Iberian Markets

Some insist that this is not the case. Still, the American Mark Twain, not the Englishman Benjamin Disraeli, established the genus ‘mendacium’ subspecies: lies, big lies and statistics. Having clarified this, since assigning blame to each one correctly is essential, we can now affirm that behind these super-lies of statistics, there is always a certain amount of truth that cannot be ignored. It may rest on the seriousness (or not) of its institutions, on the character of those who carry out their duties in each geography or on the (im)permeability of its habits to the best practices in pursuit of progress, industry and domestic and foreign trade in its markets.

At the base of every metric is an attitude towards what is being measured. And every attitude is driven by incentives and serves biases. Mark Twain's attitude towards statistics correlated with his resistance to understanding and accepting the conclusions from the resulting ratios. If it had been Benjamin Disraeli, perhaps it would have been about wanting to understand and accept the conclusions reached by the data provided to him. Still, the reverse situation is also acceptable, allowing Mr Disraeli to resist the conclusions shown to him. In general, every metric makes some sense if one knows what to do with the data, even if it is a preliminary experiment. Here, it would be very appropriate to remember the trial and error method and the falsifiability of working hypotheses.

I was reviewing the weighted averages of the economies that develop in the territories of the two Iberian nations (with the magnanimity of Andorra, which has other advantages and can be seen below, but that of having a remarkable absolute market size) and, well, I found that there is a need to open the focus (especially from the perspective of Spain) on those other markets that are closer by proximity.

It has always seemed strange to me that the weather information given from Spanish television sources does not incorporate what happens in Portugal; I do not say this because I wish the second to be subsumed by the first in any way. On many occasions, the weather map on these televisions suggests that a geographical condition, such as the Portuguese territory between the Atlantic Ocean and a good part of Spain, does not exist in meteorological reality. In addition to being shocking and lacking the certainties of topography, I think it deprives you of understanding many of the things that geography does take into account. It is usually a political map, which denies a factual reality that is very conditioning the actual context of things like the climate. Whoever says geography could also say about society, markets, the economy and the opportunities that these offer and that are incomprehensibly sidelined. Since geography is the context in which economies and the opportunities and markets that these entail must first be understood, a broader regional perspective seems obligatory. Similar in regards to markets' opportunities.

Fragmented Markets into a Regional Whole

It turns out that, among all the markets in which someone could operate in these territories, the third place in absolute GDP is not the region of Andalusia but the nation of Portugal…. Okay, Iet's accept it: it could be said that Portugal is a fully-fledged nation and economic region, while Madrid and Catalonia are economic regions within another fully-fledged nation, such as Spain, and with which Portugal should be compared rather than with the previous ones. But here is the evidence: statistics depend significantly on the scope of the universe being analysed and its homogeneity as a field of work.

Spain, in its closest economic area of ​​interest, the Iberian Peninsula, performs as an island in many cases, i.e., in energy) Due to its fragmented markets, it must be analysed together with its nearby peers. Leaving aside the influence of the transport of products and services in bringing together markets that could be better communicated than others with which there is more excellent geographical proximity (again, the case of the peninsula that functions as an island in specific sectors; Italy could be another case that I am not going to deal with here). Thus, the analysis of these markets must be done with Portugal within and not apart. A slightly broader analysis would require including Morocco just after the Valencia economic region, although it would require further clarification. In the first table, you will also see this data for Morocco below, which is essential as Morocco maintains a privileged relationship with the EU that impacts the performance forecasts of the Iberian economies and markets and, substantially, specific industries and sectors.

Returning to the main subject of these paragraphs, I understand that those who do not perceive the need to include Portugal in the joint Iberian analysis will be aware that, as I have already pointed out, in Spain, the market is not unified internally, but on the contrary, and that the disaggregation into 17+2 internal markets does not lead to supporting this idea of ​​unity, but the opposite. The almost only unifying element of the regional markets in Spain is given by (i) the substrate in the use of the same language (with at least three peripheral exceptions that are contemplated without too much stridency - business people will know why they prefer it, given the little push they make for this need for unification - and where my personal opinion is not relevant now) and (ii) the superstructure of membership in the European Union, to limit ourselves to the most obvious. Therefore, analysing Portugal's performance at its appropriate level (Iberian markets) is relevant when making investment and presence decisions. It is worth noting that Portuguese is the ninth most spoken language in the world. A lever of power that is not inconsiderable. In short, the whole peninsular market cannot leave Portugal aside.

