VZCZCXRO6860
RR RUEHAG RUEHDF RUEHIK RUEHLZ RUEHROV
DE RUEHMD #0060/01 0121323
ZNR UUUUU ZZH
R 121323Z JAN 07
FM AMEMBASSY MADRID
TO RUEHC/SECSTATE WASHDC 1604
INFO RUCNMEM/EU MEMBER STATES COLLECTIVE
RUEHLA/AMCONSUL BARCELONA 2347

UNCLAS SECTION 01 OF 02 MADRID 000060 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
EUR/WE 
 
E.O. 12958: N/A 
TAGS: ECON ETRD EAGR TBIO SP EINV EAIR UK
SUBJECT: MADRID WEEKLY ECON/AG/COMMERCIAL UPDATE REPORT 
 
 
MADRID 00000060  001.2 OF 002 
 
 
EAGR: Biotechnology corn plantings 
ETRD: Spain's new Tobacco control law 
EAIR: Germany LTU to buy Air Madrid 
ECON: Spain's rural decline 
ETRD: Lily to triple pharmaceutical production 
 
 
The future of biotechnology corn looks bleak 
 
¶1. (U) Greenpeace Spain recently posted its calendar year 
(CY) 2006 environmental report card for Spain.  In its 
analysis, posted to their Website 
(http://www.greenpeace.org/espana/), it announced that one of 
the most important developments in Spain during CY 2006 was a 
reduction in biotechnology corn plantings vis-a-vis previous 
year's plantings. 
 
¶2. (U) However, during marketing year (MY) 2006, Spanish corn 
producers actually increased biotechnology corn plantings as 
a percent of total corn hectares planted.  While MY 2006 
planting statistics are not yet final, we know that Spanish 
farmers planted at least 53,700 hectares of biotechnology 
corn, and using that statistic (we expect that final numbers 
will be even higher), biotechnology corn comprised 14.8 
percent of total corn planning's, up from last year's 12.8 
percent ratio.  Spanish corn farmers did indeed decrease 
total planted corn hectares (all varieties and types) in both 
MY 2005 and again in MY 2006, but the reductions were 
related, in large part, to prevailing drought conditions, and 
not to non-science based political pressure on them to quit 
using agricultural biotechnology. 
 
IMPACT OF SPAIN'S NEW TOBACCO CONTROL LAW 
 
¶3. (U)  January 1 marked the first anniversary of Spain's 
tough anti-tobacco law, which banned smoking in the work 
place and most other public places and limited smoking in 
bars and restaurants.  The press ran numerous articles 
assessing the alleged successes and failures of the 
legislation.  On the success front, the law is credited with 
the first ever decline in tobacco sales in Spain.  Sales 
declined by 3.12 percent in 2006 as compared to 2005, and the 
head of Spain's National Commission for the Prevention of 
Tobacco Use told the media that this decline was a direct 
result of the new law.  The Health Ministry also claims that 
500,000 Spaniards quit smoking during the course of 2006. 
Most observers also claim that the ban on smoking in the 
workplace is being complied with.  On the negative side, only 
15 percent of Spain's restaurants, bars, and discos have 
elected to become smoke free or to construct the special 
isolated smoking sections required under the law.  And very 
few Spanish regions, which are charged with implementing the 
law, are actually enforcing the legislation (Catalonia 
appears to be the exception).  Also on the negative side is 
the release by several Spanish regions, including the 
opposition-controlled Madrid region, of implementing 
instructions that are far more lenient than the national 
legislation and are clearly designed to undermine the new 
law.  The national administration is currently fighting these 
regions in the courts. 
 
Germany's LTU will buy Air Madrid 
 
¶4. (U) According to the Spanish Ministry of Public Works, the 
German airline LTU will acquire bankrupt Air Madrid.  The 
deal was made public on January 8, although rumors had been 
circulating in the press during the previous week.  The 
announcement comes some three weeks after Air Madrid abruptly 
ceased operations just before the Ministry of Public Works 
withdrew its license to operate.  The cessation, just as the 
busy Christmas travel season began, stranded thousands of 
passengers worldwide.  The Ministry of Public Works ended up 
chartering planes to fly many of these passengers home. 
Under the terms of the agreement, LTU will operate most of 
Air Madrid's transatlantic routes (primarily to South 
America) and will honor previously acquired tickets to fly up 
until the end of June (with a surcharge of Euros 250 per 
flight.)  It also appears that LTU will retain close to 50 
percent of Air Madrid's staff. Other Air Madrid employees 
continue to fight for the payment of their salaries. 
 
Seeking Ways to Halt Spain's Rural Decline 
 
¶5. (U) One effect of Spain's long run of strong economic 
growth has been the loss of inhabitants in many rural 
villages and towns.  According to the Financial Times, 
Castilla y Leon, Spain's largest region, lost more than one 
million residents between 1950 and 2001.  Some village and 
regional leaders, however, have come up with creative 
 
MADRID 00000060  002.2 OF 002 
 
 
approaches to try to stem the exodus to larger towns and 
cities, albeit with only limited success.  For example, there 
are currently four "English villages" run by the firm Pueblo 
Ingles, which offer Spanish executives immersion courses in 
English, given by native speakers who trade their language 
skills for vacations in rural Spain.  The hosting villages 
receive steady income from the teachers and students, 
presumably giving residents a reason to stay.  A mayor in the 
region of Aragon, seeking new blood for his village, traveled 
to Argentina and Romania to recruit immigrant families with a 
promise of jobs, free education, and favorable loans.  He had 
some initial success and his approach was copied by some 
other villages.  However, inevitably, a good-sized percentage 
of the new arrivals found rural life boring and moved on to 
Spain's larger cities.  Other communities have used European 
Union funds to promote ecotourism and rural tourism projects 
- again with modest success.  Rural exodus is and will remain 
a concern for regional and especially local governments - 
with fewer inhabitants and fewer tax payers, services become 
more expensive to deliver to the mostly older remaining 
residents in rural areas. 
 
Lily plans to triple its Pharmaceutical production in Spain 
in 2008 
 
¶6. (U) Spain Lilly President Javier Ellena announced the 
planned expansion on December 25.  The company intends to 
hire 100 additional professionals, although Ellena said that 
it would be difficult to find sufficient numbers of qualified 
people.  Last year, Lily's revenues grew by 15%, considerably 
higher than the 6.6% industry average.  Nevertheless, Ellena 
posted that the R&D pharmaceutical investment climate in 
Spain remains problematic because of price, tax and patent 
issues.  Lilly is particularly interested in maintaining its 
patent on Zyprexa until 2011 because this drug represents 40% 
of its revenues in Spain.  (Note: We believe this in one of 
the drugs scheduled form patent expiry prior to 2011 because 
this drug represents 40% of its revenues in Spain.  (Note: We 
believe this is one of the drugs scheduled for patent expiry 
prior to 2011 because it only benefited from process, not 
product, protection when the international commitments to 
provide product patent protection.  Product patent protection 
became available in Spain in patent protection for a number 
of successful drugs that only benefit from process patent 
protection.  In return, the companies are willing to 
co-finance an R&D "consortium".  The companies are also 
pursuing court cases in Spain, several of which they say they 
have won, although the companies say the Spanish legal route 
is expensive and probably will not provide most of the patent 
changes they seek.  USG and Swill government lawyers do not 
concur with the firms' assertion that TRIPS obliges the 
Spanish government to extend retroactive product patent 
protection to drugs that have process patent protection. 
Embassy Madrid continues at various levels to encourage the 
Spanish government to continue its dialogue with the industry 
to improve the investment climate for the R&D-based 
pharmaceutical industry. 
Aguirre