able to increase both social and
public infrastructure spending, due to a rapidly expanding tax
base following the introduction of a value-added tax.  Starting
in mid 1991, the rate of growth of public works spending was
sharply curtailed because of the need to cut the deficit in
face of growing social program coverage and expenditures. 
Social spending and transfer payments exploded during the 1993
recession.  The budget proposed for 1994 reverses this
emphasis, seeking to dampen the growth of social expenditures
but increase public investment to five percent of GDP (partly
with the support of funds transferred from the EU).

2.  Exchange Rate Policy

    Spain joined the European Monetary System (EMS) in mid
1989, and was given a "wide band" of plus or minus six percent
around the peseta's central peg to the ECU.  The peseta played
a role in the turmoil disrupting the EMS beginning in September
1992 and resulting in expansion of EMS "bands" to 15 percent in
August 1993.  Since August 1992, the peseta has declined by 18
percent against the ECU and 25 percent against the DM.  This 
has contributed to a recovery of Spanish competitiveness vs.
other EU countries.  Many local economists believe the peseta
is now at a realistic value with regard to other EMS
currencies, and the government is likely to attempt to maintain
the peseta more or less at its current value within the EMS.

    From mid 1989 through December 1992, the Bank of Spain
maintained a high interest rate policy as the principal measure
to combat inflation.  While the policy had some success in
reducing inflation, the high yields attracted foreign capital
which pushed the peseta near the top of its allowed band. 
During the 1992/93 series of crises in the EMS, Spain was able
to reduce benchmark interest rates from a December 1992 peak of
13.75 percent to 9.5 percent currently.

    The Government of Spain removed the few remaining capital
controls on February 1, 1992.  The controls were temporarily
reimposed in the wake of the September 1992 EMS crisis, but
rescinded shortly thereafter.

3.  Structural Policies

    Joining the EU in January 1986 required Spain to open its
economy.  By December 1992, Spanish tariffs were phased out for
imports from other EU countries, and lowered to the EU's common
external tariff level for imports from non-EU countries.  Many
non-tariff barriers also had to be reduced or eliminated. 
While areas of dispute remain (see section 5), the trend is
strongly toward a more open economy.  The EU program to
establish a single market has accelerated Spain's integration
into the EU.

    Spain's membership in the EU also required liberalization
of its foreign investment regulations and the foreign exchange
regime.  In July 1989, a securities market reform went into
effect.  The reform has provided for more open and transparent
stock markets, as well as for licensing of investment banking
services.  The reform also liberalized conditions for obtaining
a stock brokerage license.  A new foreign investment law passed
in June 1992 removed many of the administrative requirements
for foreign investments.  Investments from EU resident
companies are free from almost all restrictions, while non-EU
resident investors must obtain authorization from the
authorities to invest in broadcasting, gaming, air transport,
or defense.

    Faced with the loss of the Spanish feed grain market as a
result of Spain's membership in the EU, the United States
negotiated an Enlargement Agreement with the EU in 1987 which
establishes a 2.3 million ton annual quota for Spanish imports
of corn, specified nongrain feed ingredients and sorghum from
non-EU countries during a four year period.  Since the United
States and the EU could not agree on permanent compensation
when the Agreement was to expire in 1990, additional one year
extensions were negotiated for 1991 and 1992.  The U.S. and the
EU agreed upon a 1993 extension.  The United States remains
interested in maintaining access to the Spanish feed grain
market and will continue to press the EU on this issue.  U.S.
exports of corn and sorghum, valued at about $200 million
annually, are an important part of the U.S. trade with Spain.

    Spain was obliged under its EU accession agreement to
establish a formal system of import licenses and quotas to
replace the structure of formal and informal import
restrictions for industrial products existing prior to EU
membership.  The United States objected that the new import
regime for non-EU products was illegal under the GATT.  In
response to U.S. concerns, in October 1988, Spain initiated an
automatic, computerized licensing system for Spanish imports of
the affected U.S. products.  Since the system became effective,
no U.S. exporters have reported market access impediments to
their products covered under the automatic approval system.

