VZCZCXRO8709
RR RUEHRN
DE RUEHMD #1942/01 2790850
ZNR UUUUU ZZH
R 060850Z OCT 07
FM AMEMBASSY MADRID
TO RUEHC/SECSTATE WASHDC 3587
INFO RUEHSS/OECD POSTS COLLECTIVE
RUEHLA/AMCONSUL BARCELONA 3112

UNCLAS SECTION 01 OF 02 MADRID 001942 
 
SIPDIS 
 
SIPDIS 
 
EUR/WE, EEB/EFD/OMA 
 
E.O. 12958: N/A 
TAGS: ECON EFIN EIND ENRG ETRD SP EINV EAGR SOCI
ELAB 
SUBJECT: MADRID WEEKLY ECON/AG/COMMERCIAL UPDATE REPORT - 
OCTOBER 1-5 
 
 
MADRID 00001942  001.2 OF 002 
 
 
Table of Contents: 
 
ECON/EFIN: Economists speculate weak dollar might not be such 
a bad thing 
ECON: BBVA President considers U.S.- European dialogue 
"crucial" 
EFIN: Government Research & Development spending set to 
increase by 17.4% in 2008 
EFIN/EIND: EU Competition Commissioner says most EU 
Commissioners "annoyed" by the Spanish attitude on Endesa 
EIND: Construction company Fomento de Construcciones y 
Contratas says it intends to continue to grow in the U.S. 
ETRD: Jamon Iberico may be coming soon to a store near you 
ECON/SOCI: Retoucherie - from small town to world-wide 
business 
 
 
ECONOMISTS SPECULATE WEAK DOLLAR MIGHT NOT BE SUCH A BAD THING 
 
¶1. (U) Spanish Employers Federation (CEOE) Economic 
Commission President Jose Luis Feito says the Spanish economy 
can withstand a dollar/euro exchange rate of 1/1.4 because 
most Spanish exports go to Europe and, besides, exports are 
not as important a component of Spanish GDP as they are for 
countries like Germany, France or Italy.  Feito argues that 
the probability that the European Central Bank (ECB) will not 
raise interest rates, and might even lower them, is much more 
important to the Spanish economy because Spain is more 
interest rate sensitive than exchange rate sensitive. 
(Comment: Feito is a well-respected economist and a good 
Embassy contact.  He is probably right that interest rates 
matter more than exchange rates for Spain.  Nonetheless, it 
is worthwhile remembering that Second Vice President and 
Finance Minister Pedro Solbes has fretted publicly about the 
stronger euro inhibiting German exports, and hence Spanish 
exports to Germany.  In 2006, Spanish exports to Germany 
represented almost 11% of Spain's worldwide exports.  So 
exchange rates really do matter for Spain, albeit perhaps 
less than possible ECB easing of interest rates as Feito 
points out.) (El Pais, 9/30/07) 
 
BBVA PRESIDENT CONSIDERS U.S. - EUROPEAN DIALOGUE "CRUCIAL" 
 
¶2. (U) Gonzalez remarked on the need for a dialogue in the 
context of the 9/27/07 European Financial Services Roundtable 
in Washington, D.C.  Fed Chief Ben Bernanke gave the closing 
address at this conference.  Gonzalez called for more 
dialogue on a range of issues, including antitrust, although 
he focused on the financial sector.  (Comment: Gonzalez, 
intervention was noteworthy because Spain's most important 
businessmen do not often comment publicly on these matters.) 
(Expansion, 9/28/07) 
 
GOVERNMENT RESEARCH & DEVELOPMENT SPENDING SET TO INCREASE BY 
17.4% IN 2008 
 
¶3. (U) This increase is certainly less than the 30% by which 
R&D spending went up in 2007, but it does mean that the 
Zapatero government will have fulfilled a pledge to double 
R&D spending during the 2004-2008 period.  Civilian R&D 
spending will receive euros 7.7 billion and euros 1.6 billion 
will be allocated for military R&D spending.  (El Pais, 
9/30/07) 
 
