“Despite the conflict, Israel-Spain business relations are going well”
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Artificial intelligence has been a revolution in our days. So much so that companies, from any sector, seek to be more competitive using this new revolutionary technology applied to gain competitiveness and efficiency. Gil Gidron, president of the Israel-Spain Chamber of Commerce and Industry and president of Cardumen Capital, has spoken with elEconomista.es how Israel works and innovates to cover the technological needs of these companies in Spain and how the conflict is affecting investment.
Is there a lot of interest from Spain in the technology developed in Israel?
Yes, we see that interest in technology in general continues to grow. Especially in the technology applied in sectors such as agriculture, water, renewable energies, cybersecurity and, above all, a lot of artificial intelligence technology applied to different sectors.
In what specific sectors is this Israeli artificial intelligence technology being applied?
It is being applied to different sectors, for example, to improve productivity. For example, with this technology we can make more sophisticated drip irrigation, nourishing each plant with what it specifically needs. That is to say, what there is in Israel is, basically, applied technology.
Does Israeli innovation adapt well to the Spanish market?
Definitely. The Spanish market is more flexible, so to speak, it is more Mediterranean. On the other hand, there is the size of the companies. That is, one thing is to innovate in a large company and another is to innovate in SMEs. So, we are seeing a lot of demand.
Has the conflict affected investment?
I have been amazed, we would say, in a very positive way, that the business relations between Israel and Spain are going very well. In preparing for this interview I made calls to my fellow investors and other businesses and I am not aware of any contract cancellations. I mean, I don’t know anyone who has told me “hey, we lost a client.” It is true that there are cancellations, but as in the normal course, nothing exceptional.
“What the conflict has brought is loss of manpower and productivity by the reservists”
Business investment has fallen 67.8% in the fourth quarter. Does the conflict have anything to do with it?
It is evident that the conflict has several impacts on the economy. We cannot be oblivious. The first thing it has affected is the number of reservists who have been called up. In the end, that has meant a loss of hours of productivity. Labor that has been directed to something else, this has clearly had an impact on the country’s GDP. On the other hand, it must be taken into account that Israel is a very small economy, everything it sells is abroad and most of its clients are international, so the impact on the technology-based economy is not that great. . That is to say, there is an impact, obviously, but since it is very oriented abroad and on international demand, it is working relatively well. In fact, Intel announced an investment of 22.7 billion euros at the end of last year. It is true that merchandise sales and tourism have fallen. But Israel is making an extraordinary effort to go on business missions, in fact there have been several in Valencia, Madrid or León, for example.
How much does technology represent in the Israeli foreign market?
Technology and technological innovation represent 20% of the country’s GDP. In addition, it is 14% of the employment that is generated and represents 54% of exports. We are talking about a very important and very powerful sector for the country’s economy.
A study claims that private investment fell 29% at the beginning of 2023 due to Netanyahu’s judicial reform.
What we have seen is that the strategic investor continues to invest in Israel. That is, technology companies that need technology to be competitive continue to invest. It is true that the most financial investor had a fall due to the announcement of that judicial reform that is currently stopped. It is true that at the time there was some uncertainty, which caused this move away from investment. I’ll tell you a specific case. We at Cardumen Capital have closed the second fund that invests in 100% Israeli capital at 105 million euros. The first was 60 million and the second was 105. We closed it in a year, after the conflict.
Leaving aside the conflict. In general, now there is not a good climate in the world to do business, due to the great economic uncertainty in the world.
There is a lot of uncertainty. Armed conflicts, elections in the United States, inflation, rising interest rates… You have to know that interest rates in technological investment generate a lot of impact. They greatly influence investment in alternatives. In technology investment, alternative investment is totally financial. And we have seen that at the international level. But strategic investors like Apple, for example, when they go to buy technology, have no choice. Therefore, this affects financial investment more than strategic investment, but I could tell you that more than the judicial reform, which did generate uncertainty, interest rates also discouraged this type of investment. If an investor can get 8% or 9% without risk and 15% with risk, then they are going to go for the risk-free option.
“In technological investment, interest rates generate a lot of impact”
They are all very aware of the decisions of the Fed and the ECB.
More than pending, I would say expectant. But I still say that it is a very good time to invest in technology because conditions are much better now than a year ago.
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