Estonia, an opportunity for Spanish companies

Fernando Carderera Soler, Spain's ambassador to Estonia and Finland since October 2000, describes the transformations in the Baltic country as extraordinary and says it is hard to imagine that present-day Estonia could have been a Soviet republic eleven years ago.
The embassy encourages Spanish businesspeople to actively contribute to this economic restructuring process, which has yielded such excellent results, as the conditions for doing business in the country are optimal.

In just over ten years since regaining its independence in 1991, Estonia has undergone extraordinary transformations. Almost from the outset, the Estonian government implemented an economic program in close collaboration with the International Monetary Fund to stabilize its economy. Among the agreed-upon measures were the prohibition of passing deficit budgets and the pegging of the Estonian krona first to the German mark and then to the euro.
Important structural reforms were also adopted, the central focus of which was the liberalization of the economy and which included an ambitious privatization program.

Estonia is a country with an area of 45.227 km² and a population of just under 1.400.000. Its GDP per capita in 2001 was approximately €4.400, and it boasts a well-educated and highly skilled workforce. Estonia's two main foreign policy objectives are joining the European Union and NATO.

Fernando Carderera Soler, Spanish ambassador to Estonia.

Bilateral relations between Spain and Estonia have developed satisfactorily over the past ten years. Of particular note is an increase in bilateral trade, which, although still modest in volume, has been the greater frequency of political contacts and visits, including those of Foreign Minister Josep Piqué in April 2001, the Prime Minister in September 2001, and the President of the Generalitat of Catalonia in June 2001.

Our trade with Estonia has increased significantly since 1995, but it remains modest, with €35 million in Spanish exports and €111 million in Estonian imports. Spain therefore occupies a relatively small position in Estonia's foreign trade, ranking twenty-fifth as a customer and twenty-fourth as a supplier. To date, Spanish capital investment in Estonia has been virtually symbolic.

Despite the small market size, there are significant opportunities for Spanish exporters and investors, who will find a liberalized market, a legal framework that protects foreign investment, and attractive wage levels. Spanish businesses are objectively well-positioned to do business in Estonia.

Estonia is slowly recovering its pre-Soviet industrial pattern: light industry (mainly textiles and processed wood products), which is regaining its traditional weight in the economy, along with services associated with the transit of goods and new companies in the field of electronics and telecommunications, developed under subcontracting agreements with the large Nordic telecommunications companies (Ericsson and Nokia), constitute the most active sectors of the Estonian economy.

The Spanish investor or exporter will find a liberalized market that protects foreign investment.

Investment in outsourcing in any of these sectors remains profitable, given the still low wages, in relation to the skill level, of the local workforce (the average gross monthly wage is below 350 euros).

Manufacturing textiles and furniture for re-export is a strategy already being used by Finnish companies. Perhaps, in the case of Spanish companies, it's worth considering investment opportunities in the forestry industry as a potential source of supply for the Spanish furniture industry, always bearing in mind, of course, that while forests are the country's main natural resource, they are mostly coniferous and birch forests.

Other sectors with potential are the tourism industry and services related to east-west freight traffic, at least as long as the flows of raw material exports (mainly gas and oil) from Russia continue to pass through Estonian territory (the expansion projects of the Port of St. Petersburg and the development of new oil pipelines could limit this expansion).

Estonia is a modern and fully Western country.

The installation of factories for any other consumer product could also be profitable within a strategy of supplying the entire Baltic region from Estonian territory, since labor costs in the Nordic countries are comparatively much higher and there is considerable growth potential in the markets of the other neighboring countries (Latvia, Lithuania, Poland…).

From an export perspective, it is worth highlighting the potential for exporting industrial equipment for the agricultural sector, which, although its contribution to GDP has decreased, still constitutes an important pillar of the economy. The supply of consumer goods of all kinds, and especially agricultural products not produced in the region, should also increase, although in the former case it should be noted that some other countries with a well-established national product image already have a presence in the country (Italian shoes, French perfumes, etc.).

In the case of Spanish companies, it is worth considering the investment possibilities in the forestry industry.

Everything indicates that Estonia will be able to conclude its EU accession negotiations by the end of this year, which should allow it to join at the beginning of 2004. When visiting Estonia for the first time, it is striking to think that what is now a modern, fully Westernized country was, just eleven years ago, a Soviet Republic. The changes are so dramatic that the Tallinn I first visited in November 2000 is quite different from the one you find today. I hope these reflections will encourage our companies to take a more active role in the transformation and growth of the Estonian economy.