Enero 2018 MADRID. Opportunities in the Italian market

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1 MADRID Opportunities in the Italian market 0

2 SUMMARY EXECUTIVE SUMMARY... 2 BILATERAL COMMERCE... 3 COMMERCIAL OPPORTUNITIES BY SECTORS... 5 OPPORTUNITIES MADRILEÑAS COMPANIES... 6 RECOMENDATIONS

3 EXECUTIVE SUMMARY The following executive report shows the export opportunities of companies from the Community of Madrid to Italy, the most successful sectors and best accepted by the Italian economy, as well as a series of recommendations for all those companies wishing to expand their business crossing borders, supported on data of economic forecasts of both countries. The bilateral relations between Spain and Italy are close and show a great harmony. Italy is one of the great economies of the European Union and has a very mature market of 60 million consumers in which Spanish companies still have a long way to go. One aspect to be considered by our companies is the great cultural proximity and the growing improvement of perception of Spanish brands. As in other advanced countries, the services sector is the main branch of activity of the Italian economy (74% of GDP), followed by industry. The differences between the northern regions, more developed and industrialized, and those of the south, economically less favored, are quite noticeable, conditioning the standard of living and consumption demand, although lately there is a certain redistribution of industry towards southern regions due to structural changes. 2

4 BILATERAL COMMERCE Spain is the fifth customer and supplier in Italy. In 2016, Spanish exports increased by 8.7% compared to the previous year and Italian imports to our country by 4.3%. The top ten Spanish products exported to Italy are automobiles, olive oil, clothing, raw materials and semimanufactured plastic, automotive equipment and components, foundry and iron and steel products, chemicals, pharmaceuticals, fuels and frozen seafood. According to official sources (ICEX), Spanish exports to Italy totaled 13,466 million euros, representing an increase of 15.1% compared to the same period of For its part, Italy sells to our market mainly components for automotive, automotive, foundry and iron and steel products, fuels, raw materials and semimanufactures of plastic, organic chemistry, clothing, pharmaceutical products and electrical machinery. Imports also increased, 12.6% in this period with 11,840 million euros. In this way, the bilateral balance is positive for Spain, with 1,562.7 million euros and a coverage rate of 115.4%. The table and the graphic shown below support what was previously mentioned. Both documents reflect the high number of companies that export on a regular basis over the total, together with a variation of the exports, mostly positive, in the last year. 3

5 In the same way, a graphic representation of the volume of exports of the most successful sectors in their internationalization projects to Italy is shown. There is a great difference in exports between the first sector, the automobile sector, and the rest. The automotive sector is a sector with a lot of prestige and reputation in Spain, which has always represented a very high percentage of exports that are made from Spain to many countries of the European Union and other continents. However, the export figures of the remaining sectors are truly positive, at the same time as they are adequate to the demand of the Italian market. To all this, it is added that the Spanish product is very well recognized in Italy. The only handicap that still exists is the fact that a high percentage of our agri-food sales to Italy does not provide added value, as it is selling bulk products, without bottling, as is the case of oil and wine where the price is the main differentiating value, and not other aspects such as quality. 4

6 COMMERCIAL OPPORTUNITIES BY SECTORS With the "Destinazione Italia" program, the Italian Government seeks to attract foreign investment and boost the competitiveness of companies. It is endorsed by institutions such as INVITALIA, a reference for foreign companies wishing to establish themselves in the country. There are good opportunities in the agri-food sector, especially in the export of products such as fresh and frozen fish and seafood, nuts, olive oil, wine and fresh fruits and vegetables, as well as semi-processed foods with a designation of origin (preserves of fish, dairy, industrial pastry). Although Italy is a major competitor of Spain in the footwear sector, this country is one of our main buyers internationally and the characteristics of its market allow sales to expand. The same can be said of the sector of ceramic floor and wall tiles.furniture and lighting, products closely linked to design, so appreciated by the Italian consumer, are also sectors with good sales prospects in that country.automobiles, one of our main exported products, is another sector of opportunity, along with machine tools, casting and molds and dies. The productive structure of the Italian companies, less flexible than the Spanish companies, offers good opportunities for outsourcing in the industrial sector, given that our factories are capable of producing shorter series of units in a shorter period of time. Regarding the services sector, there is potential for the implementation of franchises, such as restaurants or medical services. 5

7 OPPORTUNITIES MADRILEÑAS COMPANIES The Community of Madrid closed the year 2017 with an increase in exports of 0.8% to reach 29, million euros, a figure that practically doubled imports, which amounted to 59, million. Regarding exports, the Community of Madrid occupies the second place by autonomous communities that make more exports, just behind Barcelona. The value in millions of euros amounts to 28,202.7 which means a variation on the previous year of 1.7%. The percentage over the national total of exports of Spain represents 11, 3%. In the same way, the Community of Madrid represents 27.8% of the total national exporters, with a total of 40,998 exporters. Below is a graph of the sectors with the highest volume of exports from the Community of Madrid to Italy. It is worth noting the reasonable similarity of the chart with the one shown above, where the power of automobile exports is observed. A very remarkable fact, precisely in this sector is that the Community of Madrid exports more than 10% of the total sector, figures that have also increased in recent years, with a very favorable forecast, which is expected to grow around the 1.5% However, the most representative sector is that of pharmaceutical products, where the Community of Madrid represents more than 50% of the total exports to Italy. The pharmaceutical sector is going through a great moment regarding foreign trade, especially in Madrid, with higher figures every year, thus accounting for more than half of the country's exports. This upward trend will continue in the coming years, thanks to the demand and the great acceptance of the products from Madrid in the transalpine country. In the same way, it is worth praising the great effort of other sectors exported from Madrid, which affect Italian consumers, as well as electrical and jewelery materials, paper and the textile sector. 6

8 RECOMENDATIONS It is a fact that Madrid products are a success in the Italian market; the number of export volumes increases every year, which is a great incentive for Andalusian companies to continue investing in the transalpine country. Spain is the fourth country that exports the most to Italy, only behind Germany, France and China. There are good opportunities in the automotive sector, in the sector of pharmaceutical products, upward sectors in the Community of Madrid, and very well accepted in Italy. We also highlight the high potential of the sectors of electrical equipment and mechanical devices, and their components, whose items are of great interest to the market, where they offer products and services with added value, which are less sensitive to the rise and fall of prices. To be successful in Italy it is necessary to offer quality products and services. In the same way and understanding from a general point of view, the region where they should focus their interests would be the region of Lombardy, the richest and most industrialized region of Italy. In the same way, highlighting that access to Italy is not only a sales opportunity, but also that of generating new strategic partners, as well as an active search for technological, commercial, R & D partners... In addition, Italy it is consolidated as the gateway to the Balkan countries. 7