Spain

Reading Spain's economy through art sales

March 3, 2014: 9:43 AM ET

Spain's art world was whiplashed by the country's bubbly rise and quick collapse. Signs of the trauma linger at this year's ARCOmadrid art fair.

By Ian Mount

140303093733-arcomadrid-2-620xa

FORTUNE -- At this year's 33rd edition of Spain's ARCOmadrid contemporary art fair, it was pretty easy to tell where you stood in the art world hierarchy.

If you visited over the weekend, you were one of a diminished group of 100,000 or so civilians who forked out between 20 and 40 euros ($27.50 and $55) to bask in art that ran from canonized names like photorealist painter Richard Estes to up-and-comers like Mexican installation artist Héctor Zamora. But if you attended on Wednesday or Thursday, you were likely one of the 400 or so rich folks and art institution bigwigs who'd been invited to Spain, your trip paid in full, in the hopes that you might drop some serious dough on art.

All major art fairs have VIP programs designed to attract big spenders. But ARCO's dedication of 20% of its 4.5 million euro budget to inviting buyers and promoting the fair overseas shows how Spain's economic crisis -- now more than five years old -- has forced the fair to turn its attention from national museums and modest local buyers to big international collectors.

"In the years before the crisis, there were a lot of sales to domestic institutions. This has disappeared, and now there are more sales to foreign collectors," said Carlos Urroz, ARCO's director since 2010.

MORE: Buffett keeps mum on stocks and successor

Spain's art world was whiplashed by the country's bubbly rise and quick collapse. The Spanish art market grew 200% between 2002 and 2007, from 160 million to 480 million euros, only to crash to 271 million euros in 2009, according to a study led by Clare McAndrew, founder of research firm Arts Economics, for Barcelona's Arte y Mecenazgo foundation. The market has recovered only slightly since, hurt in part by the government's increase of its VAT (sales tax) on art works from 18% to 21% in 2012 (up from 16% in 2010).

"We're doing very badly compared to pre-crisis," said Idoia Fernández, sitting in the white ARCO cube of Madrid's Galería Nieves Fernández, where she is the director. "Last year, if it weren't for foreigners, ARCO would have been a disaster. We sold only one piece to a Spanish collector last year at ARCO, for 3,000 euros."

It's hard to know how a fair is doing, as many are loath to divulge overall sales numbers. Urroz couches his response in gallery "satisfaction."

"We don't have sales figures," he said. "We know the level of satisfaction of the galleries, and we are confident this year will be better."

What numbers are available aren't good. In 2003 and 2004, ARCO's visitor numbers hit a high of 200,000 people annually, but this number fell to 127,500 in 2012 and an estimated 100,000 this year. And big Spanish institutional buyers -- especially ones dependent on government support -- have cut their spending. Take the Museo Nacional Centro de Arte Reina Sofía, which trimmed its ARCO budget from 927,762 euros in 2010 to 700,000 euros in 2012, 318,999 euros in 2013, and 204,625 euros this year.

Which brings us back to the international collectors. With local money scarce, ARCO has flown in international collectors and added foreign galleries from Latin America to show those collectors pieces they wouldn't see elsewhere.

When I walked through ARCO a few hours after it opened on Wednesday, the first collector and industry day, the fair's redefinition appeared to be working. The VAT had been dropped to about 15.5%, and the halls were full of elder gentlemen in expensive casual wear, women of a certain age who'd undergone extreme plastic surgery, and young guys with tight pants and waxed moustaches.

140303093559-arcomadrid-1-620xa

"Since Carlos has run the fair, it's made an enormous step forward. It has become so international. Not just European collectors, but ones from Latin America and the U.S.," said Thomas Krinzinger of Austria's Galerie Krinzinger, who noted that he'd already sold two pieces for between 30,000 and 50,000 euros.

And it seemed that even some wealthy Spanish buyers had returned.

MORE: Why Google should acquire Tesla

Marcia Gail Levine, special projects director at New York's Marlborough Gallery, said that the gallery had already sold four pieces by Juan Genovés for around 100,000 euros and two by Manolo Valdés for some 200,000 euros to Spanish and American collectors. "Even though there was a crisis, there are certain artists we have that people in Spain were buying. We weren't hit that bad," she said. To drive home Marlborough's immunity to Spanish flu, gallery president Pierre Levai added that ARCO's generally bad 2012 was an "exceptionally good" year for Marlborough.

To be sure, the international rich have only grown richer in the post-crisis years, and Marlborough is a high-end giant that "virtually invented the modern art market," according to The Observer. The story is not the same for the middle class of the art world, which, just like the middle class elsewhere, has been squeezed.

