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Cablegate: Spanish President Zapatero Calls for Renegotiation

VZCZCXRO8178
RR RUEHLA
DE RUEHMD #1039 2961108
ZNR UUUUU ZZH
R 231108Z OCT 09
FM AMEMBASSY MADRID
TO RUEHC/SECSTATE WASHDC 1369
RUEATRS/DEPT OF TREASURY WASHDC
INFO RUEHLA/AMCONSUL BARCELONA 4167
RUCPDOC/DEPT OF COMMERCE WASHDC
RHEHNSC/NSC WASHDC

UNCLAS MADRID 001039

SENSITIVE
SIPDIS

STATE FOR EUR/WE AND EEB/IFD/OMA;
TREASURY FOR OIA:R.JOHNSTON AND OTP:JHARRINGTON;
COMMERCE FOR 4212/DON CALVERT

E.O. 12958: N/A
TAGS: EFIN SP
SUBJECT: SPANISH PRESIDENT ZAPATERO CALLS FOR RENEGOTIATION
OF DOUBLE TAXATION TREATY

Action Request in Para 4

1.(U) In an October 21 speech to the American Business
Council (ABC), President Zapatero announced that the GOS was
ready to begin the process of revising the 1990 bilateral tax
treaty. In a conversation afterwards, Zapatero told post's
Commercial Counselor that the USG should follow up with
Secretary of State for Finance and Budget Carlos Ocana and
his staff.

2.(SBU) The announcement surprised and delighted several
representatives of U.S. companies who were present. The ABC
and the separate American Chamber of Commerce in Spain
(AmCham) have during the past few years regularly called for
renegotiation of the treaty. Spanish companies with
investments in the U.S. have also asked the GOS to
renegotiate. Finance Ministry officials have in the past not
indicated that renegotiation was a priority for them. Just
before Zapatero's meeting with the President last week, the
AmCham sent the Presidency its list of recommended changes to
the treaty. Post will forward that document to State and
Treasury.

3.(SBU) Comment: Our conversations with GOS economic
officials suggest that the GOS' sudden willingness to
renegotiate the treaty is a result of the positive impact of
Zapatero's meeting with the President. In his speech,
Zapatero cited the willingness to renegotiate as one part of
a broad effort by the USG and the GOS to create jobs by
promoting investment in both countries. (Septel reports his
comments on fighting internet piracy; he also announced that
the two governments were considering establishing a bilateral
investment forum.) Our belief that the meeting made the
difference is strengthened by the fact that the Presidency
did not inform the ABC that Zapatero was willing to address
it until October 16, after the Washington visit.

4.(U) Action Request: Post understands that Treasury's
Office of Tax Policy had informed treaty negotiators who work
for Ocana last year, and had informed the Spanish ambassador
in Washington early this year, of USG interest in
renegotiating the treaty. Zapatero's statement is a clear
demonstration of GOS interest. Presidency Economic Office
head Javier Valles said after the speech that the GOS would
like a formal expression of interest from Treasury in order
to proceed. Post seeks guidance on next steps. End Action
Request.
CHACON

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