VZCZCXRO2620
RR RUEHAG RUEHDF RUEHIK RUEHLZ RUEHROV
DE RUEHMD #0077/01 0281206
ZNR UUUUU ZZH
R 281206Z JAN 08
FM AMEMBASSY MADRID
TO RUEHC/SECSTATE WASHDC 4130
INFO RUCNMEM/EU MEMBER STATES COLLECTIVE
RUEHLA/AMCONSUL BARCELONA 3252

UNCLAS SECTION 01 OF 02 MADRID 000077 
 
SIPDIS 
 
SIPDIS 
 
DEPARTMENT FOR EUR/WE AND EEB/IFD/OMA 
 
E.O. 12958: N/A 
TAGS: EAIR ECON EFIN EIND EINV ELAB ENRG ETRD SP
SUBJECT: MADRID WEEKLY ECON/COMMERCIAL UPDATE - JANUARY 21 
- JANUARY 25 
 
REF: MADRID 0047 
 
MADRID 00000077  001.2 OF 002 
 
 
Table of Contents: 
 
ECON/EFIN: Stock market stabilizes after a very volatile week 
ECON/ELAB: Unemployment increased to 8.6 percent in 2007 Q4 
ECON: Tourism in 2007: More tourists but less money... 
ECON/EAIR: ...And low-cost airlines brought 24 million of them 
ECON/EIND: Vehicle manufacturing rose by 4 percent 
EINV/ETRD: Peruvian President Alan Garcia seeks Spanish 
investors 
ECON/EAIR: Low-cost travel brings 24 million foreign 
travelers to Spain 
ENRG/EINV: Chinese firm to invest in solar electricity 
projects 
 
 
STOCK MARKET STABILIZES AFTER A VERY VOLATILE WEEK 
 
¶1. (U) Spain's Ibex-35 stock index rose by a relatively minor 
0.3 percent on Friday to bring the net decline in a very 
volatile week to 3.8 percent.  The index fell 7.5 percent on 
Monday, rose 1.7 percent on Tuesday, fell 4.6 percent on 
Wednesday and jumped a one-day record 7 percent on Thursday. 
The ups and downs of the Spanish market have been pretty 
close to movements in other major European stock markets. 
(Comment: The reality is that nobody knows how the markets 
will perform in the short-term.  It is significant though 
that Spanish equities' performance is tracking, for better or 
for worse, more consistently with other European stock 
markets.  This may be a sign that investors expect Spanish 
economic performance to be closer to the Eurozone's average 
than it has been in years past.  Having said that, although 
2008 growth rates are being revised downwards for most 
countries, Bloomberg and the World Bank are still forecasting 
2.8% economic growth for Spain in 2008 vice 2.0% for France, 
1.7% for Germany, and a 2.0% average growth rate for the 
Eurozone.  Even so, lower growth in Spain means less 
construction activity and higher unemployment.  This helps 
explain why economic issues have somewhat unexpectedly become 
more prominent in the Spanish election debate.) (Expansion, 
1/24/08 and 1/25/08) 
 
UNEMPLOYMENT INCREASED TO 8.6 PERCENT IN 2007 Q4 
 
¶2. (U) The National Statistics Institute (INE) reported that 
the unemployment rate rose to 8.6 percent in the fourth 
quarter of 2007, up from 8.05 percent the previous quarter. 
In 2007 as a whole, the number of people employed and the 
number of unemployed both rose, the latter by 6.5 percent. 
Minister of Labor and Social Affairs Jose Luis Caldera noted 
on January 24 that the unemployment rate increase was indeed 
an unfavorable statistic, but he pointed to the job growth 
and a decreasing level of temporary work contracts. 
(Comment: This jump in unemployment levels will provide more 
ammunition to the opposition Partido Popular in its campaign 
for the March 9 general elections. See reftel for more 
background.) 
 
TOURISM IN 2007: MORE TOURISTS BUT LESS MONEY... 
 
¶3. (U) Spain hosted 59.7 million international tourists in 
2007, 1 million more than in 2006.  The increase is 
attributed to the growth of low-cost airline flights to 
Spain.  Despite this, total spending slipped by 0.7 percent 
to 37.2 billion euros, continuing a trend of recent years of 
less spending per tourist.  Spain is the world's second 
leading international tourist destination (second to France 
in number of visitors, second to the U.S. in revenues), and 
the sector accounts for 12 percent of GDP. 
 
...AND LOW-COST AIRLINES BROUGHT 24 MILLION OF THEM 
 
¶4. (U) Low-cost airlines brought 24 million passengers to 
Spain in 2007, a 34 percent increase over their 2006 total. 
The top five such airlines were Ryanair with 5.4 million 
passengers, EasyJet with 4.2 million, Air Berlin, Veuling 
(Spanish), and Iberia subsidiary Clickair with 1.2 million. 
The competition from low-cost airlines has caused some major 
airlines like Iberia, Spanair, Lufthansa, and Air France to 
cut flights to Spain, and the total number of passengers the 
traditional airlines brought to Spain fell by 3 percent. 
Low-cost airlines now have 40 percent of the market and are 
expected to soon reach 50 percent.  Cataluna and the Balearic 
Islands were the preferred "low-cost" destination regions, 
with a combined 11 million travelers, with Andalucia third. 
Most of the passengers were British (8 million) or German 
(6.2 million), with significant numbers of Italians (2.3 
million) and Dutch (1.5 million) as well.  (El Pais) 
 
MADRID 00000077  002.2 OF 002 
 
 
 
VEHICLE MANUFACTURING ROSE BY 4 PERCENT 
 
¶5. (U) Total Spanish motor vehicle production rose 4 percent 
in 2007 to 2.89 million units.  This was the country's fourth 
highest total ever.  The Spanish Association of Automobile 
and Truck Manufacturers expects an increase of 1 to 2 percent 
in 2008.  Spain is the world's seventh largest vehicle 
manufacturer and the third largest in the EU. 
 
PERUVIAN PRESIDENT ALAN GARCIA SEEKS SPANISH INVESTORS 
 
¶6. (U) President Garcia's main mission in his January 20-21 
visit to Spain was to promote joint business opportunities. 
During his first visit to Spain, he met with Spanish 
businessmen in hopes of obtaining additional investors from 
the energy and industrial sectors.  President Zapatero 
commended Garcia's economic and investment policies and 
offered his support to speed up negotiations between Latin 
America and the EU. (all media) 
 
CHINESE FIRM TO INVEST IN SOLAR ELECTRICITY PROJECTS 
 
¶7. (U) Chinese electrical engineering firm Chint plans to 
take stakes in a solar panel producing factory in Murcia and 
a number of solar farms. The factory and farms will use Chint 
technology.  Firms from Germany, Austria, Israel, Britain, 
and Japan are also investing in Spain's renewable energy 
sector, which benefits from government price guarantees.  The 
country's installed capacity of solar panels has risen 
ten-fold since 2005, and energy regulators estimate that 2 
billion euros has been invested in solar projects.  While 
current solar electricity production remains small, the 
installed capacity of solar panels is expected to reach 500 
MW by the end of this year and 1,000 MW by 2010, when it will 
represent about one percent of the country's total 
electricity generating capacity.  (Financial Times 01/19/2008) 
 
LLORENS