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IntroductionThe agrofood industry (AFI) in western countries has undergone an important transformation during the last two decades as a result of two interrelated phenomena: the ongoing process of productive restructuration and the configuration of a new juridical frame specific to that sector.Thus, the restructuration process which is taking place within all industrial activities (strengthened by technological innovation, the increasing role of the service sector, the process of economic globalization and the breakdown of mass consumption) has disturbed, by multiple means1 the sharing of power along the value chain of the agrofood system (AFS) in favour of the distributive sector, which in turn has provoked a noticeable increase in the requirements of flexibility and competitiveness for the food and drink manufacturers. Furthermore, the new or expected changes within the legal frame of the AFI have strengthened those requirements in particular in the European Union, given the enormous politicization of the agricultural sector2.As for the Spanish agrofood industry, it has not been indifferent to this changing context. In fact, Spain's membership in the European Union, the broadening of external competition, the restructuring of productive activities, the acceleration of technological changes and the alterations of consumer patterns and of commercial and distribution structures, have given shape to a historic change within the sector3 whose final outcome is still in gestation.Considering the complex scenario within which the Spanish agrofood industry evolves, and trying to prove its relevance as an instrument to promote economic growth and spatial development, this paper is divided into three parts. In the first one, the relative importance of the agrofood sector within the European Union is determined. In the second, the main features of the Spanish agrofood industry are analysed. Lastly, the paper includes some reflections on the possible evolution of this sector in the near future.The agrofood industry in Spain and the European UnionAt present, the AFI is one of the main industrial activities within the developed countries. This feature is particularly noticeable in the European Union, which has been the largest producer of manufactured food in the world for more than a decade, ahead of the United States and Japan. This last outcome is largely due to a better performance of agrofood activities than the whole industrial sector in terms of production and employment during the past years, as is displayed in Figure 1. Thus, along with the fact that it is one of the European industrial activities which shows a faster rate of growth, the AFI is, nowadays, one of the most important within the European context, both in output and employment4.However, the agrofood sector does not have the same level of economic relevance in all European countries. Thus, as can be observed from data included in Table 1, only five countries account for 76,2% of the output for the whole European sector, 75,2% of the gross value added, 83,7% of total number of firms and 76,6% of the employment). Those countries are: Germany5 (whose figures are 19,2%, 19,1%, 1,9% and 17,1% respectively), France (18,9%, 17,7%, 32,9% and 19,3%), United Kingdom (15,7%, 17,2%, 3,8% and 15,3%) and, at some distance, Italy 13,7%, 12,2%, 32,2% and 13,5%) and also Spain (8,8%, 9,0%, 13,0% and 11,4%).Figure 1: Trends in the agrofood industrial production and employment within the European Union. (constant prices. Base year 1990 = 100)Tendences de la production et de l’emploi dans l’IAA de l’UE (prix constants)Data referred to EU-15 until 1990Données référées a UE-15 jusqu’à 1990.Source: European Commission (1995, 1997): European Industry Overview; European Commission (2001): European Business Overview 2000.Table 1: Economic relevance of the AFI within the European UnionImportance économique de l’IAA dans l’UEValue added rates in thousand ECU'sRatios de valeur ajoutée en milliars d’ECUsData referring to firms with 20 or more employees in Germany and Greece, with 3 or more employees in Ireland. Estimated data of employment for the Netherlands and of Value added for AustriaDonnées référées aux entreprises avec 20 ou plus employés en Allemagne et en Grèce, avec 3 ou plus employés en Irlande. Estimations pour l’emploi aux Pays Bas et pour la valeur ajoutée en Autriche. Source: Own elaboration from data provided by the European CommissionÉlaboration propre à partir des donnés de la Comission Europénne (EUROSTAT): Vue statistique sur l’Europe 2000.Furthermore, only in the case of Spain and France is the importance of the agrofood activities within the context of their respective industrial sector meaningful (Table 1) Nevertheless, the importance of the Spanish AFI is not reflected in the degree of capitalization within the sector, comprising only 14,3% of the total investment effort within the Spanish industry and standing far below the average within the European Union (16,9%), although it is higher than the average for OECD countries (7,3%). This finding, in addition