VZCZCXRO4736
RR RUEHAG RUEHDF RUEHIK RUEHLZ RUEHROV
DE RUEHMD #1075/01 1551737
ZNR UUUUU ZZH
R 041737Z JUN 07
FM AMEMBASSY MADRID
TO RUEHC/SECSTATE WASHDC 2685
INFO RUCNMEM/EU MEMBER STATES COLLECTIVE
RUEHLA/AMCONSUL BARCELONA 2774

UNCLAS SECTION 01 OF 02 MADRID 001075 
 
SIPDIS 
 
SIPDIS 
 
EUR/WE 
 
E.O. 12958: N/A 
TAGS: BEXP EAGR EAIR ECON EFIN EIND ETRD TBIO SP
EINV, UK 
SUBJECT: MADRID WEEKLY ECON/AG/COMMERCIAL UPDATE REPORT - 
MAY 28 
 
MADRID 00001075  001.2 OF 002 
 
 
SENV: Prestige's disaster continues 
EINV/ETRD: Spanish Economy slowing down 
EFIN:PTER: Real estate boom linked to Money Laundering 
EFIN/ETRD: UK's Permira set to buy Caprabo 
KIPR: Pharmaceutical patents may benefit from patent 
protecion 
EAGR: French President looking for allies on agriculture and 
DOHA 
EINV/ECON: Housing prices to drop sooner than expected 
 
PRESTIGE OIL SPILL LASTING EFFECT ON CLEAN-UP CREWS? 
 
¶1. (U)  A recent study on over 6,000 crewmembers who worked 
in 2002 to clean up the Prestige tanker oil spill off the 
cost of Galicia shows that thousands of the original clean-up 
crew are now suffering health problems that include breathing 
difficulties and chronic coughs. The study, is expected to be 
formally published in the next edition of the American 
Journal of Respiratory and Critical Care Medicine and was 
based on surveys of 6,869 clean up crew workers. 
 
LOWER GROWTH RATE PREDICTED FOR 2008 AT 3.2% 
 
¶2. (U) According to a general consensus among Spain's leading 
institutes, the Spanish economy is expected to grow by 3.2% 
in 2008, down .5 percentage points from an estimated 2007 
growth rate of 3.7%.  The studies anticipate that decreased 
construction will play a role in this slowdown, but say that 
the economy will be able to absorb this due to strong 
investment in public works and the positive influence of 
growing economies of other European countries. Continued 
immigration is expected to offset the slowdown in the real 
estate market somewhat although anticipated higher interest 
rates will cause a slowdown in consumer spending in general. 
The 3.2 percent rate for 2008 is higher than the 2.7 percent 
growth rate predicted by OECD. 
 
FINANCIAL NOTIFICATION NUMBERS DISPARATE WITH INVESTIGATIONS 
 
¶3. (U) Financial Intelligence Unit (SEPBLAC) receives 78 % 
more notifications in 2006 than in 2005.  There were fewer 
SEPBLAC investigations in 2006, however, causing criticism by 
the OECD. (Comment: It appears that banks and other financial 
institutions are taking their reporting requirements more 
seriously.  Given the widespread public assumption in Spain 
that the country's real estate boom is being accompanied by 
massive money laundering, Spanish authorities are under more 
pressure to pursue more cases.  This piece is based on a 
newspaper article that did not discuss terrorism finance.) 
(Expansion, May 25, 2007) 
 
UK INVESTING HEAVILY IN SPAIN 
 
¶4. (U) UK-based private equity firm Permira front-runner to 
buy Spanish supermarket chain Caprabo.  Caprabo is in trouble 
as a result of competition from a Spanish low-cost equivalent 
of Wal-Mart, Mercadona. Permira is quite active in Spain. 
Recently it purchased the pizza delivery company Telepizza 
for Euros 850 million. (Financial Times, May 30, 2007) 
 
PRODUCT PATENT PROTECTION FOR PHARMACEUTICAL PATENT HOLDERS 
 
¶5. (U) European Patent Office issues recommendation 
suggesting that pharmaceutical process patent holders can 
also benefit from product patent protection: The issue arises 
because prior to 1992, drug companies could only get process 
patent protection.  The R&D-based companies, among them major 
U.S. firms, would like to have product patent protection for 
a number of their blockbuster drugs patented prior to 1992, 
thereby effectively benefiting from patent protection for a 
few more years.  In order to achieve this goal, the R&D-based 
firms have filed lawsuits in Spain, a few of which they have 
won.  The companies have also offered Euros 300 million to 
the Spanish government to co-finance a research consortium if 
the Spanish government agrees to provide retroactive product 
patent protection.  The government has told the Embassy that 
while it is sympathetic to the R&D-based industry, it would 
be very difficult to extend product patent protection 
retroactively, among other reasons because it might face 
lawsuits from generics manufacturers. (Expansion, May 29, 
2007) 
 
FRENCH PRESIDENT, SARKOZY TO DISCUSS DOHA AND AGRICULTURE 
WITH ZAPATERO 
 
¶6. (U) The newly elected President of France, Nicolas 
Sarkozy, paid a visit to President Zapatero on May 31, 2007. 
It was his first visit as President of France, and he was 
 
MADRID 00001075  002.2 OF 002 
 
 
reported to be interested in addressing several important 
political interests shared by both countries.  We suspect 
that among the issues, he addressed the topic of the Doha 
Development Agenda negotiations, in particular their shared 
interests in the agriculture chapter.  In the north of France 
President Sarkozy is reported to have told his audience 
"Europe needs to remain a strong agricultural power, and a 
place where the young can become farmers if they so choose." 
Within this context he is also reported to have said: "This 
is an essential question for us and if they do not understand 
that at the WTO table, France will use its veto." 
 
¶7. (U) The Zapatero Government has been consistent in its 
support for a Doha deal.  Spain does have major market 
interests in the negotiations on agriculture, including the 
export of olives, olive oil, wine, vegetable and fruit 
products, etc.  However, their interest in protecting 
sensitive agricultural activities far outweigh their market 
access objectives.  In this sense, we expect that the two 
presidents will be of one mind regarding the "not so likely 
possibility" of EC Member States offering greater negotiating 
flexibility on agriculture tariffs to the European 
Commission's lead negotiator (Peter Mandelson) in the Doha 
Development Agenda negotiations.  It has been reported from 
Geneva that without the additional EC negotiating flexibility 
on agriculture tariffs, negotiators from the 148 WTO members 
will be hard pressed to come to an agreement. 
 
BBVA STUDY CONFIRMS THE RUMORS 
 
¶8. (U) A BBVA study has confirmed the projections of dropping 
real estate prices beginning as early as next year.  Jose 
Luis Escriva, BBVA Director of Economic Studies, predicts a 
significant decrease in housing prices next year.  The drop 
will be slow in coming unlike more rapid drops of 15% 
experienced in the early 1990's.  Nonetheless, Spain is 
expected to experience a gradual adjustment in the coming 
months in the real estate sector as the prices will continue 
to rise above the inflation rate.  One study indicates a 
rhythm of a 4% increase this year and just 1% next year. 
AGUIRRE