VZCZCXRO6493
RR RUEHAG RUEHDF RUEHIK RUEHLZ RUEHROV
DE RUEHMD #0053/01 0182009
ZNR UUUUU ZZH
R 182009Z JAN 08
FM AMEMBASSY MADRID
TO RUEHC/SECSTATE WASHDC 4089
INFO RUCNMEM/EU MEMBER STATES COLLECTIVE
RUEHLA/AMCONSUL BARCELONA 3240

UNCLAS SECTION 01 OF 03 MADRID 000053 
 
SIPDIS 
 
SIPDIS 
 
DEPARTMENT FOR EUR/WE AND EEB/IFD/OMA 
 
E.O. 12958: N/A 
TAGS: EAIR ECON EFIN ETTC KIPR SENV SOCI TBIO SP
SUBJECT: MADRID WEEKLY ECON/COMMERCIAL/AG UPDATE - JANUARY 
14 - JANUARY 20 
 
MADRID 00000053  001.2 OF 003 
 
 
Table of Contents: 
 
ECON/EFIN: Financial Times lead editorial gloomy on Spain 
ECON/EFIN: Real estate companies shut down in wake of housing 
slowdown 
ECON/TBIO: Senators Grassley and Thune meet with Secretary of 
State Mejia 
ETTC/KIPR: El Pais says Spain a "leader" in internet music 
and movie downloads 
SENV: Greenpeace wants Spain to follow France on ag 
biotechnology 
ETTC: Spain's Telefonica to focus more on China and other 
growing markets 
EAIR: Iberia President complains about subsidized Middle 
Eastern airlines 
SOCQ Spanish send umbilical cords abroad for storage 
 
FINANCIAL TIMES LEAD EDITORIAL GLOOMY ON SPAIN 
 
¶1. (U)  The FT's January 14 lead editorial is titled "Spain 
feels the credit squeeze pain: Europe's economic success 
story may be about to unravel."  The editorial focuses on 
December's bad inflation numbers, falling housing prices and 
rising unemployment.  The FT recommends that the GOS avoid 
generous tax cuts; take measures to increase competition in 
retailing, transport and energy; ditch the preference for 
national champions; increase independence for universities; 
and allow companies to opt out of collective wage deals. 
(Comment: The GOS and some businessmen will take issue with 
this editorial, but it will sting because the FT is  widely 
read by EU elites.  The government might challenge the FT 
assertion that France, unlike Spain, has embarked on needed 
structural reform; it could argue that the Spanish tax take 
as a percentage of GDP remains significantly lower than 
France's, Spain's labor market remains more flexible, and 
France retains a preference for "national champions.") (FT, 
1/14/08) 
 
REAL ESTATE COMPANIES SHUT DOWN IN WAKE OF HOUSING SLOWDOWN 
 
¶2. (U) In the aftermath of the housing market downturn, more 
and more real estate agents are going out of business. The 
API, a real estate agent association, estimates that more 
than half of the 80,000 real estate offices that existed in 
the beginning of 2007 have closed down.  The majority of 
these closures reportedly are affecting smaller, and less 
established real estate businesses.  API estimates that these 
closures have resulted in some 100,000 lost jobs.  (Comment: 
The estimate seems high, but there is no doubt that real 
estate companies are hurting.)  (El Pais, January 17) 
 
SENATORS GRASSLEY AND THUNE MEET WITH SECRETARY OF STATE 
MEJIA 
 
¶3. (U) Senators Charles Grassley and John Thune, together 
with DCM, AgCouns and EconOff, met with the Ministry of 
Industry, Tourism and Trade's Secretary of State (vice 
minister) for Tourism and Trade, Pedro Mejia January 11 
during CODEL Martinez, visit to Spain.  Senator Grassley 
emphasized the importance of science-based decisions in the 
agricultural biotechnology context.  Mejia said that Spain 
had a relatively "liberal" view with respect to 
biotechnology.  However, even in Spain the technology was 
controversial and faced NGO opposition, albeit not as strong 
as in some other EU member states.  Senator Thune asked what 
influence Spain could exercise in Brussels on this issue. 
Secretary General for Foreign Trade Alfredo Bonet noted that 
 
