Current Affairs: Spain Is Disgusted With Corruption But Can Anything Be Done About It?

Spain Is Disgusted With Corruption But Can Anything Be Done About It?

By TIME

 “¡Basta!” When yet another massive corruption scandal broke in Spain last week, the headline of the Jan. 19 edition of the Barcelona-based newspaper El Periódico contained just that one word: “Enough!” It was echoed a few days later by a paper at the opposite end of the political spectrum, the monarchist ABC: “Spaniards say enough.” And certainly this particular case, which has conjured the edifying spectacle of high-ranking officials receiving envelopes of cash even while they imposed austerity measures on the rest of the population, seems particularly egregious. But in a country that has long accepted kickbacks as the price of doing business, it’s worth asking: What will it take before Spain does something about its corruption problem?

The latest scandal broke on Jan. 16, when Swiss officials reported that they had found accounts containing 22 million euros registered to Luis Bárcenas, former treasurer of Spain’s ruling Popular Party. Appointed by PP leader Mariano Rajoy in 2008, Bárcenas was forced to resign a year later for his possible role in another major corruption case, called Gürtel, and it was not immediately clear how he might have amassed that amount legally. Bárcenas has denied any wrong doing and said he was “holding the amount for investors,” though in a conversation that was wiretapped by police during the Gürtel investigation, an unidentified man claims he bribed Bárcenas for around 6 million euros.

There are allegations that Bárcenas didn’t keep the money for himself. On Jan. 21, a former member of parliament for the PP, Jorge Trías, published an article in Spain’s leading newspaper, El País, averring that Bárcenas and others regularly handed out envelopes containing as much as 10,000 euros in cash to other high-ranking Popular Party officials. “Outside of whatever the prosecutors and judges do,” wrote Trías, “the Popular Party must explain in complete detail what means it has used to finance itself.”

Trías could well be understating the problem. Earlier this week, El Mundo newspaper published an article suggesting that many of those officials who received kickbacks actually signed receipts for the payments. And Bárcenas has also claimed that, after years of holding the Swiss accounts without declaring their contents to Spanish tax authorities, he registered and paid reduced taxes on half the amount in 2012 thanks to a fiscal amnesty passed by…wait for it…the Popular Party—which by then had been elected to run the government.

Yet Popular Party officials are hardly the only ones under scrutiny. The king’s son-in-law, former Olympic handball player Iñaki Urdangarin, is being investigated for skimming money from sporting and tourism contracts arranged by his Noós Foundation. In Andalusia, where the regional government is in Socialist Party hands, officials are accused of knowingly using public funds to pay out fraudulent retirement packages. The courts are investigating the president of the regional government of Madrid after his Jan. 16^th admission that a 770,000-euro Marbella apartment whose previous owner was identified as an offshore company was indeed his. And on Friday, Jan. 25, Unió, which makes up half of the coalition governing Catalonia, was found guilty of siphoning public funds. Meanwhile, the children of the founder of Convergence, the other half of that coalition, are being investigated for influence peddling.

The real estate boom that preceded the current economic crisis allegedly made it possible for millions of euros to find their way into politicians’ pockets in exchange for preferential contracts and building permits. In 2006, the entire municipal government of Marbella was replaced when all its members were indicted in a case called Operation Malaya that is still ongoing. But the structures that have made corruption possible are much deeper.

“A lack of separation between the political class and the public administration is something we inherited from the Franco regime,” says Victor Lapuente, political scientist at the University of Gothenburg’s Quality of Government Institute. “It’s a revolving door–our civil servants become politicians and our politicians become civil servants.” In the absence of figures like city managers who aren’t elected and don’t owe their positions to those who are, patronage has become extremely important.

Spain’s hybrid electoral system, which is parliamentary but in which two parties (the PP and the PSOE) tend to dominate, has also made it harder for voters to feel like they have real alternatives. “We have the disadvantages of both systems,” says Lapuente. “In many places you can really only vote for one of two parties, and both are stained, so it’s very hard for citizens to feel like they have a clean option. But we also don’t have advantage of a real bipartisan system, which is that you get to vote for an individual candidate—here you vote for a party roster. So you can’t elect a clean party and you can’t elect a clean candidate.”

Election results bear Lapuente out. Sixty-nine of the candidates running for mayors’ offices in the April 2012 municipal elections had been indicted for corruption; a full 40 of them won. And there are currently roughly 300 people holding political office in Spain who have been indicted or found guilty of the same. “People vote for corrupt politicians as long as they are efficient—they get things built, bring the [high speed train] to town,” says political scientist Manuel Villorio, a member of the governing board of Transparency International Spain. “It’s only when, in addition to being corrupt they aren’t effective that they vote them out.”

There is no question that public awareness of—that is, disgust with—corruption has grown. In the last year, quarterly polls conducted by the Center for Sociological Investigations saw Spaniards rank it as the country’s fourth gravest problem, surpassed only by unemployment and other economic issues. Yet, the Bárcenas revelations brought only an estimated 1,000 people to an impromptu demonstration held in front of Popular Party headquarters in Madrid. “The idea that politicians are getting envelopes stuffed with cash during these moments of crisis has certainly generated a sense of indignation,” says Villoria. “But there’s also a sense of what can you do besides answer a poll?”

