Government vs. Ferrovial, an asymmetrical equation


Fernando González Urbaneja | It is not often that a government directly confronts a business decision taken by a responsible collegiate body. And when it does happen, it is not often that the government ends up getting fleeced. The relationship of political power with any business, no matter how large, is usually asymmetrical, in favour of the executive. Businessmen avoid confrontation because even if they achieve their aims, they always lose along the way.

In recent days we have seen the outcome of two confrontations in two very different countries (Mexico and Spain) with two Spanish multinational companies.

In Mexico, the confrontation between its president (Andrés Manuel López Obregón, AMLO) and the Spanish company Iberdrola is a well-known fact with several scenarios of tension. AMLO has not shied away from blunt criticism of Iberdrola (and other Spanish multinationals established in Mexico) to finally reach an agreement that seems to satisfy both parties. The Mexican maintains that he has nationalised electricity to reduce prices for consumers (it remains to be seen if this will happen) and Iberdrola’s directors are cautiously satisfied with an agreement that frees them from lawsuits and allows them to leave an uncomfortable market, all with a sale for which they obtain a capital gain, pending final valuations to be known. Iberdrola can explain to its shareholders and analysts that it is meeting its asset rotation and decarbonisation targets without appreciable costs. Everyone is happy, with one final consideration: investing in countries with autocratic tendencies and market mistrust ends up with uncertain bills to be paid.

The case of Ferrovial in Spain has nothing to do with what happened to Iberdrola in Mexico, but it has certain parallels. A business decision clashes with the government, which feels scorned and criticised. And the government, under a direct mandate from its president, reacts with a certain excessiveness, with unprecedented overreaction. The president has taken it as an amendment and censure in its entirety and does not stop when it comes to warning Ferrovial’s management that they will pay for the contempt, that bad things could happen to them, for example, the withdrawal of tax benefits to which they are entitled unless they bother the authorities.

The confrontation of a government, even a democratic and controlled government, with a company is always undesirable, especially for the employer. The relationship is asymmetrical, the power is on the side of politics, politicians who have little to lose in the conflict. We will soon know whether the governmental pressure, which is becoming intense and blatant, is enough to impose its criteria and dictate the best decision for the company and its shareholders. Whatever happens at Thursday’s general meeting, there will be subsequent scenarios in which the company will feel the powerful breath of authority, exercised with an iron fist and little restraint.

Iberdrola leaves Mexico with a sense of relief, especially in view of the opportunities in the United States, which is more determined than others to invest in renewable energies. Ferrovial has been far from Spain for years and is unlikely to close the gap for fairly obvious reasons. The most striking aspect of this story is that politicians with zero experience of industrial and business management are making amends to a board such as Ferrovial’s, which, if anything, can boast its professionalism.

About the Author

Fernando Gonzalez Urbaneja
Over 30 years working in economic journalism. Fernando was founder and chief-editor at El País, general editor at the business daily Cinco Días, and now teaches at Universidad Carlos III. He's been president of the Madrid Press Association and the Spanish Federation of Press Associations. He's also member of the Spanish press complaints commission.