to the high number of small and medium size firms, largely justifies the low level of productivity achieved by the AFI6. Thus, Spain shows a ratio of value added related to employment only better than the Greek and Portuguese ones and far below those showed by Ireland, the United Kingdom, the Netherlands and Sweden, according to the data included in the &#34;European Business Overview 2000&#34;, published yearly by Eurostat (European Commission, 2001). However, this potential problem of the Spanish agrofood industry is partly compensated by lower labour costs, dedicated to maintain and improve the competitiveness in the sector.Main features of the Spanish agrofood industryAfter having determined the importance of the Spanish agrofood sector within the European context, the study of its highly distinctive features becomes relevant. In order to accomplish that objective, this section is divided into three parts, which will analyse the trends in the basic macroeconomic variables for this sector, its sector distribution and the size of its productive units. In a latter section we will discuss the spatial patterns of the Spanish agrofood industry and its potential role for regional development.General overview of the sector: employment and productionIn the previous part of the article we have proven the outstanding relevance of the AFI within the Spanish industrial sector in terms of employment and production. Moreover, that finding is even more obvious when the comparative analysis focuses on the actual importance of the industrial activities regarding to selected indicators (Table 2). Thus, Food, beverage and tobacco shows the best results, since it occupies the first place in terms of sales (15,5% of the total industrial sector in 2000), the second in terms of employment (14,1%), yet close to the production of metallic products (14,5%), and the third in terms Value Added at factor costs, after the previous activity (12,9%) and Extraction industries, petroleum, energy and water (13,8%). Table 2: Main features of the industrial activities in Spain, 2000 (current prices)Traits principaux des branches industrielles en Espagne, 2000 (prix courants)Source: INE: Encuesta Industrial de Empresas, 2000.Nevertheless, the low ratio of Value Added per worker (6,33) proves the low level of labour productivity within the agrofood sector, which is below other industrial activities considered in the analysis. This last feature can be clearly observed in Figure 2, which displays the level of productivity within the AFI compared to the whole national industry for the last two decades, the first always being below the last one and with a widening of the gap between them during the last years.Figure 2: Trends in employment, value added and productivity in the Spanish Agrofood Industry (1978-2000)Tendences de l’emploi, de la valeur ajoutée et de la productivité dans l’IAA espagnole (1978-2000)The vertical shows the change of the statistical methodology occurred in 1993. Productivity data are measured in terms of value added per 10 employees in constant prices of 1985La ligne verticale indique le changement dans la méthodologie statistique effectué en 1993. Les donnés référées à la productivité ont été mésurées en termes de valeur ajoutée par 10 employés en prix constants de 1985. Source: Own elaboration from data provided by INEÉlaboration propre à partir des données de l’INE: Encuesta Industrial de Empresas, 1978-1992 &#38; 1993-2000.Even so, there is no doubt that the Spanish agrofood industry, along with the European one, had undergone a positive evolution, in particular since the mid-eighties. The increase in its productive levels has been slow but steady, mainly due to the efforts made in terms of Value Added, which has been increasing above its reference for the industrial sector as a whole between 1978 and 19957. This improvement in production is particularly noticeable since 1986, concurrent with the Spanish membership in the EEC and the phase of expansion in the economic cycle. A similar feature can be pointed out if we consider the evolution in terms of employment. Thus, despite that its level has been diminishing since 1978, the falling pace has been less sharp than the one shown by the whole industrial sector, with even periods of relative recovery since 1986, although slowed down by the economic crisis between 1992 and 19968.Sectorial structureAlthough the relevance of the activities that comprise the Spanish AFI is very different depending on the variables that we considered (as it is shown in Table 3), there are four that clearly stand out: Meat industry, Bread &#38; pastry, Alcoholic beverages and Milk industry. More specifically, these four industrial activities concentrated 61% of the employment, 49,7% of sales, 56,4% of labour costs, 58% of investment in equipment and 74% of the number of firms existing in the whole agrofood sector in 2000 (Figure 3).The ratio labour cost per employment follows a very diverse evolution within the agrofood activities. Amongst the four main activities previously mentioned, Alcohol beverages shows the highest level for this ratio