VZCZCXRO6023
RR RUEHAG RUEHDF RUEHIK RUEHLZ RUEHROV
DE RUEHMD #1489/01 2111429
ZNR UUUUU ZZH
R 301429Z JUL 07
FM AMEMBASSY MADRID
TO RUEHC/SECSTATE WASHDC 3110
INFO RUCNMEM/EU MEMBER STATES COLLECTIVE
RUEHLA/AMCONSUL BARCELONA 2950

UNCLAS SECTION 01 OF 04 MADRID 001489 
 
SIPDIS 
 
SIPDIS 
 
EUR/WE 
 
E.O. 12958: N/A 
TAGS: EAGR ECON EFIN EIND ELAB ENRG ETRD KIPR PTER
SENV, SP, EINV, UK 
SUBJECT: MADRID WEEKLY ECON/AG/COMMERCIAL UPDATE REPORT - 
JULY 23 
 
 
MADRID 00001489  001.2 OF 004 
 
 
Table of Contents: 
 
EFIN: VP & Finance Minister Solbes will not compete in a tax 
cutting "auction" with opposition 
KIPR: 16 arrested for Internet Piracy 
PTER: Two Syrians arrested for channeling funds for the Jihad 
EAGR: EC may be forced to change AG biotech evaluation process 
EAIR: Iberia allies with AA to request anti-trust immunity 
ECON: Budget surplus for Spain for first half of 2007 
EAIR/EIND: Ministry of Industry to increase investment in 
aviation sector 
EIND/EINV: Announcements for major biodiesel production 
plants in Spain continue 
SENV/ENRG: GOS announces environmental plans focusing on 
energy and climate change 
EINV: Carlyle group wins Applus  bid 
EINV: Manuel Jove acquires 5% of BBVA 
ENRG: Call for Spanish national energy policy 
ELAB: Poor Representation of women on Spanish boards 
ELAB: Delphi - union agreement settles final major hurdle to 
closure of Puerto Real 
 
VICE PRESIDENT AND FINANCE MINISTER PEDRO SOLBES SAYS HE WILL 
NOT COMPETE IN A TAX CUTTING "AUCTION" WITH OPPOSITION 
CONSERVATIVE PP PARTY 
 
¶1. (U)  The opposition Popular Party recently proposed tax 
cuts on the order of euros 20 billion.  The budget surplus 
this year is euros 7 billion - Solbes says any tax cuts 
should amount to considerably less than this figure given 
future health and pension commitments.  The Minister also 
criticized Rodrigo Rato for leaving the IMF two years before 
his term expired.  Solbes also made it clear that would have 
preferred more long-term measures to increase the fertility 
rate in Spain, rather than the euros 2500 the Zapatero 
government intends to give families for each new baby. (El 
Pais, July 22) 
 
SPANISH POLICE ARREST 16 PEOPLE FOR INTERNET PIRACY 
 
¶2. (U)  This was a big raid, and the arrests reflected the 
large-scale commercial nature of much of the internet piracy 
that goes on in Spain.  For example, the groups sold a DVD 
called "All in One," which provided software used in 
neutralizing security systems.  The DVD cost euros 9500 and 
was bought by people specializing in installing pirated 
software.  The economic damages caused by the sale of just 
this one product are estimated to have amounted to euros 80 
million. (Comment: The arrests were conducted by the Spanish 
police's Antipiracy and Technology Investigation Brigade. 
This unit is highly respected by the content provider 
community.  The question is now whether the Spanish judiciary 
will issue deterrent level sentences.  In general, copyright 
industry representatives respect police work against internet 
pirates - they just wish there were more of it.  The industry 
is much more critical of the judiciary.) (El Pais, July 23) 
 
TWO SYRIANS ARRESTED FOR CHANNELING FUNDS FOR THE JIHAD 
 
¶3. (U) Syrian citizens Bassan Dalasi Satut (48 years old) and 
Samer Dabbas (30 years old) were arrested Wednesday morning 
in Madrid for channeling funds from radical extremists living 
in Spain to the jihad.  Some of the money came from Spanish 
and foreign Islamist investors, and it was usually invested 
in building houses that were later sold.  The profits were 
sent outside Spain.  The police also seized 120,000 euros in 
cash, press information related to international terrorism, 
cell phones, and computer material.  Minister of Interior 
Rubalcaba said that the suspects had bank accounts in 
different countries in the amount of 700,000 euros.  Spanish 
prosecutors are expected to charge the suspects with 
cooperating with a terrorist organization, forging documents, 
and money laundering.  Bassan Dalasi Satut had taken over the 
job of Mohamed Ghalef Kalaje Zouaydi, alias Abu Talha, who 
was arrested in the Datil operation November 2001, and who is 
serving a nine year jail sentence. 
 
