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Cablegate: Madrid Weekly Econ/Commercial Update May 19 - May

VZCZCXRO2181
RR RUEHAG RUEHDF RUEHIK RUEHLZ RUEHROV
DE RUEHMD #0583/01 1441527
ZNR UUUUU ZZH
R 231527Z MAY 08
FM AMEMBASSY MADRID
TO RUEHC/SECSTATE WASHDC 4835
INFO RUCNMEM/EU MEMBER STATES COLLECTIVE
RUEHLA/AMCONSUL BARCELONA 3444

UNCLAS SECTION 01 OF 02 MADRID 000583

SIPDIS

STATE FOR EUR/WE AND EEB/IFD/OMA

E.O. 12958: N/A
TAGS: EAGR ECON EFIN EINV KGHG SENV SP
SUBJECT: MADRID WEEKLY ECON/COMMERCIAL UPDATE MAY 19 - MAY
23

REF: MADRID 00566

MADRID 00000583 001.2 OF 002


Table of Contents:

ECON/ETRD/KIPR/ENRG/TBIO:DCM Pays Courtesy Call on new
Secretary of State for Trade
EFIN: GOS announces "twin peaks" financial regulatory system
for Spain
ECON/EINV: Securities and Exchange Commission (SEC) letter to
Repsol
EINV/ELTN: Abertis wins big Pennsylvania road project
EFIN: Delinquency rate rises, although it is still below
the European average
ECON/EINV: Minister of Industry prioritizes the U.S.
ENRG: Abengoa CEO says Spain is failing on biofuels use

DCM PAYS COURTESY CALL ON NEW SECRETARY OF STATE FOR TRADE

1.(U) DCM met with the new Secretary of State for Trade,
Silvia Iranzo Gutierrez, on May 19, 2008. DCM used the
opportunity to deliver the Iran critical needs equipment
demarche (reftel) and to reiterate our interest in working
with Spain on copyright-related intellectual property rights
issues. DCM reviewed current priorities: Doha, agricultural
biotechnology, food security, and renewable energy. Iranzo
thanked the DCM for the call and said she was interested in
working with us. She is still forming her personal staff so
she took the DCM,s call with no staff present. (Bio Note:
Iranzo is a senior career civil servant economist. Prior to
assuming her current position, she worked at the Bank of
Spain as the head of Country Risk Division. Iranzo was born
in San Sebastian in 1958, is married and has four children.
Her father was a career Ministry of Industry employee who was
posted for a number of years in San Francisco. As a result,
Iranzo speaks excellent American accented English.)

GOS ANNOUNCES "TWIN PEAKS" FINANCIAL REGULATORY SYSTEM FOR
SPAIN

2. (U) On 5/22/08, Second Vice President and Finance Minister
Pedro Solbes announced that that the National Commmission for
Securities Markets (CNMV) will be abolished and that a
National Commission for Financial Services (CNSF) will be
created in its place. Under the new regulatory architecture,
the Bank of Spain will assume the responsibility for
monitoring solvency for insurance companies and investment
companies, as well as continue to monitor solvency in banks
and savings and loan associations. The new CNSF will ensure
that investors, savers and insurance consumers are protected.
In the past, the CNMV was only responsible for protecting
investors, rights. This reform has been received quite well
by market observers, although as Expansion pointed out in an
editorial, the success of the new regulatory scheme will
depend in large measure on the independence afforded the CNSF
and the resources afforded the new regulatory entity.
Expansion considers the Bank of Spain to be independent and
adequately staffed. (Note: Under the so-called twin peaks
financial regulatory system, one regulator protects consumers
and another regulator monitors and regulates the financial
entities, solvency. Australia and a number of other
European countries already have such regulatory systems. The
UK combines all these functions under one regulator. Some
observers believe that the Northern Rock banking failure
demonstrated a fatal flaw in such a system as the regulator
could not separate its solvency and consumer protection
mandates in such a way as to ensure the bank,s solvency.)

SECURITIES AND EXCHANGE COMMISSION (SEC) LETTER TO REPSOL

3. (U) El Pais reports that on August 28, 2007, the SEC sent
a letter to Repsol asking for information on Repsol,s
investments in Iran and Cuba. El Pais characterizes the
letter as having an "inquisitorial tone." Repsol reportedly
responded by saying that it had not made a final investment
decision with respect to Iran. (Note: Repsol,s response was
presumably sent prior to the company,s reported decision to
desist from investing in phase 13 of the South Pars gas
project.) With respect to Cuba, the company told the SEC
that in 2000 it signed an agreement with Cuba to explore for
oil&gas in seven blocks in Cuban territorial waters, but that
so far nothing had been found. (El Pais, 5/18/08)

ALBERTIS WINS BIG PENNSYLVANIA ROAD PROJECT

4. (U) Abertis, together with Citigroup and Criteria, will
pay USD 12.8 billion to manage for 75 years the Pennsylvania
Turnpike between Philadelphia and Pittsburgh. This is an 801

MADRID 00000583 002.2 OF 002


km stretch of road. Abertis beat Goldman Sachs/Transurban
and Macquarie/Cintra to win the contract. (El Pais, 5/20/08)

DELINQUENCY RATE RISES, ALTHOUGH IT IS STILL BELOW THE
EUROPEAN AVERAGE

5. (U) At this time, roughly 1.2% of borrowers are behind on
their payments, compared with 0.66% in March 2007. This is
still better than the average EU rate of 2.5%. And it is
still very low compared with the 8% delinquency rate Spain
had in 1993 at the height of a financial crisis then. Still,
it is one more piece of bad economic news. (El Pais, 5/20/08)

MINISTER OF INDUSTRY PRIORITIZES THE U.S.

6. (U) Speaking before the Senate on May 19, Minister of
Industry, Tourism and Trade Miguel Sebastian said that given
the current exchange rate, it was beneficial for Spanish
companies to invest in the U.S., and that he would encourage
this. The Minister emphasized especially small and medium
sized businesses. The article mentions the April 24 meeting
that Ambassador Aguirre had with Minister Sebastian, and that
Sebastian wants to strengthen U.S.-Spain ties. (Expansion,
5/20/08)

ABENGOA PRESIDENT STATES SPAIN HAS FAILING MARKS ON BIOFUELS
USE

7. (U) Sustainable solutions in the transportation industry
are lacking according to Abengoa Bioenergy President Javier
Salgado. He believes that the central government should set
mandatory blending requirements through a ministerial
order/decree. (Note: Recently, the GOS did announce modest
mandatory blending requirements. However, they will only
take effect in 2009.)
Aguirre

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