VZCZCXRO1001
RR RUEHAG RUEHBC RUEHDE RUEHDF RUEHIK RUEHKUK RUEHLZ RUEHROV
DE RUEHLB #0356/01 0700525
ZNR UUUUU ZZH
R 100525Z MAR 08 ZDK DUE TO NUMEROUS REQUESTS
FM AMEMBASSY BEIRUT
TO RUEHC/SECSTATE ASHDC 1248
INFO RUEHEE/ARAB LEAGUE COLLECTIVE
UCNMEM/EU MEMBER STATES
RHEHNSC/NSC WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RUCPDOC/USDOC WASHDC

UNCLAS SECTION 01 OF 02 BEIRUT 000356 
 
SIPDIS 
 
SENSITIVE 
 
SIPDIS 
 
STATE FOR NEA/ELA 
STATE PASS USTR 
TREASURY FOR MNUGENT AND SBLEIWEISS 
USDOC FOR 4520/ITA/MAC/ONE 
NSC FOR ABRAMS/SINGH/GAVITO 
E.O. 12958: N/A 
TAGS: ECON EFIN PREL PGOV LE
SUBJECT:  LEBANON: SWAP OF MATURING EUROBONDS AND FRENCH SOFT LOAN 
EASE PRESSURE ON STATE FINANCES (ECONOMIC WEEK IN REVIEW, MARCH 3 - 
9, 2008) 
 
BEIRUT 00000356  001.2 OF 002 
 
 
CONTENTS 
-------- 
 
-- CREDIT SUISSE AND AUDI BANK TO MANAGE EUROBOND ISSUE 
-- LEBANON RECEIVES $220 MILLION SOFT LOAN FROM FRANCE 
-- PIRACY RELATED LOSSES ESTIMATED AT OVER $26 MILLION IN 2007 
-- CONSUMER PRICES CONTINUE TO RISE IN 2008 
-- INDUSTRIALISTS TO SUE THE GOL FOR LACK OF PROTECTION 
-- AGRICULTURAL AND INDUSTRIAL EXPORTS RISE BY 23 PERCENT IN 2007 
-- FORMER MINISTER ESTIMATES ECONOMY'S GROWTH POTENTIAL AT OVER 
SEVEN PERCENT 
-- REAL ESTATE TRANSACTIONS REACH OVER $4 BILIION IN 2007 
-- MASTERINDEX INDICATES SHARP DECLINE IN LEBANESE CONSUMER 
CONFIDENCE 
 
CREDIT SUISSE AND AUDI BANK TO 
MANAGE UPCOMING EUROBOND ISSUE 
-------------------- 
 
¶1. (SBU) The Ministry of Finance (MOF) on March 6 contracted with 
international financial institution Credit Suisse and local Audi 
Bank as lead managers in a new five-year Eurobond to refinance March 
12 maturities amounting to $869 million, a senior MOF source told 
us.  The coupon is estimated to range between 9.125 percent and 9.5 
percent, relatively high compared to international rates but close 
to the rates for Lebanese papers in the secondary market. 
 
LEBANON RECEIVES $220 MILLION 
SOFT LOAN FROM FRANCE 
-------------------- 
 
¶2. (SBU) Lebanon received last week a $220 million soft loan from 
the Agence Francaise de Developpement (AFD - French USAID 
counterpart), a senior source at the Finance Ministry told us on 
March 4.  This amount was disbursed after Lebanon's Finance Minister 
Azour signed a Euro 375 million loan agreement for debt reduction on 
February 21, 2008, in Paris.  This agreement is part of France's 
pledge at the Paris III Donors' conference. 
 
PIRACY RELATED LOSSES ESTIMATED 
AT OVER $26 MILLION IN 2007 
-------------------- 
 
¶3. (U) The International Intellectual Property Alliance (IIPA) 
estimated preliminary 2007 piracy-related losses in Lebanon at $26.8 
million, up from $25.6 million in 2006, and accounting for 3.6 
percent of all such losses in the MENA region.  The IIPA recognized 
that some progress had been made in combating piracy, given the 
political and security situation in the country, mainly by the 
special police Cyber Crime and Intellectual Property Bureau, 
Customs, and the Ministry of Economy and Trade (MOET) inspectors. 
The IIPA believes more work needs to be done in terms of enforcing 
existing anti-piracy laws and improving the efficiency of the 
judiciary, and by imposing sentences for offenders which are more of 
a deterrent. 
 
