VZCZCXRO0661
RR RUEHAG RUEHDF RUEHIK RUEHLZ RUEHROV
DE RUEHMD #0895/01 2271532
ZNR UUUUU ZZH
R 141532Z AUG 08
FM AMEMBASSY MADRID
TO RUEHC/SECSTATE WASHDC 5241
INFO RUCNMEM/EU MEMBER STATES COLLECTIVE
RUEHQT/AMEMBASSY QUITO 1426
RUEHLA/AMCONSUL BARCELONA 3544
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEATRS/DEPT OF TREASURY WASHDC

UNCLAS SECTION 01 OF 02 MADRID 000895 
 
SIPDIS 
 
STATE FOR EUR/WE, EEB/IFD/OMA; TREASURY FOR IA:W.LINDQUIST 
 
E.O. 12958: N/A 
TAGS: EC ECON EFIN EINV ENRG EPET PGOV SP
SUBJECT: MADRID WEEKLY ECON/COMMERCIAL UPDATE AUGUST 11-14 
 
REF: A. MADRID 879 
     ¶B. MADRID 641 
     ¶C. QUITO 691 
 
MADRID 00000895  001.2 OF 002 
 
 
Contents: 
 
ECON/PGOV: Ministers Return from Vacation to Tackle Economic 
Woes 
ECON: Tourism Begins to Show Downturn 
ECON/EFIN: Residential Home Prices Continue to Fall 
EPET/EINV: Repsol to Agree to Ecuador,s New Petroleum 
Contract 
EINV/ENRG: Florida Power and Light Plans Solar Investment 
 
 
Ministers Return from Vacation to Tackle Economic Woes 
 
¶1. (U) President Zapatero and economic ministers met on 
August 13 in a special session to discuss the economy and the 
impact of previous GOS stimulus measures and to propose new 
measures to address the slowdown.  During the meeting, Second 
Vice President and Minister of Economy Pedro Solbes presented 
a report that indicated that Spain's economic woes would 
continue through 2009.  During the media's presence at the 
meeting, President Zapatero indicated that while 2008 and 
2009 would be "complicated", the economy would become strong 
once more in 2010.  As follow-up to this session, the Council 
of Ministers is expected to approve on August 14 a set of 24 
stimulus measures, the details of which have not been 
released publicly.  The session prompted criticism from 
opposition party representatives who accused the government 
of holding this extraordinary session as a media stunt. 
Comment: This is the first time that the Council of Ministers 
has ever met in the middle of August vacations.  The measures 
that will be announced are not likely to have much immediate 
impact, but the meetings - which have been planned for a 
month - seem to be aimed at sending a message that the 
government is working to address the economic slowdown.  (All 
Media, 8/13-8/14) 
 
 
Tourism Begins to Show Downturn 
 
¶2. (U) In conjunction with the downturn in the economy, 
tourism in Spain is also beginning to suffer.  According to a 
Ministry of Industry, Tourism, and Commerce survey, spending 
by foreign tourists in June decreased by 0.5% from June of 
the year before.  Indications are that Spanish tourists in 
Spain are reducing their spending as well.  Representatives 
from Spain,s biggest hotel group, Sol Melia, predict that 
summer demand will be below expectations, a slowdown they 
believe will continue until the last quarter of 2008 and 
potentially into all of 2009.  The economic downturn is 
having more of an effect on mid-range tourism, while luxury 
travel has not suffered as much.  Spaniards and the British 
represent the two largest-spending tourist segments in Spain. 
 (ABC, 8/11) 
 
 
Residential Home Prices Continue to Fall 
 
¶3. (U) According to TINSA, Spain,s largest real estate 
appraisal company, housing prices in the month of June 2008 
were 3.9 percent below their level of June 2007.  Price drops 
were most severe in coastal areas as well as urban centers 
with a population of more than 50,000.  (Comment: Residential 
real estate price falls are becoming more pronounced.  In the 
first quarter of 2008, the average year-on-year price fall 
was 0.3%; in May TINSA estimated a 2.5 percent y-o-y price 
drop.  Since many experts believe that homes in Spain are 
overvalued by up to 20-30%, prices are expected to fall a lot 
further.) (All Media, 8/13) 
 
 
Repsol to Agree to Ecuador,s New Petroleum Contract 
 
¶4. (U) Repsol, Spain,s largest crude oil company, has 
decided to accept the revised contract terms offered by 
Ecuador,s President Correa to foreign petroleum companies. 
The new contract will change Repsol's role from production 
for its own sale to that of a service provider, delivering to 
the GOE on a fee basis all of the petroleum it extracts. 
Repsol currently has rights through 2012 to three blocks in 
Ecuador.  In exchange for signing the new contract, Repsol 
will receive an extension to 2018 of its rights.  A press 
report suggests that it could take a year for Repsol and the 
GOE to complete negotiations on details of the new contract. 
 
MADRID 00000895  002.2 OF 002 
 
 
Repsol will also be able to keep a greater share of its 
"extraordinary profits" on petroleum sales until the new 
contract comes into effect.  It also has decided to withdraw 
its suit against Ecuador in the International Center for 
Settlement of Investment Disputes (ICSID) (reftels B-C).  In 
2007, Repsol,s production in Ecuador totaled 6.6 million 
barrels of crude per year, less than 4 percent of Repsol,s 
production worldwide.  (Cinco Dias, 8/12) 
 
 
Florida Power and Light Plans Solar Investment 
 
¶5. (U) Florida Power and Light (FPL) plans to invest over 
$1.2 billion (800 million euros) to develop four solar 
thermal power plants in the region of Extremadura.  FPL has 
created an alliance with Spain-based Grupo Hernando to 
develop the plants near the cities of Caceres and Badajoz. 
Each of the four plants will have capacity to generate 50 
megawatts (MW) of electricity.  The first two plants are 
expected to be operating by the end of 2010.  According to 
the company, FPL has already secured all of the financing 
required for the project.  Two of FPL,s largest competitors, 
Spain-based Iberdrola and Acciona, also operate solar power 
plants in the region.  Iberdrola, which attempted to acquire 
FPL several years ago, is a rival of the company in the U.S. 
in the installation of new wind power, especially over the 
past three years.  Since 2006, the two companies combined 
have installed an additional 8,000 MW of wind power.  They 
are two of the world's three largest wind power generators. 
(Expansion, 8/11; Extremadura 24, 8/11) 
Aguirre