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From NPR News, this is ALL THINGS CONSIDERED. I'm Audie Cornish.

The Basque country is a region in northern Spain about the size of Delaware. It's long been infamous as the home of ETA, the terrorist group that fought for independence from Madrid. But with a cease-fire in place and no attacks in years, Basque country is now becoming known for something else: its booming economy. While Spanish unemployment tops 25 percent, the Basque rate is less than half that.

Lauren Frayer traveled to the north of Spain to find out why.

LAUREN FRAYER, BYLINE: For decades, most of the news out of Basque country was horrible.

UNIDENTIFIED MAN: Let's go now to Europe where a car bomb has exploded outside a civil guard barracks in the northern Spanish town of Burgos about...

FRAYER: Since the late 1960s, more than 800 people were killed by ETA. But two years ago, the Basque separatist group declared a final cease-fire. And now, Basque country sounds more like this.

(SOUNDBITE OF MACHINERY)

FRAYER: Machines meld molten steel into train cars here at one of the region's most successful companies, CAF, which makes trains for Amtrak, the Washington, D.C., metro and light rails in Sacramento, Pittsburgh and Houston. While the rest of Spain's economy is forecast to shrink nearly 2 percent next year, CAF is growing by 10 percent a year. Companies like this keep the Basque unemployment rate down around 12 percent, half of what it is in the rest of Spain.

Aitor Galarza is an engineer and spokesman for CAF.

AITOR GALARZA: We are disconnected from the Spanish economy, I would say, almost totally .

FRAYER: Basque country has a unique tax system with fiscal autonomy from Madrid. CAF exports 77 percent of the trains it makes and that's typical for Basque country. People here make up about 4.5 percent of Spain's population, but they contribute nearly 10 percent of Spanish exports.

Economist Fernando Fernandez at Madrid's IE Business School says the Basque region is rich in natural resources. And for centuries, it was easier for Basque traders to sail north to England rather than ride horses over the nearly 10,000 foot mountains that separate the Basque country from Madrid.

FERNANDO FERNANDEZ: They had mines there. There was steel and there was coal. And they were very close to England. So they were exposed to the Industrial Revolution much earlier than other regions of Spain, much earlier.

FRAYER: On top of strong exports, the region also has a vocational education system more like Germany's than Spain's. Jose Luis Curbelo manages the Basque Institute for Competitiveness.

JOSE LUIS CURBELO: You had a company, a factory, and nearby the factory was a school, a vocational school to train workers. And that was from the 19th century on. And the companies had always relied on the workers that they were training nearby.

FRAYER: So in Basque country, training to become a mechanic, for example, is just as prestigious as going to university. It pays well too. For companies like the railway manufacturer CAF, that means there's a large pool of qualified workers, says spokesman Galarza.

GALARZA: All the time, you can find somebody to come into the company and to start working the next day. It doesn't happen that easily with our factories in the south of Spain.

FRAYER: In southern Spain, vocational training was phased out in part because it was associated with the dictatorship of Francisco Franco, which ended in the 1970s. Spaniards started going to university instead. But unemployment among young grads is around 50 percent now.

The rest of Spain is also littered with empty buildings left over from the housing crash. But Basque country doesn't have any. Terrorism meant no one wanted to build here, says the Basque competitiveness expert, Curbelo.

CURBELO: Housing was an activity to house people rather than to speculate. So the real estate sector here was a normal activity. It was not totally overgrown activity like in the rest of the country.

(SOUNDBITE OF MACHINERY)

FRAYER: Back at the CAF railway factory, Aitor Galarza, the engineer, has another theory about Basque productivity: The region gets more than 200 days of rain a year.

GALARZA: So when you are working at your factory, you never think of going to the beach in the afternoon or just having fun. That also moves your mind to the work you are doing.

(LAUGHTER)

FRAYER: Leaving Basque country, the train home to Madrid winds through soggy valleys dotted with smoke stacks and factories before emerging onto Spain's central plateau where empty houses start appearing once again.

For NPR News, I'm Lauren Frayer.

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