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

VZCZCXRO6493
RR RUEHAG RUEHDF RUEHIK RUEHLZ RUEHROV
DE RUEHMD #0053/01 0182009
ZNR UUUUU ZZH
R 182009Z JAN 08
FM AMEMBASSY MADRID
TO RUEHC/SECSTATE WASHDC 4089
INFO RUCNMEM/EU MEMBER STATES COLLECTIVE
RUEHLA/AMCONSUL BARCELONA 3240

UNCLAS SECTION 01 OF 03 MADRID 000053

SIPDIS

SIPDIS

DEPARTMENT FOR EUR/WE AND EEB/IFD/OMA

E.O. 12958: N/A
TAGS: EAIR ECON EFIN ETTC KIPR SENV SOCI TBIO SP
SUBJECT: MADRID WEEKLY ECON/COMMERCIAL/AG UPDATE - JANUARY
14 - JANUARY 20

MADRID 00000053 001.2 OF 003


Table of Contents:

ECON/EFIN: Financial Times lead editorial gloomy on Spain
ECON/EFIN: Real estate companies shut down in wake of housing
slowdown
ECON/TBIO: Senators Grassley and Thune meet with Secretary of
State Mejia
ETTC/KIPR: El Pais says Spain a "leader" in internet music
and movie downloads
SENV: Greenpeace wants Spain to follow France on ag
biotechnology
ETTC: Spain's Telefonica to focus more on China and other
growing markets
EAIR: Iberia President complains about subsidized Middle
Eastern airlines
SOCQ Spanish send umbilical cords abroad for storage

FINANCIAL TIMES LEAD EDITORIAL GLOOMY ON SPAIN

1. (U) The FT's January 14 lead editorial is titled "Spain
feels the credit squeeze pain: Europe's economic success
story may be about to unravel." The editorial focuses on
December's bad inflation numbers, falling housing prices and
rising unemployment. The FT recommends that the GOS avoid
generous tax cuts; take measures to increase competition in
retailing, transport and energy; ditch the preference for
national champions; increase independence for universities;
and allow companies to opt out of collective wage deals.
(Comment: The GOS and some businessmen will take issue with
this editorial, but it will sting because the FT is widely
read by EU elites. The government might challenge the FT
assertion that France, unlike Spain, has embarked on needed
structural reform; it could argue that the Spanish tax take
as a percentage of GDP remains significantly lower than
France's, Spain's labor market remains more flexible, and
France retains a preference for "national champions.") (FT,
1/14/08)

REAL ESTATE COMPANIES SHUT DOWN IN WAKE OF HOUSING SLOWDOWN

2. (U) In the aftermath of the housing market downturn, more
and more real estate agents are going out of business. The
API, a real estate agent association, estimates that more
than half of the 80,000 real estate offices that existed in
the beginning of 2007 have closed down. The majority of
these closures reportedly are affecting smaller, and less
established real estate businesses. API estimates that these
closures have resulted in some 100,000 lost jobs. (Comment:
The estimate seems high, but there is no doubt that real
estate companies are hurting.) (El Pais, January 17)

SENATORS GRASSLEY AND THUNE MEET WITH SECRETARY OF STATE
MEJIA

3. (U) Senators Charles Grassley and John Thune, together
with DCM, AgCouns and EconOff, met with the Ministry of
Industry, Tourism and Trade's Secretary of State (vice
minister) for Tourism and Trade, Pedro Mejia January 11
during CODEL Martinez, visit to Spain. Senator Grassley
emphasized the importance of science-based decisions in the
agricultural biotechnology context. Mejia said that Spain
had a relatively "liberal" view with respect to
biotechnology. However, even in Spain the technology was
controversial and faced NGO opposition, albeit not as strong
as in some other EU member states. Senator Thune asked what
influence Spain could exercise in Brussels on this issue.
Secretary General for Foreign Trade Alfredo Bonet noted that

SIPDIS
it was very difficult to get a qualified majority for biotech
approvals in the EU Environment Council, so in the end the
Commission was taking decisions in favor of biotechnology.
Both Mejia and Bonet noted that commodity price hikes might
spur greater liberalization on biotech imports. The
Secretary of State asked about the status of the proposed

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elimination of the "splash and dash" tax credit loophole that
allows biodiesel producers in the U.S. to import commodities
such as soybeans from overseas to the U.S., add a minimal
amount of petroleum diesel, and then re-export the biodiesel.
European producers have complained about these imports.
Mejia said that he was pessimistic about the prospects for
successful conclusion of the Doha Round negotiations because
major developing countries were not willing to give
sufficiently in terms of industrial and services market
access - he emphasized especially Spain's interest in better
services access. He noted also that with high agricultural
commodity prices, some developing countries now did not see
why they should give on industrial goods and services access.
He said that the U.S. was still under pressure to do more on
domestic agricultural support. Spain's senior trade
representative asserted that the EU had made a good

MADRID 00000053 002.2 OF 003


agricultural access offer. The Senators expressed support
for Doha but were pessimistic about getting support for Trade
Promotion Authority (TPA) this year. Finally, there was a
lively discussion of the renewable energy mission to
Washington and Colorado that Secretary of State Mejia is
leading and that post is helping organize. Both Senators
were very interested in the mission.

4. (U) Comment: This was a very good substantive discussion.
However, it is clear that while Spain will continue sometimes
to vote in favor of biotechnology liberalization proposals,
the Spaniards will continue to tread warily on this issue
given their own domestic sensitivities and other equities
Spain has in the EU. It was interesting to hear Mejia's
strong emphasis on services as the future of Spain's economy.
Unfortunately, however, Spanish services companies have not
been aggressive in promoting Doha, although this is true of
many other services companies in Europe as well.

