VZCZCXRO1768
RR RUEHAG RUEHDF RUEHIK RUEHLZ RUEHROV
DE RUEHMD #0692/01 1760845
ZNR UUUUU ZZH
R 240845Z JUN 08
FM AMEMBASSY MADRID
TO RUEHC/SECSTATE WASHDC 4977
INFO RUCNMEM/EU MEMBER STATES COLLECTIVE
RUEHLA/AMCONSUL BARCELONA 3476

UNCLAS SECTION 01 OF 03 MADRID 000692 
 
SIPDIS 
 
STATE FOR EUR/WE AND EEB/IFD/OMA 
 
E.O. 12958: N/A 
TAGS: ECON EFIN EIND EINV ELAB ENRG ETRD EWWT PTER
SENV, TSPL, SP 
SUBJECT: MADRID WEEKLY ECON/COMMERCIAL/AG UPDATE JUNE 14-20 
 
MADRID 00000692  001.2 OF 003 
 
 
Table of Contents: 
 
ECON/ELAB: Truckers' strike fizzles, other sectors demonstrate 
ELAB: Labor Minister offers payout to immigrants to leave 
EFIN: Bad bank debt rises, still below EU average 
EINV: Inward, outward FDI both rose in 2007 
TSPL: Research and development spending up, still below EU 
average 
ECON/ELAB: Madrid region liberalizes store hour rules 
ENRG/EINV: New York judge recommends against Iberdrola's 
acquisition of Energy East 
EIND/ETRD: Textile industry continues to decline, 
brands/marketing key to survival 
EWWT/PTER: Ceremony celebrates Container Security Initiative 
SENV: Americans among winners of biodiversity awards 
ECON: Population reaches 46 million 
 
 
TRUCKERS' STRIKE FIZZLES, OTHER SECTORS DEMONSTRATE 
 
¶1. (U) After suspending last week,s disruptive truckers, 
strike, independent truckers, groups also cancelled a Madrid 
demonstration scheduled for June 18, ostensibly due to 
security concerns.  Demonstrations, however, continue within 
other sectors affected by high fuel prices.  Over 10,000 
members of the Asaja farmers and cattle raisers association 
protested June 19 in Madrid and another 8,000 in 12 of 
Spain's 17 Autonomous Communities seeking government actions 
to cushion the impact of high fuel and fertilizer prices, 
including a reduction in VAT tax on fuel.  Asaja leaders have 
threatened to block highways at the start of the vacation 
season in late July and early August if the government does 
not meet their demands.  (ALL MEDIA, June 18-20) 
 
 
LABOR MINISTER OFFERS PAYOUT TO IMMIGRANTS TO LEAVE 
 
¶2. (U) Minister of Labor and Immigration Celestino Corbacho 
announced on June 17 a new measure to offer unemployed legal 
immigrants lump sum payments to return home.  The measure 
would be offered to non-EU immigrants, and would provide a 
lump-sum payment of 40% of unemployment benefits when the 
immigrant renounces his/her Spain residency and the remaining 
amount when he/she returns to the country of origin.  With 
this measure, the ministry hopes to soften the blow of 
Spain,s economic downturn, particularly given that 
unemployment rates for immigrants surpass the national 
average (15 percent compared with 9.6).  The initial reaction 
from immigrant groups was that the incentive was not 
sufficient to encourage many to return.  (Wall Street 
Journal, 6/18; El Confidencial, 6/17) 
 
 
BAD BANK DEBT RISES, STILL BELOW EU AVERAGE 
 
¶3. (U) Nonperforming loans held by banks and savings banks 
rose to 1.3 percent of the total in April, the tenth 
consecutive monthly increase and the highest rate since March 
of 2000.  It is still significantly below the EU average of 
2.5 percent.  (Europa Press, 6/18) 
 
 
INWARD, OUTWARD FDI BOTH ROSE IN 2007 
 
¶4. (U) After four consecutive years of decline, Spain's share 
of total world foreign direct investment (FDI) rose to 3.9 
percent in 2007.  The partial purchase of ENDESA by the 
Italian firm ENEL accounted for a significant portion of the 
increase.  Even without this transaction, FDI in Spain would 
have risen 33 percent, twice the rate of growth of overall 
world FDI.  While inward FDI was 36 billion euros, Spanish 
FDI abroad rose 44 percent to a record 91 billion euros. 
Again, one transaction accounted for much of the increase, 
this time Banco Santander's participation in the purchase of 
ABN Amro.  (Expansion, 6/17) 
 
 
RESEARCH AND DEVELOPMENT SPENDING UP, STILL BELOW EU AVERAGE 
 
¶5. (U) Spending on research and development as a percentage 
of GDP rose from 0.79 percent in 1995 to 1.2 percent in 2006. 
 However, this contrasts with the 1.74 percent EU average and 
the 2.25 percent OECD average.  Press reports state that the 
higher spending has not yielded a commensurate payoff in 
terms of innovation and productivity, in part because 
educational quality, with a few exceptions, is weak. 
(Comment: The new Zapatero government has created a Ministry 
of Science and Innovation that is intended to encourage 
research and promote the link between research and overall 
 
MADRID 00000692  002.2 OF 003 
 
 
economic productivity.) (El Mundo and El Pais, 6/18) 
 
