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

VZCZCXRO2139
RR RUEHRN
DE RUEHMD #1982/01 2901608
ZNR UUUUU ZZH
R 171608Z OCT 07
FM AMEMBASSY MADRID
TO RUEHC/SECSTATE WASHDC 3623
INFO RUEHSS/OECD POSTS COLLECTIVE
RUEHLA/AMCONSUL BARCELONA 3121

UNCLAS SECTION 01 OF 02 MADRID 001982

SIPDIS

SIPDIS

EUR/WE, EEB/EFD/OMA

E.O. 12958: N/A
TAGS: EAIR ECON EFIN EIND ELAB KIPR SP EINV
SUBJECT: MADRID WEEKLY ECON/AG/COMMERCIAL UPDATE REPORT -
OCTOBER 8-12


MADRID 00001982 001.2 OF 002


Table of Contents:

ECON/EFIN: Second Vice President and Finance Minister
maintains Spain will still grow by 3.3% in 2008
ECON/ELAB: New minimum wage?
EFIN: Prices rise for basic foodstuffs
KIPR: Minnesota illegal downloading court judgment widely
reported
ECPS: 2 billion euros invested in telecommunications
EIND: Tourism Estimates
EIND/ELAB: Barcelona better than Madrid for business
start-up, housing and quality of life
EAIR: Ministry of Industry unveils plan to strengthen
aeronautical sector

SECOND VICE PRESIDENT AND FINANCE MINISTER MAINTAINS SPAIN
WILL STILL GROW BY 3.3% IN 2008

1. (U) The President of the Bank of Spain, Miguel Angel
Fernandez Ordonez, forecasts 2008 GDP growth of 3% or
possibly somewhat less. The IMF currently forecasts 2.7%
growth for Spain in 2008. (Comment: The lower central bank
forecast is perhaps most interesting, as Fernandez was
appointed to his position by the Socialist government, so he
is demonstrating independence by submitting this lower
forecast. Also, while the IMF is still led by former Partido
Popular Finance Minister Rodrigo Rato, the Zapatero
government cannot claim the Fund's lower growth estimates to
be entirely politically driven, as the IMF is revising growth
estimates downwards for many countries as a result of
financial sector turbulence.) (El Pais, 10/10/07 and
Expansion, 10/10/07)

NEW MINIMUM WAGE?

2. (U) Second Vice President and Finance Minister Pedro
Solbes is in a new public spat with a cabinet colleague, this
time with Minister of Labor Jesus Caldera's proposal to
insert into the ruling Socialist party's electoral program a
commitment to raise the minimum wage from 570 euros to 800
euros a month. (Comment: Caldera is a political heavyweight,
so Solbes is expected to lose this battle, although he will
no doubt seek to delay the implementation of the proposal for
as long as possible. Given all the other inflationary
pressures on the Spanish economy, he can certainly muster
strong economic arguments.) (Expansion 10/10/07)

PRICES RISE FOR BASIC FOODSTUFFS

3. (U) Spaniards notice increases in prices of basic
foodstuffs such as milk, beans, oranges, lemons, etc. During
the month of September, for instance, the price of milk rose
12.7%. According to an Expansion poll, over 90% of Spaniards
say they have noticed the rise in prices of basic food
products. (Comment: What is happening in Spain is not very
different from what is happening in the rest of the world as
a result of greater Asian demand for food plus the shift to
biofuels. It is not clear if these rises will have an
electoral impact in the next parliamentary elections,
expected in March, 2008.) (Expansion, 10/10/07)

MINNESOTA ILLEGAL DOWNLOADING COURT JUDGMENT WIDELY REPORTED

4. (U) Minnesota court USD 220,000 judgment against internet
illegal song downloader Jamie Thomas was widely reported in
the Spanish press. The Spanish articles report that courts
in Spain cannot fine illegal consumer downloaders unless they
can prove a profit motive, i.e. a commercial scale gain.
However, the Spanish Society of Authors and Editors (SGAE -
MPAA is associated with SGAE) maintains that Spanish law does
permit action to be taken against some of the newer websites
(not consumers) such as Ares, Azureus, Sinlamula.com, and
Peliculasonline.net. (Comment: The issue of illegal internet
downloading will be discussed at a November 7-8 intellectual
property rights conference in Madrid organized by the
Ministry of Industry, Tourism and Trade. The U.S. Copyright
Office is sending a representative, who will participate in
the discussions.) (El Pais, 10/9 and 10/07; Expansion,
10/6/07)

2 BILLION EUROS INVESTED IN TELECOMMUNICATIONS

5. (U) Minister of Industry, Tourism, and Commerce Joan Clos
testified in an October 9 Senate committee-level hearing that
no less than 2 billion euros a year was being invested
towards the development of the telecommunications sector in
Spain. He said that the federal government was contributing
between 1.2 and 1.3 billion euros annually towards this goal,
and that regional governments and the private sector were

MADRID 00001982 002.2 OF 002


contributing the rest. Clos told the Senators that
telecommunications was a fast-growing market in Spain, with
recent annual profits of 42 billion euros and an annual
growth rate of 9 percent. He added that Spain was moving
ahead of schedule to lay down high capacity networks,
efficiently manage its radio-electric spectrum, and overall
modernize and increase capacity in its telecommunications
sector.

TOURISM ESTIMATES

6. (U) The number of foreign tourists expected to visit Spain
in 2007 is estimated to be up 2 % from last year. Tourism
Secretary Amparo Fernandez commented on Tuesday that the GoS

SIPDIS
expects 60 million foreign tourists this year cementing
Spain's position as the second-most visited country, after
France. (Herald Tribune)

BARCELONA BETTER THAN MADRID FOR BUSINESS START-UP, HOUSING
AND QUALITY OF LIFE

7. (U) According to a survey by real-estate consultants
Cushman & Wakefield, London was the best EU city in which to
start-up a business, followed by Paris second, Frankfurt
third, Barcelona fourth, and Madrid seventh. The presence of
the two Spanish cities among the top 10 "consolidates the
solidity of the development of Spanish cities and positions
Spain as a reference point with regard to urban business
locations," according to the survey's author.

8. (U) Barcelona, followed by Madrid, also heads up the list
of best residential housing for expatriate executives. In
hotel accommodations, they placed third and fourth,
respectively. Both cities earned high marks for employee
quality of life, with Barcelona first and Madrid third. (El
Pais)

MINISTRY OF INDUSTRY UNVEILS PLAN TO STRENGTHEN AERONAUTICAL
SECTOR

9. (U) This past week, the Ministry of Industry, Tourism, and
Commerce unveiled its 8-year aeronautical strategic plan to
strengthen Spain's civil aviation and aerospace sectors. The
plan envisions an increase in private and public investment
to spur these sectors into tripling the 2005 level of
production by 2016. The strategy envisions that with the
proper strategic investments, earnings from these sectors
would be able to contribute at least 1 percent to the 2016
GDP. The plan proposes greater public-private cooperation
and greater regional government involvement, particularly by
governments in the regions with a greater concentration of
these businesses (Madrid, Andalusia, the Basque region,
Castilla la Mancha, and Catalonia).
AGUIRRE

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