VZCZCXRO6156
RR RUEHAG RUEHDF RUEHIK RUEHLZ RUEHROV
DE RUEHMD #0715/01 1820836
ZNR UUUUU ZZH
R 300836Z JUN 08
FM AMEMBASSY MADRID
TO RUEHC/SECSTATE WASHDC 5005
INFO RUCNMEM/EU MEMBER STATES COLLECTIVE
RUEHLA/AMCONSUL BARCELONA 3483

UNCLAS SECTION 01 OF 02 MADRID 000715 
 
SIPDIS 
 
STATE FOR EUR/WE AND EEB/IFD/OMA 
 
E.O. 12958: N/A 
TAGS: BEXP EAGR ECON EIND EINV ENRG PGOV SP
SUBJECT: MADRID WEEKLY ECON/COMMERCIAL/AG UPDATE JUNE 21-25 
UPDATE 
 
MADRID 00000715  001.2 OF 002 
 
 
Table of Contents 
 
ECON/PGOV:  Solbes disassociates himself from June 23 
economic package 
ECON: Inflation rate projected to reach 5.1 percent in June 
ENRG: Enel and Acciona clash over Endesa's renewables assets 
but agree to sell other assets to E.ON 
EAGR/EIND/BEXP: Smithfield Foods and Campofrio to create 
joint pan-European group 
PGOV: Telefonica first company to register as a lobby on an 
EU registry 
BEXP/EINV: ACS/Zachry win 50 year infrastructure project in 
Texas 
ENRG/EINV: Iberdrola Renovables to invest heavily in 
renewable energies in the U.S. 
 
SOLBES DISASSOCIATES HIMSELF FROM JUNE 23 ECONOMIC PACKAGE 
 
¶1. (U)   Second Vice President and Finance Minister Pedro 
Solbes said on June 24 that the freeze in government salaries 
of high officials announced as one of the 21 measures in the 
June 23 package would have more of a &psychological8 than 
macroeconomic impact.  Sources in his ministry also 
reportedly told Expansion said that they had not participated 
in the preparation of the 21 measures. (Comment: Observers 
seem to think that this may be the first salvo for control of 
economic policy that will take place between Solbes and the 
Minister of Industry, Tourism and Trade, Miguel Sebastian. 
In any event, Solbes, recent statement is just the latest 
example of his occasionally intimating publicly disapproval 
of certain economic policies approved by President Zapatero. 
The Second Vice President does not apparently intend to leave 
the government though.) (Expansion, 6/25/08) 
 
INFLATION RATE PROJECTED TO BE  5.1 PERCENT IN JUNE 
 
¶2. (U) The definitive number will be out by July 11. The 
projected June inflation rate is twice as high as the June 
2007 rate.  The inflation rate for the year of 2008 is 
expected to be around 4 percent.  Price hikes in oil, raw 
materials and food products are responsible for the high 
inflation rate.  (El Confidencial, 6/27/08) 
 
ENEL AND ACCIONA CLASH OVER ENDESA'S RENEWABLES ASSETS, BUT 
AGREE TO SELL OTHER ASSETS TO E.ON 
 
¶3. (U)   Last year, with some controversial GOS help, 
Italy,s Enel and Spanish construction/electricity company, 
Acciona, edged out Germany,s E.ON for control of Endesa, 
although Enel and Acciona agreed to sell some of Endesa's 
assets to E.ON.  The takeover was the culmination of a two 
year battle for control of the utility.  Since then, 
Acciona,s CEO, Jose Manuel Entrecanales, has apparently 
moved aggressively to control Endesa, in some cases 
successfully against Enel,s will.  Enel may, however, be 
able to exercise leverage over Entrecanales in the next 
couple of months because Acciona wants to buy Endesa,s 
renewable energy assets at a favorable price.  However, 
because Acciona is the buyer, the company cannot sit on the 
corporate entity that will determine the sales price for the 
assets.  Enel will, however, be represented on this body.  In 
the meantime, on 6/26/08, Enel and Acciona sold conventional 
power plant assets located in Spain to E.ON for euros 11.8 
billion.  As a result of the sale, Iberdrola is now Spain's 
largest electric utility.  (FT, 6/25/08/Europa Press, 
6/26/08) 
 
SMITHFIELD FOODS AND CAMPOFRIO TO CREATE JOINT PAN-EUROPEAN 
GROUP 
 
¶4. (U) The Spanish meat processing company, Campofrio, is 
planning to merge with Groupe Smithfield Holdings (GSH) and 
create a pan-European group.  The new company will be a 
European leader in processed meat products such as cured ham, 
bacon, and sausages.  The new firm will have the name 
Campofrio and will be listed on the Madrid stock exchange. 
Campofrio shareholders will own 51.5 percent of the new group 
and GSH shareholders will own 48.5%.  The press is describing 
the transaction as a friendly merger between equals. (Note: 
The Ambassador is meeting with Campofrio CEO Pedro Ballve, 
who will head up the new entity, on July 16.) (Expansion, 
6/26/08) 
 
TELEFONICA FIRST COMPANY TO REGISTER AS A LOBBY ON AN EU 
REGISTRY 
 
¶5. (U)  The Spanish telecoms giant was the first European 
company to sign in with this voluntary registry.  Telefonica 
reported that its lobbying costs were USD 1.5 million in 
 
MADRID 00000715  002.2 OF 002 
 
 
¶2007.  (IHT, 6/24/08; Expansion, 6/24/08) 
 
ACS/ZACHRY WIN 50 YEAR INFRASTRUCTURE PROJECT IN TEXAS 
 
¶6. (U) The Spanish construction giant has won with its Texas 
partner, Zachry, a 50-year contract to design, plan and 
develop an infrastructure corridor of 1,000 kilometers across 
Texas.  This "I-69 Trans Texas Corridor" project will go 
across Texas from North to South, connecting the Mexican 
border to the coastal region of the Gulf of Mexico, Houston, 
and major industrial and logistics centers of Texas with the 
northern part of the country. (WSJ, 6/26/08) 
 
IBERDROLA TO INVEST HEAVILY IN RENEWABLE ENERGIES IN THE U.S. 
 
¶7. (U) Iberdrola announced in a press release June 26 that it 
planned to spend over 18 billion euros during 2008-2012 
investing in renewable energy projects domestically and 
abroad.  Of that amount, 50 percent is slated for investment 
in the U.S., 23 percent for investments in Spain, and 25 for 
the rest of Europe.  Iberdrola Renovables invests in all 
types of renewable energy, but focuses primarily on wind 
energy.  The company also announced plans to invest USD 800 
million in gas storage in the U.S. 
 
 
 
 
AGUIRRE