EC MAY BE FORCED TO CHANGE AGBIOTECH EVALUATION PROCESS 
 
¶4. (U) A confluence of unintended consequences stemming from 
agriculture policy may force the European Commission (EC) to 
change its agriculture biotechnology evaluation process 
and/or its renewable fuels goals.  European Union (EU) 
failure to act/react expeditiously to new agriculture 
biotechnology, and the worldwide push for renewable fuels 
production have led influential Spanish (and other EuropeQ) 
compound feed and meat and poultry producers to challenge the 
Commission.  While Spanish grain farmers, who just harvested 
 
MADRID 00001489  002.2 OF 004 
 
 
record grain crops, revel in the confluence of record-high 
production and high prices, Spanish compound feed, meat and 
poultry producers suffer the latter.  Spanish compound feed 
producers do not have access to biotechnology corn produced 
in the United States, nor to any of its by products i.e. corn 
gluten feed, because the EC has not yet accepted the 
biotechnology corn varieties that are now under U.S. 
cultivation.  In addition, new EU (Spanish ethanol production 
is further limiting the grain available to Spanish compound 
feed manufacturers.  Could these events spell the beginning 
of the end to EU-US differences in agriculture biotechnology? 
 We may be only one "short" world grain crop away from "yes." 
 
IBERIA ALLIES WITH AMERICAN AIRLINES TO REQUEST ANTI-TRUST 
IMMUNITY FROM DEPARTMENT OF TRANSPORTATION 
 
¶5. (U) The relationship between Iberia and American Airlines 
recently grew stronger after the two companies agreed to a 
framework that would broaden their commercial and operational 
cooperation.  Iberia and AA submitted this framework 
agreement to the Department of Transportation (DoT) in the 
hopes of obtaining anti-trust immunity.  Separately, Iberia 
and AA filed an additional framework agreement for DoT's 
approval between the two airlines and their Oneworld alliance 
partners, Finnair, Royal Jordanian, and Malev.  Iberia 
representatives note that if approved, these agreements would 
allow the company to offer more flight destinations, 
flexibility in flying times and ticket purchases, and more 
attractive frequent flyer mile programs.  Iberia airlines 
currently flies to DC, Miami, Boston, New York, and Chicago. 
 
BUDGET SURPLUS FOR SPAIN FOR FIRST HALF OF 2007 
 
¶6. (U) The Secretary of State for the Ministry of Economy and 
Treasury, Carlos Ocana, announced this week that at the close 
of the first half of 2007, Spain had a budget surplus of over 
6 billion euros.  In his announcement, Ocana added that the 
surplus was expected to grow further in the second half. 
According to the ministry, the surplus is a result of higher 
than expected revenues, brought on partly by more aggressive 
anti-fraud measures as well as higher than expected income 
tax revenue generated by a favorable economic and employment 
growth. 
 
MINISTRY OF INDUSTRY TO INCREASE INVESTMENT IN AVIATION 
SECTOR 
 
¶7. (U) The Minister of Industry Joan Clos unveiled Spain's 
strategic plan to boost the viability of Spain's aviation 
sector over the next 8 years.  Under this plan, which would 
entail government investment of up to 11 billion euros 
starting in 2008, Spain hopes to strengthen its aviation 
sector's positioning vis a vis other European countries.  The 
Ministry of Industry's investment would support programs to 
increase the sector's production capabilities as well as 
research and development.  In his announcement of the plan, 
Minister Clos expressed hope that by 2016, Spain's aviation 
sector would be able to make a more notable contribution to 
the country's GDP. 
 
ANNOUNCEMENTS FOR MAJOR BIODIESEL PRODUCTION PLANTS IN SPAIN 
CONTINUE 
 
¶8. (U)  Madrid-based Elecnor, a widely diversified Spanish 
utility company, plans to build one of the world's largest 
biodiesel production plants in the port of Gijon, in the 
northern region of Asturias.  The 70 million euro 
construction project will be completed in mid 2009 and will 
produce up to 500,000 tons of biodiesel per year from 
vegetable oil, according to the company (Reuters, July 18). 
The Spanish biofuel company Biocarburantes Vascos announced 
plans to build a large biodiesel plant in the Spanish North 
African port of Cueta.  The 44 million euro plant will have 
production capacity of 200,000 tons of plant-based diesel 
fuel per year.  Construction of the Cueta-based facility will 
be completed 16 months after land reclamation is finished. 
The company also operates a 120,000 ton per year plant near 
Seville, and is planning construction of three additional 
plants in Spain (Reuters, July 26).  Several other 
Spain-based biodiesel production plants have been announced 
in recent months, including Italian oil refining company 
Sara's current construction of a 200,000 ton per year 
biodiesel plant in Cartagena, Spain.  (Reuters, June 6) 
These new biodiesel production plants represent the market's 
continued response to the GOS's decision to make the EU's 
non-binding target of 5.75 percent biofuel usage in transport 
fuels mandatory by 2010. 
 