with a value of 5,17 million pesetas per worker (social security and compensation expenditures included). However, this last activity is not the most relevant considering the ratio for whole agrofood industry, being surpassed by other industries such as Tobacco (6,18 millions of pesetas) and Non-alcoholic beverages (5,17 millions of pesetas). In the other end of the scale, two industries, Bread &#38; pastry (with the lowest ratio of 2,37 millions of pesetas) and Meat industries (3,18 millions of pesetas) are found below the average value of the ratio for the whole Spanish agrofood industry (3,52 millions of pesetas), which would imply a higher level of cost competitiveness of these two agrofood activities compared with others within the sector.The ratio Net Added Value per worker is not very high, in general terms, amongst the agrofood activities. It is particularly low for the cases of Bread &#38; pastry and Meat industry (3,01 and 4,36 millions of pesetas, respectively), which in turn shows their low level of productivity and their scarce intensity of the elaboration process in these activities. Amongst all agrofood activities, only three of them show a value of the ratio that is greatly higher than the average for the whole agrofood industry. These three activities are Alcoholic beverages, Non-alcoholic beverages and Tobacco, with ratios of 11,08, 9,87 and 12,1 million of pesetas, respectively. Business dynamicsAs for the characteristics of the productive units within the Spanish agrofood sector and their performance during the last years, we can point out the following features:Table 3: Main indicators for the Spanish Agrofood Activities, 2000 (percentages)Principaux indicateurs pour les branches de l’IAA espagnole, 2000 (%)Source: Own elaboration from data provided by INEÉlaboration propre à partir des données de l’INE: Encuesta Industrial de Empresas, 2000.Figure 3: Number of firms by activities within the Spanish Agrofood Industry, 2000 (percentages)Numéro d’entreprises dans les différentes branches de l’IAA espagnole 2000 (%)Source: Own elaboration from data provided by INEÉlaboration propre à partir des données de l’INE: Encuesta Industrial de Empresas, 1978-1992 and 1993-2000.The outstanding prevalence of small size firms. Thus, 96,8% of the agrofood firms generate less than 50 jobs, the majority of which are included in the group of those with less than 10 employees (82,2%, with a noticeable relevance of firms without wage earner employees. On the contrary, the largest enterprises (more than 200 employees) only represent 0,72% of total number of firms in the sector. The average size of the firms within the AFI is 14,8 workers, which stands below the same average for the whole Spanish industrial sector (16,1 workers). The smallest firms within the agrofood industry are found in two activities: Oil &#38; Fat and Bread &#38; Pastry (8,19 and 8,35 workers, respectively), while the largest can be found in the firms involved in the industries of Tobacco (199,7 workers) and in Non-alcoholic beverages (46,9 workers)9.There is a noticeable trend towards business concentration. Thus, despite the previous mentioned feature, the AFI has shown a slow but steady trend towards the concentration of firms during the last two decades, which is partly explained by the great expectations generated by the Spanish membership in the European Union. This trend becomes evident when we observe the diminishing number of small size enterprises over the years and the consolidation of larger firms.The massive influx of foreign capital from multinational companies such as Ferruzzi, BSN, Guinness, Nestle, Nabisco, etc. These companies have been taking over an enormous number of small Spanish agrofood firms, increasing the previous mentioned trend towards business concentration and also contributing to modernize the actual business structure of the sector in Spain, with a strong correlation being found between large firm size and foreign property. Amongst the agrofood industrial activities, the most affected by the influx of foreign investment are Beverages (with more than 51% of the total foreign investment in the Spanish AFI between 1993 and 1997) and at less extend Cookies, Sugar, Cocoa and chocolate, Milk industries and Oil &#38; fat.The increasing process of tertiarization showed by the agrofood industrial activities. This process has been stimulated by technical changes (adding more utility to the final products), the frequent use of external services by the firms within the agrofood industry (transport, logistic, management and assistance, etc.) and the incoming of the large French companies in the distribution phase. As result of all of these facts, as it also happened in the sector in the world context (Rastoin, 1993), the Spanish AFI has undergone an increasing movement of value change towards the part of the agrofood system more closely related to the customers: the distribution sector10.The continuous process of business internationalization. The opening of the Spanish economy provoked by membership in the EEC implied the end of protectionism within the AFI and the