4.  Debt Management Policies

    Spain's external debt is expected to total $90 billion by
the end of 1993.  International reserves peaked at $72.3
billion in July 1992, but fell to $50.5 billion by the end of
that year, as the Bank of Spain used extensive reserves in
attempts to support the peseta.  Moody's rates debt of the
Kingdom of Spain as AA2.  Given Spain's membership in the EU
and the relatively high level of reserves, Spain should have no
difficulty in meeting its obligations.

    Spain is also a significant creditor (over $10 billion) to
high debt developing countries.  Spain has worked within the
Paris Club to reschedule debt.

5.  Significant Barriers to U.S. Exports

    Import Restrictions:  Under the EU's Common Agricultural
Policy (CAP), Spanish farm incomes are protected by direct
payments and guaranteed farm prices that are higher than world
prices.  One of the mechanisms for maintaining this internal
support are high external tariffs and variable levies (as much
as 200 percent for some commodities) that effectively keep
lower priced imports from entering the domestic market to
compete with domestic production.

    In addition to these mechanisms, the EU employs a variety
of strict animal and plant health standards which act as
barriers to trade.  These regulations end up severely
restricting or prohibiting Spanish imports of certain plant and
livestock products.  One of the most glaring examples of these
policies is the EU ban on imports of hormone treated beef,
imposed with the stated objective of protecting consumer
health.  Despite a growing and widespread use of illegal
hormones in Spanish beef production, the EU continues to ban
U.S. beef originating from feedlots where growth promotants
have been used safely and under strict regulation for many

    One important aspect of Spain's EU membership is how EU
wide phytosanitary regulations, and regulations that govern
food ingredients, labeling and packaging will impact the
Spanish market for imports of U.S. agricultural products.  The
majority of these regulations took effect on January 1, 1993
when EU "single market" legislation became fully implemented in
Spain, and now agricultural and food product imports into Spain
are subject to the same regulations as in other EU countries.

    While many restrictions that had been in operation in Spain
before the transition have now been lifted, for certain
products the new regulations will impose additional import
requirements.  For example, Spain will now require any
foodstuff that has been treated with ionizing radiation to
carry an advisory label.  In addition, a lot marking is now
required for any packaged food items.  Spain, in adhering to
EU-wide standards, continues to impose strict requirements on
product labeling, composition, and ingredients.  Like the rest
of the EU, Spain prohibits imports which do not meet a variety
of unusually strict product standards.  Food producers must
conform to these standards, and importers of these products
must register with government health authorities prior to

    Telecommunications:  Spain's telecommunications services
policy is set out in the 1987 Telecommunications Law and
subsequent amendments to bring Spain in line with EU
liberalization requirements, and a 30 year contract between the
telephone company (Telefonica) and the Spanish Ministry of
Public Works and Transport (signed in 1991).  In essence, the
new contract providing for a gradual reduction in Telefonica's
monopoly also implies that the company will lose its monopoly
in voice telephony by 2003.  The contract also provides for the
gradual liberalization of data transmission (beginning in
1993), mobile telephony (a second license in 1994), and
value-added services.  Despite this gradual liberalization, a
proposed Spanish amendment to the Telecommunications Law would
limit foreign ownership of firms offering final or carrier
services to 25 percent of equity capital, unless cabinet
approval is granted.  There are, however, special caveats that
will permit differentiation between Spanish and foreign

    British Telecom and Banco Santander opened the battle for
data communications September 15, when they announced an
alliance to compete with Telefonica in this segment of the
market.  The new alliance will have to use circuits owned by
Telefonica.  Their decision has forced Telefonica to accelerate
its own plans for the sector, announcing an alliance with La
Caixa savings bank to capitalize on the financial institution's
large data transmission network, and plans to spend up to 46.5
million pesetas on a fiber optic network for corporate data

    The equipment segment of the Spanish market is generally
open.  Purchases of customer premise equipment have been
liberalized, and Telefonica is a major buyer of U.S.
transmission and switching equipment.  Product certification
requirements, however, can still be a problem for some types of

    Banking Services:  Spain's transposition of the EU Second
Banking Directive in March 1993, placed U.S. banks with
branches in Spain at a competitive disadvantage with respect to
branches of EU banks in Spain.  The latter are now exempt from
Spanish dotation capital requirements as well as extensive
reporting requirements.  There are ongoing negotiations to find
an acceptable solution.

