Immigrants squeezed as Spain’s boom turns to bust

Lured by the promise of wealth in a booming economy, immigrants from North Africa, Latin America and other regions flocked to Spain in the last decade, quickly becoming Exhibit A in the Mediterranean nation’s remarkable success story. ¶ But the surging economy – which relied, to it’s eventual peril, largely on construction, tourism and service industries – has crashed. ¶ In a real estate-fueled boom-and-bust cycle that mirrors remarkably the one in the U.S., Spain today is in the throes of a dramatic downturn. Many of the first to lose their jobs and default on loans are those same immigrants, many of whom eschewed a move to the United States to try their luck in Spain. ¶ Of nearly 460,000 who lost their jobs in the last year, about 60% were immigrants, official data show. The unemployment rate is rising three times faster among immigrants than it is for the general population. ¶ Similar economic contraction is wracking communities throughout Europe with Spain, along with the region’s other star performer, Ireland, merely the most acute examples. Projections for growth are being slashed across the board and the word “recession” is in the air. Germany, France and Italy all posted negative growth in the second trimester of 2008.

Continued slowdown in Europe could spell more trouble for the United States, which has benefited recently from strong foreign demand for exports. As Spain, Ireland and other European economies have begun to slump, however, that demand is expected to falter.

This week, the Spanish government released figures showing that 103,000 people filed new unemployment claims in August, a 4.3% increase that brings the nation’s total unemployed to 2.53 million, Bloomberg News reported. At the same time, construction, which added more than a million jobs over the past 10 years, continued to slump.

“The economic situation is worse than we all predicted,” Spanish Economy Minister Pedro Solbes told the El Pais newspaper recently. “We thought it would happen slowly but instead it has hit fast.”

With unemployment among all workers at its highest level in 10 years, growth has slowed to its worst pace in 15 years. In the construction sector, where the international credit crunch finally quashed runaway building and rampant speculation, profits were reported to have fallen by 87 percent. Forecasters warn major banks may be headed for trouble as the number of borrowers who default or are in arrears has tripled.

Charity agencies in Madrid, who note a rise in the hungry at soup kitchens, have begun to sketch what they call the new face of the Spanish poor: an immigrant who had worked in the construction industry, was laid off and can’t find sustained work in a shrinking market.

“Those with mortgages are the ones who are really hurting,” said German Cubas, a Peruvian dentist now working as a waiter in Madrid at the Inti de Oro Peruvian restaurant.

With consumer spending down, so are his tips - and he is struggling to make ends meet.

“The economic situation is worse than we all predicted,” Spanish Economy Minister Pedro Solbes told the El Pais newspaper recently . “We thought it would happen slowly but instead it has hit fast.”

Of course, immigrants are not the only ones who are suffering.

At Madrid’s downtown Monte de Piedad, a 12th-century institution where the poor can obtain low-interest loans, the native born were well represented among those filling the plastic chairs in a crowded waiting hall the other day. Proprietors at pawnshops report Spanish customers from a social class higher than any seen in awhile.

Jose Luis Valdivieso, a professional driver in Madrid, benefited from the boom but now sees the bust destroying his daughter’s family. Like so many Spaniards, Valdivieso bought an apartment in 2000 and was able to sell it a couple of years later at more than double the price. He repeated the deal, acquiring a much larger place after profiting, again, on the sale of the earlier property.

Then came the crash in real estate. He has had to watch his daughter, a more recent homeowner, at a devastating disadvantage. She purchased an artificially expensive apartment in the so-so southern neighborhoods of Madrid, availing herself of the cheap loans being offered at the time. But interest rates shot up, and now she can barely make payments, Valdivieso said.

Meanwhile, the collapse of the construction business – which had accounted for 18% of Spanish GDP – has begun to spill over into other areas of the economy,

Consumer spending is down, and other sectors reporting losses include general commerce, tourism and transportation.

The seeds of the crisis, as in the United States, were sowed during the flush years, when money was invested in the construction of seemingly endless housing tracts, hotels and other buildings, instead of more sustainable areas such as technology or research and development.

Economists as early as last year were saying Spain was long overdue for a recession.

Politically, the Socialist government of Jose Luis Rodriguez Zapatero, reelected to a second four-year term in March, has been widely criticized for moving too slowly to confront the crisis.

Last month, Zapatero canceled August vacation for his Cabinet ministers and ordered them back to work. They drafted an emergency $30-billion stimulus package on Aug. 14 that includes tax cuts, rebates and loans to small businesses.

Solbes, the economy minister, said leaders understood the severity of Spain’s troubles as the crash approached, but could not order builders to halt construction or “tell banks not to lend money.”

“We have said that building 800,000 homes a year did not seem sustainable, that extending mortgages to 40 years was not sensible – but the government cannot prohibit certain things,” he said.

Solbes is projecting growth in Spain this year at 1.6%, down from 3.8% last year. Growth was all but nonexistent in the second quarter, and some analysts predict Spain will enter its first recession in 15 years by 2009.

Because so many of the job losses are in construction, immigrants are being hit disproportionately by the twin vises of the crisis. The consumer group Adicae says the most vulnerable are foreign workers and young couples; immigrants usually have it worse because they can’t turn to a family network for help and may be less informed of legal or other recourses.

Most of Spain’s recent immigrants arrived, legally and illegally, from Latin America and the northern African region known as the Maghreb. They now number about 10% of the population, up from 2% a decade ago.

As the region’s prosperity soared, so did the status of the hundreds of thousands of people who had moved from Morocco, Peru and elsewhere.

Their work fueled the economy and their presence was welcomed. Many bought homes, a remarkable accomplishment as first-generation immigrants obtained mortgages that would have been out of reach in previous years.

Now, the government is struggling to come up with programs aimed at helping them, including retraining for other jobs and cash incentives to return home.

“They don’t want to have a lot of unemployed immigrants around,” said Francisco Meana Jimenez, a spokesman for Aculco, an association of Latin American immigrants.

But many are reluctant to leave, he said, having established a life in Spain complete with a home, property and, now, huge debts.

 tracy.wilkinson@latimes.com