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Cablegate: Madrid Weekly Econ/Ag/Commercial Update Report -

VZCZCXRO8709
RR RUEHRN
DE RUEHMD #1942/01 2790850
ZNR UUUUU ZZH
R 060850Z OCT 07
FM AMEMBASSY MADRID
TO RUEHC/SECSTATE WASHDC 3587
INFO RUEHSS/OECD POSTS COLLECTIVE
RUEHLA/AMCONSUL BARCELONA 3112

UNCLAS SECTION 01 OF 02 MADRID 001942

SIPDIS

SIPDIS

EUR/WE, EEB/EFD/OMA

E.O. 12958: N/A
TAGS: ECON EFIN EIND ENRG ETRD SP EINV EAGR SOCI
ELAB
SUBJECT: MADRID WEEKLY ECON/AG/COMMERCIAL UPDATE REPORT -
OCTOBER 1-5


MADRID 00001942 001.2 OF 002


Table of Contents:

ECON/EFIN: Economists speculate weak dollar might not be such
a bad thing
ECON: BBVA President considers U.S.- European dialogue
"crucial"
EFIN: Government Research & Development spending set to
increase by 17.4% in 2008
EFIN/EIND: EU Competition Commissioner says most EU
Commissioners "annoyed" by the Spanish attitude on Endesa
EIND: Construction company Fomento de Construcciones y
Contratas says it intends to continue to grow in the U.S.
ETRD: Jamon Iberico may be coming soon to a store near you
ECON/SOCI: Retoucherie - from small town to world-wide
business


ECONOMISTS SPECULATE WEAK DOLLAR MIGHT NOT BE SUCH A BAD THING

1. (U) Spanish Employers Federation (CEOE) Economic
Commission President Jose Luis Feito says the Spanish economy
can withstand a dollar/euro exchange rate of 1/1.4 because
most Spanish exports go to Europe and, besides, exports are
not as important a component of Spanish GDP as they are for
countries like Germany, France or Italy. Feito argues that
the probability that the European Central Bank (ECB) will not
raise interest rates, and might even lower them, is much more
important to the Spanish economy because Spain is more
interest rate sensitive than exchange rate sensitive.
(Comment: Feito is a well-respected economist and a good
Embassy contact. He is probably right that interest rates
matter more than exchange rates for Spain. Nonetheless, it
is worthwhile remembering that Second Vice President and
Finance Minister Pedro Solbes has fretted publicly about the
stronger euro inhibiting German exports, and hence Spanish
exports to Germany. In 2006, Spanish exports to Germany
represented almost 11% of Spain's worldwide exports. So
exchange rates really do matter for Spain, albeit perhaps
less than possible ECB easing of interest rates as Feito
points out.) (El Pais, 9/30/07)

BBVA PRESIDENT CONSIDERS U.S. - EUROPEAN DIALOGUE "CRUCIAL"

2. (U) Gonzalez remarked on the need for a dialogue in the
context of the 9/27/07 European Financial Services Roundtable
in Washington, D.C. Fed Chief Ben Bernanke gave the closing
address at this conference. Gonzalez called for more
dialogue on a range of issues, including antitrust, although
he focused on the financial sector. (Comment: Gonzalez,
intervention was noteworthy because Spain's most important
businessmen do not often comment publicly on these matters.)
(Expansion, 9/28/07)

GOVERNMENT RESEARCH & DEVELOPMENT SPENDING SET TO INCREASE BY
17.4% IN 2008

3. (U) This increase is certainly less than the 30% by which
R&D spending went up in 2007, but it does mean that the
Zapatero government will have fulfilled a pledge to double
R&D spending during the 2004-2008 period. Civilian R&D
spending will receive euros 7.7 billion and euros 1.6 billion
will be allocated for military R&D spending. (El Pais,
9/30/07)

EU COMPETITION COMMISSIONER SAYS MOST EU COMMISSIONERS
"ANNOYED BY THE SPANISH ATTITUDE ON ENDESA

4. (U) Kroes added that the Commission 152 million euro fine
against Telefonica was justified. (Comment: Many Spanish
analysts agree with Commissioner Kroes, although even those
analysts very critical of the Zapatero government note that,
especially in the energy sector, other countries such as
Germany and France also want to create and defend "national
champions.") (Expansion, 10/2/07)

CONSTRUCTION COMPANY FOMENTO DE CONSTRUCCIONES Y CONTRATAS
SAYS IT INTENDS TO CONTINUE TO GROW IN THE US

5. (U) FCC owns Giant Cement Holding in the U.S. and says it
is selling all the cement it produces. Giant Cement produces
cement in South Carolina, Maine and Pennsylvania and most of
it is used in infrastructure projects. FCC sees continued
opportunity in Texas, despite the controversy in that state
over toll roads. FCC recently qualified together with an
Australian contractor to build the Dublin metro. (Comment:
Clearly FCC, like other Spanish construction firms, will
continue to look for opportunities overseas as Spanish
infrastructure and housing development slows down.)

MADRID 00001942 002.2 OF 002


(Expansion, 10/3/07)

JAMON IBERICO MAY BE COMING SOON TO A STORE NEAR YOU

6. (U) Spanish "Jamon Iberico" may soon be available to U.S.
consumers in the United States. The U.S. Department of
Agriculture's Food Safety Inspection Service (FSIS) just
approved the list of Spanish port products exporters
submitted for export accreditation by Spain's Ministry of
Health (MoH). The list contains a slaughterhouse that is
approved for export - the only Spanish slaughterhouse ever to
have been approved for export to the United States. This
means that the "products" of Spanish-produced hogs,
slaughtered by the approved slaughterhouse, are now either
eligible for export to the United States. And, since one of
the specialties of the approved establishment is slaughter of
the Iberia hog, the traditional Iberian ham is now eligible
for export.

Regarding the possible timing of the first Iberian ham
exports, the first possible shipment may come within months,
or could be delayed by two-to three years. Because the
slaughterhouse in question was previously approved for export
to the United States and has continued following FSIS
inspection protocol during a suspension of that export
accreditation, the hams that have been curing in storage may
become eligible for export. FSIS is expecting to receive
just such a request from MOH within the next few days and
will then decide the fate of the hams currently in storage.
Regardless, hams produced from hogs now being slaughtered
will be eligible for export when fully cured - two-to-three
years.

RETOUCHERIE FROM SMALL TOWN TO WORLD WIDE BUSINESS

7. (U) Manuela Rodriguez Losada began as a seamstress at home
taking small orders to make ends meet and later on was the
exclusive seamstress of a clothing company in France where
she and her husband moved in pursuit of a better life.
Motivated by her clients she opened her own store, la
Retoucherie - an alteration store, was born. She returned to
Spain and opened and still maintains her first store in La
Vaguada in 1983 a "gold mine" location she says. A family
business with the logo of a measuring tape in the form of a
lasso in black and white colors. At 65 she refuses to
retire, there are too many things that she would like to
accomplish such as creating a foundation for senior citizens.

The stores bear her name now La Retoucherie de Manuela and
she owns 28 out of the 312 stores the rest are franchises.
She recently signed a franchise contract with China to open
17 stores. Manuela employs mostly women over 40 as they are
the hardest hit during recessions and she sympathizes with
them. The company offers a training program for the
employees and has recently added an extra benefit, a no cost
private health plan. The company continues to grow and just
last year made 40 million euros a 15% increase from the
previous year.
LLORENS

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