SIPDIS 
it was very difficult to get a qualified majority for biotech 
approvals in the EU Environment Council, so in the end the 
Commission was taking decisions in favor of biotechnology. 
Both Mejia and Bonet noted that commodity price hikes might 
spur greater liberalization on biotech imports.  The 
Secretary of State asked about the status of the proposed 
 
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elimination of the "splash and dash" tax credit loophole that 
allows biodiesel producers in the U.S. to import commodities 
such as soybeans from overseas to the U.S., add a minimal 
amount of petroleum diesel, and then re-export the biodiesel. 
 European producers have complained about these imports. 
Mejia said that he was pessimistic about the prospects for 
successful conclusion of the Doha Round negotiations because 
major developing countries were not willing to give 
sufficiently in terms of industrial and services market 
access - he emphasized especially Spain's interest in better 
services access.  He noted also that with high agricultural 
commodity prices, some developing countries now did not see 
why they should give on industrial goods and services access. 
 He said that the U.S. was still under pressure to do more on 
domestic agricultural support.  Spain's senior trade 
representative asserted that the EU had made a good 
 
MADRID 00000053  002.2 OF 003 
 
 
agricultural access offer.  The Senators expressed support 
for Doha but were pessimistic about getting support for Trade 
Promotion Authority (TPA) this year.  Finally, there was a 
lively discussion of the renewable energy mission to 
Washington and Colorado that Secretary of State Mejia is 
leading and that post is helping organize.  Both Senators 
were very interested in the mission. 
 
¶4. (U) Comment: This was a very good substantive discussion. 
However, it is clear that while Spain will continue sometimes 
to vote in favor of biotechnology liberalization proposals, 
the Spaniards will continue to tread warily on this issue 
given their own domestic sensitivities and other equities 
Spain has in the EU.  It was interesting to hear Mejia's 
strong emphasis on services as the future of Spain's economy. 
 Unfortunately, however, Spanish services companies have not 
been aggressive in promoting Doha, although this is true of 
many other services companies in Europe as well. 
 
EL PAIS SAYS SPAIN A "LEADER" IN INTERNET MUSIC AND MOVIE 
DOWNLOADS 
 
¶5. (U) Spain's leading daily published an article on internet 
downloading that cites a 2007 European Advertisers 
Association (EIAA) study saying that 52% of Spanish internet 
users download movies and music, vice a European average of 
20%.  The El Pais story noted that President Sarkozy's 
proposal to create an independent authority to crack down on 
illegal internet downloading had generated positive reactions 
from rights-holders groups in a number of EU Member States, 
including Spain.  However, internet users groups generally 
opposed the French proposal.  The article reports that EU 
Information Society Commissioner Vivane Reding plans to 
submit a proposal in mid-2008 creating (and regulating) a 
unified EU market in internet-delivered content, which will 
include rules on uploads and downloads.  The story says that 
P2P downloads are "completely legal" in Spain and points to 
the 2006 Office of the Prosecutor Circular to prosecutors 
effectively decriminalizing P2P downloads unless there is a 
profit (commercial) motive for the download.  Although the 
police have acted against about 20 webmasters, the judiciary 
has not yet convicted any owners or managers of websites 
trafficking in pirated material.  (Comment: This article 
provides a detailed and balanced view of what is happening 
with respect to internet piracy in Spain.  Assuming President 
Sarkozy's proposal to create an independent authority to 
control internet downloads, it will be interesting see how it 
works out in practice, among other reasons because the French 
proposal says that the independent authority to be created 
will be placed "under a judge."  This aspect of the French 
proposal is something that Spanish rights-holders 
associations do not highlight because they would prefer not 
to have work with judges.) (El Pais, 1/12/08) 
 
