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

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RR RUEHRN
DE RUEHMD #2129/01 3231038
ZNR UUUUU ZZH
R 191038Z NOV 07
FM AMEMBASSY MADRID
TO RUEHC/SECSTATE WASHDC 3821
INFO RUEHSS/OECD POSTS COLLECTIVE
RUEHLA/AMCONSUL BARCELONA 3177

UNCLAS SECTION 01 OF 03 MADRID 002129

SIPDIS

SENSITIVE
SIPDIS

EUR/WE
EEB/IFD/OMA

E.O. 12958: N/A
TAGS: ECON EFIN ELAB ETRD KIPR PTER SOCI TBIO SP
EINV
SUBJECT: MADRID WEEKLY ECON/AG/COMMERCIAL UPDATE - NOVEMBER
12-16

MADRID 00002129 001.2 OF 003


Table of Contents:

ECON: Spanish economy grew by 0.7% during the third quarter
of 2007
EINV: Spain the number four foreign investor in the U.S.
SENV: UN SYG to attend Valencia IPCC meeting
SENV: CO2 emissions expected to rise in 2007 after declining
in 2006
KIPR: Commercial Counselor and EconOff meet with R&D-based
pharmaceutical representatives
ECON: Autonomous Communities' 2008 budget proposals show
large increases
PTER/KCRM: ETA estimated to have collected 3.5 million euros
through extortion since June 2007
ELTN: New high-speed train to the north close to opening
EMIG: Spain signs work permit agreement with Senegal
ETRD: Jamon Iberico arrives in the US market, heading to China
SENV: Galicia 5 years after the Prestige disaster

SPANISH ECONOMY GREW BY 0.7% DURING THE THIRD QUARTER OF 2007

1. (U) The 0.7% quarter-on-quarter GDP growth figure was
lower than the second quarter's 0.9%, so it tracks with other
signs of a slowdown. The Spanish government forecasts
full-year 2007 growth of 3.8%. (Comment: The big question is
how much lower growth will be in 2008. The opposition
conservative PP party is trying to make the economy an issue
in the March 2008 election. Inflation (people are
complaining about rising food prices), interest rates, and
rising unemployment creation is of concern to the government.
The opposition PP is hoping to get some traction on economic
issues, even though the overall state of the economy remains
good. (Europa Press, 11/13/07)

SPAIN THE NUMBER FOUR FOREIGN INVESTOR IN THE U.S.

2. (U) During the first ten months of 2007, Spanish companies
invested USD 21.3 billion in the U.S., behind only Canada,
the UK and Holland. BBVA's purchase of Compass Bank and
Iberdrola's purchase of Energy East were two of the biggest
acquisitions during this period. Other Spanish companies
such as Ferrovial, FCC, Acciona, Ebro Puleva, Gamesa, Inditex
and Telvent are also very active in the U.S. (Comment: This
level of investment in the U.S. is truly new for corporate
Spain. Acquisitions, rather than traditional FDI, seem to
be the preferred Spanish mode of getting into the U.S.
market.) (El Pais, 11/11/07)

UN SYG TO ATTEND VALENCIA IPCC MEETING

3. (U) The Intergovernmental Panel on Climate Change (IPCC)
meeting this week in Valencia is scheduled to conclude on
Saturday, November 15, with the release of a summary report
of the most recent state of knowledge on the science of
climate change. This "summary for policymakers" is based on
three previously released reports that the USG played a
significant role in developing and fully supports. The
fourteen person-U.S. delegation is being led by Harlan Watson
of OES and Sharon Hays of the White House Office of Science
and Technology. U.N. Secretary General Ban Ki-moon plans to
attend the closing of the IPCC meeting, and he discussed
global warming with Spanish President Zapatero in Madrid on
Wednesday, November 14.

CO2 EMISSIONS EXPECTED TO RISE IN 2007 AFTER DECLINING IN 2006

4. (U) Spain's CO2 emissions are expected to increase by 1
percent during 2007 after experiencing a 4 percent reduction
in 2006. Electricity generation figures show that through
November 12, Spain has increased its production of
coal-generated electricity by nearly 5 percent while reducing
its use of nuclear electricity by 7.6 percent and natural
gas-generated electricity by 2.3 percent. The implication of
these shifts, according to the Spanish representative of
Worldwatch Institute, is an estimated 1 percent increase in
Spain's CO2 emissions for the year. A 1 percent increase
would bring Spain's emissions to about 50 percent above their
level in 1990. Under the Kyoto Protocol, Spain's emissions
are required to be no higher than 15 percent above its 1990
level. An article in the pro-government El Pais newspaper
noted that it was the previous government that had agreed to
the Kyoto target that now looks unattainable. The article
added that European countries' excessive issuance of
emissions quotas to companies had caused a dramatic drop in
the cost of carbon dioxide emission allowances, reducing the
incentive for companies to reduce emissions. The article

MADRID 00002129 002.2 OF 003


also pointed out inconsistent use of data by the government.
When she opened the IPCC meeting earlier this week, Vice
President Fernandez de la Vega had cited Worldwatch's
estimated 4 percent 2006 decline as proof that it was
possible for the economy to grow while emissions declined,
but the GoS had not used Worldwatch's 2007 estimate even
though it had issued advance forecasts before the end of 2006
when the news was better. (El Pais, 11/15/2007)

