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Andorra
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For
715 years, from 1278 to 1993, Andorrans lived under a
unique co-principality, ruled by French and Spanish leaders
(from 1607 onward, the French chief of state and the Spanish
bishop of Urgel). In 1993, this feudal system was modified
with the titular heads of state retained, but the government
transformed into a parliamentary democracy. Long isolated
and impoverished, mountainous Andorra achieved considerable
prosperity since World War II through its tourist industry.
Many immigrants (legal and illegal) are attracted to the
thriving economy with its lack of income taxes.
Tourism,
the mainstay of Andorra's tiny, well-to-do economy, accounts
for more than 80% of GDP. An estimated 11.6 million tourists
visit annually, attracted by Andorra's duty-free status
and by its summer and winter resorts. Andorra's comparative
advantage has recently eroded as the economies of neighboring
France and Spain have been opened up, providing broader
availability of goods and lower tariffs. The banking sector,
with its partial "tax haven" status, also contributes
substantially to the economy. Agricultural production
is limited - only 2% of the land is arable - and most
food has to be imported. The principal livestock activity
is sheep raising. Manufacturing output consists mainly
of cigarettes, cigars, 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.
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