EL PAIS SAYS SPAIN A "LEADER" IN INTERNET MUSIC AND MOVIE
DOWNLOADS

5. (U) Spain's leading daily published an article on internet
downloading that cites a 2007 European Advertisers
Association (EIAA) study saying that 52% of Spanish internet
users download movies and music, vice a European average of
20%. The El Pais story noted that President Sarkozy's
proposal to create an independent authority to crack down on
illegal internet downloading had generated positive reactions
from rights-holders groups in a number of EU Member States,
including Spain. However, internet users groups generally
opposed the French proposal. The article reports that EU
Information Society Commissioner Vivane Reding plans to
submit a proposal in mid-2008 creating (and regulating) a
unified EU market in internet-delivered content, which will
include rules on uploads and downloads. The story says that
P2P downloads are "completely legal" in Spain and points to
the 2006 Office of the Prosecutor Circular to prosecutors
effectively decriminalizing P2P downloads unless there is a
profit (commercial) motive for the download. Although the
police have acted against about 20 webmasters, the judiciary
has not yet convicted any owners or managers of websites
trafficking in pirated material. (Comment: This article
provides a detailed and balanced view of what is happening
with respect to internet piracy in Spain. Assuming President
Sarkozy's proposal to create an independent authority to
control internet downloads, it will be interesting see how it
works out in practice, among other reasons because the French
proposal says that the independent authority to be created
will be placed "under a judge." This aspect of the French
proposal is something that Spanish rights-holders
associations do not highlight because they would prefer not
to have work with judges.) (El Pais, 1/12/08)

GREENPEACE WANTS SPAIN TO FOLLOW FRANCE ON AG BIOTECHNOLOGY

6. (U) Greenpeace Spain is attempting to use French President
Sarkozy's ban on agriculture biotechnology to try to shame
the Government of Spain into a similar ban. Juan Felipe
Carrasco, who is responsible for Greenpeace's campaign
against agriculture biotechnology in Spain, said: "the
conservative government of the most important EU agricultural
Member State (France) has taken a responsible decision based
on scientific information (to ban agriculture biotechnology).
Meanwhile the Government of Spain has succumbed to the power
of the chemical and biotechnology giants, and has shown no
political bravery to place itself on the side of citizen and
environmental interests."..."There are just a few weeks left
for the end of this Government's political term, and now is
the perfect moment for the Government of Spain to take a
similar decision to put society and environmental interests
before the dark interests of the agro-chemical
multinationals."

7. (U) The French decision has provided Spanish
anti-biotechnology enthusiasts a tremendous tool to pressure
the Zapatero Government. However, Spain and France are as
different as night and day with regards to cereal grain
production and import policies. France is a net grain
exporter and Spain a net importer. With record high grain
prices and livestock/pork producers and consumers complaining
about high agricultural product/food prices, it seems hard to
imagine that president Zapatero would follow in Sarkozy's
footsteps on this issue: unless, that is, his election
campaign team came to believe (somehow) that a similar ban,
which would eliminate the production of 75,000 hectares of
biotechnology corn production, would bring more voters to
support the Government in its bid for reelection in March.


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TELEFONICA TO FOCUS MORE ON CHINA AND OTHER GROWING MARKETS

8. (U) Analysts assert that Telefonica, the world's fifth
largest telecoms company, intends to gain a stronger foothold
in the growing China market. Telefonica has already begun to
inch its way into China through a 5 percent market share
ownership of China Netcom which it intends to increase to 10
percent (partially based on expectations that an imminent
Chinese telecoms restructuring will benefit China Netcom).
In addition, Chairman Cesar Alierta is expected to increase
Telefonica's control of Vivo, Brazil's largest mobile
operator, which Telefonica currently co-owns with Portugal
Telecom. (Financial Times, January 14)

IBERIA PRESIDENT COMPLAINS ABOUT SUBSIDIZED MIDDLE EASTERN
AIRLINES

9. (U) Fernando Conte, the president of Iberia Airlines and
of the European Airline Association (AEA), recently
complained about the "unfair" advantages enjoyed by some
Middle Eastern airlines such as Emirate Airways, Qatar
Airways, Etihad, and Gulf Air. Speaking at a recent
conference, Conte warned that the national assistance that
some Middle Eastern airlines enjoyed left European airlines
in a disadvantaged, less competitive position. Conte
asserted that European airlines could soon be substituted by
these airlines, particularly for long-haul flights.
Presumably, Conte will lobby this message to the EC.
(Expansion, January 16)

SPANISH SEND UMBILICAL CORDS ABROAD FOR STORAGE

10. (U) Although Spain recently passed legislation allowing
private umbilical cord banks, a large majority of Spaniards
who save their children's cords are still shipping them to
other European countries. In fact, Spain and Italy are the
only European countries that do not allow private storage of
umbilical cords. In Spain, parents wishing to save their
children's cords in country must donate them to a
government-funded public bank, which aims to build a reserve
of 40,000 cords over the next eight years until a sufficient
reserve is created for public transplants. It is estimated
that Spaniards currently have stored more than 10,000 cords
in private banks outside the country. Valuable genetic
information and hopes for future cures are some of the
reasons for storing abroad to ensure personal control.
Rafael Matesanz, the director of the National Transplant
Organization, argues that most of the stem cell treatments
that have been developed to date do not require stem cells
from the same donor and often cannot use cells from the same
donor. (El Pais 1/14)
AGUIRRE

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