Search

 

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

VZCZCXRO2305
RR RUEHAG RUEHDF RUEHIK RUEHLZ RUEHROV
DE RUEHMD #2250/01 3481723
ZNR UUUUU ZZH
R 141723Z DEC 07
FM AMEMBASSY MADRID
TO RUEHC/SECSTATE WASHDC 3962
INFO RUCNMEM/EU MEMBER STATES COLLECTIVE
RUEHLA/AMCONSUL BARCELONA 3203

UNCLAS SECTION 01 OF 03 MADRID 002250

SIPDIS

SENSITIVE
SIPDIS

DEPARTMENT FOR EUR/WE AND EEB/IFD/OMA

E.O. 12958: N/A
TAGS: BEXP EAGR ECON EIND EINT EINV ENRG KIPR KNNP
SP
SUBJECT: MADRID WEEKLY ECON/COMMERCIAL/AG UPDATE - DECEMBER
10-14

REF: MADRID 2236

MADRID 00002250 001.2 OF 003


Table of Contents:

ECON: Ambassador talks with Circulo de Confianza business
group
ECON: Solbes forecasts 2008 growth around 3 percent
ECON: ECB study shows high processed food inflation
KNNP/ENRG: Union group suggests reopening nuclear debate
EINT: First Vice President, Telefonica CEO praise broadband
penetration
ECON/ENRG: International press stories suggest varied picture
for Spanish companies
EINV: FCC buys two U.S. waste treatment firms, becomes 2nd
largest in U.S. market
EAGR/BEXP: Export subsidies manipulating market signals
EINV/EIND: Delphi to close another plant
EINV: Las Vegas-style casinos approved for Aragon
EIND: Sustainable tourism plan unveiled

AMBASSADOR TALKS WITH CIRCULO DE CONFIANZA BUSINESS GROUP

1. (SBU) The Ambassador spoke on December 10 to the Circulo
de Confianza, a blue-chip collection of important businessmen
that also includes a few politicians and government
officials. The Circulo meets periodically for off-the-record
conversations with prominent individuals. Spaniards have a
tradition of the &tertulia,8 which in this case meant a
structured way of maintaining a question and answer session.
The Ambassador was asked questions on topics ranging from
foreign policy to the marketing of Spanish wine in the U.S.
Perhaps the biggest benefit of the evening was the
opportunity the Ambassador had to put U.S. Iran and Cuba
policy in perspective for this audience of movers and
shakers. The Ambassador emphasized that U.S. Iran policy was
unchanged and highlighted two critically suspicious aspects
of Iranian behavior: Iran's continued enrichment of uranium
and Iran's continued development of ballistic missiles.
Cuba, as is often the case here, came up when a businessman
asked why the U.S. maintains the embargo against Cuba while
at the same time having normal relations with Vietnam. The
Ambassador turned the question around by saying he was
surprised that the Spanish government maintains normal
relations with a communist dictatorship. He also said that
for both the U.S. and Spain, Cuba was more of a domestic than
a foreign policy matter. He said that it was unthinkable for
the U.S. to have normal relations with Cuba unless
democratization and respect for human rights emerges.

SOLBES FORECASTS 2008 GROWTH AROUND 3 PERCENT

2. (U) The new forecast is down from the Government,s
estimate several months ago of 3.3 percent, but may be on the
high side as many analysts are leaning towards an estimate
closer to 2.5 percent. Solbes also says that despite lower
growth, the budget surplus for 2008 will still be about 1.15
percent of GDP. The Second Vice President and Finance
Minister says he is considering a reduction in corporate tax
rates, although "it is not a priority now." Solbes is also
forecasting that there will be less inflationary pressure.
(Expansion, 12/12/07)

ECB STUDY SHOWS HIGH PROCESSED FOOD INFLATION

3. (U) The European Central Bank compared annualized 2007
processed food (the survey also included bread, cereal and
dairy) inflation in the eurozone. Average processed food
inflation in the Euro area was 4.0 percent. Among the big
euro economies, Spain had the highest increase, 6.8 percent
and France the lowest, 1.3 percent. (Comment: It is not
clear why there is such a big difference. One thing is clear
though. Higher food prices are a subject of national debate
in Spain and something the government is sensitive about.
End comment.) (Financial Times, 12/14/07)

UNION GROUP SUGGESTS REOPENING NUCLEAR DEBATE

4. (U) The federal secretary of the influential PSOE-allied
Union General de Trabajadores (UGT), Ignacio San Miguel, said
on 12/11/07 that Spain should have a calm ("sereno") debate
about nuclear energy. (Comment: This was an important
intervention, as the Socialist government is basically
anti-nuclear power, although President Zapatero did say at a
recent Economist Intelligence Unit seminar that he was not a
"fundamentalist" on the topic.) (Expansion, 12/12/07)

FIRST VICE PRESIDENT, TELEFONICA CEO PRAISE BROADBAND

MADRID 00002250 002.2 OF 003


PENETRATION

5. (SBU) Maria Teresa Fernanda de la Vega and Cesar Alierta
presented the eighth Information Society Report on December
11. According to the report, 75% of Spanish households with
internet access have broadband internet, which is 13
percentage points above the EU average. (Comment: The
high-level Spanish government participation was one more
indication of the Spanish government's treatment of
Telefonica as something of a "national champion." This
treatment is a complicating factor in our efforts to get
Telefonica, Spain's by far and away most important Internet
Service Provider, to crack down on internet piracy. End
comment.) (Expansion, 12/12/07)

