Cablegate: Madrid Weekly Econ/Ag/Commercial Update Report

VZCZCXRO4660
RR RUEHAG RUEHDF RUEHIK RUEHLZ RUEHROV
DE RUEHMD #3093/01 3611437
ZNR UUUUU ZZH
R 271437Z DEC 06
FM AMEMBASSY MADRID
TO RUEHC/SECSTATE WASHDC 1509
INFO RUCNMEM/EU MEMBER STATES COLLECTIVE
RUEHLA/AMCONSUL BARCELONA 2308

UNCLAS SECTION 01 OF 02 MADRID 003093

SIPDIS

SENSITIVE
SIPDIS

EUR/WE

E.O. 12958: N/A
TAGS: ECON ETRD EAID EAGR TBIO SP EINV EWWT PREL
EAIR, UK, KIPR
SUBJECT: MADRID WEEKLY ECON/AG/COMMERCIAL UPDATE REPORT

REF: A. MADRID 2362

B. LONDON 7429

MADRID 00003093 001.2 OF 002

1. ECON: Spanish economic growth
2. EAGR: Ethanol production
3. EAID: Spain sends aid to Phillippines
4. ECON: Spain to stop subsidizing energy prices
5. EAIR: New direct flight to Gibraltar
6. EAID: 700 million USD to UNDP
7. KIPR: Anti-pirating campaign

Spanish Economic Growth in 2006 Higher than Forecast - 2007
Growth will also be Strong:

1. (U) The Spanish Cabinet released numbers on December 22
estimating 2006 growth will be 3.8% instead of 3.4% as
predicted earlier. Higher growth will translate into sharply
higher revenues in 2006, amounting to 1.4% of GDP instead of
the 0.9% of GDP forecast earlier. Next year, the Spanish
government estimates the economy will grow by 3.4% instead of
the 3.2% predicted last July. (Comment: The government
argues that growth is becoming more "balanced". This is a
politically important assertion because many observers
believe that Spain cannot rely indefinitely on construction
and consumer spending to prop up growth, particularly given
Spain's current account deficit. The government points out
that the growth in internal demand is tapering off somewhat.
It also says that investment in capital goods is up
(important because such investment should increase
productivity). There are some numbers to back up these
assertions. The government also forecasts increases in
exports, probably the hardest thing for Spain to achieve
given current strength of the euro. The bottom line though
for now is that Spain continues to enjoy higher than average
Eurozone economic growth and is the only big EU economy with
a budget surplus. The latest numbers released by the
government suggest that the economy will be in good shape in
time for the March 2008 parliamentary elections so other
issues will probably overshadow the electoral contest.)

Spanish Ethanol Production - U.S. Wheat Export Prospects

2. (U) The prospects for additional U.S. high-quality wheat
shipments to Spain may be further dampened as a result of
Abengoa's, Spain's largest producer of ethanol,
recently-announced decision to switch from wheat-to-barley as
its primary raw-material source for ethanol production. This
decision will mean an additional 50 thousand tons of wheat
per month available within the Spanish market. While the
wheat in question is very likely to have been of the poorest
quality available on the Spanish market, it may free-up
better-quality Spanish wheat to be milled, which, in turn,
may require less high-protein, high quality Hard Red Spring
wheat (available for the United States) as a compliment to
produce the required flour quality.

3. (U) U.S. high-quality wheat exports to Spain this year
have been languishing because; Spanish importers and flour
millers have been resisting the very high world prices. The
Abengoa decision may play into importers/millers favor with
additional wheat in the market place.

AECI sends emergency assistance to the Philippines Typhoon
Victims:

4. (U) On December 3, the Spanish Agency for International
Cooperation (AECI) dispatched a Defense Ministry Hercules
transport aircraft with humanitarian aid for the people
affected by Typhoon Durian. The assistance consisted of a
water treatment plant, a water distribution unit, 600 cans to
transport 10 liters of water each, two pallets of waterproof
tarps, tents, two electric generators, blankets, a field
hospital, medical supplies, and three pallets of medicines.
The pharmaceutical shipment included emergency supplies for
10,000 people for three months, as well as specialized
pediatrics, obstetrics, and traumatology medicines. In
addition, a five-person sanitary team from a Spanish NGO, an
expert in water purification, and one other expert from
AECI's Humanitarian Aid office traveled to the zone on
December 4. AECI also made an initial donation of 200,000
USD to help cover the cost of basic necessities - water and
food - for thousands of Philippine families in the affected
provinces.

