Andorra Regional Commercial/Industrial Profile

/Home/A-B Countries/Andorra (Country Code 376)/Andorra Regional Commercial/Industrial Profile

Andorra--Regional Commercial/Industrial Profile

Latest profile as of Nov 2004.

INTERNATIONAL COPYRIGHT, U.S. & FOREIGN COMMERCIAL SERVICE AND U.S. DEPARTMENT OF STATE, 1998. ALL RIGHTS RESERVED OUTSIDE OF THE UNITED STATES


1. SUMMARY: Andorra is a small nation located in the middle of the Pyrenees mountains, bordered by France and Spain, with a population of about 65,000. The country is commonly referred to as a Ïshopping paradiseÓ due to its tax system. GDP in 1996 was USD 1.2 billion. The economy is based almost entirely on an inter-dependent mix of trade, commerce, and tourism. About 10 million tourists visit Andorra every year, most for shopping or winter sports. The country's former traditional duty-free status was an important issue in defining its relationship with the European Union, which is specified in the 1990 Andorra/European Union Agreement, enacted on July 1991. Total imports into Andorra were USD 1.1 billion, in 1996. Spain and France supply 73 percent of total imports, the majority of which are consumer products. U.S. exports of USD 42.7 million, accounted for 4 percent of total Andorran imports.
2. GEOGRAPHY/DEMOGRAPHICS: Andorra, a small nation located in the mountain valleys of the Eastern Pyrenees, is perched geographically, historically and politically between Spain and France. Andorra is bordered by France on the north and by Spain on the south, sharing respectively 36.6 km. and 63.7 km. of border with each. Andorra's landscape is a sequence of valleys and mountains, the highest 2,946 meters. Its total area is 467.8 sq.km. or 180 sq.miles (about half the size of New York City).


In 1996, Andorra had a population of 64,479 permanent inhabitants, one percent above the previous year. Foreign population represents 68.5 percent of the resident population of the country, while Andorrans account for 20.2 percent, and Andorran-born, who still do not have nationality, 11.3 percent. Spanish nationals account for 44.6 percent, Portuguese 10.7 percent, and French 6.8 percent. About 50 percent of the working population (estimated at 28,071 people) are employed in activities directly related to trade and tourism.

The country is administratively divided into seven parishes (or municipalities): Canillo, Encamp, Ordino, La Massana, Andorra la Vella, Sant Julia de Loria and Escaldes-Engordany. Andorra la Vella is the capital of the country and, with a population of 21,721, its largest city. The official language of Andorra is Catalan, a romance language, spoken by more than 6 million people in the region comprising Spanish and French Catalonia. Spanish and French are widely spoken. English is also commonly used for business.

3. HISTORY/POLITICS: Andorra is the last independent survivor of the March States, a number of buffer states created by Charlemagne to keep the Muslim moors from advancing into Christian France in the VIII century. In 1278 a treaty created joint sovereignty between the Bishop of Urgell (now in Spain) and the Comte de Foix (now in France), Bishop and Count named Co-Princes. In 1574 co-sovereignty in France passed to the French crown (and later to the French republic) while in Spain the co-prince remains the Bishop of Urgell.

TodayÌs Parliament, or legislative assembly, is called the ÏGeneral CouncilÓ and originated in 1419. Nowadays, Andorra is a parliamentary democracy that retains as its head of state the co-princes. On May 1993, Andorra approved and ratified its first Constitution thus becoming a social and democratic state, while at the same time retaining its feudal political institutions. The two 'Co-Princes': the Bishop of Seu de Urgell in Spain, and the President of the French Republic, are jointly and indivisibly the Head of State. Each co-prince appoints his personal representative in Andorra. The executive branch is formed by the head of government (currently Mr. Marc Forne) and eight ministers. The legislative branch is formed by a 28-member General Council. The new Constitution is seen by many as balancing the need for a modern constitution (which Andorra needed to qualify for negotiating with the European Union) with the country's traditions, and also as a way of balancing the influence of the country's much more powerful neighbors.

4. ECONOMY: Andorra does not have its own currency. Official budgets and tax collection are done in pesetas (Ptas). Use of other currencies, primarily French francs, is also very common.