incoming of foreign capital11. These facts also had a negative impact on the Balance of Trade for processed food products, which fell into deficit after the year 1986 (Figure 4), as an expression of the lack of competitiveness that characterised the Spanish agrofood sector at that time. However, since 1996, the increasing relevance of export activities, closely related with the ongoing processes of modernization and capitalization experienced within the AFI, has changed the previous trend in the Balance of Trade, given as a result a total surplus of 60.000 million pesetas in 2000. Although the actual level of the export/import rate (104,4%) is still lower than for the years previous to the membership of Spain in the EEC, it is very significant given the context of high level of competition which characterize the agrofood activities at present. Figure 4: Trends in international trade within the Spanish AFI, 1984-2000Tendances dans le commerce international dans l’IAA espagnole, 1984-2000Note: Imports, exports and trade balance referred in ten thousands of million pesetas. Export/import rates estimated by MICYT (in percentage). Les importations, les exportations et le solde commercial sont exprimés en dixaines de milliards de pesetas. Les ratios des exportations et importations ont été estimés par le MICYT. Source: Own elaboration from data provided by / Élaboration propre à partir des données de la: Dirección General de Aduanas e Impuestos Especiales, and by/et du MICYT (2001): Informe sobre la industria española, 1999-2000.Furthermore, the increase of import and export activities explained the important actual level of economic opening within the AFI (20,5%), which is 10,3 percentage points higher than in 1989 (albeit below the average level for the Spanish industrial sector as a whole, whose internationalization process has taken place faster). Finally, despite the fact that the AFI’s process of business internationalization has mainly been performed through the trade side, it is worth noting that there is also some progress in this aspect in the productive side due to the combined action of foreign capital and the renewed emphasis on investments showed by many Spanish firms in other countries of the world.Spatial patterns and regional developmentThe analyses made in previous parts show the relevance of the AFI as a useful tool to promote industrial development. But, its strategic importance is also stressed by AFI's impact in spatial development given its direct influence in the processes of local-rural development. In this sense, among the factors which sustain the previous argument we can select the following:Its role as a direct and natural supplier of agriculture production, thus the AFI allows to increase the value added in such products as well as to revitalize the labour market in the rural areas.The AFI constitutes the first step (due to its direct relation with the territory) in order to diversify the local economic activities in rural areas, which in turn creates forward and backward links to other economic activities. At the same time, it becomes a powerful factor of productive integration of the economy in a given territory (Pardo, 1998; Gil and Pérez, 1996, 1998), contributing to fix the population to these rural areas.The new consumer patterns, based on better information and health effects, have intensified the search for differentiation and quality. This represents an opportunity to the AFI small and medium size firms in rural locations, particularly to those which have introduced a trade mark based in the quality of the products from a particular territory, such as the Origin and Quality Denominations (OQDs).All these previous arguments are strongly related with the sparse location patterns of AFI activities at local level, given that for the most of these municipal populations its possible to clearly identify the AFI activities with their local economy. In Spain, we have observed a strong correlation between the processes of local development in non-urban areas and the increasing relevance of the AFI activities, solely or in combination with other agricultural activities. In this context, it is also very noticeable the increasing compromise of Public Administration, at different levels, in promote such processes, particularly through rural development programmes (LEADER, PRODER) as well as a variety of financial aid devoted to promote the agrofood products (OQDs).In order to better characterize the AFI from a spatial perspective we have to take into account two phenomena:First, a relative regional polarization. As can be observed in Table 4, Cataluña is the Spanish region that shows higher agrofood potentials within the national context, followed by Andalucía and Castilla y León. Thus, in the year 2000, these three Autonomous regions concentrate 44,9% of the employment in the sector, 45,5% of total Net Added Value, 47,6% of business sales, 50,1% of total consumption of raw materials and 42,9% of the investment in equipment. However, in relative terms, the AFI only accounts for a noticeable percentage of the total industrial activities of