Spain’s economic crisis… and why the Land of the Free is next

Dateline: Kuala Lumpur, Malaysia

When people asked me why I established an Asian hub here in Kuala Lumpur, my first answer is always the same: easy travel.

Sure, Singapore and Hong Kong are major international air hubs with flights heading to all corners of the globe. But living in those cities can cost upwards of $10,000 a month for a high quality of life… money that seems a poor investment for a perpetual traveler such as myself.

Kuala Lumpur is the home to Air Asia and Malaysian Airlines, as well as a number of other Asian carriers that serve hundreds of destinations. Getting anywhere – and I mean anywhere – in Asia is a piece of cake.

And cheap to boot.

In fact, traveling from Kuala Lumpur keeps getting easier and easier. Mainline carriers like Malaysian fly from what is essentially “Terminal 1” at KLIA, while low cost carriers like Air Asia long operated out of a separate low cost terminal miles away.

This year, however, a new airport terminal called KLIA2 opened up, with easy connections by train to the city and a host of new shopping facilities in line with the Asian budget traveler.

While I won’t argue that booking a $16 flight from here to Singapore will result in quite a no-frills experience, travel here in Asia is constantly getting easier and more pleasant.

The tourism industry here is growing as more and more middle class consumers start traveling around the region. Air Asia, headquartered in the Malaysian tax haven of Labuan, has stated that many of its customers had never flown on a plane before they came along.

That growth story is more than can be said for bankrupt Europe. And wealth-hating Spain is leading the pack when it comes to depressing travel stories.

Now six years into a harrowing recession, Spain has become the home of a new breed of horror story: the phenomenon of “ghost airports”.

In the early 2000s, Spain was gambling big on development. While European countries like Ireland created a real economic resurgence, Spain tried to cobble together a growth plan that never really came to fruition.

In addition to an endless number of now-empty housing projects, Spanish firms and politicians gambled big on airports.

It didn’t matter that Spain already had more airports than any other nation in Europe. All it took was a rash of cheap credit and politicians looking to buy votes from development-hungry constituents to lead to a massive overbuilding that has now left Spain in the lurch.

Today, only eight of Spain’s airports are even profitable, with some attracting only a few thousand passengers in an entire year.

There’s Huesca-Pirineos Airport, which cost $80 million to build but saw only 2,781 passengers in its much-ballyhooed inaugural season. Within a year, the airport shut down, leaving behind a diner popular with locals and a runway that now hosts illegal drag races.

125 miles south of Madrid lies an even bigger failure. A public-private partnership churned out Don Quijote Airport in a city called Cuidad Real. The airport sported at $1.3 billion price tag designed to attract leisure travelers from Madrid.

Local politicians, of course, jumped on the idea, using their connections to line up cheap credit and planning a high-speed rail line to the airport from Madrid, nearly two hours away.

Politicians got their pockets lined by big business while Spanish banks made insanely risky bets that would soon tank the economy.

Nobody seemed to think that overbuilding in an already overbuilt country, where tourism has seen large declines, was a bad idea. Money was so easy to come by and bankrupt politicians were so easy to pay off that no one cared if their ideas would actually pay off.

Of course, today Spain is mired in debt.

More than half of Spanish youth are jobless, and emigration statistics are through the roof. Nearly one million properties in a country of 47 million people were foreclosed on, leading to a mass phenomenon of squatters who refused to leave.

After being hit hard by the EU debt crisis and a double-dip recession, Spain has still not bounced back. Spanish politicians continue to rail against wealth and impose crazy new tax laws.

But at least Spain realizes one thing: they need foreign capital.

Spain’s Golden Visa program offers second residency to anyone willing to invest in real estate there.

I personally wouldn’t put my money into Spanish real estate seeing that Portugal has a Golden Visa program that is cheaper and much better. And Portugal’s economy has rebounded more nicely than Spain’s.

While you can tell the Spanish government is almost begrudging in its offering of residence visa to wealthy Chinese and Russians, the fact is they are doing it.

Unlike Canada, which shut down its Immigrant Investor Program, or the Land of the Free which continues to use jingoism to keep foreigners at bay, many broke European countries realize they need to bring cash in the door.

While countries like the United States and Canada are now fully embracing the idea of replacing “too big to fail” with the idea of depositors becoming unsecured creditors when banks fail, even socialist Spain is opening the doors.

Of course, we know that tiny countries like Singapore were forced to be foreigner-friendly or else remain poor forever. While the country you live in may have a larger population to tax and a more prominent currency to print on demand, the laws of economics can not be ignored forever.

In a global economy, people will eventually go where they’re treated best. Even an endless barrage of government propaganda won’t keep the most productive people in the country forever.

Meanwhile, many emerging world millionaires are seeking a home – and a second passport – in the western world. They, too, will go where they are treated best. If the politics of today are any indication, they will be bypassing the Americas.

As western birth rates decrease, their economies will require fresh blood to survive. Money doesn’t care that you don’t want “those Mexicans” coming to your country. Money only cares about growing economies.

If a country doesn’t have a built-in base from which to grow (ie: Cambodia, where there are still millions of people making less than $100 a month) or isn’t attracting foreigners to help them grow (ie: Spain), what reason is there for long-term investment?

A bunch of Americans swapping real estate amongst themselves is a shell game that can’t go on forever with no fundamental increase in demand. That economy will eventually collapse with the bankrupt government’s blessing.

Andrew Henderson
Last updated: Jul 22, 2020 at 5:16PM

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