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Spain-Algeria trade deadlock raises business anxiety

Spain-Algeria trade deadlock raises business anxiety

Daily Sabah | 8th December 2022

By Agence France-Presse - AFP

Six months after Algeria cut ties with Spain following the dispute over Western Sahara, trade between the two countries remains paralyzed, much to the dismay of the worst-hit companies.

With sales blocked, investment frozen and projects at a standstill since June, businesses are struggling.

"We can’t export or import anything, all our operations are on standby," said Julio Lebrero, head of Aecomhel, a Spanish company specializing in the manufacture of machinery for public works.

The firm, which owns 40% of the Algerian group Europactor, conducts almost all of its business operations in Algeria, which has left it in a difficult position.

"We haven’t brought in a single euro over the past six months, which is completely unsustainable," admitted Lebrero, who said he was "very worried."

Dozens of other Spanish small and medium-sized enterprises (SMEs) are in the same boat, their business activity slowed because they cannot sell their products in Algeria.

Similar struggles have beset SMEs in Algeria whose businesses are dependent on raw materials and spare parts that are "made in Spain."

The problem began in mid-March, when Spain suddenly reversed its decadeslong stance of neutrality on the Western Sahara conflict, saying it would back Morocco’s autonomy plan for the disputed region as it sought to end a lingering diplomatic spat.

Spain’s move, widely seen as a victory for Morocco, infuriated its regional rival Algeria, which has long backed the Polisario Front, Western Sahara’s independence movement.

In response, Algiers suspended on June 8 a cooperation treaty with Madrid that had been signed in 2002, later moving to restrict commercial transactions and freeze bank operations.

The freeze on business ties, announced by Algeria’s Association of Banks and Financial Establishments (known by its French acronym, ABEF), has had "a major impact on business transactions" between the two countries, said Alfonso Tapia, head of Omnicrea Consulting, which specializes in the Algerian market.

’Everything has stopped’

To get around the problem, some firms have managed to supply their products through third countries, but that has proved impossible for small companies given the added cost.

Spain has paid a high price, with Trade Ministry figures showing exports to Algeria reached just 138 million euros ($145 million) between June and September, compared with 625 million euros for the same period a year earlier – a loss of nearly 500 million euros in just four months.

And the slump has hit everything from agribusiness to chemicals, as well as textiles and the construction industry.

"Everything has stopped," Djamel Eddine Bouabdallah, head of the CCIAE Algerian-Spanish trade and industry association, said, adding that some companies had even been forced to close.

The only exception is gas.

Spain depends on Algeria for natural gas and deliveries by Algeria’s state-owned energy giant Sonatrach have continued untouched, albeit at a higher price.

As to how long the situation would continue, nobody knows.

In June, the Spanish government appeared confident its relationship with Algeria was solid. But since then, it has said little.

State of uncertainty

For the companies hit by the freeze, Madrid’s silence does not bode well.

"We’ve asked the authorities to come up with solutions, but they’ve not come back to us," said a spokesperson for ANFFECC, which groups Spanish producers of ceramic glazes, pigments and glass-like materials.

In this sector, which is very dependent on the Algerian market, the freezing of business ties has already cost it some 70 million euros.

And many fear it could lead to a permanent loss of market share to its French and Italian competitors.

"The Spanish government is acting like there’s no problem, they have left us completely on our own," said Lebrero.

His view is shared by another Spanish business owner who, speaking on condition of anonymity, denounced the "passivity" of the government and accused Algiers of blowing "hot and cold."

In a statement at the end of July, Algeria’s Association of Banks and Financial Establishments announced the end of the restrictions with Spain.

But nothing changed, leaving companies in a state of uncertainty.

"There are currently negotiations ongoing between the two governments because they cannot leave the situation like this," said Bouabdallah, his words echoed by Alfonso Tapia.

"The current situation is no good for anyone. We need to get back to normality," he told Agence France-Presse (AFP), calling for a "quick resolution" of the deadlock.

 source: Daily Sabah