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Cablegate: Madrid Weekly Econ/Commercial/Ag Update March 1-7

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PP RUEHAG RUEHDF RUEHIK RUEHLZ RUEHROV
DE RUEHMD #0287/01 0701037
ZNR UUUUU ZZH
P 101037Z MAR 08
FM AMEMBASSY MADRID
TO RUEHC/SECSTATE WASHDC PRIORITY 4444
INFO RUCNMEM/EU MEMBER STATES COLLECTIVE
RUEHLA/AMCONSUL BARCELONA 3354

UNCLAS SECTION 01 OF 02 MADRID 000287

SIPDIS

SIPDIS

EUR/WE, EEB/IFD/OMA

E.O. 12958: N/A
TAGS: ECON EFIN EIND ENIV ENRG ETRD KIPR SP
SUBJECT: MADRID WEEKLY ECON/COMMERCIAL/AG UPDATE MARCH 1-7

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Table of Contents:

ECON/EFIN: Dubai Sovereign Investment Fund (ICD) buys
Troubled Real Estate Company
EFIN/EINV/ENRG: Solbes Calls for Level Playing Field as
Iberdrola Opposes Possible EDF Bid
ENRG/EINV: ECJ Rules Against Spain for Defying EC on German
ENDESA Takeover Bid
ECON: Ana Palacio Leaving World Bank
KIPR: Barcelona Judge Orders Website Selling Counterfeit
Goods Blocked
EFIN/ETRD: BBVA is World Leader in Trade Finance
EIND: Ferrovial wins 3 large service contracts
EIND: Renault showing signs of growth

DUBAI SOVEREIGN INVESTMENT FUND (ICD) BUYS TROUBLED REAL
ESTATE COMPANY

1. (U) The ICD came to an agreement with troubled real estate
construction company Colonial owners Luis Portillo and Luis
Nozaleda on 3/4/08. The Dubai fund will buy Colonial's
bricks and mortar real estate assets and will end up paying
something between euros 1.9 billion and 2.1 billion, i.e.,
about euros 1.3 per share. Portillo and Nozaleda are keeping
the land owned by Colonial, which is valued at euros 1.8
billion. The investment fund had originally offered euros
1.72 per share. (Comment: We cannot evaluate whether the
parties' business strategy makes sense. The Dubai investment
fund's entry into the troubled Spanish real estate sector is
likely welcomed by the Spanish government, although the
National Securities Exchange Commission (CNMV) is
investigating the details of the transaction to make sure it
is being conducted properly.) (Expansion, 3/5/08)

SOLBES CALLS FOR LEVEL PLAYING FIELD AS IBERDROLA OPPOSES
POSSIBLE EDF BID

2. (U) While in Brussels on 3/4/08, Second Vice President and
Finance Minister Solbes said that the fact that it was
impossible to mount a takeover bid for French majority
government-owned energy giant EDF was a "pertinent" factor in
Iberdrola's defense against a possible EDF and ACS (Spanish
construction firm) attempt to take over Iberdrola. However,
Solbes was careful to add that the Spanish government had
nothing to say for or against a possible takeover of
Iberdrola. His emphasis was on the need for a level European
playing field in the energy sector. Iberdrola has filed a
complaint in Brussels against the French government for its
role in the possible EDF bid. (Comment: The possible
takeover of Iberdrola, like Gas Natural's bid for Endesa in
the past, has become a political football in Spain. The
Spanish government has indicated neutrality on the issue.
The opposition conservative PP party has said it would like
Iberdrola to remain in Spanish hands.) (Expansion, 3/5/08 and
WSJ, 3/4/08)

ECJ RULES AGAINST SPAIN FOR DEFYING EC ON GERMAN ENDESA
TAKEOVER BID

3. (U) On March 6, the EU Court of Justice ruled that Spain
violated EU law in refusing to comply with an EC ruling
related to the Endesa takeover controversy. Endesa, one of
the world's largest electricity utilities, was the subject of
a bitter takeover battle that lasted over a year. During the
contentious battle, Spain had imposed restrictive conditions
against one of the primary bidders, Germany energy giant
E.ON. In response, the EC had mandated that Spain withdraw
those conditions. Spain had refused to do so, citing its own
national authority on such matters. The March 6 ruling
affirmed that EC authority superseded Spain's authority in
this matter. Although the proposed acquisition has fallen
through, and Italian firm Enel and Spanish firm Acciona won
control of Endesa in 2007, Spain must still withdraw the
conditions. If the EC is not satisfied with Spain's actions,
it may bring another case to the ECJ that could result in
Spain being fined. (EFE 03/06/08, CNN.Money 03/06/08)

ANA PALACIO LEAVING WORLD BANK

4. (U) The Bank's legal director, who was Spain's Foreign
Minister under President Aznar, has announced her departure
as of April 15. Expansion writes that her departure is one
more sign of diminishing Spanish presence in important
international economic organizations. Rodrigo Rato left his
post as head of the IMF last fall. EU Commissioner for
Economic and Monetary Affairs Joaquin Almunia is likely to
leave his job next year. Jose Manuel Gonzalez Paramo is
likely to leave the board of the European Central Bank soon.
One exception: former Spanish Central Bank President Jaime
Caruana remains in the IMF as head of the influential markets

MADRID 00000287 002.2 OF 002


division. There is still discussion in the media about the
possibility of Spain joining the G-8, although the GOS has
not formally applied for membership. The opposition
conservative PP part would like Spain to join, but it
recognizes that, realistically, this could not happen before
2012. (Expansion, 3/5/08)

BARCELONA JUDGE ORDERS WEBSITE SELLING COUNTERFEIT GOODS
BLOCKED

5. (U) On March 3, a Barcelona judge ordered a website that
supposedly sells counterfeited products from China blocked to
Spanish users. This is the first time this has happened in
Spain. The National Police and the President of the
Association of the Defense of Namebrands (ANDEMA), Jose Luis
Bonet, have underscored the importance of this action as a
stepping stone to pursue other such sites. (Terra)

BBVA IS WORLD LEADER IN TRADE FINANCE

6. (U) According to Dealogic numbers, last year the Spanish
bank had 8.3% of the global market in this year and financed
deals worth USD 9.3 billion, making it the leader in trade
finance, exclusive of aircraft and shipping. Citi came in
fourth place and Santander in 11th place. (Expansion, 3/5/08)

FERROVIAL WINS 3 SERVICES CONTRACTS

7. (U) Spanish construction group Ferrovial was awarded three
service contracts totaling 42.5 million euros. One is to
manage buildings at schools, sports centers, and
administration offices for the Madrid autonomous community
(region) government. This expands its presence in the Madrid
community, where it already manages university, hospital, and
jail buildings. Another contract is to manage a 24 hour
emergency call center in Valencia for the autonomous
community government, and the third is to maintain 264
kilometers of highway in Valencia for the national public
works ministry. (Terra 2 Mar)

RENAULT SPAIN SHOWING SIGNS OF GROWTH

8. (U) Renault Spain is finally seeing the light at the end
of the tunnel after three years of struggling due to the lack
of success of the Modus model made at its Valladolid plant.
With the introduction of a new Megane model at its Palencia
plant, the company plans to hire 4,200 workers and expand its
2008 production by 7.8 percent to 303,000 vehicles, the first
growth in four years. The firm is not expected to approach
its 2003 production level of 547,000 vehicles until the
Valladolid plant begins to produce a new model sometime after
2009.
AGUIRRE

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