VZCZCXRO6613
RR RUEHAG RUEHDF RUEHIK RUEHLZ RUEHROV
DE RUEHMD #0212/01 0561757
ZNR UUUUU ZZH
R 251757Z FEB 08
FM AMEMBASSY MADRID
TO RUEHC/SECSTATE WASHDC 4340
INFO RUCNMEM/EU MEMBER STATES COLLECTIVE
RUEHLA/AMCONSUL BARCELONA 3327

UNCLAS SECTION 01 OF 02 MADRID 000212 
 
SIPDIS 
 
SIPDIS 
 
DEPARTMENT FOR EUR/WE AND EEB/IFD/OMA 
 
E.O. 12958: N/A 
TAGS: EAIR ECON ECPS EFIN EFIS EIND EINV ENRG SENV
SP 
SUBJECT: MADRID WEEKLY ECON/COMMERCIAL/AG UPDATE - FEBRUARY 
18-22 
 
MADRID 00000212  001.2 OF 002 
 
 
Table of Contents: 
 
ECON/EFIN: Economic debate kicks off election campaign 
EFIN: Budget surplus reaches record in 2007, drops in January 
ENRG: World's largest solar thermal plants - recent and 
future, both in U.S. 
ECPS: Cellphone business skyrockets 
EIND/EINV: Zara making "fast fashion" even faster 
EINV: Construction company wins Florida contract 
EAIR: Aviation agreement with Jamaica 
EFIS/SENV: Spain calls for redistribution of unused fishing 
quotas 
 
ECONOMIC DEBATE KICKS OFF ELECTION CAMPAIGN 
 
¶1. (U) Second Vice President and Economy Minister Pedro 
Solbes debated Madrid PP parliamentary candidate Manuel 
Pizarro, who has the prestigious position of being number two 
on the Madrid list behind party leader Mariano Rajoy, on 
2/21/08 on the Antenna 3 TV station.  The debate lasted an 
hour and was largely polite.  Solbes took the view that, yes, 
the Spanish economy faces "turbulence," but not a "crisis." 
Pizarro said that things were worse than the socialist 
government was willing to recognize and that the government 
had not used the last four years well to prepare for more 
trying economic times.  Both protagonists used a lot of 
statistics, and sometimes displayed charts, to buttress their 
points.  After the debate, Antenna 3 conducted a poll asking 
respondents for their view as to who the winner of the debate 
was.  The poll showed that 47% of the viewers though that 
Solbes won and that 37% thought Pizarro won.  (Comment: 
Solbes' mastery of the issues showed, although it is not 
clear how well his professorial demeanor comes across to the 
broader electorate.  Pizarro did a creditable job, although 
the fact that he is not a macroeconomist showed.  For 
instance, when asked by Solbes as to how the conservative PP 
party intends to finance its tax and spending proposals, 
Pizarro responded by saying that the PP would abolish the 
Ministry of Housing, eliminate the Office of the Presidency 
Economic Office, reduce expenditures on Justice Minister 
Bermejo,s apartment and stop payments to terrorists.  This 
was red meat for the PP base, but it is not clear how 
relevant these high profile, albeit macroeconomically 
insignificant, proposals will be perceived by a wider 
electorate.) 
 
BUDGET SURPLUS REACHES RECORD IN 2007, DROPS IN JANUARY 
 
¶2. (U) The government's budget surplus reached a record 2.23% 
of GDP in 2007, or 23.4 billion euros.  This includes central 
government, regional and municipal governments, and social 
security.  Even after rate cuts, central government personal 
and corporate income tax revenues rose by 15 and 20 percent, 
respectively.  Value-added tax receipts rose by only 2.2 
percent, however.  Government officials have cited the 
surplus as providing room to maneuver in what is likely to be 
a more difficult 2008.  A sign of this came three days later 
when the January surplus was reported to be 50% below the 
surplus in January 2007.  (El Pais 02/22/08, ABC 02/25/08) 
 
WORLD'S LARGEST SOLAR THERMAL PLANTS - RECENT AND FUTURE, 
BOTH IN U.S. 
 