While those polls show overwhelming support for toughening sanctions against corruption, little government action has yet been taken. In the wake of the latest scandals, the Popular Party has promised to conduct a thorough internal investigation and prime minister Rajoy said that “his hand would not tremble” to punish anyone found guilty of misconduct. It has also promised greater accountability and oversight in the form of a Transparency Law, proposed last March but still not yet approved, that would require governments at all levels to make their accounts available to the public. But already there are caveats. On Friday, it was announced, that the royal family would be exempt from the law. And thanks to opposition from both the PP and the PSOE so too, most likely, will political parties. Over 75,000 citizens have signed an online petition asking that the parties be included in the legislation. But for that to happen, something would have to change.

Current Affairs: Spanish schoolboy fakes kidnap to avoid parents' evening

Original ! ...

Spanish schoolboy fakes kidnap to avoid parents´evening

Police officer´s 11-year-old son, who claimed he was being driven away in the boot of a car, was found hiding in family home

The Guardian

It was both dramatic and creative – but it was also one of the most over-the-top solutions ever invented for avoiding that well-known childhood nightmare, when parents are called in to talk to their teachers.

Early on Monday afternoon the unnamed 11-year-old son of a Spanish police officer stationed in the north-western town of Xinzo de Limia sent a text message from his mobile phone to tell his father he had been kidnapped.

When his father phoned back, the boy confirmed the worst. He had been snatched off the street as he was putting out the rubbish, he said, and was locked in the boot of a car. He had no idea where his kidnappers were taking him, but knew that the car he was in was a blue Seat.

The worried father told his commanders and, as the news was relayed around civil guard barracks across the province of Ourense, his colleagues hurriedly set up roadblocks. A nationwide alert was released in case the vehicle had left the province.

Police in neighbouring Portugal were also informed amid worries that the boy's kidnappers may have fled across the border.

Local newspapers flashed the news on their websites and ran photographs of heavily armed police manning roadblocks.

It was only two hours later that the boy's father noticed the keys to a spare flat owned by the family were missing.

The child was soon discovered there and reportedly explained that he had been terrified by the prospect of his parents going to school to speak to his teachers.

"The civil guard attributed the false alarm to a childish 'prank' that had something to do with the boy's situation at school," the local Faro de Vigo newspaper reported.

"The child's poor school scores in recent weeks appear to explain a form of behaviour that no one in Xinzo could understand," said the Voz de Galicia newspaper. "He and his parents were due to meet his class tutor that afternoon."

They did not report on whether that meeting had now been cancelled – or merely delayed.

Finance&Economics: How BMW dealt with exchange rate risk

Case Study

The case study: How BMW dealt with exchange rate risk

By The Financial Times

©AP

The story. BMW Group, owner of the BMW, Mini and Rolls-Royce brands, has been based in Munich since its founding in 1916. But by 2011, only 17 per cent of the cars it sold were bought in Germany.

In recent years, China has become BMW’s fastest-growing market, accounting for 14 per cent of BMW’s global sales volume in 2011. India, Russia and eastern Europe have also become key markets.

The challenge. Despite rising sales revenues, BMW was conscious that its profits were often severely eroded by changes in exchange rates. The company’s own calculations in its annual reports suggest that the negative effect of exchange rates totalled €2.4bn between 2005 and 2009.

BMW did not want to pass on its exchange rate costs to consumers through price increases. Its rival Porsche had done this at the end of the 1980s in the US and sales had plunged.

The strategy. BMW took a two-pronged approach to managing its foreign exchange exposure.

One strategy was to use a “natural hedge” – meaning it would develop ways to spend money in the same currency as where sales were taking place, meaning revenues would also be in the local currency.

However, not all exposure could be offset in this way, so BMW decided it would also use formal financial hedges. To achieve this, BMW set up regional treasury centres in the US, the UK and Singapore.

How the strategy was implemented. The natural hedge strategy was implemented in two ways. The first involved establishing factories in the markets where it sold its products; the second involved making more purchases denominated in the currencies of its main markets.

BMW now has production facilities for cars and components in 13 countries. In 2000, its overseas production volume accounted for 20 per cent of the total. By 2011, it had risen to 44 per cent.

In the 1990s, BMW had become one of the first premium carmakers from overseas to set up a plant in the US – in Spartanburg, South Carolina. In 2008, BMW announced it was investing $750m to expand its Spartanburg plant. This would create 5,000 jobs in the US while cutting 8,100 jobs in Germany.

This also had the effect of shortening the supply chain between Germany and the US market.

The company boosted its purchasing in US dollars generally, especially in the North American Free Trade Agreement region. Its office in Mexico City made $615m of purchases of Mexican auto parts in 2009, expected to rise significantly in following years.

A joint venture with Brilliance China Automotive was set up in Shenyang, China, where half the BMW cars for sale in the country are now manufactured. The carmaker also set up a local office to help its group purchasing department to select competitive suppliers in China. By the end of 2009, Rmb6bn worth of purchases were from local suppliers. Again, this had the effect of shortening supply chains and improving customer service.

At the end of 2010, BMW announced it would invest 1.8bn rupees in its production plant in Chennai, India, and increase production capacity in India from 6,000 to 10,000 units. It also announced plans to increase production in Kaliningrad, Russia.

Meanwhile, the overseas regional treasury centres were instructed to review the exchange rate exposure in their regions on a weekly basis and report it to a group treasurer, part of the group finance operation, in Munich. The group treasurer team then consolidates risk figures globally and recommends actions to mitigate foreign exchange risk.

The lessons. By moving production to foreign markets the company not only reduces its foreign exchange exposure but also benefits from being close to its customers.

In addition, sourcing parts overseas, and therefore closer to its foreign markets, also helps to diversify supply chain risks.