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