CONSUMER PRICES CONTINUE 
TO RISE IN 2008 
-------------------- 
 
¶4. (U) According to reputed private consultancy firm Consultation 
and Research Institute (CRI), the Consumer Price Index (CPI) rose by 
3.5 percent in January 2008 compared to December 2007.  This 
increase was mostly due to a 7.7 percent increase in prices of 
personal care and other products and 7.46 percent increase in prices 
of food and beverages.  The food sub-index showed an increase of 
45.74 percent and 19.8 percent in prices of vegetables and 
fish/seafood respectively.  Housing prices went up by 4.22 percent. 
On a yearly basis, the CPI increased by 5.7 percent between January 
2007 and January 2008. 
 
¶5. (SBU) The Central Administration of Statistics (CAS) will start 
issuing a monthly CPI under IMF technical assistance in two weeks, a 
CAS source told us, refusing to disclose their January CPI at this 
moment.  CAS used to issue a quarterly CPI.  CAS estimated inflation 
at 9.3 percent in 2007. 
 
INDUSTRIALISTS TO SUE THE 
GOL FOR LACK OF PROTECTION 
-------------------- 
 
BEIRUT 00000356  002.2 OF 002 
 
 
 
¶6. (U) On March 3, the Association of Lebanese Industrialists (ALI) 
announced that it would sue the GOL for failing to protect local 
industries against unfair competition.  ALI argues that local 
industries, especially those that are energy-intensive, cannot 
compete with imports from Arab states that subsidize the cost of 
energy for their local production, and with which Lebanon has signed 
free trade agreements.  In a letter addressed to all Arab 
governments, ALI suggested countries either cut subsidies, allow 
Lebanon to impose duties on Arab imports, create a special fund to 
subsidize energy costs for non-oil producing countries, or give 
compensation to industries enabling them to open elsewhere. 
 
AGRICUTLURAL AND INDUSTRIAL EXPORTS 
RISE BY 23 PERCENT IN 2007 
-------------------- 
 
¶7. (U) According to the Investment and Development Authority of 
Lebanon (IDAL)'s annual report, 2007 economic growth reached between 
1.7 - 2 percent.  Export of agricultural and industrial products 
rose by around 23 percent in 2007.  Activity in Beirut's 
international airport as well as in the Port of Beirut rose by 20 
percent and 59 percent respectively compared to 2006.  The report 
also noted a significant rise in real estate transactions, valued at 
around $4 billion, and the continued expansion of Lebanese banks 
abroad. 
 
FORMER MINISTER ESTIMATES ECONOMY'S 
GROWTH POTENTIAL AT OVER SEVEN PERCENT 
-------------------- 
 
¶8. (U) Former Economy and Trade Minister Adnan Kassar said on March 
6, that had it not been for the deteriorating political situation, 
economic growth in Lebanon could have been over seven percent per 
year since 2005, compared to actual growth rates of zero percent in 
2006 and around 2.5 percent in 2007.  Kassar estimated losses in GDP 
of around $3 billion, $5 billion in Foreign Direct Income, and $2.2 
billion in the tourism sector in the past three years. 
 
REAL ESTATE TRANSACTIONS REACH 
OVER $4 BILIION IN 2007 
-------------------- 
 
¶9. (U) In a March 7 interview with the Daily Star newspaper, general 
manager of real-estate firm Coldwell Banker, Elie Harb said that 
property sales reached $4.2 billion in 2007, compared to a little 
over $3 billion in 2006.  According to Harb, 2007 was the best year 
for property sales and transactions since 2001.  Meanwhile, leading 
Lebanese bank, Audi Bank's research department attributed the rise 
in real estate transactions to an increase in population, higher 
demand by expatriate Lebanese, relatively low taxes, improvement in 
property transfer operations, and ease of foreign ownership. 
 
MASTERINDEX INDICATES SHARP DECLINE 
IN LEBANESE CONSUMER CONFIDENCE 
-------------------- 
 
¶10. (U) MasterCard's biannual MasterIndex consumer confidence index 
survey for the second half of 2007 recorded a 38.6 out of 100 score 
for Lebanon, a sharp decline from 67.6 in the first half of the 
year.  This indicates overall pessimism on all five indices used by 
the survey: measuring consumer expectations on the stock market -- 
with the highest drop compared to the second half of 2006 - followed 
by quality of life, employment, economy, and regular income (the 
only index whose score was in the optimistic zone).  Forecasts for 
the first half of 2008 indicate a continuation of the overall 
pessimism, with some expected improvement in the quality of life, 
stock market, and employment indices. 
 
SISON