VZCZCXRO9905
RR RUEHAG RUEHDF RUEHIK RUEHLZ RUEHROV
DE RUEHMD #1110/01 1591339
ZNR UUUUU ZZH
R 081339Z JUN 07
FM AMEMBASSY MADRID
TO RUEHC/SECSTATE WASHDC 2722
INFO RUCNMEM/EU MEMBER STATES COLLECTIVE
RUEHLA/AMCONSUL BARCELONA 2785

UNCLAS SECTION 01 OF 02 MADRID 001110 
 
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 - 
JUNE 4 
 
MADRID 00001110  001.2 OF 002 
 
 
EINV: Lending fund manager advises clients to reduce exposure 
to Spanish equities 
EINV/ETRD: Housing slow down could affect GDP and employment 
EFIN: Venture Philanthropists among the Spanish elite 
EFIN/EMIG: Success and hard work for Spanish immigrants 
ECON/EMIG: Latin-Americans remit 3,730 million euros home 
 
LENDING FUND MANAGER ADVISES CLIENTS TO REDUCE EXPOSURE TO 
SPANISH EQUITIES 
 
¶1. (U) Spain's best-performing fund manager thinks a harder, 
rather than softer, landing more likely for the Spanish 
economy.  Francisco Parames, head of Madrid-based Bestinver 
Asset Management, says he was asked by Warren Buffet a few 
months ago for advice about investing in Spain.  Parames said 
he was thrilled to be asked but less sanguine about prospects 
for the Spanish economy.  He thinks there is a credit bubble 
- he says credit has increased by 25% a year every year for 
six years, even more than in China.  He is advising clients 
to invest in global stocks instead of Spanish equities.  In 
line with this view, University of Barcelona Economics 
Professor Gonzalo Bernardos forecasts housing prices will 
decline by 20% from now through 2009: Why?  A classic case of 
oversupply according to the professor.  European interest 
rate hikes will also start to affect economic behavior. 
(Comment: We are beginning to see more articles like this in 
the national and international press, although official 
national and international growth forecasts for Spain remain 
strong for 2007 and even 2008 to some extent.)  (IHT, 6/5/07 
and IHT, 6/7/07) 
 
HOUSING SLOWDOWN COULD NEGATIVELY AFFECT GDP AND EMPLOYMENT 
 
¶2. (U) Analysts estimate that a housing slowdown could cut 
GDP growth by 1% a year and cost 50,000 jobs:  However, most 
analysts and the government still seem to think there will be 
a "soft landing" for the real estate market and therefore the 
economy.  The government still thinks the economy will grow 
by 3.7% to 3.8% (first quarter growth was 4.1%) in 2007, and 
that in 2008 growth will be something between 3.3% to 3.4%. 
This would still be well above average Eurozone growth. 
Politically, the government does not want growth to slow down 
to 2.5% because at that point analysts estimate that 
unemployment would start to increase. (El Pais, June 4, 2007) 
 
 
VENTURE PHILANTHROPY THE FASHION IN SPAIN 
 
¶3. (U) Spanish philanthropists follow Gates model in "venture 
philanthropy;" roughly, this means trying to ensure that 
every donated Euro has the desired impact.  Rich business 
people and foundations such as Carmela Arias y Diaz de 
Rabago, Emilio Botin, Rafael del Pino, the Thyssen 
Foundation, German Sanchez Ruperez, Esther Koplowitz, Amancio 
Ortega, Isidoro Alvarez, the March family, and Manuel y Jose 
Maria Roviralta are listed as "venture philanthropists." 
(Expansion, June 4, 2007). 
 
IMMIGRANTS LIVING THE SPANISH DREAM 
 
¶4. (U) Immigration and Work in Spain; 1 out of 6 Immigrants 
own Businesses.  A recent study by La Fundacion La Caixa 
showed that of the 1.75 million immigrants registered with 
social security, 13.7 percent have established their own 
business.  The study, which breaks down the type of 
businesses established into five categories, shows that the 
majority cater to immigrant populations, though some such as 
restaurants or Artesan stores, cater to all.  The predominant 
types of businesses owned by immigrants are those that 
provide food items for local consumption, followed by 
"circuit businesses" that provide services such as messenger 
and money services back to the country of origin.  According 
to another survey, it is estimated that 80 percent of all 
immigrants work compared with 58 percent of Spaniards. 
 
LATINAMERICANS SEND 3,730 MILLION EUROS HOME 
 
¶5. (U) Latin-Americans maintain strong ties with their home 
countries.  Their ties are not only emotional but also 
monetary.  In 2006 1.82 million adult Latin immigrants 
residing in Spain, remitted 3,730 million euros (based on 
total income of 30,000 million euros) according to a study by 
Bexiden Consultants and the Interamerican Development Bank. 
They already represent 7% of the Spanish labor force and 70% 
are registered in the Social Security system.  Their numbers 
have tripled in the last 5 years and by 2010 they could be 
sending as much as 5,000 million euros annually.  The 
importance of remittances to that continent is such that they 
 
MADRID 00001110  002.2 OF 002 
 
 
already surpass direct foreign investment in Latin America. 
In Guatemala, El Salvador or Honduras, the remittances 
surpass 10% of the GDP.  The average monthly amount remitted 
is 270 euros (15% of their income) by which a 2% commission 
is paid.  Colombians, Ecuadorians, Bolivians and Dominicans 
send the most.  The Argentines and Peruvians send the least 
amounts home. (20 minutos, June 6, 2007) 
AGUIRRE