“Nowadays, there is great economic uncertainty. That’s why economists always describe the present”

The example we will discuss about is the insurance company MAPFRE. It’s the tenth largest insurance company in the world. It appears in the Spanish stock market and not only with car insurance, but also in health and investment. They invest about 50 million euros annually, trying to provide investment solutions.

Judith Ricart Madero
Student of the Degree in Business Administration and Management of the University of Vic

A few days ago, we were visited at the University of Vic by the economics chief of the company, Mr. Alberto Matellán. One of the tasks of the economics chiefs of a largest company like MAPFRE is anticipate how GDP and prices will be. There are many factors that can affect our economy, such as exports.

If the prediction of the GDP is better in US, they will invest more -in EU too-, this is an asset allocation. So even if the EU numbers are worse than last year, we will grow with the help of the US, buying from us being our main customer. For example, China, with a GDP lower than ours, no longer buy us because we’re expensive. If a client country grows, you will grow.

Another factor that affects the economy is inflation. It is a global factor, a large price chain. In the EU is less inflation than in the US, because the EU is more open and the lower prices of China affects. We know with certainty that inflation doesn’t affect consumption, people won’t buy less if prices rise. This depends more in income.

Who regulates this inflation? The answer is the Central Bank. Controls inflation and interest rates. And why do they control it? Inflation is a method of measuring the economy, and if prices rise very quickly, it’s no longer used as a reliable tool, that’s why they control it. They try to control inflation with interest rates, but on a large scale, whatever they do will negatively affect them. If interest rates rise, income will fall. If they lower it, nobody will let money to the government. So, can you really fix it? You can only expect something external to grow, such as the aforementioned GDP. They have other tools, like creating bills.

And what can we say about interest rates? In the case of EU, now we have negative rate, so if you let money to the government, they will return you less. The logical would be having interest rates higher than inflation rates. But if it’s the logical, why big companies such as MAPFRE buy around 25 million government loans? One answer is because of safety, if you invest money and although you get paid less, it’s safe to the companies because they know they will have a safety amount of money in the future. Another answer is due to regulation. Banks and insurance companies have the obligation to buy government loans.

For finishing, as Mr Matellán said: “Keep away from newspapers in analysing. They are a business and they want to sell, obviously bad news”.