Swiss Bank Decline Makes Way for Italy Mozzarella Makers

Photographer: Gianluca Colla/Bloomberg

With its campaign Benvenuta impresa!, or “Businesses welcome!,” Chiasso wants to attract as many as 20 Italian companies per year to fill the city’s office space left empty by the financial sector. Close

With its campaign Benvenuta impresa!, or “Businesses welcome!,” Chiasso wants to... Read More

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Photographer: Gianluca Colla/Bloomberg

With its campaign Benvenuta impresa!, or “Businesses welcome!,” Chiasso wants to attract as many as 20 Italian companies per year to fill the city’s office space left empty by the financial sector.

After eating at 40 restaurants in Ticino in a quest to gauge the quality of mozzarella, Andrea Lamberti’s verdict was clear: it was bad. So he left his native Italy and set up a cheese-making business in the Swiss canton.

“When I visited Switzerland for the first time, I immediately knew I’d move here if I ever wanted to start my own company,” said Lamberti, 44, co-founder of Caseificio Oro Bianco Sagl, which produces and imports five kinds of mozzarella cheese in the Italian-speaking region. “In Italy, businesses don’t have the chance to develop. The state destroys companies,” Lamberti, who set up shop in Chiasso in September, said in a phone interview.

With its campaign Benvenuta impresa!, or “Businesses welcome!,” Chiasso, the southernmost city of Switzerland, wants to attract as many as 20 Italian companies per year to fill office space left empty by the financial sector. In return it offers lower taxes and less bureaucracy, according to Mayor Moreno Colombo.

The city started wooing Italian companies to replace banks that relocated to Ticino’s finance center in nearby Lugano or closed down. The number of institutions in the canton declined to 64 at the end of 2011 from 78 in 2005, according to the Ticino Banking Association.

Photographer: Mario Laporta/AFP/Getty Images)

An employee prepares buffalo mozzarella as he works at a dairy farm. Close

An employee prepares buffalo mozzarella as he works at a dairy farm.

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Photographer: Mario Laporta/AFP/Getty Images)

An employee prepares buffalo mozzarella as he works at a dairy farm.

Disappearing Banks

“Ticino has seen its banking sector shrink more strongly than the rest of Switzerland in recent years,” said Raoul Wuergler of the Association of Foreign Banks in Switzerland. “The canton has many smaller financial institutions, who either merged or didn’t survive because of the financial crisis and other factors including tougher demands regarding cross-border activities and tax matters.”

The canton’s focus on Italian clients meant that banks also lost business when Italy passed a tax amnesty in 2009, according to Wuergler. The pardon allowed Italians to repatriate undeclared funds by paying a fine of 5 percent to 7 percent of their assets.

To attract Italians, Ticino markets itself as distinctively Swiss with an “unmistakable touch of Italy,” combining political stability with a relaxing pace of life, according to the canton’s Finance and Economics Department. The Alpine area’s 19.85 percent corporate tax rate compares with an initial 27.5 percent rate in Italy before regional levies and business-related charges are added.

Entrepreneurs Attracted

“We’ve had a lot of entrepreneurs from Italy interested in operating from Switzerland in the last two to four years,” said Marco Passalia, deputy director of the Chamber of Commerce in Lugano, Ticino’s biggest city. “This is not only for tax reasons. It’s easier to operate from Switzerland, as there is no bureaucracy.”

Photographer: Valentin Flauraud/Bloomberg

Switzerland is 29th in the World Bank’s ease of doing business ranking, which annually measures the effort required in categories including starting a business, trading across borders and business regulation. Close

Switzerland is 29th in the World Bank’s ease of doing business ranking, which annually... Read More

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Photographer: Valentin Flauraud/Bloomberg

Switzerland is 29th in the World Bank’s ease of doing business ranking, which annually measures the effort required in categories including starting a business, trading across borders and business regulation.

Switzerland is 29th in the World Bank’s ease of doing business ranking, which annually measures the effort required in categories including starting a business, trading across borders and business regulation. Italy comes in at no. 65, with the country’s scores on companies getting credit pulling down its mark. Singapore tops the list.

“When we started to grow internationally, Italy didn’t seem the best base, because of the limited access to credit, the labor costs, the lack of labor flexibility, and bureaucracy,” said Fabio Cannavale, founder and chairman of tourism company Bravofly SA. “We couldn’t have expanded the way we did if we had stayed in Italy.”

Bravofly, founded in 2004 in Milan, moved the 34 miles (55 kilometers) to Chiasso two years later and now employs about 1,000 people, 250 of whom work in the Swiss city. It books more than 1 billion euros ($1.4 billion) in travel transactions, up from about 100 million euros six years ago, and may sell shares to the public next year.

Italian Commuters

The population of Chiasso, which was invaded by the Swiss in the early sixteenth century, doubles during workdays to about 16,000 as commuters, or “frontalieri,” cross from Italy to the city. Ticino counts about 60,000 such workers, roughly a third of its entire workforce. “If you look at the map, Ticino basically is Italy,” Cannavale said.

The push in Ticino, the country’s largest financial center after Zurich and Geneva by the number of institutions, is part of a wider trend of Swiss regions trying to attract companies by offering lower taxes or tax holidays. Whereas German-language cantons compete for business from nations including Germany, the U.S., and the U.K., Ticino focuses on neighboring Italy.

“The goal is to revive Chiasso,” Mayor Colombo said in an interview from his office in the town hall. “We are organized, central and respond immediately.”

Fighting Back

Italy has noticed, and started fighting back. In response to Chiasso’s offensive, Roberto Maroni, the governor of Lombardy, the country’s wealthiest region, has begun a campaign to counteract the movement to Ticino, pledging the region will give small businesses access to funding and credit, as well as tax relief to persuade them to stay.

Lombardy is trying to boost its competitiveness, Maroni said. “Obviously we don’t blame the entrepreneurs, who, in an attempt to survive, seek to use the more favorable opportunities in terms of fiscal and environment, which can be found across the border.”

Regaining the confidence of Italian entrepreneurs won’t be easy. Italy, the euro area’s third-biggest economy, is mired in its longest recession since World War II, with joblessness at the highest since records began in 1977, signaling that the euro area’s recovery may be bypassing it.

EUSolar Srl, a Northern Italian builder of solar plants which opened a new headquarters in Locarno in August, cites reduced funding costs as one of the reasons for its relocation.

“Credit conditions in Italy are prohibitive,” said Maurizio Guidi, a co-owner EUSolar. Bravofly’s Cannavale agrees.

In Switzerland “everything is very easy,” as banks readily lend to businesses at low cost, he said. “The access to the capital market for a private company is much easier in Switzerland because of access to investors and because people generally prefer to invest in Swiss companies. They trust them more.”

To contact the reporters on this story: Corinne Gretler in Zurich at cgretler1@bloomberg.net; Carolyn Bandel in Zurich at cbandel@bloomberg.net

To contact the editors responsible for this story: Cecile Vannucci at cvannucci1@bloomberg.net; Frank Connelly at fconnelly@bloomberg.net

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