    Government Procurement:  During the May 1992 GATT 
Government Procurement Code Committee meeting, signatories
agreed to extend code benefits to Spain by July 22, 1992.  This
required Spain to fully implement the corresponding EU
directives.  As a result, American suppliers having contracts
with Spanish government entities covered by the GATT Code are
protected with respect to discrimination, transparency, and
appeal procedures.

    Offset requirements are common in defense contracts and
some large non-defense related and public sector purchases
(e.g. commercial aircraft and satellites).  Recent large
commercial contracts have contained offset provisions in the 30
to 60 percent range.

    Television Broadcasting Stations:  The government has not
transposed the EU broadcast directive which imposes
restrictions on the share of non-EU programming shown on TV. 
Nor has the government introduced draft legislation to regulate
cable T.V.  Private stations, which heavily program U.S. movies
and sitcoms, are concerned that the Spanish government may
introduce and later enforce draft legislation which would
require 60 percent EU program content.  Given the strong public
preference for U.S. programs, quota restrictions would limit
sales opportunities.  In addition Spanish legislation imposes
restrictions on foreign ownership of the three private TV
concessions allowed.  These restrictions are aimed at
developing the local Spanish program industry and encouraging
Spanish language productions.

    Motion Picture Dubbing Licenses and Screen Quotas:  Spain
requires issuance of a license for dubbing non-EU films into
Spanish for distribution in Spain.  During 1993, the Spanish
government drafted new legislation that could significantly
increase the burden on distributors of U.S. films.  Spain is
attempting to pass this legislation by "decree law", allowing
the new legislation to be "grandfathered" under the Uruguay
Round.  The U.S. Government is strongly opposed to Spain's
attempt to pass this legislation and wants Spain to remove this
trade barrier altogether.  Dubbed movies are commercially more
successful than subtitled original language films in the
Spanish market.  Currently, to obtain a license, distributors
must contract to distribute a Spanish film.  Spain continues to
enforce screen quotas requiring cinemas to show one day of EU
films for every two days of non-EU films.

    Product Standards and Certification Requirements:  While
product certification requirements (homologation) have been
liberalized considerably since Spain's entry into EU, problems
remain for U.S. exporters in three areas.  First, cumbersome
certification requirements remain for some telecommunications
products, terminal equipment, certain computer peripherals, and
some building materials.  Second, there is a lack of
transparency and consistency in the application of
certification requirements.  There are no published norms for
the documentary evidence needed to establish that an item has
met certification requirements of another EU government and
that a product is in "free circulation" in an EU market. 
Third, the local interpretation and application of some EU
directives and regulations have caused disruption in trade with
the U.S.  In a recent example, Spanish enforcement of rules for
pleasure boat imports delayed American imports until the
corresponding certification requirements were clarified.

    The Spanish government generally maintains that it does not
use product certification procedures to hinder trade.  It has
been cooperative in resolving specific trade problems brought
to its attention.  The United States has encouraged Spain to
simplify its certification procedures and to make them more
transparent.  In this regard at the EU level mutual recognition
of product standards and testing laboratory results is being

6.  Exports Subsidies Policies

    In order to promote exports, particularly in Latin America,
Spain uses "tied aid" credits.  Such credits are consistent
with the OECD arrangement on officially supported export

    As a member of the EU, Spain benefits from EU export
subsidies which are applied to many agricultural products when
exported to destinations outside the Community.  Total EU
subsidies of Spanish agricultural exports amounted to $518
million in 1992.  Spanish exports of grains, wine, sugar, dairy
products, beef, and fruits and vegetables benefitted most from
these subsidies in 1992.

