Double trade record with Morocco

"Morocco can help Spain emerge from the crisis," Nizar Baraka, the Moroccan economy and finance minister, said a few weeks back. "Morocco can be a solution to improve the competitiveness of the Spanish economy," Karim Ghellab, the speaker of the Moroccan parliament and a former economy minister, said earlier this month in Madrid.

These statements are not mere propaganda aimed at ingratiating Morocco with its Spanish partner and the domestic media, but a description of reality. If Spain's exports as a whole have increased, shipments to Morocco have taken off to such an extent that the North African country has become Spain's biggest trading partner outside of the European Union with the sole exception of the United States.

If the first Popular Party governments led by Prime Minister Jos¨¦ Mar¨ªa Aznar almost came to blows with Morocco over the occupation by Rabat of the disputed unoccupied island of Perejil off the coast of the North African country, the current administration of Mariano Rajoy has kept its distance, failing to move to resolve outstanding political problems amid a background of economic dynamism between the two countries.

Last year, the exports of 18,839 small to midsized Spanish enterprises (SMEs) to Morocco increased by 28.7 percent to 5.295 billion euros, giving Spain a record trade surplus with its partner of 2.350 billion. The trend continued in the first month of this year when Spanish exports climbed 24.6 percent from the same period a year earlier. As a result, since Morocco became independent in 1956, Spain has for the first time displaced France as the country's main trading partner.

However, in practice Spain has been Morocco's top commercial partner for almost a decade. Apart from official exports, the contraband that takes place between Morocco and the North African Spanish exclaves of Ceuta and Melilla -- something the authorities of both cities describe coyly as "atypical trade" -- brings in an additional 1.4 to 1.5 billion euros. The value of goods smuggled to Morocco surpasses that of official Spanish exports to countries such as Canada, India and Argentina.

Contraband via Spain's exclaves brings in an extra 1.5 billion euros

The contracts that Spanish businesses have lost out on in Morocco, such as the high-speed train link between Tangier and Casablanca, which was handed to French companies, and the installation of the Renault factory in Tangier, have also brought some positive consequences. The sub-contractors for such deals are often Spanish firms. Spain's Assignia Infraestructuras, for example, is building two stretches of the new line amounting to 67 kilometers in a deal worth 87 million euros.

However, France continues to be the leading foreign investor in Morocco. It accounts for nearly a half of foreign direct investment in the country (49 percent), almost triple that of Spanish companies (17 percent) in second place. Some 700 Spanish SMEs have invested in Morocco in industry, tourism and the banking sector. However, the companies that make up the Spanish blue-chip Ibex 35 index have scant presence, even more so after telecoms giant Telef¨®nica's 2009 decision to pull out of the mobile operator Meditel.

The upsurge in exports is the result of the need for Spanish companies to open up new markets to compensate for the drop in consumption in Spain as well as the relatively good spell the Moroccan economy is currently enjoying, having been barely touched by the global crisis. Annual growth in output has fallen below five percent, but Baraka is confident that Morocco will return to growth levels of six percent.

One would have imagined that the increase in official trade between the two countries would have led to a drop in smuggling. Although it is difficult to gauge the extent of contraband, this does not appear to have been the case. Import sales tax (IPSI) recollections in Ceuta and Melilla last year rose five and nine percent respectively.

In the first two months of this year, IPSI revenues in Ceuta were up 18 percent from a year earlier, a development that surprises Guillermo Mart¨ªnez, the economy commissioner for the exclave. "Local consumption is at a standstill, if not falling, according to the Chambers of Commerce and Confederation of Businessmen," Mart¨ªnez explains. "The growth can only be explained in one way: atypical exports to Morocco are on the increase." The commissioner estimates that since the start of the year, contraband volumes have increased by 25 percent. There is no official trade between Ceuta and Morocco because Rabat has refused to install a customs office at the border.

Returning the territories is currently the only viable solution to Spain's crisis"

This is a welcome development for the strained coffers of the exclave. The IPSI -- the rates for which vary between 0.5 and 10 percent -- brought in 65 million euros last year, 26 percent of the city's total budget. Revenues this year are expected to surpass that amount. According to experts, there is no rational explication for this phenomenon as the bulk of the goods that are illegally shipped have scant added value.

The Moroccan think-tank, Mediterranean Strategic Analysis and Intelligence Company, argued in a report released last month that "the maintenance of the colonial exclaves weighs on" Spain's budget. "Returning the territories is currently the only viable solution to the crisis Spain is suffering," it claimed.

Not all of the Spanish businessmen who have dealings with Morocco have made fat profits. Some of those who have come up against the arbitrariness of the authorities or the greed of their local partners have set up the Association of Spanish Businessmen Affected by Extortion in Morocco. One of the group's biggest gripes is against Addoha Douja Promotion, the biggest real estate developer in the country.

Morocco is also feeling the euro crisis as overseas remittances from Spain fall. Over half of Moroccan immigrants in Spain are out of work. Although to a lesser extent than Ecuadorians, Moroccans are also returning home, according to a study by Spanish sociological research center Colectivo Io¨¦. However, at the same time, they try to maintain their residence in Spain for when the good times return across the Strait of Gibraltar.