 
MADRID 00001489  003.2 OF 004 
 
 
GOS ANNOUNCES ENVIRONMENTAL PLANS 
 
¶9. (U) The GOS has recently made two environmental 
announcements related to energy use and climate change.  On 
July 20, the GOS announced a new energy action plan for 
2008-2012 entitled the Strategy of Saving and Energy 
Efficiency.  The plan will reportedly generate savings of 
87.9 million equivalent tons of petroleum, and reduce CO2 
emissions by 238 million tons.  The GOS has committed nearly 
2.4 billion euros to the plan, a more than 20% increase over 
the previous plan for the same time period.  In total, 59 
specific "actions" have been identified to reach the plan's 
goal, with efforts focused on seven industry sectors.  The 
plan will include economic incentives, specific GOS 
initiatives and communication programs.  (GOS, July 20)  On 
the same day, July 20, the Cabinet of Ministers approved more 
than 80 "urgent measures" to fight climate change.  Some of 
the announced measures include better insulation in 
government buildings, continued development of wind power and 
the elimination of vehicle registration taxes for automobiles 
that emit the least amount of CO2.  Both 
Vice-President/Minister of the Presidency Fernandez de la 
Vega and Minister of the Environment Narbona emphasized that 
climate change will continue to be a major priority of the 
Zapatero Administration. (GOS, July 20) 
 
CARLYLE GROUP WINS APPLUS  BID 
 
¶10. (U) The Carlyle group, teaming with Catalonian partners 
Caixa de Catalunya, Caixa de Manresa, Caixa de Terrassa, 
Caixa de Tarragona and the Real Automovil Club de Catalunya, 
has closed its deal to purchase Applus  for 1.48 billion 
euros. Applus  is a Spanish company whose business is the 
inspection and certification of a range of items such as 
cars, ships and factories.  The owners of Applus , Agbar 53%, 
Union Fenosa 25%, and Caixa Madrid 22%, will profit 
handsomely from the deal.  Agbar, the Barcelonan water 
utility will enjoy a profit of 2l0 million euros and plans to 
use the cash to pay off debt and expand its business.  The 
deal which is Spain's largest buyout in some time saw Carlyle 
edge out France's Eurazeo whose bid offered similar 
compensation but imposed more conditions on Applus . 
 
MANUEL JOVE ACQUIRES 5% OF BBVA 
 
¶11. (U) Galician business magnate Manuel Jove, who made his 
fortune during the real estate boom as the founder of the 
Spanish property company Fadesa, has acquired a 5% stake in 
BBVA making him the largest single shareholder of the Spanish 
bank.  The move by Jove was made after assurances to the 
Spanish bank that he had no intention of a takeover and would 
not seek a spot on the board or make changes to management. 
Jove's assurances were reportedly reassuring to the bank 
which sees Jove's stake as a protective measure, having 
recently fought off a bid by Sacyr Vallehermoso and is still 
considered ripe for takeover after some years without 
expansion. 
 
CALL FOR SPANISH NATIONAL ENERGY POLICY 
 
¶12. (U) The business organization CEOE has called on national 
government to harmonize environmental law and policy among 
the autonomous communities.  CEOE advocates the establishment 
of a national standard on emissions that apply to all 
companies nationwide. CEOE is seeking a common standard to 
ensure fairness in the application of environmental 
regulations and level the playing field for businesses both 
on a national and EU level.  While Spain admits that it is 
far off from meeting its Kyoto goals on emissions, Spanish 
businesses have also stressed that Spanish regulation can at 
times be overly harsh when compared to competitors operating 
in other EU nations. 
 
POOR REPRESENTATION OF WOMEN ON SPANISH BOARDS GETTING WORSE 
NOT BETTER 
 
¶13. (U) In spite of efforts to increase the presence of women 
at the highest levels of Spanish business, the evidence 
points to a worsening situation. Some progress was made in 
2006 amid the debate and entering into force of the Unified 
Code of Corporate Governance and the Law of Equality: women 
board members on market listed corporations rose to 80, a 62% 
increase.  It is worth noting however that this seemingly 
giant leap is to be considered against a total of 1,346 board 
seats so the 62% increase is an increase from a very low 
starting point.  This year there is no doubt of a continuing 
problem as more women have left the boardroom than have 
entered it.  In addition to this current trend there remains 
 
MADRID 00001489  004.2 OF 004 
 
 
the statistic that 15 of the Ibex 35 companies are without a 
single female board member, including giants Telefonica, 
Endesa, Theria, Gas Natural, and Altadis. 
 
DELPHI - UNION AGREEMENT SETTLES FINAL MAJOR HURDLE TO 
CLOSURE OF PUERTO REAL 
 
¶14. (U) American car parts manufacturer Delphi reached an 
agreement with UGT, its Puerto Real Plant's work-force union, 
on July 9, affirming a prior agreement struck with the 
Andalusia government.  The agreement allows Delphi to move 
ahead with its plan to close the factory located in Cadiz 
province on July 31.  The negotiated deal stipulates that 
Delphi provide a more generous compensation package for its 
displaced workers, that it assume 200 million euros worth of 
debt, and that it turn over the factory and its machinery 
(worth an estimated 160 million euros to the government of 
Andalusia in order to speed the recovery and redevelopment of 
the community.  The total cost to be shouldered by Delphi 
relating to the closure is estimated at 500 million euros 
The agreement will likewise allow the Andalusia Business 
Committee to move closer to finding a new owner for the 
manufacturing plant.  Catalonia's Ficosa is currently the 
leading bidder.  Ficosa would convert the factory into an 
aeronautics plant. 
AGUIRRE