 
MADRID REGION LIBERALIZES STORE HOUR RULES 
 
¶6. (U) On June 19, the Autonomous Community of Madrid 
approved a law to allow store owners to keep their businesses 
open longer.  Under the prior law, stores were only allowed 
to open for a total of 90 hours per week between 7am and 
midnight, Monday through Saturday.  Additionally, those 
stores with more than 300 employees were restricted in the 
number of Sundays or holidays that they could open.  The new 
law, which is the most liberal of its kind in all of Spain, 
would remove those restrictions, allowing stores to be open 
anytime during Monday-Saturday.  Although the Autonomous 
Community of Madrid praised the new bill as a positive step 
that would lead to more employment and less inflation, it was 
met with protests by Spain,s workers, unions, the UGT and 
the CCCO.  (El Pais, 6/20) 
 
 
NEW YORK JUDGE RECOMMENDS AGAINST IBERDROLA'S ACQUISITION OF 
ENERGY EAST 
 
¶7. (U) On June 16, a New York administrative law judge issued 
a non-binding recommendation to the state,s Public Service 
Commission (PSC) that it not approve the $4.5 billion 
acquisition due to a "lack of potential synergies or other 
benefits."  The judge also recommended several preconditions 
if the PSC does decide to give its approval, including 
barring the company from owning power generation capabilities 
in the state of New York, including wind farms, and requiring 
Iberdrola to pay $650 million to Energy East customers. 
Iberdrola has offered to pay $200 million in ratepayer 
benefits.  After the judge,s recommendation was made public, 
Iberdrola announced its plan to invest $2 billion in 
renewable energy in New York state.  Both Governor David 
Patterson and Senator Charles Schumer have issued statements 
encouraging the PSC to approve the deal. (El Pais, Bloomberg, 
Reuters, 6/17) 
 
 
TEXTILE INDUSTRY CONTINUES TO DECLINE, BRANDS/MARKETING KEY 
TO SURVIVAL 
 
¶8. (U) The Center for Textile and Apparel Information (CITYC) 
numbers are clear.  During the 2001 to 2007 period, the 
number of Spanish companies in the sector declined from 4,815 
to 4,120; employment declined from 175,000 to 136,000; 
nominal euro value production declined from 7.2 billion to 
6.6 billion; and, production fell from 287,000 tons to 
220,000 tons.  During the same period, exports rose from 
euros 2.6 billion to euros 4.5 billion; imports rose from 
euros 4.4 billion to euros 9.5 billion; and consumption rose 
from euros 9 billion to euros 11.5 billion.  One way of 
looking at this is that in 2001, Spain,s textile and apparel 
trade deficit was euros 1.8 billion.  By 2007, it had grown 
to almost euros 5 billion.  Spain has had some successes 
thanks to brands such as Zara, Mango and others.  But while 
exports have grown substantially, imports have grown more, 
and domestic production is declining.  There is only one 
solution: more development of brands and more high-end 
design, if not production.  Spain has demonstrated that this 
can be done, and there is no reason not to believe that Spain 
cannot continue to be successful in this area.  But the 
reality is that overall production and employment in the 
Spanish textiles and apparel sector is likely to continue to 
decline. (El Pais, 6/16) 
 
 
CEREMONY CELEBRATES CONTAINER SECURITY INITIATIVE 
 
¶9. (U) On June 18, the Department of Homeland Security and 
Spain,s Customs Authority organized a ceremony to honor 
those individuals participating in the successful Container 
Security Initiative in Spain.  The Container Security 
Initiative is a DHS program in which DHS personnel work with 
local authorities to interdict hazardous materials and 
contraband that may be a threat to the U.S.  The Ambassador 
presided over the celebration, presenting the U.S. and 
Spanish participants of the program plaques to thank them for 
their service.  The CSI program is active in three ports in 
Spain - Valencia, Barcelona, and Algeciras - and has been key 
in the interdiction of arms, smuggled goods, and other items 
going through Spanish ports. 
 
 
AMERICANS AMONG WINNERS OF BIODIVERSITY AWARDS 
 
 
MADRID 00000692  003.2 OF 003 
 
 
¶10. (U) Stanford professor Harold Mooney and Peter Raven of 
the Missouri Botanical Garden were among the winners of the 
BBVA (bank) Foundation 2007 Biodiversity Conservation Awards, 
given June 17 in the presence of Environment Minister 
Espinosa.  The awards were divided into three areas: research 
in ecology and conservation biology, application/development 
of conservation projects, and dissemination of environmental 
knowledge and social awareness.  Professor Mooney and Mr. 
Raven shared the research prize, while the Mexican Sierra 
Gorda Ecological Group won the conservation project prize and 
Spanish journalist Benigno Varillas won the knowledge 
dissemination prize.  In his keynote address, Professor 
Mooney applauded Spain's efforts at fostering international 
cooperation on environmental issues and praised BBVA for its 
private sector leadership on conservation.  He then discussed 
the imperative for action from individuals and nations on 
climate change.  He argued that the lack of an independent 
body or specific targets listed in international conventions 
was a major obstacle to progress on the policy front. 
However, he said that an upcoming meeting to be hosted by the 
French represented a positive step. 
 
 
POPULATION REACHES 46 MILLION 
 
¶11. (U) According to the latest National Institute of 
Statistics (INE) survey, Spain,s population reached 46 
million in 2008, a 1.9% growth from the year before.  Not 
surprisingly, the largest growth in population came via an 
increase in immigrants; of the 863,000 net new residents in 
2007, 700,000 were immigrants.  The immigrant population is 
now 5.22 million, 11 percent of the total population.  (Cinco 
Dias, 6/20) 
AGUIRRE