Spain fails youth in innovative endeavours

At Tipos Infames bookshop in central Madrid, you can sip a glass of Rioja while leafing through the many offerings on the shelves. Or you might enjoy an espresso as you wander through the art exhibition area downstairs.

For many book-lovers, wine and coffee complete the perfect reading experience. For the Spanish authorities and banks, however, the business concept proved so incomprehensible and downright inconvenient that it took the shop’s three young owners six months to get a bank loan – and three years to secure the licences required to open.

“We didn’t fit the usual business model, so they didn’t know what to do with us,” says Gonzalo Queipo (33), one of the three.

Queipo and his colleagues are among many young Spaniards who say bureaucracy and inflexibility are hindering efforts to start up in business. This is absurd, they say, in a country with more than 26 per cent unemployment – and with some 57 per cent of 18- 24-year-olds out of work.

In the World Bank ranking of how easy it is to start a business, Spain comes 136th, compared to Ireland's 10th, and is also way behind Kenya, Rwanda and Tajikistan.

“The thinking here and the town hall’s approach are obsolete,” says Queipo. “They have a very fixed, narrow-minded way of doing things.”

Three licences were required to get Tipos Infames up and running: one for selling books, a second for the wine, and another for coffee. Queipo says that for many months they were bumped from one enterprise office to another, filling in forms and repeating the application process. And the banks were less than enthusiastic.

“You see all the bank adverts aimed at ‘young entrepreneurs’, saying, ‘Yes, we will help you start your business’. But it’s not true. In reality, all the banks want to know is, ‘Where’s your guarantor?’ Because if you don’t have one and you’re young, you don’t get the loan. They don’t base their decision on your business plan.”

Pooled savings
The three pooled their savings and asked their families to stand as guarantors for the remainder of the €120,000 needed to start up.

While they waited for loan approval and the licences, they paid rent for a year on their still-empty premises. Eventually they opened in October 2010 having secured two out of three licences, although everyone – even the town hall – advised them to go ahead long before then, which is apparently the norm in Spain.

None of this comes as a surprise to social policy expert Myriam Perez Andrada, who has worked with international research body Ecorys and is now an independent consultant.

Perez Andrada is highly critical of the way in which the two main political parties – the incumbent conservative Partido Popular and the Socialists before them – have failed to harness the energy and entrepreneurship of Spain's educated youth in an effort to pull the country off its knees.

“What we have are mediocre politicians at each other’s throats. They are not open to innovation. Innovation requires change, and that is not something that happens easily in Spain.”

She says paralysis in the bloated, dysfunctional civil service and semi-state sector has ensured that powerful interest groups remain protected while those young people who do get jobs must content themselves with precarious temporary contracts. Recent reforms have weakened job protection.

“Now you can use the economic crisis as justification to lay people off – and to pay 20 days’ redundancy per year instead of 45. Firms are taking advantage of this to get rid of the most vulnerable in a cheaper way.”

In the meantime, business opportunities are being missed. Catalan bicycle design company Edse Inventiva recently lost out on the chance to produce 11,000 bicycles for Copenhagen's city bikes scheme. The reason? No bank would lend the money to get the five million order up and running, and no investor would bite.

Perez Andrada says too little focus is placed on helping such highly skilled would-be entrepreneurs to get ahead in business. “They talk about helping those in the 18-24 age bracket, but a 20-year-old can’t be expected to open an innovative enterprise. They might open a chiringuito (beach bar) – but how will that contribute to a sophisticated, developed economy? We need to try new things. In Spain we put so much investment into education, and yet we have so many highly qualified graduates leaving the country.”

The latest figures from Spain’s national institute of statistics show just under 60,000 Spaniards emigrated in 2012, and 55,000 in 2011. Even more worrying in the eyes of demographic experts is the 13 per cent drop in the birth rate since 2008. Lower wages, the collapse of the jobs market and a generally more pessimistic view of the future are among the reasons attributed to the shift. And, for the first time since annual data collection began in 1970, the country’s population fell slightly last year, to 46.7 million.

Exodus
Cuts in areas such as research and development will see the exodus continue, Perez Andrada predicts. "With the highly skilled gone, we are faced with the prospect of a radically diminished middle class, and a low-paid, 'new poor' sector that is growing. Young people today are much poorer than their parents, even though their level of education is far higher. It is a disaster for business, and a disaster for the economy."

Back at Tipos Infames, business is ticking over. Queipo says an overhaul of the support system for new business would be no bad thing. He could probably write a book about it.