This Monday, Carlos Torres Vila opened the 39th APIE Seminar in Santander, together with Nadia Calviño, the first Vice President of the Spanish government and Minister of Economic Affairs and Digital Transformation. The BBVA Chair said that “private investment will be fundamental to the decarbonization of the planet.” In this regard, he believes authorities play a crucial role in building “confidence, with certainty regarding the regulatory framework, the rules of the game, budgetary and fiscal stability, and competitiveness.”
He also called for an agenda of priorities and major objectives, which are to be transferred to the regulatory framework and to public tenders. “This is essential to producing signs of demand for products and services without emissions,” he said. He then stressed the importance of authorities in terms of price setting through two elements: on the one hand, the creation of a liquid and effective global emissions market; and on the other, the elimination of subsidies that currently exist for emitting technologies, or even, explicit support for this transition through regulation or guarantees.
In the energy field, he underlined that the decarbonization objectives set in Europe have to be accompanied by effective measures so they can become a reality”. On this matter, Carlos Torres Vila said that “Spain has taken many steps in the right direction; we need to continue along this path and ensure that they work in practice”. To achieve this, the country has advantages such as ample renewable energy sources, institutions committed to this challenge, ambitious objectives, a pioneering business sector that is a leader in the sustainable transition, and enormous human capital.
In his opinion, decarbonization and energy autonomy must be approached with ambition and realism. However, initially, it will be necessary to “place special emphasis on energy efficiency measures to reduce consumption”. “Individually they are small gestures, but all of them together will play a decisive role in the planet's decarbonization”, he assured. In order for it to be “a fair transition”, he asked for “support for the most affected and vulnerable groups with specific and targeted measures.”
The BBVA Chair stressed that “the role of banks, financing said investments, will be extremely relevant. At BBVA we are totally committed to financing this transition.”
The role of public institutions, key to promoting innovation
Secondly, he referred to digitization and new technologies as levers of economic growth. “Digitization represents an enormous competitive advantage,” Carlos Torres Vila stressed, but at the same time he indicated that “we must take special care to ensure that its undeniable benefits reach everyone.” “At BBVA we have launched initiatives to facilitate the adaptation of the elderly or people with special needs, and we will continue to work” along these lines.
Going beyond digitalization, he said that “we are facing an unprecedented wave of disruption”. Technologies such as artificial intelligence, cloud computing, blockchain technology, the internet of things, robotics and gene editing “are transforming the economy and will have a major impact on all industries”. The BBVA Chair expects these activities, which are currently in their infancy, “to multiply their value in little more than a decade, replacing traditional activities in the process”.
On this point, he emphasized the role of public institutions in two areas. First, fostering innovation, with measures such as the recent approval of the project for the recovery and economic transformation of microelectronics and semiconductors, or the plan to attract scientific and innovative talent. Second, investing in education, much needed in this changing environment.
“At BBVA we want to be part of this transformation, we support education y and knowledge and we accompany our clients so they can take advantage of the opportunities brought by all this innovation,” he said. In this way, and aiming to be the bank of the companies that are redefining the future, BBVA has reorganized internally to capitalize on this opportunity,” he said. Likewise, “we have increased our desire to invest in growth companies,” he added.
Finally, the BBVA Chair referred to the disruptive potential of decentralized technologies in both the general economy and finance. “The financial sector is the first to apply this type of technology, but decentralization through ‘smart contracts’ stored in the blockchain is going to extend to practically any industry,” he anticipated.
ECB actions are key to avoid a price spiral
Carlos Torres Vila also referred to the immediate effects the invasion of Ukraine has had on the economy, which has altered the road to recovery with which the year began and is causing difficulties in production chains and a rise in the cost of energy. This has led to high levels of inflation, which in Spain already exceeds 8.5 percent. In this sense, the BBVA Chair expects inflation in Spain to “gradually reduce throughout the year and normalize in 2023.”
Against this backdrop, “measures by central banks and the ECB in particular in the coming months, and everyone’s effort, will be crucial to avoid a price spiral and other factors that would impede the proper transfer of monetary policy.” Despite the uncertainty, he foresees that the Spanish economy “will continue to grow in 2022 and recover pre-COVID levels in 2023.”
In his opinion, Spain has factors in favor of its economy, such as the European Next Generation EU funds, “if they are channeled in an agile and competitive way.” In the opinion of Carlos Torres Vila, “these funds should be used to implement structural reforms and support Spanish businesses in the transition of their businesses towards more sustainable models and in their digital transformation.”