City Analysis of Seville

The city that I will be focusing on is Seville, Spain. Seville is the largest city and the capital of the Spanish province, Andalucía. It is one of the oldest cities in Spain with history going back to the Roman times and it was one of the main economic centers of the Spanish Empire during the Golden Age. Due to its extensive history, Seville has many historical landmarks, and has the third largest original city core in Europe. Currently, Seville has a municipal population of around 705,000 and a metropolitan population of around 1.5 million, making it the 4^th largest city in Spain. Spain’s largest cities include Barcelona and Madrid, with municipal populations of 1.6 and 3.3 million people, respectively. Major cities in Spain with a smaller population would include, Zaragoza and Málaga, with populations of 680,000 and 568,000, respectively.

Seville is one of the most unique cities in Spain for many reasons. One of the main components of Seville is the Guadalquivir River, the 2^nd longest river that is completely in Spain. The Guadalquivir’s proximity to the Atlantic Ocean made Seville a major trading route and harbor. Also, there are many historical landmarks that make Seville one of the most popular tourist destinations in Spain. Structures such as: La Torre del Oro, la Catedral de Santa María, the General Archive of the Indies, and the Alcázar, are just a few of many impressive landmarks that many tourists visit every year from around the world. In a smaller city in Spain, one would not be able to encounter these extraordinary buildings because they are very expensive and are almost always exclusive to large cities with an extensive history. Since Seville is one of the larger cities in Spain, there is not much that you wouldn’t be able to find in the city that you would be able to find in a larger one. The only difference would probably be a matter of variety. 

Nissan in Spain

The automotive industry is a significant part of Spain’s economy. Spain not only manufactures vehicles for various automotive companies, but they also produce many of the parts to make the vehicles. They have a highly developed infrastructure to support this industry, which makes them the 2^nd largest exporter of automobiles in Europe. This article, written by Isa Soares on CNN.com (http://edition.cnn.com/2013/02/28/business/spain-auto-soares/), focuses on Nissan’s recent impact on Spain’s economy.

As you may already know, Spain’s economy has been recovering in recent years from a large financial crisis in 2008 that left the country in ruins. Spain’s GDP has fallen and their unemployment rate is currently around 26.7%. This article focuses on the economic recovery that is occurring in the automotive sector, specifically with Nissan. The Nissan branch is Spain is currently expanding and also hiring. When this article was written, February 28, 2014, Nissan Barcelona had been given 178 million dollars in an investment that would create 1,000 direct jobs and 3,000 indirect jobs. According to the article, this was possible due to Nissan’s negotiations with trade unions, which limited wages, giving the company flexibility with its workforce. Limiting the wages has given Spain an advantage over other European countries because they are able to supply more jobs for an economy that desperately needed it. Lower the labor costs is also making the automotive industry in Spain more competitive.

Other car companies are feeling the pressure that Nissan is supplying and may also do the same thing as well. Even though just lowering the labor costs is not enough to make them competitive on the global stage. According to the article, “It's this logistical innovation that has enabled Nissan Barcelona to cut costs by as much as 30%; and for an industry that accounts for 10% of Spain's industry, this is a crucial part of Spain's long haul to recovery.” Nissan has had an impact on Spain’s economy that will hopefully help them recover faster from their economic struggles. There may be people that complain about the lower wages, which may decrease the standard of living for those working, but with an unemployment rate of 26.7%, I think that is a risk that can be taken and is supported by many Spaniards. 

Modern Trading Cycle of Scrap

a.              India and China are similar when it comes to their demand for resources and their role in recycling scrap material. When comparing the two however, China deals with scrap material on a larger scale than India. This situation is the result of a compilation of factors. When looking at labor costs, the article, Chapter 5: Backhaul of Adam Minter’s work, Junkyard Plant, states that Indian workers in the scrap business make around $80 a month while Chinese workers in the same business make around $250. At first glance, this may seem confusing as to why many prefer to go through China instead of India, but there are other factors that are more important. When it comes down to it, it all boils down to shipping cost as well as cost of refinement. In the case of China and India, China ships all over the world, making the shipping to China very cheap in order to avoid backhaul. Since this is the case along with having many refineries that can operate at a very cheap cost, many countries, such as the United States, choose to send a lot of their scrap resources to China. In return, China refines these materials, manufactures items with them, and sends them back to the United States or other countries, and the process is done all over again. India on the other hand, does not export as much and therefore many of their clients are in the Middle East where some of their major exports are and where there is a fairly large amount of scrap material available. Like I mentioned before, this amount is not nearly as much as the amount processed in China, which can be deduced to being due to the shipping costs.

b.              Although this new global market is helping the efficiency at which scrap materials are being re-processed, there are also some problems that are arising. The main problem that I see is the decreasing need for people to work in the ship/scrap yards. The article states, “What they don’t have, however, is a lot of people out here. Sure, there’s enough staff to receive, process, and dispatch all of this scrap. But compared to a crowded Indian or Chinese scrapyard, it’s a skeleton crew.” (101). This passage is very important to acknowledge because even though the exportation of scrap materials makes more sense than processing them in the United States because of cost and fuel, the jobs in the United States are decreasing. This is a problem because while we seem to be trading materials in the most efficient manner possible, the advances in technology and efficient processes are taking away jobs within the United States that were once available. In the long run, this could have a negative affect on the economy if not monitored closely.

c.               Modern transportation relates to the themes raised by Jared Diamond in “Why Did Human History Unfold Differently On Different Continents For The Last 13,000 Years” because modern transportation favors certain countries much like geography did before. Countries with easily accessible ports and those will many raw/scrap materials are able to trade with one another and excel in this new economy, much like how China is now. However, the focus has changed from geography providing domesticable livestock and plants to being able to ship efficiently to many wealthy nations around the world. 