Cataluña. That outcome can also be observed in Figure 5, which displays the specialization level in agrofood activities for the Spanish regions in the year 2000. The industrial sector of Andalucía and Castilla y León, as well as other regions such as La Rioja, Canarias, Extremadura and Murcia shows the highest levels in terms of employment and Value Added. On the contrary, with the lowest levels of industrial specialization in agrofood activities we can find regions such as País Vasco, Madrid, Aragón and Comunidad Valenciana.Secondly, the coexistence of two different business spatial localization patterns. First, the sparse pattern, which is directly connected to agricultural productive areas and secondly, the concentrated pattern, specifically oriented to food consumption areas (urban areas, transport and communication nodes, etc.). Table 4: Main indicators for the Spanish AFI, 2000: regional comparison (percentages) / Principaux indicateurs de l’IAA espagnole, 2000: une comparation au niveau régional (%)The data for raw materials consumption and investment in equipment refer to 1999 and does not include the Tobacco industryLes données pour consommation de matières premières et investissement sont réferées à 1999, Tabac exclu.Source: Own elaboration from data provided by INEÉlaboration propre avec des données de l’INE: Encuesta Industrial de Empresas, 2000, &#38; MAPA (2000): Cuadernos de Información Económica sobre la Industria Agroalimentaria nº 11.In fact, although the ongoing changes in the world AFI is leading the location of these industrial activities towards consumption markets in many countries (Rastoin, 1993), going against the traditional perspective of proximity to agricultural raw materials, it is not so obvious in Spain or, at least, not so clear as we could expect, taking into account the relevance of foreign capital and the most recent technological changes. Thus, the Spanish AFI is one of the industrial activities more sparsely located in the national territory along with Concrete and derived (Callejón and Costa, 1995).This last outcome, even considering the relevance of some provinces, can be observed in Figure 6, which displays the spatial distribution of the agrofood activities in comparison with the one corresponding to the whole national industry, as well as the Gini coefficients and Lorenz curves for both context of analysis between the years 1955 and 1995.Figure 5: AFI specialization rates of the Spanish industrial sector, 2000: regional comparisonSpécialisation agroalimentaire de l’industrie des régions espagnolesSource: Own elaboration from data provided by INEÉlaboration propre avec des données de l’INE: Encuesta Industrial de Empresas, 2000.Figure 6: Spatial concentration of the Gross Added Value for Spanish agrofood industry by provinces, 1955-1995Concentration spatiale de la Valeur Ajoutée Brute de l’IAA espagnole au niveau provincial, 1955-1995Source: Own elaboration from data provided by Fundacion BBVAÉlaboration propre à partir des données de la Fundación BBVA: Renta Nacional de España y su distribución provincial.Moreover, the coexistence of these two different spatial localization patterns can also be observed at the local level, with a remarkable importance of cities with 50.000 inhabitants or more within the process of business creation as well as the frequent presence of agrofood firms in almost every small village (Juste, 2001). This spatial dualism of the Spanish AFI, unlike the patterns followed at the international level, is very close related to the large number of agrofood firms (with a slow process of reduction) and the presence of some obstacles to de-localization which impede a higher level of spatial concentration in the sector. Amongst these obstacles we can mention the large amount of investment not amortized yet and some features which stimulate the settlement in rural areas: the local industrial tradition, the dense presence of SME, the explicit compromise of local authorities in territorial development, the preservation of gastronomic habits and the role played by Denominaciones de Origen y de Calidad (Origin and Quality Denominations).Regarding the Origin and Quality Denominations (OQD), although they only account for less than 10% of total national food consumption, they include a large number of products and are also spread throughout the national territory. In Spain, these institutions play a relevant role, as they do in France and Italy, defending the quality of agrofood production rather than the concepts of hygiene and security considered in northern countries. The relevance of these Denominations indicates the dynamism of the industrial tradition in many rural areas and the close relationship between the AFI and the local agrarian systems. Such a relationship, which is linked to the concept of &#34;tipicity&#34; (Caldentey, 1998), is not simply based on supply needs, but rather it becomes the main argument of some heterodox research processes of local development, for example, those referring to agroindustrial districts (Iacoponi, 1990; Cecchi et al, 1992; Fanfani, 1994).The Spanish experience reveals