EU COMPETITION COMMISSIONER SAYS MOST EU COMMISSIONERS 
"ANNOYED BY THE SPANISH ATTITUDE ON ENDESA 
 
¶4. (U) Kroes added that the Commission 152 million euro fine 
against Telefonica was justified.  (Comment: Many Spanish 
analysts agree with Commissioner Kroes, although even those 
analysts very critical of the Zapatero government note that, 
especially in the energy sector, other countries such as 
Germany and France also want to create and defend "national 
champions.") (Expansion, 10/2/07) 
 
CONSTRUCTION COMPANY FOMENTO DE CONSTRUCCIONES Y CONTRATAS 
SAYS IT INTENDS TO CONTINUE TO GROW IN THE US 
 
¶5. (U) FCC owns Giant Cement Holding in the U.S. and says it 
is selling all the cement it produces.  Giant Cement produces 
cement in South Carolina, Maine and Pennsylvania and most of 
it is used in infrastructure projects.  FCC sees continued 
opportunity in Texas, despite the controversy in that state 
over toll roads.  FCC recently qualified together with an 
Australian contractor to build the Dublin metro.  (Comment: 
Clearly FCC, like other Spanish construction firms, will 
continue to look for opportunities overseas as Spanish 
infrastructure and housing development slows down.) 
 
MADRID 00001942  002.2 OF 002 
 
 
(Expansion, 10/3/07) 
 
JAMON IBERICO MAY BE COMING SOON TO A STORE NEAR YOU 
 
¶6. (U) Spanish "Jamon Iberico" may soon be available to U.S. 
consumers in the United States.  The U.S. Department of 
Agriculture's Food Safety Inspection Service (FSIS) just 
approved the list of Spanish port products exporters 
submitted for export accreditation by Spain's Ministry of 
Health (MoH).  The list contains a slaughterhouse that is 
approved for export - the only Spanish slaughterhouse ever to 
have been approved for export to the United States.  This 
means that the "products" of Spanish-produced hogs, 
slaughtered by the approved slaughterhouse, are now either 
eligible for export to the United States.  And, since one of 
the specialties of the approved establishment is slaughter of 
the Iberia hog, the traditional Iberian ham is now eligible 
for export. 
 
Regarding the possible timing of the first Iberian ham 
exports, the first possible shipment may come within months, 
or could be delayed by two-to three years.  Because the 
slaughterhouse in question was previously approved for export 
to the United States and has continued following FSIS 
inspection protocol during a suspension of that export 
accreditation, the hams that have been curing in storage may 
become eligible for export.  FSIS is expecting to receive 
just such a request from MOH within the next few days and 
will then decide the fate of the hams currently in storage. 
Regardless, hams produced from hogs now being slaughtered 
will be eligible for export when fully cured - two-to-three 
years. 
 
RETOUCHERIE FROM SMALL TOWN TO WORLD WIDE BUSINESS 
 
¶7. (U) Manuela Rodriguez Losada began as a seamstress at home 
taking small orders to make ends meet and later on was the 
exclusive seamstress of a clothing company in France where 
she and her husband moved in pursuit of a better life. 
Motivated by her clients she opened her own store, la 
Retoucherie - an alteration store, was born.  She returned to 
Spain and opened and still maintains her first store in La 
Vaguada in 1983 a "gold mine" location she says.  A family 
business with the logo of a measuring tape in the form of a 
lasso in black and white colors.  At 65 she refuses to 
retire, there are too many things that she would like to 
accomplish such as creating a foundation for senior citizens. 
 
The stores bear her name now La Retoucherie de Manuela and 
she owns 28 out of the 312 stores the rest are franchises. 
She recently signed a franchise contract with China to open 
17 stores.  Manuela employs mostly women over 40 as they are 
the hardest hit during recessions and she sympathizes with 
them.  The company offers a training program for the 
employees and has recently added an extra benefit, a no cost 
private health plan.  The company continues to grow and just 
last year made 40 million euros a 15% increase from the 
previous year. 
LLORENS