Andorra's GDP in 1996 was Ptas. 152.8 million (USD 1.2 billion), with a GDP per capita of Ptas. 2.4 million (USD 18,705). The economy is based almost entirely on an inter-dependent mix of trade, commerce, and tourism. About 10 million tourists (approximately 80 percent Spanish and 10 percent French) visit Andorra every year, primarily shopping and skiing. About 80 percent of all sales made in Andorra are purchased by tourists.

Andorra is a country of shops, offering consumer products at low prices due to the country's low sales tax and its special agreement with the European Union. However, AndorraÌs dynamic economy has somewhat eroded due to changes in neighboring economies, particularly Spain's entry into the E.U., and to its own agreement with the E.U. At present, structural changes and an improved quality service are required to develop an attractive offer to the potential purchasing visitors.

Andorra's natural resources are hydro electrical power, mineral water, timber, iron ore and lead. Energy consumption in 1996 was: electricity 79,250 TEP, petrol 45,112 TEP, diesel oil 105,162 TEP, propane gas 1,688 TEP, and butane gas 1,158 TEP.

5. INDUSTRY: Primary Sector, Industry and Services

A) The Primary Sector

The primary sector accounts for a very small part of the Andorran economy, and is limited to tobacco harvest and traditional stock breeding, however it is valued as a touristic appeal of the country. In 1996, the sector employed 192 people. That yearÌs tobacco harvest was around one thousand tons, 11 percent above 1995. It is estimated to produce revenues of USD 30 million. In 1996, Andorra had 4,673 heads of livestock comprising 2,000 sheep, 1,200 cattle, 900 horses and a small number of goats.

B) Industry

AndorraÌs industrial sector employs about 20 percent of the total labor. Construction, cigar and cigarette manufacture, small-scale textile production, and beverages bottling are the main industrial activities. Reportedly, there are 192 companies engaged in building activities. Another 126 firms are small processing industries.

AndorraÌs hydroelectric industry (hydraulic power is the countryÌs only source of energy) covers about 30 percent of total demand. Electricity production in 1996 was 109.3 million kw., 23 percent over the previous year. Another 248 million kw. were imported to cover domestic demand.

C) Services: Commerce, Tourism, Financial Services
The services sector employs 78 percent of the total labor. Although commerce continues to be an important source of income, it suffers from increasing competition, changing attitudes in business, changes in the worldwide distribution networks of many suppliers and, above all, from the loss of competitive margins in many product areas with respect to its main customers, the French and the Spaniards. Still, according to a recent survey carried out by AndorraÌs leading department store, consumer goods sell 20-40 percent lower than in Spain.

On the other hand, tourism is becoming increasingly important to the country's economy. The countryÌs natural beauty and the wide range of sports facilities offered, backed up by a good hotel/restaurant infrastructure, makes tourism the more promising sector of AndorraÌs economy. An estimated six million cars cross its borders every year. Andorra has five attractive ski resorts (227 km. of skiable paths) with good surrounding infrastructure, which already attract tourists (primarily from France and Spain) for winter holidays and long week-ends. Increasing emphasis is also being placed on promoting summer tourism. The hotel and restaurant industry is comprised of some 280 hotels (12,000 rooms) and a hundred restaurants employing 17 percent of the labor population.

AndorraÌs financial sector is another pillar of the countryÌs economy. It is formed basically by six banks and a savings bank. Together, they have some 50 branches across the country. Total bank deposits at the end of 1996 were Ptas.1,392 billion (dollars 11 billion), 5 percent above the previous year.

6. FOREIGN TRADE: Andorra's traditional duty-free status was an important issue in defining its relationship with the European Union. Andorra signed an agreement with the E.U. in 1990, which entered in force in July 1991. Under the agreement, no customs duties are applied to imports from E.U.-member countries, only a local tax. No customs duties are levied either on imports of products under Chapters 1 through 24 of the E.U. Common External Tariff Schedule, from non-E.U. countries. They are only subject to a 2 percent plus 1 percent state tax. For imports from third countries for Chapters 25 through 97, Andorra is also considered a third country. Imports are subject to the E.U. Common External Tariff duties plus a 4 percent state tax. Visitors are allowed limited (but generous) duty-free allowances. As of July 1996, Andorran Customs has become a E.U. international customs department, thus being able to clear goods coming from third countries and collecting customs taxes.

