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Cablegate: Madrid Weekly Econ/Commercial/Ag Update - March 31

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PP RUEHAG RUEHDF RUEHIK RUEHLZ RUEHROV
DE RUEHMD #0393/01 0981516
ZNR UUUUU ZZH
P 071516Z APR 08
FM AMEMBASSY MADRID
TO RUEHC/SECSTATE WASHDC PRIORITY 4577
INFO RUCNMEM/EU MEMBER STATES COLLECTIVE
RUEHBR/AMEMBASSY BRASILIA 0624
RUEHLA/AMCONSUL BARCELONA 3379

UNCLAS SECTION 01 OF 02 MADRID 000393

SIPDIS

SENSITIVE
SIPDIS

DEPARTMENT FOR EUR/WE AND EEB/IFD/OMA

E.O. 12958: N/A
TAGS: EAIR ECON EFIN EIND EINV ENRG EPET SOCI SP
SUBJECT: MADRID WEEKLY ECON/COMMERCIAL/AG UPDATE - MARCH 31
APRIL 4


MADRID 00000393 001.2 OF 002


Table of Contents:

1. ECON: Business activity declining
2. SOCI/ECON: Call for immigrants
3. ECON: Ex-Finance Minister Cristobal Montoro to coordinate
PP economic policy
4. EIND: National Competition Authority (CNC) to open
investigation into egg, bread, chicken industries
5. ECON/EFIN: Madrid Autonomous Community to do more to
attract, keep foreign investment
6. EAIR: Open Skies Agreement bringing U.S., Spain closer
7. EAIR/ENRG: Boeing Spain announces first-ever airplane fuel
cell battery
8. ECON/EFIN: Construction firms to bid on Pennsylvania
Turnpike project
9. EINV/EPET: Repsol begins major exploration project near
Brazil

BUSINESS ACTIVITY DECLINING

1. (U) Manufacturing and services sector surveys indicate
that Spain experienced a notable decline in economic activity
this past month. The March Spanish purchasing managers index
(PMI) shows a 16 point drop from a year ago, the sharpest
decline in the survey's 9-year history. Local businesses
reported a decline in new orders and lower economic activity
overall. Manufacturing data also showed a similar decline in
activity. The Financial Times says that this is leading to
fears that Spain will experience the a hard landing. (FT,
4/4/08)

CALL FOR IMMIGRANTS

2. (U) Due to Spain's aging population and low birth rates,
157,000 new immigrants will be needed to fill jobs each year
until the year 2020, according to a study from the Fundacion
Empresa y Sociedad. (Comment: We believe the current inflow
of immigrants seeking to enter the labor force is even
greater than this amount.) (Metro 4/3)

EX-FINANCE MINISTER CRISTOBAL MONTORO TO COORDINATE PP
ECONOMIC POLICY

3. (U) The former minister is closely associated with another
former Finance Minister, Rodrigo Rato. (Comment: Rajoy's
choice leaves commentators wondering what job (if any) will
be offered to his supposedly star recruit, Manuel Pizarro,
not to mention what will happen with other PP economic
heavyweights such as Juan Costa and Miguel Arias. Rajoy is
certainly choosing his own team and keeping his own counsel
in doing so.) (ABC, 4/3/08)

NATIONAL COMPETITION AUTHORITY (CNC) TO OPEN INVESTIGATION
INTO EGG, BREAD AND CHICKEN INDUSTRIES

4. (U) The CNC is reported to be reviewing e-mails, internal
documents, and even an August 29, 2007 press release to see
whether industry associations engaged in anti-competitive
practices such as "recommendations" to members and/or
"conscious parallel" pricing. Explicit price-fixing deals
are not expected to be found. Specifically, the food and
beverage association (FIAB), the chicken association
(Propollo), and the egg association (Improvo) and a number of
other associations are under investigation. (Comment: The
CNC probe is likely to be followed with considerable
interest, as there are a lot of complaints about price hikes
for basic foodstuffs.) (El Pais, 4/3/08)

MADRID AUTONOMOUS COMMUNITY TO DO MORE TO ATTRACT, KEEP
FOREIGN INVESTMENT

5. (U) The regional government is working with the Madrid
Chamber of Commerce, which already has offices in Mexico
City, Miami, Sao Paulo and Shanghai. In 2008, offices in New
York and Tokyo will be opened. (Comment: The PP- governed
Madrid regional government does not think that the national
PSOE government treats Madrid well, so it plans to do more to
attract and keep foreign investment, much as Catalonia and
the Basque Country already do.) (Expansion, 4/1/08)

OPEN SKIES AGREEMENT BRINGING U.S., SPAIN CLOSER

6. (U) The Open Skies agreement that went into effect on
March 27 will result in 15 new flights a week between Spain
and the U.S. by Iberia, American, Continental, and Delta.
Budget airline Ryanair has expressed interest as well. (Metro
4/2)

MADRID 00000393 002.2 OF 002

BOEING SPAIN ANNOUNCES FIRST-EVER AIRPLANE FUEL CELL BATTERY

7. (U) At an April 3 event attended by Ambassador Aguirre and
the GOS Secretary General of Industry, Boeing Spain announced
that it has flown a manned airplane powered by hydrogen fuel
cells - the first time this has happened in aviation history,
according to the company. The airplane and fuel cell
technology were created at Boeing,s Research and Technology
Europe Center in Madrid with assistance from industry
partners from various countries. Three test flights took
place in February and March 2008 at the airfield in Ocana,
south of Madrid. On each of the flights, the test pilot
relied solely on fuel cell power while cruising at 3,300 feet
for 20 minutes. Boeing does not expect that fuel cells,
which have zero carbon dioxide emissions, will ever be able
to provide primary power for large passenger airplanes. But
company researches believe the technology could power smaller
aircraft and be applied to secondary power units to improve
environmental performance. (All media, Boeing press release,
Embassy)

CONSTRUCTION FIRMS TO BID ON PENNSYLVANIA TURNPIKE PROJECT

8. (U) ACS and Abertis have agreed to present a joint bid.
Initially they were going to bid separately, but the
tightening credit conditions have made this impossible. The
two companies, bid is being financed by Citibank, UBS and
Santander. Ferrovial subsidiary Cintra is also bidding on
the project and is being financed by Macquarie, an Australian
bank. The Australian construction firm, Transurban, is the
third bidder. Morgan Stanley is advising the state of
Pennsylvania on the USD 15 billion 800 km project. (Expansion
3/31/08)

REPSOL BEGINS MAJOR EXPLORATION PROJECT NEAR BRAZIL

9. (U) In the upcoming four years, Repsol plans to spend the
majority of its investment resources (over 9 billion euros)
in exploration and production in three primary regions: 1.
the Gulf of Mexico/Brazil, 2. North Africa (including
Algeria) and 3. Trinidad and Tobago/Latin America. This past
March, Repsol, as part of a larger consortium, began
exploration activities in waters off the coast of Brazil.
This project in Cuenca de Santos is considered to be one of
the largest projects for Repsol under its 2008-2012 strategic
plan. (Expansion, 4/2/2008)


AGUIRRE

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