Cablegate: Madrid Weekly Econ/Commercial Update - February

DE RUEHMD #0236/01 0631244
P 031244Z MAR 08





E.O. 12958: N/A

MADRID 00000236 001.2 OF 002

Table of Contents:

EFIN - Mortgage Issuance Down by a Third in December
EINV - Sovereign Wealth Fund Offers to Buy Real Estate Firm
EINV - 2007 Corporate Profits Announced
EINV - Prisa Group Aims to Expand in the U.S
ETRD/EINV - Ambassador Aguirre Remarks on NAFTA, Trade, and
EFIN/PTER - New Wave of ETA Extortion Letters to Basque
EWWT/PTER - GOS Wants to Expand Cargo Radiation Scanning
Program to 28 Marine Ports

Mortgage Issuance Down by a Third in December

1. (U) More evidence of the slowdown in housing came with the
announcement that 32 percent fewer mortgages were issued in
December 2007 than in December 2006. The average value of
mortgages issued in the month also declined, by 2 percent to
144,000 euros, but it is not clear whether that represents a
decline in housing prices, a change in the type of housing
being built, or a change in the percentage of a unit's value
that mortgages cover. Issuance of permits for new housing
showed a similar trend, with December's total 40 percent
below that of December 2006. (El Pais, 2/27/08)

Sovereign Wealth Fund Offers to Buy Real Estate Firm

2. (U) The Investment Corporation of Dubai (ICD) has offered
to buy the troubled real estate developer Colonial for a
little over three billion euros (usd 4.5 billion). The main
stockholders, Luis Portillo and the Nozar company, are
holding out for more money. New York and London investment
funds are reported to be interested in Colonial if the ICD
offer fails. (Comment: The role of sovereign investment
funds has not so far been the subject of political debate in
Spain. More likely than not, there would be widespread
relief if a purchaser were found for Colonial. However, a
political debate would likely emerge were a sovereign wealth
fund attempt to buy any firm that could loosely be considered
a "national champion," such as Telefonica or Repsol.)
(Expansion, 2/28-29/08)

2007 Corporate Profits Announced

3. (U) Corporate profits, while generally healthy, are
providing additional evidence of the economy's slowing
growth. With nearly all of the Ibex 35 stock market
blue-chips having reported 2007 figures, it appears that the
blue-chips increased profits by 15 percent over their 2006
levels, well below 2006's 31 percent increase. 34 of the 35
companies made profits, but 10 earned less in 2007 than in
2006. Telefonica had the largest sales, with 57 billion
euros, just ahead of Repsol's 54 billion. The most
profitable companies were Banco Santander (9 billion euros,
up 19 percent), Telefonica (8.9 billion, up 43 percent), and
BBVA (6.1 billion, up 29 percent). (El Pais, 2/29/08)

Prisa Group Aims to Expand in the U.S

4. (U) The Chairman of the group, Ignacio Polanco, says Prisa
wants to expand in the U.S., and not just in the
Spanish-speaking market. Currently, Prisa is negotiating
with the UK private equity group 3i to expand the group's
radio network beyond Los Angeles and Miami. Prisa, through
its publishing house, Santillana, is already a leader in
school textbooks in Latin America (including in
Portuguese-speaking Brazil) and now wants to get into
English-language school textbooks in the U.S. Polanco is
reportedly an admirer of big media groups in the U.S.: "In
spite of the difference in size, they are the mirror we use
to measure ourselves." Prisa is best known for being the
owner of Spain's leading daily, El Pais. It owns 50% of the
satellite pay-TV platform, Sogecable, and Spain's leading
radio station, Cadena Ser. The group also has a stake in Le
Monde and has assets in Latin America, the U.S., and
Portugal. The Prisa Group is controlled by the Polanco
family. The 53-year-old Ignacio Polanco took over the reins
after his father died last year. (Comment: The Prisa Group
is best known in Spain as the owner of the slightly left of
center El Pais, i.e. "liberal" in the U.S. context. Clearly,
however, Polanco's main focus is commercial with a view to
breaking into the English-speaking world.) (Financial

Ambassador Aguirre Remarks on NAFTA, Trade, and IPR

5. (U) On February 27, Ambassador Aguirre spoke to a group of

MADRID 00000236 002.2 OF 002

prominent business leaders at the Circulo de Empresarios, one
of Spain's leading business associations. He spoke at a
ceremony in honor of a Circulo study on Spanish business in
and with the NAFTA countries. Along with the Ambassadors of
Mexico and Canada, Ambassador Aguirre described the benefits
of the NAFTA and encouraged Spanish investment in North
America. He also discussed trade liberalization in general,
emphasizing the importance of a successful conclusion of the
Doha Round and of strengthening IPR protection. His remarks
received positive press coverage. (Embassy)

New Wave of ETA Extortion Letters to Basque Businessmen

6. (U) The Basque terrorist group ETA sent Basque businessmen
a new wave of extortion letters in February. Police sources
believe that over 100 letters may have been sent, in line
with the group's monthly average in recent years. The
terrorist group has organized Basque businessmen into three
categories; those they want to pay part of what they earn "by
exploiting the workers" (Note: ETA is a Marxist group), those
who do not consider the Basque conflict their business, and
those who "gladly contribute to maintain the current
situation of oppression." The Basque government and the
region's leading business group called on recipients not to
submit to ETA extortion, and the Spanish vice minister of
Interior, Antonio Camacho, called the letters a form of
terrorism that would be investigated. (El Pais, 2/28-29/08)

GOS Wants to Expand Cargo Radiation Scanning Program to 28
Marine Ports

7.(SBU) As a result of Spain's favorable experience with the
Megaports initiative, a DOE NNSA program to detect illicit
nuclear and radioactive cargo at ports, the GOS recently
decided to expand this concept to up to 28 ports across
Spain. Working with NNSA Megaports experts, the GOS would
first expand to Barcelona and Valencia and then use the
expertise gained from this experience to expand to other
ports across Spain. Barcelona and Valencia will begin
operating their radiation detection programs in 2009 if all
goes well.

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