    Credits for pre-financing of exports made to third
countries on a consignment basis are available at unsubsidized
commercial rates, which currently range from 11 to 12 percent
per annum.  Exporters also make use of a government-subsidized
export payment insurance program which offers a wide scope of
coverage.  It applies to total or partial failure to collect
debts.  The program is administered by a government
corporation, CESCE.

7.  Protection of U.S. Intellectual Property

    Spain adopted new patent, copyright, and trademark laws as
agreed at the time of its EU accession.  It enacted a new
patent law in March 1986, a new copyright law in November 1987,
and a new trademark law in November 1988.  All approximate or
exceed EU levels of intellectual property protection.  Spain is
a party to the Paris, Bern, and Universal copyright conventions
and the Madrid Accord on Trademarks.  Spanish government
officials have said that their laws reflect genuine concern to
protect intellectual property.

    The patent law greatly increased the protection accorded
patent holders.  In October of 1992, Spain's pharmaceutical
process patent protection regime expired and product protection
took effect.  Industry sources say that the impact of the new
product protection law will not be felt until early in the next
century when new pharmaceutical products patents applied for
after October 1992 enter the market after the 10 to 12 years
research and development period normally associated with the
introduction of a new product into the market.  U.S. makers of
chemical and pharmaceutical products complain that this
provides effective patent protection for approximately eight 
years.  The U.S. pharmaceutical industry would like to see some
lengthening of the patent term.

    The copyright law is designed to redress historically weak
protection accorded movies, video cassettes, sound recordings
and software.  It includes computer software as intellectual
property, unlike the prior law.  In 1991, judicial sanctions
for violations increased significantly again.  The law provides
a clear legal framework for copyright protection.  The new
copyright law has been useful in alleviating abuses of authors'
rights.  For example, the home video industry trade association
reports a much improved ability to secure court orders since
the copyright law was enacted.

    Nevertheless, U.S. software producers complain of losses
from business software piracy and are taking legal action under
the new intellectual property law to correct this.  The Spanish
government has responded to concerns over software piracy by
sending instructions to prosecutors calling for rigorous
enforcement of the law and urging private industry to pursue
pirates aggressively through the courts.  In late October 1993,
the government submitted to the Parliament draft legislation
that would transpose the EU software directive.  The draft
includes provisions that allow for unannounced searches in
civil lawsuits.  U.S. industry would like to see a speedy
approval of the legislation.

    In 1991, continuing Spanish government enforcement efforts
sharply reduced video and audio cassette piracy.  Operators of
small neighborhood cable networks, called "Community Video,"
broadcast video programs without broadcast rights, but the
Spanish government has prohibited them from running cables
across public ways and is attempting to phase them out.  The
copyright law has clearly established that no motion picture
can be publicly exhibited without the authorization of the
copyright holder and that "Community Video" is to be considered
as public exhibition.

    The trademark law is intended to facilitate improved
enforcement.  It incorporates by reference the enforcement
procedures of the patent law, defines trademark infringements
as unfair competition, and creates civil and criminal penalties
for violations.  Aggressive Spanish enforcement efforts since
1991 have resulted in numerous civil and criminal actions;
however, the infringement of trademark rights in Spain is still
a problem, particularly in the textile and leather goods sector.

    In 1993 Spain was placed for the fourth year on the Special
301 Watch List, primarily because of inadequate protection for
computer programs and growing concerns about reported plans to
tighten up on the motion picture licensing regime.  An
out-of-cycle review of Spain under Special 301 is scheduled for
January 1994.