COMMERCIAL COUNSELOR AND ECONOFF MEET WITH R&D BASED
PHARMACEUTICAL REPRESENTATIVES

5. (SBU) Visiting Pharma representative Jonathan Kimball and
a local pharmaceutical industry representative, Gema Delgado,
explained on 11/14 that the industry is still trying to
persuade the Spanish government to grant retroactive product
patent protection for drugs that only benefited from process
patent protection prior to 1992. Kimball said that Finland
had recently changed legislation in ways that were
potentially relevant to the Spanish situation. He said he
would send more information. Kimball also said that Pharma
representatives would be meeting in the next few weeks with
USTR and USPTO representatives to explain the industry's
TRIPS rationale for Norway's providing retroactive product
patent protection along the lines that industry wants in
Spain. (Note: At least in the Spanish case, USG lawyers have
not found a TRIPS argument for arguing for retroactive patent
law change, although the local industry uses TRIPS arguments
in local court cases, in some cases successfully.) Commercial
Counselor and EconOff reiterated the Embassy's willingness to
broker meetings with the government and to make policy-based
arguments on behalf of the R&D-based pharmaceutical industry.
Commercial Counselor explained that the Ambassador's
11/14/07 lunch for the Minister of Health, to which
pharmaceutical industry representatives were invited, was
part of that effort.

AUTONOMOUS COMMUNITIES' 2008 BUDGET PROPOSALS SHOW LARGE
INCREASES

6. (U) The 2008 Autonomous Communities' budget proposals,
which were recently made public, project increases in real
terms over 2007. The combined budgets of the regional
governments for operations and personnel expenses total 164.4
billion euros, an amount that is 7.8 percent higher than the
central government's allocation for similar expenses.
Overall, the regional budget total represents a 22.5 percent
increase in investment over 2007 and a 7.9 percent increase
in administrative funding. The largest increases are
proposed by the Basque region, while the largest budgets
overall are in Andalucia and Catalonia. (Expansion, Nov. 9)


ETA ESTIMATED TO HAVE COLLECTED 3.5 MILLION EUROS THROUGH
EXTORTION SINCE JUNE 2007

7. (U) According to research by the Department Head of
Terrorism Economics at the University of Madrid Complutense,
the Basque terrorist group ETA has successfully extorted
approximately 3.5 million euros since the end of its cease
fire in June 2007. This amount far surpasses the estimated
1.35 million euros collected by ETA in all of 2006 through
the same means. Over the past summer, there were numerous
reports of ETA extortion letters reaching businesses in the
Basque and Navarra regions. (Comment: ETA continues to carry
out occasional attacks, but a combination of good police work
and a bit of luck has thus far allowed the GOS to disrupt or
thwart several planned attacks.) (Expansion, Nov. 9)

NEW HIGH-SPEED TRAIN TO THE NORTH CLOSE TO OPENING

8. (U) Perhaps to show that not all railway news these days
is bad, on November 15 Public Works Minister Alvarez took
reporters on a test ride on the high-speed "AVE" train
connecting Madrid with the northwest cities of Segovia and
Vallodolid, which is expected to open on December 22. This
project, which was co-financed with European Union funds,
will cut the travel time to Segovia and Vallodolid by a
third. This is likely welcome news, given the continuing
unanticipated interruptions in Barcelona commuter rail
service caused by construction of the long-delayed AVE rail
line that will link Madrid and Barcelona. (El Mundo,
Expansion, Public Bulletin, 11/16)

SPAIN SIGNS WORK PERMIT AGREEMENT WITH SENEGAL


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9. (U) Senegal and Spain signed an agreement granting 2,700
work permits to Senegalese in an attempt to stem the wave of
illegal migration to Europe. The agreement was signed by
Labor Minister Jesus Calderon on Friday, November 9. A group
of 2,000 Senegalese will be trained to work on Spanish
fishing boats, and the remaining 700 will be employed in the
agricultural sector. (AFP)

JAMON IBERICO ARRIVES IN THE U.S. MARKET, HEADING TO CHINA

10. (U) Customs in New York received the first legal
shipment of Iberian ham ("Jamon Iberico"), 300 pieces from
Salmantina Embutidos Fermin, the only company to meet the
current requirements. Separately, after four years of
negotiations, Spain and China signed an agreement on November
15 allowing exportation of Spanish pork products into the
country. According to Secretary of State in the Industry and
Commerce Ministry, Pedro Mejia there are currently ninety
Spanish companies interested in selling pork and Jamon
Iberico to China. (20 minutos)

GALICIA 5 YEARS AFTER THE PRESTIGE DISASTER

11. (U) November 13th marks the fifth anniversary of the most
catastrophic oil spill in Europe, when 70,000 tons of fuel
were spilled off of Galicia's coast by the Prestige oil
tanker. The fishing villages of Galicia were hit hard as
their way of life came to an abrupt end. Thousands of
volunteers poured in to help clean up the disaster, and the
villagers have moved to other work. There are several
manufacturing companies in the area, and more than half of
the Spanish naval fleet is manufactured in Galicia. A recent
study of seagulls indicated that even birds born a year after
the spill had high concentrations of hydrocarbons in their
blood. This study suggested that the estimated time of
recuperation from the spill may have been underestimated.
The Director of the Spanish Oceanographic Institute in Vigo
said that almost 98% of the affected area is now clean, even
though the vessel continues to leak its remaining fuel.

12. (U) The recycling of the more than 60,000 tons of
residual contaminants from the disaster is anticipated to be
completed in 18 months, according to the President of the
Galician regional government. Emilio Perez Tourino described
the recycling process as "a technological pioneer and unique
in the world." "Our capability to respond to the collection
of hydrocarbourants has multiplied by thirty" thanks to
initiatives such as this one. (Note: The company that runs
the industrial waste treatment plant that recycled the
contaminants is seeking a patent for its recycling process,
and countries such as France have expressed interest.) (La
Vanguardia Magazine, 11/11/07)
LLORENS

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