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Cablegate: Madrid Weekly Econ/Ag/Commercial Update Report

VZCZCXRO3840
RR RUEHAG RUEHDF RUEHIK RUEHLZ RUEHROV
DE RUEHMD #0396/01 0611756
ZNR UUUUU ZZH
R 021756Z MAR 07
FM AMEMBASSY MADRID
TO RUEHC/SECSTATE WASHDC 1993
INFO RUCNMEM/EU MEMBER STATES COLLECTIVE
RUEHLA/AMCONSUL BARCELONA 2500

UNCLAS SECTION 01 OF 02 MADRID 000396

SIPDIS

SENSITIVE
SIPDIS

EUR/WE

E.O. 12958: N/A
TAGS: EAGR EAID EAIR ECON EFIN ENRG ETRD SENV TBIO
SP, EINV, UK
SUBJECT: MADRID WEEKLY ECON/AG/COMMERCIAL UPDATE REPORT

MADRID 00000396 001.2 OF 002


SENV: Waste water treatment below standards
KIPR: Speaker Visit of Judge Bernice Donald
KIPR: Spain - hotbed of digital piracy
EAGR/ETRD: Renewable fuels homegrown vs imports
EAID: Spain an equal opportunity donor
EAGR: Biothechnology corn

SPAIN FAILING TO IMPLEMENT EU WASTE WATER TREATMENT DIRECTIVE

1. (U) An EU Directive from 1991 requires Member States to
treat waste water in towns containing over 2,000 inhabitants
to specified standards by December 2005. Spain codified this
directive into national law via its 1995 Water Treatment
Plan. But it is clear that Spain has failed to implement
this directive in an effective fashion. According to the EU,
approximately 800 Spanish towns with over 2,000 people
(representing a total 6.5 million people) are not treating
their waste water to EU standards. To make matters worse,
the EU has declared 288 of these towns to be "sensitive
areas" which require even stricter waste water treatment
standards. Prominent population centers on the EU hit list
include Vigo, Oviedo, Burgos, Ibiza, Ourense, Gijon, Badajoz,
Ciudad Real, Ubeda, Algeciras, and Moron de la Frontera.
Experts cite several reasons for Spain's failure to comply,
including: population growth, a building boom, climate
change and low rainfall levels. Another key factor is the
fact that towns are not required to install water treatment
facilities when they approve new residential developments.
The GOS counters that it has budgeted 17.5 billion euros to
bring all Spanish towns into compliance with the directive by
2015 (10 years after the EU deadline).

JUDGE BERNICE B. DONALD MADRID/BARCELONA INTELLECTUAL
PROPERTY RIGHTS (IPR) TOUR

2. (U) Judge Donald (U.S. District Court for the Western
District of Tennessee) spoke February 19-21 about
developments in U.S. IPR law and the importance of respecting
intellectual property with a variety of audiences in Madrid
and Barcelona. Judge Donald was well received, and her
Spanish audiences were very interested in what she had to
say. Her trip was very useful in confirming that the Spanish
judiciary (both acting judges and future judges) are our
toughest target. Judge Donald spoke to about 100 future
judges at the Judicial Training School in Barcelona who
displayed almost unanimous opposition to prosecuting
individual illegal internet downloads, in part because the
Spanish penal code does not provide for administrative type
sanctions for these violations. Embassy's PD section funded
and supported the trip. EconOff accompanied the Judge to all
her events and provided additional substantive input,
especially in dealing with more policy-oriented questions.
This was well worth doing.

IIP RECOMMENDS SPAIN FOR SPECIAL 301 WATCH LIST

3. (U) Financial Times reports Spain is a "hotbed of digital
piracy": Box office receipts were down by 2.2 percent in
Spain last year. The EU as a whole saw a 4 percent increase
in box office receipts. In the U.S., box office receipts
were up by 3.4 percent. (Comment: These numbers no doubt
explain in part why the International Intellectual Property
Alliance (IIPA) has recommended Spain for inclusion on the
Special 301 Watch List.) (FT, 2/23/07)


RENEWABLE FUELS

4. (U) Can Europe meet its currently voluntary "renewable"
fuels-use targets using Europe-produced renewable fuels from
locally produced feedstock? Without European Commission
intervention, when the vagaries of very complex local and
world commodity markets turn against European renewable fuels
producers, local producers may become hard pressed to remain
financially viable.

