August 15, 2022

Overbuilding in Spain Leaves Many White Elephants

To justify the grand opening, Carlos Fabra, the head of Castellón’s provincial government, argued that it was a unique opportunity to turn an airport into a tourist attraction, giving visitors full access to the runway and other areas normally off limits. This Sunday, it will be used as the starting point for part of Spain’s national cycling championships, featuring the three-time Tour de France champion Alberto Contador.

Castellón Airport, built at a cost of €150 million, or $213 million, is not the only white elephant that now dots Spain’s infrastructure landscape. Spain’s first privately held airport — in Ciudad Real in central Spain — had to enter bankruptcy proceedings a year ago because of a similar lack of traffic.

Across the country, nearly empty toll roads are struggling to turn a profit. Other projects are surviving only with continued public financing, which has been cast into doubt by Europe’s sovereign debt crisis.

Over the past 18 months, Spain has been in investors’ line of fire after allowing its budget deficit to balloon during a long real estate bubble, which finally burst alongside the worldwide financial crisis. To clean up the mess, the Socialist government of José Luis Rodríguez Zapatero introduced austerity measures last year that, among other things, shrank spending on infrastructure. And that has left some projects in limbo, despite political pledges to keep them alive.

Over the past two decades, Spain built transport networks at a rate that few other European countries came close to.

Having opened its first high-speed train connection between Madrid and Seville in 1992, Spain overtook France last December as the country operating Europe’s biggest high-speed rail network, covering just over 2,000 kilometers, or 1,200 miles.

Growth in road and air transport has been just as spectacular. From 1999 to 2009, Spain added over 5,000 kilometers of highways — the biggest road construction endeavor in Europe. And its 43 international airports handle more cross-border passengers than any other country in Europe.

Such expansion has been a source of intense national pride. It has also brought major economic benefits to some previously isolated and impoverished regions.

Yet like Castellón Airport, not all the projects were necessarily well thought out. Some experts suggest that Spain’s approach to development during the boom years had placed speed ahead of risk assessment.

Joseph Santo, logistics and transportation director in the Iberian subsidiary of the consulting firm Booz Co., said there were differences between Spain and Britain, for example, when it comes to forming so-called public-private partnerships in the transport sector.

“In the U.K, they try to get everything into the agreement ahead of time and think of every contingency, so that it can take years to negotiate the deal,” Mr. Santos said. “In Spain, they do the reverse. They make the deal in six months and then if something comes up, they see how they can fix it.”

In separate interviews, the heads of some of Spain’s largest construction and infrastructure management companies conceded that spending had gotten out of control before the crisis. But they also predicted that most building projects, particularly in transport, would eventually yield profits.

“The problem is that such projects are generally conceived at a time when everything seems bound to succeed — even sometimes badly conceived projects — and there were no doubt some planning problems,” said Salvador Alemany, the chairman of Abertis, which is based in Barcelona. “At the same time, such projects have to live with the realities of an economic cycle that brings lows as well as highs, and there are plenty of examples of highways around the world that had difficult takeoffs.”

Baldomero Falcones, chairman and chief executive of FCC, another builder, recalled the painful opening of toll roads in the region of Catalonia in the 1970s — roads that have recently required expansion to cope with soaring traffic.

“I have never seen any transport infrastructure that at the end of the day has not proved profitable,” he said.

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