Nation at a Glance - Andorra

History

The landlocked Principality of Andorra is one of the smallest states in Europe, nestled high in the Pyrenees between the French and Spanish borders. For 715 years, from 1278 to 1993, Andorrans lived under a unique coprincipality, ruled by French and Spanish leaders (from 1607 onward, the French chief of state and the Bishop of Urgell). In 1993, this feudal system was modified with the introduction of a modern, constitution; the co-princes remained as titular heads of state, but the government transformed into a parliamentary democracy.Andorra has become a popular tourist destination visited by approximately 10 million people each year drawn by the winter sports, summer climate, and duty-free shopping. Andorra has also become a wealthy international commercial center because of its mature banking sector and low taxes. As part of its effort to modernize its economy, Andorra has opened to foreign investment, and engaged in other reforms, such as advancing tax initiatives aimed at supporting a broader infrastructure. Although not a member of the EU, Andorra enjoys a special relationship with the organization and uses the euro as its national currency.

Location: Southwestern Europe, Pyrenees mountains, on the border between France and Spain

Border Countries: France 55 km, Spain 63 km

Total Area: 468 sq km Land: 468 sq km Water: 0 sq km

Climate: Temperate; snowy, cold winters and warm, dry summers

Terrain: Rugged mountains dissected by narrow valleys

Natural resources: Hydropower, mineral water, timber, iron ore, lead

Land use: Agricultural land: 43.4% arable land 5.5%; permanent crops 0%; permanent pasture 37.9% Forest: 34% Other: 22.6% (2011 est.)

Ethnic groups: Andorran 49%, Spanish 24.6%, Portuguese 14.3%, French 3.9%, Other 8.2% (2012 est.)

Languages: Catalan (official), French, Castilian, Portuguese

Religions: Roman Catholic (predominant)

Population: 85,660 (July 2016 est.)

Administrative divisions: 7 parishes (parroquies, singular - parroquia); Andorra la Vella, Canillo, Encamp, Escaldes-Engordany, La Massana, Ordino, Sant Julia de Loria

Economy: Andorra has a developed economy and a free market, with per capita income above the European average and above the level of its neighbors, Spain and France. The country has developed a sophisticated infrastructure including a one-of-a-kind micro-fiber-optic network for the entire country. Tourism, retail sales, and finance comprise more than three-quarters of GDP. Duty-free shopping for some products and the country’s summer and winter resorts attract millions of visitors annually. Andorra uses the euro and is effectively subject to the monetary policy of the European Central Bank. Andorra's comparative advantage as a tax haven eroded when the borders of neighboring France and Spain opened and the government eased bank secrecy laws under pressure from the EU and OECD. Agricultural production is limited - only about 5% of the land is arable - and most food has to be imported, making the economy vulnerable to changes in fuel and food prices. The principal livestock is sheep. Manufacturing output and exports consist mainly of perfumes and cosmetic products, products of the printing industry, electrical machinery and equipment, clothing, tobacco products, and furniture. Andorra is a member of the EU Customs Union and is treated as an EU member for trade in manufactured goods (no tariffs) and as a non-EU member for agricultural products. Andorra is open to, and actively seeking to attract, foreign investment. The Andorran economy is undergoing a process of diversification centered largely on the sectors of tourism, trade, property, and finance. To provide incentives for growth and diversification in the economy, the Andorran government began sweeping economic reforms in 2006. The Parliament approved three laws to complement the first phase of economic openness: on companies (October 2007), on business accounting (December 2007), and on foreign investment (April 2008 and June 2012). From 2011 to 2015, the Parliament also approved direct taxes in the form of taxes on corporations, on individual incomes of residents and non-residents, and on capital gains, savings, and economic activities. These regulations aim to establish a transparent, modern, and internationally comparable regulatory framework. The economic reforms aim to attract investment and businesses that can contribute most to Andorra’s economic development and offer greater diversification and higher value added. Prior to 2008, Andorra offered limited foreign investment opportunities largely because of concerns about the impact of foreign firms on such a small economy.

Agriculture - products: Small quantities of rye, wheat, barley, oats, vegetables, tobacco; sheep, cattle

Industries: Tourism (particularly skiing), banking, timber, furniture