¶3. (U) In unrelated events this week, Acciona inaugurated 
what it said was the largest solar thermal power plant built 
anywhere in the last 17 years and Abengoa announced that it 
had signed a contract to build the largest solar plant of any 
kind in the world.  The new Acciona plant is the 64-megawatt 
Nevada Solar One complex in Boulder City, Nevada.  Acciona 
also announced that it would invest 1.8 billion euros in 
renewable energy projects in the U.S. in the next two years, 
1.2 billion to build wind farms with almost 1,000 MW of 
capacity and 600 million to build solar thermal plants with a 
combined capacity of 200 MW.  Abengoa's 280 MW Solana plant 
will be in Arizona and is scheduled to begin service in 2011. 
 Abengoa will sell the electricity to Arizona Public Service 
for 30 years for 4 billion dollars. (El Pais and ABC, 
2/22/08; ABC, 2/25/08) 
 
CELLPHONE BUSINESS SKYROCKETS 
 
¶4. (U) Spain now has 50 million active mobile phones, 1.12 
per person, according to the Comision del Mercado de las 
Telecomunicaciones.  3.4 million new phone lines were created 
in 2007.  Competition is fierce with Vodafone now number one, 
followed by Movistar and Yoigo.  Orange is losing clients and 
deactivated 500,000 lines.  The number of high-speed Internet 
users also increased by 20.5 percent from the previous year. 
 
MADRID 00000212  002.2 OF 002 
 
 
DSL connections increased by 44 percent and now account for 
1.35 million lines.  Telefonica reports a 22 percent increase 
of broadband lines. (El Pais, 02/21/2008) 
 
ZARA MAKING "FAST FASHION" EVEN FASTER 
 
¶5. (U) Zara is part of the Inditex group, the world's second 
largest clothing manufacturer after Gap.  Inditex's flagship 
store is Zara, but the group owns seven other store brands as 
well, including the more upscale Massimo Dutti.  The first 
Zara store opened in 1975, and Inditex now owns 3,691 stores 
in 68 countries.  Without a doubt, Zara is a phenomenon, a 
prime example of Spain's newfound business strength.  "Fast 
fashion" means producing new designs quickly, inexpensively, 
and in limited quantities so as to create an air of 
exclusivity.  Zara addicts (and there are many around the 
world) know that if they want something they have to get it 
quickly and not wait for sales, which the group does not use 
much.  Unusually, most of the manufacturing is in Spain, 
Portugal, Morocco, or Turkey, not Asia.  Labor costs are 
higher, but proximity has efficiency advantages.  The problem 
for Inditex is that competitors such as Bennetton, Fast 
Retailing Co., Patagonia, Hennes & Mauritz, and Mango are 
copying its supply chain management.  As a result, the group 
is trying to find ways to order and unpack merchandise faster 
and add new cargo routes.  As new stores are opened around 
the world, Inditex may also have to open regional logistics 
centers outside Spain, including in Asia.  (Comment: Inditex 
owner Amancio Ortega Gaona is a self-made man who is Spain's 
richest individual.  He prefers to maintain a low profile and 
is grooming his daughter to take over the company.)  (Wall 
Street Journal, 2/20/08) 
 
CONSTRUCTION COMPANY WINS FLORIDA CONTRACT 
 
¶6. (U) Community Asphalt, the U.S. subsidiary of OHL, one of 
Spain's six largest construction companies, recently won a 
USD 111 million Florida Department of Transportation contract 
to extend and reconstruct 17 km of US-1.  Payment will be 
received after the project is completed.  The Caja Madrid 
savings bank is providing and coordinating financing. 
(Expansion, 2/20/08) 
 
AVIATION AGREEMENT WITH JAMAICA 
 
¶7. (U) Spain and Jamaica have signed an air service agreement 
to encourage tourism.  The island is seeking to open itself 
up to European Union flights.  The agreement is expected to 
be implemented provisionally until it formally takes effect 
after legislative ratification in both countries. 
(Hosteltur.com, 2/22/08) 
 
SPAIN CALLS FOR REDISTRIBUTION OF UNUSED FISHING QUOTAS 
 
¶8. (U) Secretary of State for Fishing Juan Carlos Martin 
Fragueiro asked the European Commission to create a mechanism 
through which EU countries could redistribute unused fishing 
quotas.  He argued that each year some countries do not reach 
their allocated quotas, which could be made available to 
"those who really need them."  He did not call for modifying 
the current percentages allocated to each member, only for 
allowing flexibility to redistribute.  (AFP, 2/20/08) 
 
AGUIRRE