On February 23, the trade agency Instituto de Comercio Exterior (ICEX) of Castilla-La Mancha launched a program to analyze together with companies the problems they are facing with the current economic situation. All this without knowing that Russia would soon invade Ukraine, which made things worse, as we saw a month and a half after the beginning of the conflict. [El textil y el calzado, los sectores más afectados de Castilla-La Mancha por la invasión de Ucrania – ABC]
"The situation was already complicated in 2021, in full recovery from the coronavirus pandemic, with a demand gap, with a deficit of raw materials, problems with international transport, high inflation and an abnormal explosion of exports," says the director of ICEX in Castile-La Mancha, Pedro Antonio Morejon. This dynamic predicted that in 2022 the situation could be rebalanced, "but the invasion of Ukraine turned everything upside down."
"The least serious effect is on exports from Castile-La Mancha, and from Spain in general, to Russia and Ukraine, but the consequences for imports will be worse," explains Morejón, who refers, for example, to the wheat and feed with which animals in the livestock and meat sector are fed — which weigh heavily in the region — which are now in short supply because ukrainian cereals and oilseeds with which livestock food is produced. they no longer reach Spain.
"Another consequence of the invasion of Ukraine - he says - has to do with the geostrategic sphere and with energy because, although Spain is not affected so much, our EU partners in the European Union are mainly the countries of the East, which are heavily dependent on Russia for energy. When there is a war you can turn off the tap, even economic measures become a weapon and the picture becomes darker".
As for the data itself, the director of ICEX in the region points out that Russia and Ukraine are "small markets", since the sum of both countries accounts for only 1% of everything that Castilla-La Mancha exports. "Although the percentage is low, exports to these countries have grown in recent years," he says. In fact, in the latest reports, exports to these destinations have grown by more than 30% and almost 40% in some sectors, such as textiles, footwear or automotive components.
Pedro Antonio Morejón estimates at about 60 or 70 the number of companies in Castile-la Mancha with a stable presence for decades in the Russian and Ukrainian market, especially in the footwear and textile sector. All of them "had no problems with short-term collection because the pending commercial operations were insured, except for a few small mishaps".
ICEX data in 2021 show that Castilla-La Mancha exported to Ukraine an amount of 22 million euros and imports were worth 14.3 million, which gave a positive balance to the bilateral trade balance of 7.7 million euros. Exports instead reached 68.2 million euros to Russia, while imports were 8.9 million euros, therefore with a positive balance of 59.3 million euros.
However, and here comes the worst of the news that Morejón predicts, "all these companies are likely to lose these two markets for different reasons in the next five years". In his opinion, "it will be very difficult to recover for the Ukrainian market, a devastated country whose recovery, at the end of the war, will cost between 300,000 and 500,000 million euros, a figure not very far from what the European Union is about to allocate to the "Next Generation Fund" for the recovery after the Covid-19 pandemic".
The Russian market will also be lost because, "the Russian economy will suffer enormously and will no longer be profitable. There will be no more profit margin with the devalued ruble." In addition, "the devastating effects of economic sanctions will affect the image of companies that had trade relations with Russia".