A) Imports:

Due to the lack of domestic industry, Andorra depends largely on imports for both the daily needs of its inhabitants and to support its tourism industry. Imports totaled Ptas. 135.5 billion (USD 1.1 billion) in 1996, 2.9 percent over the previous year, in current pesetas. Imports from E.U. member countries accounted for 86 percent of total imports. Spain and France are Andorra's major supplier countries, accounting for 41 and 32 percent share, respectively. Imports from Spain amounted to Ptas. 55.4 billion (USD 437 million), 5.3 percent above 1995, and those from France to Ptas. 41.7 billion (USD 329 million), 2 percent over the previous year. Imports from American countries were Ptas. 5.9 billion (USD 46.9 million), accounting for 4.4 percent of total imports, and those from Asian countries Ptas. 8.9 billion (USD 69.9 million), accounting fro 6.5 percent of all imports. The following table shows 1996 imports, by country of origin, expressed in million USD:

Imports 1996/95 Share of Total
Origin Million USD Growth Imports
------------- ----------- ------- --------------

Spain 437.3 5.3% 40.9%
France 329.2 2.0% 30.8%
Germany 46.2 -7.4% 4.3%
U.K. 41.8 28.0% 3.9%
Italy 35.0 -7.1% 3.3%
Switzerland 20.5 17.8% 1.9%
EUROPE 951.2 3.8% 89.0%
USA 42.7 -1.1% 4.0%
AMERICA 46.9 1.6% 4.4%
Japan 30.5 -13.2% 2.9%
China 12.8 -3.0% 1.2%
ASIA 69.9 -5.7% 6.5%
Total imports 1,059.0 2.9% 100.0%

Consumer products comprise the majority of imports. Major products imported are food products, beverages and tobacco. Together, imports of these products in 1996 increased 6.3 percent over the previous year, accounting for 19.2 percent of all imports.

Major product categories imported in 1996, were:

USD Percent of
Product Millions Total Imports
------------------------------- -------- -------------

Misc. Food Products - HS02-21 160 15.0
Electronic Equipment - HS85 104 9.7
(Incl.consumer electronics)
Tobacco Products - HS24 85 8.0
Vehicles - HS87 (incl. Bicycles) 80 7.5
Apparel - HS 61+62+63 74 6.9
Cosmetics/Perfumes - HS33 67 6.3
Beverages (alcoholic) - HS22 60 5.6
Dairy Products - HS04 44 4.1
Mechanical Equipment - HS84 46 4.3
Optical/Ophthalmic Products - HS90 29 2.7
Footwear - HS64 25 2.4
Precious Metals - HS71 22 2.0
Toys & Games - HS95 22 1.9
Clocks & Watches - HS91 19 1.8
Pharmaceutical Products - HS30 14 1.3

B) Exports:

Andorra's exports totaled USD 46.4 million in 1996, 3.4 percent below the previous year. Almost all exports are to European countries, only 1.3 percent go to the American continent. Spain is AndorraÌs leading customer absorbing 50 percent of all exports, followed by France which acquires another 40 percent. Germany and Switzerland account for 1.3 percent, each, of total exports. Tobacco smuggling, is common. A European Union inspectors team visited Andorra in early 1998 to evaluate the volume of tobacco smuggling. According to a local press article, it was estimated at about 125 million packets, in 1997.

Major product categories exported in 1996, were:

USD Percent of
Product Millions Total Exports
---------------------------------- -------- -------------

Vehicles (incl. Bicycles)- HS87 9.4 20.2
Apparel - HS61+62+63 6.2 13.3
Electronic Products - HS85 6.1 13.2
Books - HS49 4.8 10.4
Beverages - HS22 2.0 4.3

7. TRADE WITH THE UNITED STATES: Andorran Customs statistics indicate that imports from the U.S. in 1996, dropped 1.1 percent from the previous year, to Ptas. 5.4 billion (USD 42.7 million), accounting for 4 percent of total imports. According to Andorran Chamber of Commerce sources, imports from the U.S. are suffering from a stronger dollar value against the peseta and the French franc. U.S. exports to Andorra consist mainly of tobacco products, electrical equipment, and food products. Andorran exports to the U.S. in 1996, were Ptas. 3 million (USD 23,680).

