MADRID: The rush starts at about 8pm at La Infinito. That’s when Antonio Rojas Fernandez and Paloma Perez Rodriguez’s Madrid cafe usually fills up, typically keeping them busy until midnight.
While they have two part-timers to help prepare food and bus the dozen tables a few times a week, the couple hasn’t taken more than a day off each since opening in May 2012, five months after they lost their jobs. She was a teacher, while he installed television antennas.
“It’s not easy, but it’s working,” said Perez, 36, popping her head through a beaded curtain from the kitchen as the fruit blender’s whir covers the music. “I tell people it’s true I still have problems,” said Rojas, who is a year older. “The difference is that now they’re the ones I’ve chosen.”
As Spaniards endure the worst economic crisis and deepest austerity measures in their country’s democratic history, start-up companies are proliferating.
Over the first seven months of the year, registrations of self-employed people increased by 21,992 while they fell by 6,826 over the same period a year earlier. The number of companies created increased by 8.2 percent in the first half as a 26 percent unemployment rate spurs entrepreneurship in a country where the government still accounts for one in six jobs.
That compares with a 20 percent increase in new businesses in neighbouring Portugal, where unemployment is at 16.4 percent. The number of start-ups in Germany and France, the euro area’s two largest economies, is declining, data from national statistical offices show.
“There are indications that necessity entrepreneurship, people who create a business to exit unemployment rather than by opportunity, is increasing in Spain,” said Mariarosa Lunati, Paris-based economist at the Organisation for Economic Cooperation and Development who specialises in entrepreneurship. “This seems to be happening in other countries that are in a situation of crisis as well.”
Spain’s gross domestic product contracted more last year than initially estimated, INE, the national statistics institute, said last week. It revised the data to a 1.6 percent drop from 1.4 percent. In 2011, the only positive year since 2008, growth was 0.1 percent instead of 0.4 percent, it said.
The crisis has jolted people out of their comfort zone, said Paris de L’Etraz, General Director of the Venture Lab at the Madrid campus of the IE Business School. “Necessity is changing this unfortunate chip in people’s mind that led to a situation in which, even four or five years ago, more than half the population wanted to work for the government.”
New companies will help foster an economic recovery in Spain if they can generate jobs, business for other firms and revenue for the state, said Pedro Nueno Iniesta, an entrepreneurship professor at Madrid’s IESE business school.
Prime Minister Mariano Rajoy predicts the economy will grow this quarter after the recession abated in the first half of this year, reducing the unemployment rate for the first time since 2011 in the second quarter.
In July, the Spanish parliament approved a law simplifying paperwork and creating tax breaks to encourage more Spaniards to become self-employed or start a company. Lawmakers are in the process of looking at another one to reduce the risk of losing personal assets in the event of a bankruptcy.
“It’s very positive that people aren’t just staying paralysed and it’s normal that all businesses don’t prosper,” Nueno said. “Some will last and that means a job is created and another can follow that contributes to the economic recovery.”
Yet the fragility of the new companies poses a risk to the economy, said Pilar Andrade Sanchez, president of Ceaje, the young entrepreneurs’ business lobby in Spain.
Figures from the INE statistics office show that 53 percent of Spanish companies have no employees, as many can’t afford to hire full-time workers. That portion reached 55 percent last year. The total number of businesses declined for a fifth year in 2012, falling to the lowest level since 2005, the INE said in a statement this month.
While the number of companies seeking protection from creditors fell to 2,408 in the three months through June, the count was 62 percent higher than in the same period in 2011.
“We need to help companies to consolidate or else we’ll keep on churning out companies that go bust after a year,” Andrade said in a telephone interview.
Interest in start-ups increased as Rajoy, 58, made it tougher to find work funded by taxpayers. Since he came to power at the end of 2011, the number of people employed by the state and related companies and organisations dropped 12 percent after rising to 3.22 million, the most since the start of data in 1976.
WP-Bloomberg