Spain to eliminate tariff deficit in electricity supply market

5. (U) The GOS announced on December 13 that it will
eliminate the tariff deficit in its electricity supply market

MADRID 00003093 002.2 OF 002

by 2010-2011. The tariff deficit stood at 3.8 trillion euro
(5.05 trillion USD at 1.33 euro/dollar) in 2005. Speaking to
Parliament, Spain's Minister of Industry, Tourism, and Trade,
Joan Clos, stated that the average electricity tariff for
domestic consumers will increase by 2.8 percent in 2007, a
rate in line with the forecast rate of inflation. On
December 14, Clos submitted draft legislation to CNE, Spain's
energy regulator, with the aim to promote reduced energy
consumption. Clos has previously been vocal in his view that
the GOS can no longer continue to subsidize energy prices,
noting that it is important to change "consumption habits in
favor of energy savings." Clos also stated that this change
"should be taken alongside the development of renewable
energy."

First direct flight between Madrid and Gibraltar lands on
December 16

6. (U) As a result of the historic September 18 Tripartite
Accord on Gibraltar, the first direct flight from Madrid to
Gibraltar took place on December 16. An Iberia A-319 Airbus
departed from Madrid Barajas airport to complete the one hour
flight. On board were representatives from Spain's Ministry
of Foreign Affairs, including Deputy Foreign Minister
Bernardino Leon and Director General for North America and
Europe Jose Maria "Pepe" Pons. Representatives from the UK
Embassy in Madrid were also on board. The passengers were
met by Chief Minister of Gibraltar, Peter Caruana, upon
arrival at North Front airport. The flight represents one of
the most visible successes of the accord, and also marks the
first time in 50 years that two GOS officials have publicly
set foot on the isthmus between Gibraltar and Spain. Spain
has always claimed that the isthmus, where the airport is
located, was never ceded under the Treaty of Utrecht. See
REFTEL A and B for background on the Gibraltar Tripartite
Accord.

Spain gives USD 700 million to UNDP to finance UN Millenium
development goals

7. (U) Prime Minister Zapatero announced in New York December
18 that Spain had donated USD 700 million to UNDP to finance
projects designated to advance the UN's Millenium Development
Goals (MDG) agenda. The agreement was signed that same day
by Spanish Agency for International Cooperation (AECI) head
Leire Pajin and UNDP Administrator Kemal Dervis. The Spanish
funds will be used to stand up a "UN Fund for the
Accomplishment of the MDGs" that will be jointly administered
by Spain and the UN. The new fund, which will disburse the
Spanish monies over the next four years (2007-10), will
finance programs in seven areas: (1) good governance; (2)
gender equality; (3) basic social needs, including youth
employment; (4) economic development (including private
sector development); (5) environment and climate change; (6)
conflict prevention and peacekeeping; and, (7) cultural
diversity and development. In her remarks, Pajin said that
Spain had already increased its funding of UN organizations
(beyond normal dues assessments) from 93 million euros in
2005 to 481 million euros in 2006 and that this additional
contribution of 528 million euros (700 million USD) further
demonstrated Spain's commitment to the UN and the MDGs.

Ministry of Culture initiates second antipirating campaign

8. (U) In a December 14 ceremony chaired by the Culture
Ministry's Technical Secretary General, Concepcon Becerra,
the Ministry of Culture presented the second part of its
campaign entitled "Defend your Culture Against Pirating."
The campaign, a continuance of measures programmed on April
8, 2005 under the Intellectual Property Rights Integral Plan
for the Elimination of Violating Activities (better known as
the Anti-pirating Plan), is programmed to spend 2.8 million
euros. The campaign's message rejects the tolerance of
piracy and underscores the need to protect the work and
cultural investment of both creators and producers. It is
also designed to defend the social and economical riches
generated by culture and its community. The focal point of
the campaign is to utilize the media, radio, television,
internet, movie theaters and magazines to broadcast
anti-pirating images and ads throughout the months of
December and early January.
AGUIRRE

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