8. INFRASTRUCTURE:

A) Transportation:

Andorra is only accessible by road (467 km.: 269 km. of national roads and 198 km. of tarmacked roads), either from Spain or France. Due to the physical characteristics of the landscape there is no airport or railroad system. The country is, however, connected to Spanish and French airports and railway stations by regular bus service.

B) Communications:

Telecommunications expansion continued in 1996, with 30,964 telephone lines subscribed, 4 percent over the previous year. On March 1995, Mobilan GSM system service began with 2,420 subscribers, to reach 5,343 in 1996. Telephone traffic rose to 73 million minutes of telephone services invoiced in national calls and 38 million minutes in international calls, representing a growth of 6 percent over 1995. The Andorran Telecommunications Service (STA) is a full member of the International Communications Union since November 1993. As a result, Andorra has its own country code (376). STA provides telex, facsimile, radio message and GSM mobile telephone services, connection to the Internet and the services ÏAndortexÓ, permitting connection with the videotext networks of various European countries, and ÏAndorpacÓ, for highspeed batch data transmission. Optic cable and optic fiber infrastructures are being developed.

There are two postal services: the Spanish and the French. The Andorran Radio and Television Corporation operates the PrincipalityÌs public radio and television network. Andorra has its own TV channel and two radio stations. Six other TV channels (Spanish and French) are also accessible.

A daily paper and several weekly and monthly magazines are also published in the Principality.

9. FOREIGN INVESTMENT: At present, foreign investment in Andorran companies is limited to a 33 percent share. The government of Andorra is working on legislation to provide new legal structure to foreign investment and to raise the existing limit of foreign ownership. The new strategic plan envisions two proposals: a) for those companies in sectors which already have a strong structure in Andorra (tourism, trade, real estate, finance and insurance) maintain a limit on foreign investment so that majority remains in Andorran hands; b) corporations in sectors not covered by Andorran firms, and of particular public/social interest (health care, education, R&D labs) there is a proposal to allow up to 100 percent ownership. This new legislation is encountering opposition from local entrepreneurs - particularly in the banking area - and is still being discussed.

The Chamber of Commerce, Industry and Services was created in September 1993, with the aim of coordinating private business in order to represent and defend their general interests. The Foreign Commercial Service in Barcelona cooperates with the Chamber to facilitate and increase trade between Andorra and the U.S., by organizing ÏU.S. Trade DaysÓ and providing information on trade events and new U.S. products.

10. MAJOR PROJECTS/INFRASTRUCTURE: A ÏStrategic PlanÓ, to improve the countryÌs infrastructure and ensure AndorraÌs capability to operate as a Ïservices centerÓ, was designed in 1993. This Plan includes a number of actions to improve the environment, the telecommunications network, transportation and, to promote skiing as a key tourist appeal. Some of the measures established by the Plan have already been implemented while others are developing more slowly.

A) In 1996, the government of Andorra presented a Traffic Plan, providing for the construction of a toll highway 45 km. long, including the construction of 12 tunnels. This highway will allow the crossing of the country in little more than 20 minutes, and will increase the number of accesses to Spain and France, from two to five. The government considers this project a priority and plans are for the construction of the first 14 km. before the year 2000. This ambitious plan envisions the investment of over USD 750 million (both public and private) in the next 25 years. The first step will be the construction of the ÏEnvaliraÓ tunnel. (Contact: Ministeri dÌOrdenament Territorial).

B) Another major project is the reopening of the airport of Seu de Urgell, Spain, 10 km. South of the Andorran/Spanish border. The airport of Seu de Urgell presents several technical problems related to its geographic location. Investment required will be about USD 8 million. The project also faces financial obstacles as it involves the governments of both Andorra and Spain. (The airport was in operation during 1982-84. It was to have direct flight connections with five Spanish cities and one French city, but the only route to come into operation was Barcelona. Flight delays and canceled trips brought the passenger load factor down to 40 percent. Thus, operation of the airport was not profitable.) (Contact: Ministeri de Relacions Exteriors).

C) Some other major projects are being envisioned, such as expanding the French railroad system up to Andorra, using the Port of Barcelona, Spain, as the natural Andorran exit to the sea for maritime merchandising, and setting up a merchandise depot at the Barcelona World Trade Center (under construction). However, all of these are in the study phase. (Contact: Govern dÌAndorra).