8.  Worker Rights

    a. The Right of Association

    All workers except military personnel, judges, magistrates
and prosecutors are entitled to form or join unions of their 
own choosing without previous authorization.  Self-employed,
unemployed and retired persons may join but may not form unions
of their own.  The only requisites for forming a union are a
group of more than two persons and registration with the
Ministry of Labor and Social Security.  There are no
limitations on the right of association for workers in special
economic zones.  Under the constitution, trade unions are free
to choose their own representatives, determine their own
policies, represent their members' interests, and strike.  They
are not restricted or harassed by the government and maintain
ties with recognized international organizations.  About 11
percent of the Spanish work force belongs to a trade union. 
While no official data are available on the percentage of union
affiliation in Spain's free trade zones, a trade union official
has stated that union membership in these zones is higher than
average throughout the economy.

    b.   The Right to Organize and Bargain Collectively

    The right to organize and bargain collectively was
established by the Workers Statute of 1980.  Trade union and
collective bargaining rights were extended to all workers in
the public sector, except the military services, in 1986. 
Public sector collective bargaining in 1989 was broadened to
include salaries and employment levels.  Collective bargaining
is widespread in both the private and public sectors.  Sixty
percent of the working population is covered by collective
bargaining agreements though only a minority are actually union
members.  Labor regulations in free trade zones and export
processing zones are the same as in the rest of the country. 
There are no restrictions on the right to organize or on
collective bargaining in such areas.

    c.   Prohibition of Forced or Compulsory Labor

    Forced or compulsory labor is outlawed and is not
practiced.  Legislation is effectively enforced.

    d.   Minimum age for employment of children

    The legal minimum age for employment as established by the
Workers Statute is 16.  The Ministry of Labor and Social
Security is primarily responsible for enforcement.  The minimum
age is effectively enforced in major industries and in the
service sector.  It is more difficult to control on small farms
and in family-owned businesses.  Legislation prohibiting child
labor is effectively enforced in the special economic zones. 
The Workers Statute also prohibits the employment of persons
under 18 years of age at night, for overtime work, or in
sectors considered hazardous by the Ministry of Labor and
Social Security and the unions.

    e.   Acceptable Conditions of Work

    Workers in general have substantial, well defined rights. 
A 40 hour work week is established by law.  Spanish workers
enjoy 12 paid holidays a year and a month's paid vacation.  The
employee receives his annual salary in 14 payments--one
paycheck each month and an "extra" check in June and in
December.  Based on a 1992 average exchange rate of 102 pesetas
to the U.S. dollar and full days and years of work, the legal
minimum wage for workers over 18 is $19.12 per day or $573.82
per month.  For those 16 to 18 it is $12.63 per day or $380 per
month.  The minimum wage is revised every year in accordance
with the consumer price index.  Government mechanisms exist for
enforcing working conditions and occupational health and safety
conditions, but bureaucratic procedures are cumbersome.  Safety
and health legislation is being revised to conform to EC

    f.   Rights in Sectors with U.S. Investment

    U.S. capital is invested primarily in the following
sectors: petroleum, automotive, food and related products,
chemicals and related products, primary and fabricated metals,
non-electrical machinery, electric and electronics equipment,
and other manufacturing.  Workers in those sectors enjoy all
the rights guaranteed under the Spanish constitution and law,
and conditions in these sectors do not differ from those in
other sectors of the economy.

         Extent of U.S. Investment in Selected Industries

              U.S. Direct Investment Position Abroad
                on an Historical Cost Basis - 1992
                    (Millions of U.S. dollars)

Category                                    Amount

Petroleum                                               149
Total Manufacturing                                   5,430
    Food & Kindred Products                   499
    Chemicals and Allied Products             810
    Metals, Primary & Fabricated              196
    Machinery, except Electrical              607
    Electric & Electronic Equipment           208
    Transportation Equipment                2,113
    Other Manufacturing                       996
Wholesale Trade                                       1,089
Banking                                               1,022
Finance and Insurance                                   166
Services                                                410
Other Industries                                       -101

TOTAL ALL INDUSTRIES                                  8,165

Source:  U.S. Department of Commerce, Bureau of Economic

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