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Cablegate: Madrid Weekly Econ/Ag/Commercial Update Report -

VZCZCXRO4446
RR RUEHRN
DE RUEHMD #1600/01 2320828
ZNR UUUUU ZZH
R 200828Z AUG 07
FM AMEMBASSY MADRID
TO RUEHC/SECSTATE WASHDC 3228
INFO RUEHSS/OECD POSTS COLLECTIVE
RUEHLA/AMCONSUL BARCELONA 2993

UNCLAS SECTION 01 OF 02 MADRID 001600

SIPDIS

SIPDIS

EUR/WE

E.O. 12958: N/A
TAGS: ECON EFIN EIND ENRG ETRD SP EINV EAGR SMIG
SUBJECT: MADRID WEEKLY ECON/AG/COMMERCIAL UPDATE REPORT -
AUGUST 13

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Table of Contents:

EFIN/ECON: Ibex 35 up Friday by 1.84% shortly before closing
EFIN: New takeover law effective 8/13/07
EFIN: GE forms partnership with Catalan firm
SMIG: Spain is the second source of remittances in the world
after the US
ENRG: Spain's petroleum station owners call for subsidies on
renewable fuels
ELTN/PGOV: Opposition parties ask Minister of Infrastructure
to resign

IBEX-35 UP FRIDAY BY 1.84% SHORTLY BEFORE CLOSING

1. (U) This follows Thursday's 3.72% drop. Spain's Dow
equivalent, the Ibex-35, had a rocky week, like most European
stock markets. The market fell by about 4% over the week.
The general and financial press has been full of stories
about the dramatic events on the stock market, particularly
after Thursday's 3.72% fall, the biggest drop since the March
11, 2004 train bombing. Most analysts still believe the
market will recover, but clearly investors are nervous.
Spanish banks and real estate companies have taken the
biggest hits. So far, however, no Spanish banks seem to be
dangerously exposed to bad investments in securities backed
by sub-prime loans, at least so far. Investors want to be
sure though. (Comment: We expect continued turbulence over
the next couple of weeks. One immediate consequence of this
problem is that Spain's major construction groups will find
it more difficult to obtain financing so it is likely that
their big acquisition spree is at an end.) (Expansion,
8/17/07)

NEW TAKEOVER LAW EFFECTIVE 8/13/07

2. (U) The new takeover law implements a 2004 EU directive on
the subject. The law has been commented upon extensively in
the national and international press. The immediate reason
for the commentary is that everybody has the long and
tortured Endesa takeover saga in mind. But, as the Financial
Times reports, the law was also written with the Spanish
"partial takeover" in mind, the practice whereby important
Spanish companies have been able to gain effective control of
companies with minority stakes, and at the same time put
other minority stockholders at a disadvantage. The key
feature of the new law is that companies will be able to buy
up to 30% of a takeover target after announcing a bid, but
they will then also be forced to make an offer to all the
shareholders so that minority shareholders are not
disadvantaged. (Comment: It will be interesting to see
whether the new takeover law, in fact, changes the somewhat
clubbish nature of the way business is done in Spain.) (FT
8/13/07; El Pais 8/13/07; Expansion 8/13/07)

GE FORMS PARTNERSHIP WITH CATALAN FIRM

3. (U) GE forms partnership with a small Barcelona-based
healthcare group to enhance GE "cross-selling" in the growing
healthcare industry. The partnership with the Catalan firm,
USP Hospitales, engendered an admiring article in the
Financial Times, something of a boon to GE Spain's dynamic
CEO, Mario Armero. (FT 8/10/07)

SPAIN IS NOW THE SECOND SOURCE OF REMITTANCES IN THE WORLD
AFTER THE US

4. (U) In three years, Spain has gone from being a net
recipient of remittances to a net source of remittances. In
2006, immigrants in Spain remitted euros 6.8 billion. This
represented 0.7% of Spain's GDP and accounted for almost one
percentage point in Spain's current account deficit of about
8% of GDP. Almost 70% of the money went to Latin America; 6%
went to Morocco, and eastern European countries received
almost 8%. In terms of the importance of remittances from
Spain as a percentage of receiving countries' GDP, the
numbers are: Bolivia (8.5%); Ecuador (3.6%); Senegal (1.9%);
Dominican Republic (1.5%); Colombia (1.25%); Morocco (0.91%);
Romania (0.5%); Peru (0.31%). (Comment: The numbers for
Africa and the Maghreb are still relatively low, but they
will undoubtedly become more important. Bolivia's dependence
on remittances from Spain is truly remarkable.) (Expansion,
8/14/07 citing Bank of Spain numbers)

SPAIN'S PETROLEUM STATION OWNERS CALL FOR SUBSIDIES ON
RENEWABLE FUELS

5. (U) Spain's petroleum station owners are calling on
national and regional governments to subsidize Spain's move
towards the use of renewable fuels. One of the Spanish

MADRID 00001600 002.2 OF 002


associations of petroleum station owners (Aevecar) has
petitioned the Spanish Government for subsidies to defray the
costs of installing new equipment that will be required to
meet the European Union's renewable fuels-use requirements.
According to Aevecar, the average cost per station will be
from the 30-50 thousand euro range, to include the costs of
new storage tanks and pumping equipment.

6. (U) The other important petroleum station owner's
association (CEEES) has announced that the Government of the
Autonomous Region of Valencia has agreed to subsidize half
the costs of 61 renewable-fuels use projects for refueling
station owners. According to the CEEES press release, 48 of
the projects are new stations and 13 are equipment
replacement in now existing stations. The subsidies will
increase by more than ten times the number of petroleum
stations dispensing renewable fuels in Valencia.

OPPOSITION PARTIES ASK MINISTER OF INFRASTRUCTURE TO RESIGN

7. (U) On August 14, the Spanish Congress convened a special
session to question the Minister of Public Works and
Infrastructure, Magdalena Alvarez, over the numerous train,
electricity, and airport infrastructure failures occurring in
the Catalonian region over the past months. Listing the
blackouts, train derailments and delays, and problems with
Barcelona's El Prat airport, members of the PP and other
opposition parties demanded that Minister Alvarez resign.
Minister Alvarez refused, saying that she would only leave if
President Zapatero requested that she do so. During the
five-hour session, the Minister defended her work at the
ministry, outlining improvements in investments in
Catalonia's infrastructure during her tenure. She admitted
that there had been numerous problems, but claimed that some
of the failures were beyond the Administration's control.
She also said that that the Ministry had spent much more on
improving Catalonia's infrastructure than the previous
administration, perhaps suggesting that some fault be placed
with the former administration's "inadequate" investment in
this region's infrastructure.
AGUIRRE

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