5. (U) One of the Spanish companies that currently leads
Europe in the production of ethanol from grains, has just
reminded everyone that production of ethanol and bio-diesel,
for that matter, can be an economic challenge. Abengoa, an
engineering group that operates three grain-to-fuel
distilleries in Spain, just announced that it will close its
newest and largest ethanol-producing plant during April, May
and June of 2007. The reason was not disclosed, but
reportedly it has to do with the information outlined in the
graph found at USDA.FAS.com (Attache 2007 reports SP7011).
Immediately after the announcement, local barley and wheat
prices reportedly dropped four Euros/ton, and some analysts

MADRID 00000396 002.2 OF 002


believe they will drop another three-to-four Euros/ton, in
particular, as the new-crop comes on in late June-to-early
July. When in full-out production, the Salamanca plant in
question uses 50,000 tons of grain feedstock per month.

6. (U) Abengoa's Spanish ethanol plants are landlocked and
highly dependent on local barley and wheat production and
stocks. In December 2006, Abengoa announced that it was
switching from wheat to barley, perhaps due to barley's lower
price and greater availability in Spain (GAIN SP6034). But,
the switch may not have been enough, because just as grain
prices increased steeply in late 2006 (see graph), crude oil
prices moved just as hard and quickly in the opposite
direction, setting up Abengoa's current dilemma.

7. (U) European grain prices are Euros per ton, FOB (Source:
CESFAC - FEGA-MAPA) European fuel prices are USD per barrel
in the Brent spot market (source: DOE-EIA at
http://www.eia.doe.gov/emeu/international/oil price.html)


FOREIGN ASSISTANCE FOR EVERYONE

8. (U) Continuing the Zapatero policy of dramatically
expanding Spanish foreign assistance levels, Spain in recent
weeks announced several disaster-relief related donations:

-- On February 23, the Spanish Agency for International
Cooperation (AECI) announced that Spain had provided 450,000
euros in emergency assistance to Mozambique in the aftermath
of cyclone Favio. 250,000 euros will be used to buy in South
Africa 500 tents, two electricity generators, 600 water
tanks, 100 shelters, and 500 food and medicine kits. 200,000
euros was provided via a February 16 AECI airlift of
emergency supplies to the stricken country. This airlift
included four potable water treatment plants.

-- On February 22, AECI announced that it had increased it
assistance to Bolivian flood victims to a total of 600,000
USD. 100,000 USD was provided via UNDP on February 12. On
February 21, AECI sent an additional 131,000 USD via UNDP, as
well as 269,000 USD to the AECI office in Bolivia to locally
purchase food, tents, hammocks, mosquito nets, and tools.
Finally, AECI provided 100,000 USD to the Spanish Red Cross
to purchase foodstuffs for the flood victims.

-- In response to food shortages experienced by Western
Sahara refugees in Tindouf, Algeria, AECI announced February
16 that it would both send emergency food supplies from Spain
and help feed the refugees via locally purchased foodstuffs.
850,000 tons of corn flour was dispatched from Spain while
800,000 tons of lentils and 450 tons of oil was purchased
locally for the refugees. An additional 1,000,000 tons of
rice and 152 tons of sunflower oil was also provided (it is
not clear if they were dispatched from Spain or purchased
locally). The total cost of this emergency food assistance
was about 1.5 million euros, bringing total 2006 Spanish
support for the Sahara refugees to over 6 million euros.

INCREASING POLEMICS OVER BIOTECH IN SPAIN

9. (U) The Basque Autonomous Regional Government has declared
the Basque Country a transgenic-free zone, the third of
Spain's 17 autonomous regional governments to do so, after
Asturias and the Balearic Islands. In addition, in Murcia,
an association of agricultural cooperatives publicly
petitioned their regional government to declare its own
transgenic-free zone. The three transgenic-free Autonomous
Regions do not have corn-borer infestations, so, they had
very little to lose since only biotechnology-derived,
corn-borer resistant corn has been approved for planting in
Spain. However these regions do have feed manufacturers that
use corn and/or corn gluten feed that is of likely
biotechnology origin. We expect that very little will be
said by these local governments about the use of
biotechnology corn/products to keep their animal industries
supplied with feed. We also note that there is not any
anti-GMO legislation currently being contemplated in
Autonomous Regions such as Catalonia and Aragon where corn
farmers have adopted biotechnology corn in response to corn
borer infestations (see FAS Gain Report No. SP7001).
AGUIRRE

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