INTERNATIONAL PRESS STORIES SUGGEST VARIED PICTURE FOR
SPANISH COMPANIES

6. (SBU) International newspaper stories this week painted a
mixed picture of Spanish companies, prospects. IHT has a
story on the real estate market slowdown called "Spanish real
estate: All work but no sales." The IHT also has a story
entitled "Inditex profit mirrors consumer slowdown." Inditex
owns the well-known Zara clothing brand that has 3500 stores
worldwide. The company is underperforming in Spain, and the
article suggests a link to the weaker construction sector.
Other newspapers reported favorably on Iberdrola,s spinoff
of 20 percent of its renewable electricity unit in an IPO
(reftel). The Financial Times also reports that "Savings in
Endesa greater than Enel expected." (Comment: No doubt about
it, Spain's construction- and consumer-led expansion is
slowing. Some Spanish companies have been very aggressive in
diversifying into other areas, such as construction companies
in the renewable electricity sector. Some companies have
gone heavily international. Whether these efforts will be
enough to compensate for a downturn in housing construction
remains an open question. End comment.) (IHT, 12/13/07; FT
12/13/07)

FCC BUYS TWO U.S. WASTE TREATMENT FIRMS, BECOMES SECOND
LARGEST IN U.S.

7.(U) Spanish construction and services group FCC has bought
two U.S. industrial oils and oil residue treatment companies
from Siemens Water Technologies for 182.5 million dollars.
FCC plans on integrating the companies into its industrial
waste division, making it the second largest player in the
U.S. market. (Reuters, 12/11/07)

EXPORT SUBSIDIES MANIPULATING MARKET SIGNALS

8. (SBU) The European Commission (EC) will now reportedly
subsidize the export of European-produced pork into the world
market. While the practice is permissible under the EU,s
obligations under the Uruguay Round Agreement of the World
Trade Organization (WTO), it is a practice almost completely
abandoned by all other WTO Members, because it is so
trade-distorting. In the current round of WTO negotiations,
the very first objective of WTO Member negotiators was to
agree to a date-certain elimination of export subsidies.

9. (SBU) Unfortunately, the Government of Spain voted in
favor of these production- and trade-distorting subsidies,
ostensibly because Spanish pork producers are struggling
economically with historically high grain prices, relatively
weak pork prices, and a strong Euro. The EC could have
helped hog producers to access competitively-priced feed
ingredients by expediting the biotechnology approvals process
in Brussels. However, it appears that reigniting export
subsidies was more expedient and politically acceptable.

DELPHI TO CLOSE ANOTHER PLANT

10. (U) Bankrupt auto-parts company Delphi announced this
week that it would be closing its plant in Tarazona beginning
in January 2008, leaving 320 workers jobless. The company
will soon present its contract termination proposal for this
closure and for the plant's employees. Also at risk is its
plant in Belchite that currently employs 120 people. Earlier
this year, Delphi closed its 1,600-employee plant in Cadiz,
prompting massive strikes by hundred of thousands of workers
in support of their Delphi colleagues. Ultimately, Delphi
agreed to a 120 million-euro settlement. (Comment: Given the
Cadiz experience, Delphi will presumably approach the
Tarazona closure with more caution. We will continue to
follow this potentially problematic issue. End comment.)
(ABC, 12/11/07)

MADRID 00002250 003.2 OF 003

LAS VEGAS-STYLE CASINOS APPROVED FOR ARAGON

11. (U) The President of the Autonomous Community of Aragon
and a private consortium announced December 13 plans to build
a massive casino complex that would be second only to Las
Vegas. Construction on this 17 billion-euro development
would begin in the second quarter of 2008 with opening of the
first phase predicted for 2010. The development would
include 232 restaurants, 70 hotels and 32 casinos. (print and
TV media 12/13/07)

SUSTAINABLE TOURISM PLAN UNVEILED

12. (U) Tourism Plan Horizon 2020, an initiative by the GOS
to increase demand and spread out the impact of tourism by
extending the season and promoting lesser-known areas. The
Spanish tourism office expects Spain to receive 60 million
visitors by the end of 2007, a 2 percent increase from
2006,s total. Tourism accounts for 10 percent of the
country's GDP. (eTN 12/11/07)

AGUIRRE

© Scoop Media

 
 
 
World Headlines

 

UN: As COVID Deaths Pass Two Million Worldwide, Guterres Warns Against Self-Defeating ‘Vaccinationalism'

With more than two million lives now lost worldwide to COVID-19, the UN Secretary-General appealed on Friday for countries to work together and help each other to end the pandemic and save lives. In a video statement , Secretary-General António Guterres ... More>>

Gordon Campbell: On The Washington Riot And The Georgia Results

Hong Kong and Washington DC. On the same morning, the tyrants in power in Beijing and their counterpart in the White House have shown how they refuse to accept the legitimacy of any different points of view, and the prospect of losing power… More>>

UN: Violent Attempt At US Capitol To ‘overturn’ Election, Shocking And Incendiary

Unsplash/ElevenPhotographs The US Capitol building in Washington D.C. A group of independent UN rights experts released ... More>>

UN: Guterres To Seek Second Five-year Term
António Guterres will be seeking a second five-year term as UN Secretary-General, which would begin in January 2022.... More>>