"The professionals and the rich come the first days to make big buys. If you have 50 million euros and it goes to 40 million, it doesn't change anything. But on the weekend, the people pay 4,000 to 5,000 euros to buy something. That wave is more affected by the crisis," said Juan Ignacio García Velilla, director of the Altxerri gallery in San Sebastián, Spain.

Idoia Fernández of Galería Nieves Fernández, for one, was saddened by the disappearance of the middle-class buyers who used to buy art at the fair on weekends.

"The market of younger professionals who would buy art instead of a 800 euro TV has disappeared," said Fernández, who had sold three pieces valued between 2,000 and 14,000 euros when we talked the first day. "We'd extended the market to them in Spain, but it's disappeared. Which is a shame. We had made buying art much more normal."

Still, things seemed a little brighter, she said. "This year, we've already sold two pieces to Spanish collectors," she said with a laugh. "So we've doubled our Spanish sales."

  • Spain's underground economy is booming

    Spain's economic crisis, the government's response to it, and pervasive corruption have inspired a flowering of the black market economy.

    Feb 14, 2014 12:13 PM ET
  • Why Greeks are overworked while Germans go home early

    Workers in struggling Southern European countries put in far more hours per year than their northern counterparts.

    Feb 3, 2014 12:05 PM ET
  • Spain's largest bank is in trouble

    Santander has fallen woefully short of its chairman's growth targets, and it's not clear things are improving.

    FORTUNE -- In early December, Banco Santander spent $650 million to buy an 8% stake in the Bank of Shanghai. For Santander (SAN), Spain's largest bank, the deal looks to be another case of wrong place, wrong time.

    It's also the latest example of Santander's hard-charging chairman Emilio Botín's long-running growth strategy. Botín has pursued acquisitions MORE

    - Jan 3, 2014 11:38 AM ET
  • Investors cast doubt on Spain's rosy economic picture

    There are signs that Spain's economy isn't performing as well as Spain's government is saying. If it's true, it's bad news for the EU.

    FORTUNE -- A disastrous share offering in Madrid earlier this week portends continued economic trouble for Spain and, quite possibly, for the European Union. Shares of Bankia, the nationalized Spanish lender, fell by as much as 21% Tuesday as the bank issued 11.5 billion new shares in MORE

    May 30, 2013 5:00 AM ET
  • Europe: Is it time to break up this marriage?

    From up close, it looks like the 'poorer' nations could do just fine without a single currency.

    By Erin Burnett, contributor

    FORTUNE -- This summer trips to Europe opened my eyes to something: There's a lack of passion in Europe for keeping the euro. Yes, the pain of a breakup would be severe. But many of the poorer southerners of Europe don't seem to feel that they need "Europe" anymore.

    That, at MORE

    Sep 12, 2012 5:00 AM ET
  • Reinventing Spain's economy

    The nation has a big productivity problem compared with its trading partners.

    By Pankaj Ghemawat and Stijn Vanormelingen

    FORTUNE -- As Europe's leaders attend one emergency meeting after another, the political high drama shouldn't make us lose sight of the fact that if the debt crisis is to be solved, Southern European companies need to change how they compete. Nowhere is that more evident than in Spain, whose elites fret over MORE

    Jul 10, 2012 5:00 AM ET
  • Wall Street's hidden Europe risk

    Big banks are betting that Europe's largest nations will avert crisis.

    Fortune - Wall Street firms have been trying to stay one step ahead of the European crisis. That might not be far enough.

    Earlier this year, a number of U.S. banks disclosed that they had significantly cut their exposure to Europe's most troubled economies. That was welcome news at a time when the Euro crisis appeared to be heating up again. MORE

    - Jun 12, 2012 6:00 AM ET
  • Bank bailout is no cure for Spain's pain

    Spain's bank bailout merely transfers more debt to its weak government balance sheet and it sets the stage for a full sovereign bailout.

    By Cyrus Sanati

    FORTUNE -- Investors initially cheered the news that Spain reached a deal for a 100 billion euro bank bailout, but that enthusiasm may not last once the details are digested. The deal, concocted in Madrid and Brussels over the weekend, amounts to a kind of MORE

    Jun 11, 2012 10:27 AM ET
    Posted in: , ,
  • Spain should let its small banks fail

    Cobbling a bunch of zombie banks together has created a monster that the Spanish government cannot afford to kill. More consolidation isn't the answer.

    By Cyrus Sanati

    FORTUNE -- Consolidation is no panacea for Spain's banking woes. The announcement this week of yet another banking merger in Spain has done little to restore investor confidence in the country's shattered banking sector. The Spanish government and the European Central Bank will ultimately MORE

    May 31, 2012 12:13 PM ET
    Posted in:
Current Issue
  • Give the gift of Fortune
  • Get the Fortune app
  • Subscribe
Powered by WordPress.com VIP.