D) Other civil projects being considered, on which no decision has been taken, are the construction of an ÏAmerican StyleÓ casino, a thematic park based on image and new technology, and a congress hall. (Contact: Ministeri dÌOrdenament Territorial).


11. CONTACT LIST:

Government of Andorra:
---------------------

Govern d'Andorra
Secretaria de Govern
Prat de la Creu 62-64
Andorra la Vella
Tel: 376/829345
Fax: 376/822882
(Government of Andorra)

Ministeri de Relacions Exteriors
Govern dÌAndorra
Prat de la Creu 62-64
Andorra la Vella
Tel: 376/829345
Fax: 376/869559
(Foreign Affairs Department)

Ministeri d'Economia
Govern d'Andorra
Prat de la Creu 62-64
Andorra la Vella
Tel: 376/829345
Fax: 376/828906
(Department of the Economy)

Ministeri de Finances
Govern d'Andorra
Prat de la Creu 62-64
Tel: 376/829345
Fax: 376/867898
(Department of Finance)

Ministeri dÌIndustria
Govern dÌAndorra
Prat de la Creu 62-64
Andorra la Vella
Tel: 376/829345
Fax: 376/861519
(Department of Industry)

Ministeri d'Ordenament Territorial
Govern d'Andorra
Prat de la Creu 62-64
Tel: 376/829345
Fax: 376/861313
(Department of Territorial Development)

Ministeri de Medi Ambient i Turisme
Govern d'Andorra
Prat de la Creu 62-64
Andorra la Vella
Tel: 376/829345
Fax: 376/860184
(Department of the Environment and Tourism)
Duana dÌAndorra
Ministeri de Finances
Govern dÌAndorra
Prat de la Creu 62-64
Andorra la Vella
Tel: 376/825157
Fax: 376/860533
(Andorra Customs, Office of Foreign Trade)

Missio Permanent del Principat d'Andorra
Prop de les Nacions Unides
Two United Nations Plaza, 25th fl.
New York, NY 10017
Tel: (212) 750-6084
Fax: (212) 750-6630
(Permanent Mission of the Principality of Andorra
To the United Nations)

Institut dÌEstudis Andorrans
Universitat de Barcelona
Gran Via 585
08007 Barcelona, Spain
Tel: 34/93-317-7991
Fax: 34/93-317-3182

Business Organizations:
----------------------

STA-Servei de Telecomunicacions dÌAndorra
Av. Meritxell 112
Andorra la Vella
Tel: 376/821021
Fax: 376/860601
(Telephone Company)

Cambra de Comerc, Industria I Serveis d'Andorra
Prat de la Creu 8
Edifici le Mans, despatx 204
Andorra la Vella
Tel: 376/863232
Fax: 376/863233
E-mail: ccis@correu.andorra.ad
(Andorra Chamber of Commerce)

Agrupacio de Bancs dÌAndorra
Ciutat de Consuegra 16
Andorra la Vella
Tel: 376/866845
Fax: 376/866847
(Bank Association)

Associacio dÌAgencies de Viatges dÌAndorra
Na Maria Pla 19-21
Andorra la Vella
Tel: 376/869867
Fax: 376/869867
(Association of Travel Agencies of Andorra)

Col.legi de Farmaceutics
Joan Maragall 2
Andorra la Vella
Tel/Fax: 376/8299914
(Pharmacy Association)

Unio Hotelera dÌAndorra
Antic Carrer Major 65
Escaldes-Engordany
Andorra la Vella
Tel: 376/820602
Fax: 376/861539
(Hotel Association of Andorra)

Media:
-----

Diari dÌAndorra
Premsa Andorrana, S.A.
Bonaventura Riberaygua 39
Andorra la Vella
Tel: 376/863700
Fax: 376/863800
(Daily newspaper)

ATV-Andorra Televisio
Baixada del Moli 24
Andorra la Vella
Tel: 376/873777
Fax: 376/864999
(Andorran TV Broadcasting)

12. Exchange rate used in this report:
1996 - USD 1.00 equal pesetas 126.7

13. Sources:
- Ï1996 Economic ReportÓ, Cambra de Comerc, Industria i Serveis dÌAndorra
- ÏAndorra Business GuideÓ, Credit Andorra
- Local press and industry contacts




--------------------------------------------------------------------------------
Information Source: U.S. Consulate General Barcelona IMI report dated June 19, 1998