that the application of OQDs is a very useful instrument for the enrichment of the consumer’s diet, for the revalorization of a more diversified food production, for the interprofessional articulation within the agro-food sector, for the estimulation of manufacturing and commercial distribution processes at local level and, definitively, for the management of the territory and the rural zones. Those aspects are related to some basic effects of OQDs: a higher profitability and a more intense supply concentration and modernisation of agricultural structures, from the farmers’ point of view; the development of industrial structures in rural areas (with an increasing collaborative espirit and with the creation and consolidation of competitive small and medium size enterprises), from the point of view of AFI; and the constant affluence and presence of high quality food at the shopping centres, from the perspective of the distributive sector.In fact, because the regions view the OQD system as a positive instrument, OQDs are extended to an ever growing number of products and localities. OQDs are found in a high variety of agro-food branches, particularly: wine, meat, milk products, fruits and vegetables, and also in all regions, especially in Cataluña, Andalucía, Castilla y León (the powerful triad of the Spanish AFI), Aragón and Comunidad Valenciana (Juste, 2001).Final considerations: the future of the Spanish AFITaking into account the analysis undertaken in the previous sections, we can point out that the future of the Spanish agrofood industry, as a potential instrument to promote economic growth and spatial development in the context of an open economy, relies on two major circumstances: First the capability to overcome the sector’s structural weaknesses such as: the enormous prevalence of small size enterprises; the low ratio Value Added/Production and low levels of productivity; the structural dependence on climatology, agrarian conjuncture and high seasonality of many productive processes; the slow increase of food consumption levels; the changes on the demand side, often drastically (such as those generated by the African pig plague, the “mad cow” disease, the dioxins or the aftose fever), which create an environment of uncertainty; the financing of circulating capital from suppliers and, more importantly, from distributors, given the relevance of the larger distribution firms (mainly responsible for the delays in payments to producers); the scarce investment in human capital, both by managers and workers (often hired temporarily); the low levels of investment in innovation and R+D in the firms; the lack of commercial strategies more adequate to the patterns which are followed in other countries and more effective to assure the presence of the national sector in the international realm with products of excellence; and, finally, the deficient co-operation among firms at local level.Secondly the capability to avoid the many threats posed by different phenomena such as: the continuous unprotectedness of the internal market (lead by the new regulations stipulated by the WTO applying to the international economics relations); the costs associated with a predictable tightness of environmental regulations (selective collection, recycling, etc.); the contingent system used for some raw materials (milk, sugar, tomatoes, etc.), which limits the available amount of these goods in the internal market; the import of foreign agrofood competitive products (which generate tension in a market with a very narrow benefit margins); the disloyal competition from third countries; and the deficient intergenerational relay within the family agrofood SMEs.To be able to meet all of these challenges is feasible. However, in order to do it, it becomes essential to exploit the strengths of the agrofood industry at maximum level, such as: the adaptability of SME to the permanent market changes within a context of increasing labour flexibility; or the significant “backward and forward linkages” on other economic activities; the high quality and variety of raw materials which are transformed. Similarly, it is also vital to take advantage of the business opportunities that the new international economic frame generates for the sector’s enterprises through the design of global perspective strategies in areas such as quality, innovation, human capital investment and co-operation.Those above-mentioned strategies must be complemented with another strategy from the institutional realm, co-ordinated by the government at different levels (national, regional and local) and oriented to promote not only investments, but the association and generation of new larger firms, the provision of a wide range of services to the productive units and the strengthening of professional organizations as a tool to stimulate the promotion of new products and the development of stronger co-operation links between firms. Undoubtedly, all of these actions require an additional source of competitive advantages at the onset of the XXI century: the political willingness and capability regarding the negotiation process.