A Specific Change in the Perspective

Thus, and to stick to the size of the most prominent economies within this group of Iberian markets (those with an absolute GDP greater than €100,000 million per year), the results calculated on this GDP figure for the annual period 2022 offer the following image in a very preliminary approximation of the relative size of each one and by which to begin to establish positions (source: datosmacro/expansión, year 2022):

Regarding the year 2023, the source used only includes, for the moment, data from Portugal, which counts a population of 10.6 M Hab., with a GDP of €267,384 M, which has varied by +2.5% year-on-year. Pending the knowledge of what happened in Spain in 2023, things stand as follows. [And, not to forget to mention it, the Kingdom of Morocco in 2023 offered an absolute GDP of €130,493 M, which represented a variation of +3.2%, although the figure for the population of the last year is not given.] We will have to wait for updates.

Note:

No other known sources have been used in the hope of being able to use the same criteria for all the data published here.

Purchasing Power on the Demand Side

A more precise approach to these Iberian markets would not be based on their absolute amount but on the scope of action of each actor on the demand side. This would lead us to consider GDP per capita in more detail. It is not precise when forecasting the capacity to absorb products and services. Still, it filters to establish investment priorities and identify the profile of products and services suitable for said demand power. Let us remember that although GDP is an objectively lousy indicator of purchasing power, it at least correlates in some way the production of final goods and services of an economy with the exchange of fiat money generated by said production of goods and services, assigning a certain wealth accumulated in the hands of the resident in a probabilistic and homogeneous way, without discrimination. Thus, each resident is attributed a specific purchasing power by distributing all the available theoretical consumption. It is a mistake, but we consider it admissible for making very rough forecasts.

Repeating the previous scheme: Iberian markets with a size greater than €100,000 million that offer an exciting GDP per capita when considering a certain magnitude of individual purchasing power would result in this second image, although again limited to the year 2022 and without taking into account the net purchasing power per resident that they enjoy after reducing the data with the estimate of personal tax costs on the nominal GDP per capita.

In this second case, I think it is appropriate also to provide information on other regional economies that did not appear in the previous table (those with less than €100,000 M of absolute annual GDP) and that should be considered small markets, but relatively important in terms of the allocation of wealth and some corresponding purchasing power per person. However, they have also been limited in number; thus, those Spanish regional economies whose GDP per capita ratio is lower than that of Portugal do not appear. However, that of Andalusia has been maintained.

It is worth highlighting in this second table the triumphant appearance of the GDP per capita of residents in Andorra compared to the rest of the Iberian regional markets. It can be observed that Portugal goes from being the third Iberian regional market by absolute size to the twelfth position, indicatively a potential market due to the capacity of personal wealth to influence final production. It loses positions, although it could continue to be considered deeper than the eight regions incorporated with the more incredible wealth produced per capita. Naturally, not all products and services of each regional economy are consumed internally, so the data on wealth distributed per capita would have to be refined with the products and services that leave their markets for exporting. Still, you will not see that filtering in this post. (source: datosmacro/expansión, year 2022):

Notes:

(*) In italics are the Iberian regional economies with the highest GDP per capita but were outside the previous filter by absolute market size. The demand market shows a certain purchasing power but of a reduced size; that is, it is shallow compared to the rest. For practical purposes, regional economies below Portugal's GDP per capita have not been included. Andalusia is maintained to keep the comparison.

(**) There is still no updated data to 2023 on absolute GDP or on the population from the source used at the date of this publication, except in the cases of Andorra, Portugal and Morocco, which are known.

(***) In the more general context of the Iberian markets, information is still provided on the Moroccan case: it has little purchasing power but potential market depth in products and services that cover said little capacity. This could be similar to the Asian domestic markets, which were export-focused until a few years ago when many Asian markets generated a larger middle class and greater internal consumption levels.

I have found other interesting connecting issues by entering into analyses that result from absolute GDP, such as levering hypotheses as (i) the result of subtracting public spending, or debt, from absolute GDP about the purchasing power of aggregate demand or (ii) conjecturing about the possibilities of approximating the exemption from personal taxation to the net GDP per capita available for savings and private consumption. All of this leads to tools for dealing with issues related to reaching collaboration agreements between actors in the market, investments and participation in projects. Still, these are issues that exceed the objective of this post.

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