The Shipping Container and Globalization

a.              I found the precision and efficiency of the whole shipping process to be quite interesting. Hundreds of thousands of tons of material is shipped on 1,000 foot freighters manned by around 20 people across the world in a couple of weeks. Before the shipment even reaches its destination, everything about the unloading process is already predetermined and handled by computers to make the process run smoothly. Apparently, there is a special order in which the containers need to be taken off in order to maintain balance on the ship, and each one of the 40 ton boxes are moved swiftly and carefully to their next destination. This process takes about 2 minutes per container and around 40 can be taken care of in an hour. I found it remarkable that some ports such as Tokyo and Los Angeles around 10,000 containers a day, and it really put my understanding of the amount of materials being imported into the United States into perspective.

b.              The author sees the development of the shipping container to be a major factor in the global market and globalization. The shipper container drastically lowered the transportation costs of goods making the cost of transportation almost insignificant. This made it possible for suppliers of raw materials and manufactures to be in different locations, allowing for the price of many goods to drop. This gave developing countries a chance to enter the global market as suppliers and manufactures since cost of labor was cheaper and a larger variety of raw materials could be used. Shipping containers were even made in uniform sizes so that the machinery around the world to handle them would be the same and the process would be much easier.

c.               The transformation to a globalized market has some pros and cons. From a general economic standpoint, the development of the shipping container is great. According to the article, “In the decade after the container first came into international use, in 1966, the volume of international trade in manufactured goods grew more than twice as fast as the volume of global manufacturing production, and two and a half times as fast as global economic output.”. This is a significant improvement that helped increase the integration of the global economy. Also, the development of shipping containers opened the door to a much larger, globalized market, which made it so that local markets had to adapt to the global market in order to keep up. Although the market became more globalized, many local workers lost their jobs because they could not compete with the cost of labor in other parts of the world. Also, since so many shipping containers are shipped daily, they cannot be examined and regulated thoroughly so the transportation of illegal drugs, undeclared merchandise, undocumented immigrants, and terrorist bombs was also facilitated by this change. 

A Slow Recovery for Spain's Economy

1.         In recent years, Spain’s economy has been suffering with an extremely high unemployment rate of around 27%. Fortunately, according to an article written by David Román of the Wall Street Journal (http://online.wsj.com/news/articles/SB10001424052702303678404579533123626167180), Spain’s economy is on the rise.  The article states that “Spain's economy grew at its fastest quarterly pace in six years, driven by stronger internal demand, but may struggle to sustain the growth in coming months because of stubbornly high unemployment and the risk of deflation.”. This opening statement is a good precursor into the overall theme of the article because it mentions that although Spain’s economy is improving, there are factors that are still inhibiting it from growing. This first quarter growth equates to an annual growth rate of about 1.6%( A number calculated by the Wall Street Journal since Spain does not release annualized growth rates) and signifies a significant growth since Spain’s property bust in 2008 which required a bank bailout from the European Union.

            However, even though this signifies growth, the magnitude and significance of the growth may be misleading due to some factors. Due to the increase value of the euro, Spain’s export sector has fallen as well as the construction business that, according to the article, has lost “1.78 million jobs since 2008”. Since there are still factors hindering Spain’s economic growth, primarily the high unemployment rate, many economists predict Spain’s economy to rise much slower with predictions estimating that Spain’s economy will only grow 1% in 2014 and that unemployment will remain above 20% until 2017. Spain is also suffering from deflation, which is keeping large sectors, such as the manufacturing sector, far from reaching its full capacity.

2.         This issue can be related to the GDP models that we learned about in class. As stated in the article, exports went down, which according to the GDP equation (GDP= C + I + G + (Ex – Im)), would lower the overall GDP. The article also mentioned the high unemployment, which lead to less consumption. Lowered consumption also leads to a lower GDP and an example was given when a customer in a ZARA clothing store was interviewed leaving with one bag saying ““It's hard to tell that things are getting better just yet," said Gema García, a shopper who left the store with one bag. "This I only bought as a present, because I have to."”. Investment and Government Spending were also affected according to the article. Investment was affected by the low inflation rate causing the private sector to struggle and the government spending was affected by the reduced amount of construction workers. The article provides an example which affects every category of the GDP equation in a negative way, but there are also parts of the economy that are rising which attributed to the economic growth in Spain.

3.         The article mentions that one of the main causes of this problem was the property bust in Spain in 2008. This property bust initiated the increase in the unemployment rate in Spain and the decrease of the economy. A solution to this problem was a Spanish bank bailout by the European Union, but the damage had already been done and Spain’s economy has been recovering slowly ever since. The only solution that I could think of myself is to find ways to increase tourism and use that as a way to increase consumption. Also, Zara clothing as well as Spain’s sports teams are doing well, so maybe there is a way to advertise each more to help increase exports in the textile industry.