The Canary government intends to approve a land law that follows the principles of the one approved by Aznar in 1997. The management of land is liberalized and more power is given to real estate developers. Again the Chinese story that this liberalization will activate investment and job creation and all Canarians will be happy and eat partridges. It is the same tall tale that José Manuel Soria told with the oil explorations in Lanzarote.
Unfortunately, Canarians already know the disastrous results of Aznar's land law. In 1997, for an average Canarian, buying a home cost 3.5 times their annual salary. In 2004, when Aznar left La Moncloa, the cost was seven times the annual salary of a Canarian. The bubble activated a boom in housing and credit and a disorderly growth of the population. The result is thousands of empty houses, bankruptcies of Canarian developers that all Spaniards have paid for with the Bankia bailout, high unemployment, poverty, precariousness, a public debt that has mortgaged the next two generations of Canarians and Spaniards, political fragmentation and ungovernability.
Spain and the Canary Islands are still intubated to the automatic respirator of the European Central Bank, which has allowed Canarian families to pay mortgage rates close to 0% and has prevented the bankruptcy of the entire European banking system and another Great Depression. In Frankfurt they were aware that the risk of zero rates and massive debt purchases was that agents would get confused and re-establish another real estate bubble. And their fears were not unfounded.
The Canarian Government should concentrate all its energies on improving the quality of tourist services, employment and reducing wage precariousness. With occupancy close to 100%, the fact that the unemployment rate in the Canary Islands is still at 27% indicates that something is not being done well. The world's middle classes and tourism continue to grow and are expected to continue to do so in the next decade.
Therefore, the Canary Islands must stop talking about the number of tourists and talk about income per tourist per day. If 10% fewer tourists arrive and average room prices rise by 30%, income would increase by 25%. If income increases by 25%, hotels and restaurants will be able to hire more staff and better train the staff they have to increase the quality of service. They will be able to increase salaries with sufficient profits to maintain the investment and permanent renovation that a hotel needs and guarantee an attractive return to shareholders. This is what Antonio Catalán, president of AC Hoteles byMarriott, proposed in 2014 at the Global South Forum in Lanzarote. The Canary Islands must reduce hotel monoculture.
The sectors that offer services to hotels must modernize and internationalize. The Canary Islands receives twice as many tourists as Brazil and Canarians could offer consulting, innovation or provide tourist services directly in Brazil. In strategic consulting, the hourly price is higher than the price of a hotel night.
The Canary Islands should better take advantage of its outermost region status, which allows it to maintain tax benefits for companies in the REF with the legal certainty of being part of the European Union. It should take advantage of its geostrategic advantage to position itself as a base of operations for multinationals in the African dawn, mainly multilatinas companies, as proposed by Michel Camdessus, former director of the IMF, and Mario Pezzine of the OECD at the Global South Forum in Lanzarote.
The land law that the Canarian government intends to approve will only perpetuate the model of job insecurity and will move the Canary Islands away from a winning model in a more competitive global world and in the midst of a technological revolution. The tourism model involves respecting the territory and betting on sustainable development, as already anticipated by the visionary and universal Canarian Cesar Manrique decades ago. And it involves diversifying and reducing the dependence of GDP and employment in the Canary Islands on hotel and tourism monoculture.
What I propose is not easy to achieve and it will take time to reach the goal. Every long journey begins with a step. But the land law proposed by the government is a false step that would lead to a path that Canarians do not deserve to travel again.
José Carlos Díez, Professor of Economics at the University of Alcalá