GREENPEACE WANTS SPAIN TO FOLLOW FRANCE ON AG BIOTECHNOLOGY 
 
¶6. (U) Greenpeace Spain is attempting to use French President 
Sarkozy's ban on agriculture biotechnology to try to shame 
the Government of Spain into a similar ban.  Juan Felipe 
Carrasco, who is responsible for Greenpeace's campaign 
against agriculture biotechnology in Spain, said: "the 
conservative government of the most important EU agricultural 
Member State (France) has taken a responsible decision based 
on scientific information (to ban agriculture biotechnology). 
 Meanwhile the Government of Spain has succumbed to the power 
of the chemical and biotechnology giants, and has shown no 
political bravery to place itself on the side of citizen and 
environmental interests."..."There are just a few weeks left 
for the end of this Government's political term, and now is 
the perfect moment for the Government of Spain to take a 
similar decision to put society and environmental interests 
before the dark interests of the agro-chemical 
multinationals." 
 
¶7. (U) The French decision has provided Spanish 
anti-biotechnology enthusiasts a tremendous tool to pressure 
the Zapatero Government.  However, Spain and France are as 
different as night and day with regards to cereal grain 
production and import policies.  France is a net grain 
exporter and Spain a net importer.  With record high grain 
prices and livestock/pork producers and consumers complaining 
about high agricultural product/food prices, it seems hard to 
imagine that president Zapatero would follow in Sarkozy's 
footsteps on this issue: unless, that is, his election 
campaign team came to believe (somehow) that a similar ban, 
which would eliminate the production of 75,000 hectares of 
biotechnology corn production, would bring more voters to 
support the Government in its bid for reelection in March. 
 
 
MADRID 00000053  003.2 OF 003 
 
 
TELEFONICA TO FOCUS MORE ON CHINA AND OTHER GROWING MARKETS 
 
¶8. (U) Analysts assert that Telefonica, the world's fifth 
largest telecoms company, intends to gain a stronger foothold 
in the growing China market.  Telefonica has already begun to 
inch its way into China through a 5 percent market share 
ownership of China Netcom which it intends to increase to 10 
percent (partially based on expectations that an imminent 
Chinese telecoms restructuring will benefit China Netcom). 
In addition, Chairman Cesar Alierta is expected to increase 
Telefonica's control of Vivo, Brazil's largest mobile 
operator, which Telefonica currently co-owns with Portugal 
Telecom.  (Financial Times, January 14) 
 
IBERIA PRESIDENT COMPLAINS ABOUT SUBSIDIZED MIDDLE EASTERN 
AIRLINES 
 
¶9. (U) Fernando Conte, the president of Iberia Airlines and 
of the European Airline Association (AEA), recently 
complained about the "unfair" advantages enjoyed by some 
Middle Eastern airlines such as Emirate Airways, Qatar 
Airways, Etihad, and Gulf Air.  Speaking at a recent 
conference, Conte warned that the national assistance that 
some Middle Eastern airlines enjoyed left European airlines 
in a disadvantaged, less competitive position.  Conte 
asserted that European airlines could soon be substituted by 
these airlines, particularly for long-haul flights. 
Presumably, Conte will lobby this message to the EC. 
(Expansion, January 16) 
 
SPANISH SEND UMBILICAL CORDS ABROAD FOR STORAGE 
 
¶10. (U) Although Spain recently passed legislation allowing 
private umbilical cord banks, a large majority of Spaniards 
who save their children's cords are still shipping them to 
other European countries.  In fact, Spain and Italy are the 
only European countries that do not allow private storage of 
umbilical cords.  In Spain, parents wishing to save their 
children's cords in country must donate them to a 
government-funded public bank, which aims to build a reserve 
of 40,000 cords over the next eight years until a sufficient 
reserve is created for public transplants.  It is estimated 
that Spaniards currently have stored more than 10,000 cords 
in private banks outside the country.  Valuable genetic 
information and hopes for future cures are some of the 
reasons for storing abroad to ensure personal control. 
Rafael Matesanz, the director of the National Transplant 
Organization, argues that most of the stem cell treatments 
that have been developed to date do not require stem cells 
from the same donor and often cannot use cells from the same 
donor.  (El Pais 1/14) 
AGUIRRE