VZCZCXYZ1806
RR RUEHWEB

DE RUEHMD #0981/01 2791522
ZNR UUUUU ZZH
R 061522Z OCT 09
FM AMEMBASSY MADRID
TO RUEHC/SECSTATE WASHDC 1297
INFO RHMCSUU/DEPT OF ENERGY WASHINGTON DC
RULSDMK/DEPT OF TRANSPORTATION WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RHEHNSC/NSC WASHDC

UNCLAS MADRID 000981 
 
SIPDIS 
 
STATE - EUR/WE, EUR DAS BOYER, WHA:S.WILLIAMS/J.GONZALEZ, H 
STATE/H PASS OFFICES OF SEN. MARTINEZ, REP. GRIJALVA 
TRANSPORTATION FOR EDDIE CARAZO AND OFFICE OF THE DEPUTY 
SECRETARY 
ENERGY FOR EERE: A/S ZOI, D.BIRNS, A.LEVER, U.ROHATGI 
TREASURY FOR TREASURER OF THE UNITED STATES:R.RIOS 
STATE PASS SEC FOR COMMISSIONER AGUILAR AND E.TAFARA 
 
E.O. 12958: N/A 
TAGS: ECON EINV PGOV PREL SP
SUBJECT: SCENESETTER FOR U.S.-SPAIN FORUM, OCT 9-11 IN 
VALENCIA 
 
1.(U) Embassy Madrid warmly welcomes your visit to Valencia 
to participate in the fourteenth U.S.-Spain Forum. 
U.S.-Spain relations are strong and based on shared global 
interests, including our association in NATO, the fight 
against terrorism, and growing economic ties.  Spaniards are 
enthusiastic about President Obama and his administration, 
and within the government there is a general sense of 
goodwill and optimism for increasingly closer bilateral 
relations and enhanced engagement.  The Forum takes place 
just before the high-profile October 13 meeting between our 
two presidents, which will be President Zapatero,s first 
White House meeting in his five years in office.  It also 
takes place less than three months before Spain assumes the 
presidency of the European Union.  We are confident that your 
participation in the Forum will help strengthen our bilateral 
relations. 
 
BILATERAL RELATIONS 
 
2.(U) Spain is an important friend and ally that has achieved 
a remarkable political and economic transformation since the 
Franco dictatorship ended in the 1970s.  We value its 
cooperation on security issues and in the fights against 
terrorism and narcotics.  Spain values its relations with the 
U.S. and is a strong bilateral defense partner, despite 
differences in the past over Spain,s sudden withdrawal from 
Iraq in 2004 and its withdrawal this year from the NATO force 
in Kosovo.  Spain has about 1000 troops in Afghanistan, 
including a recently announced additional commitment of 220, 
and it operates a Provincial Reconstruction Team.  It also 
allows us the use of two military bases that are crucial 
transit points between the U.S. and Afghanistan and Iraq. 
Counter-terrorism and law-enforcement cooperation is strong, 
as are commercial relations.  Since winning a second term in 
March 2008, and even more strongly since the election of 
President Obama, President Zapatero has stressed his desire 
to further improve bilateral relations. 
 
POLITICAL CONTEXT 
 
3.(U) President Zapatero won reelection to a second term in 
March 2008, but his center-left Spanish Socialist Workers 
Party (PSOE) is seven seats shy of a majority in the 350-seat 
Congress and has suffered reverses this year in regional and 
European Parliament elections.  Zapatero has come under 
increased criticism in recent months for Spain's worsening 
economic condition and what are perceived as the government's 
inadequate and inconsistent efforts to reverse it.  An April 
cabinet shuffle that included replacement of the Economy and 
Finance Minister has not noticeably improved the situation. 
Zapatero has sought to show that he is taking a leading 
international role in the response to the economic crisis, 
and he has advocated vigorously for permanent Spanish 
membership in the G-20; over the past year, Spain has been 
invited to G-20 summits on an ad hoc basis, and it is likely 
to continue to be invited at least until its EU presidency 
ends in mid-2010.  The conservative opposition Popular Party 
(PP) has not been able to capitalize on Zapatero,s 
unpopularity.  The PP has suffered internal divisions and has 
been dogged by corruption accusations that have implicated 
Valencia regional president Camps, who will host the Forum,s 
Saturday dinner. 
 
ECONOMIC CONTEXT 
 
4.(U) Spain underwent a remarkable economic transformation in 
the years following its entry into the European Union.  Over 
the 15 years through 2007, it posted economic growth rates 
well above the EU average to become the world's 9th largest 
economy.  The economy's strong performance was driven by a 
housing and construction boom that came to a halt in late 
2007, after which the global financial and economic crisis 
aggravated the country,s woes.  Spain has been in recession 
for 18 months and is expected to be the last large economy, 
and among the last in the EU, to resume growth.  The economy 
is expected to contract by around 4 percent this year and to 
contract slightly in 2010.  While the banking system was not 
exposed to instruments based on U.S. subprime mortgages, and 
there have been no major failures, some savings banks 
( cajas,) are in trouble because of overreliance on 
construction and real estate loans; the government is 
 
encouraging mergers and has developed contingency rescue 
plans.  Unemployment is above 18 percent and is expected to 
pass 20 percent in 2010. 
 
5.(U) The government has responded with a major fiscal 
stimulus.  This includes extending already generous 
unemployment benefits, funding major public works projects at 
the municipal level, and providing targeted assistance to key 
sectors and industries.  The combination of increased 
government spending and reduced tax revenues has boosted the 
budget deficit to around 10% of GDP in 2009.  While Spain's 
low level of public debt enables it to run such deficits in 
the short term, it will have to find a way to curb spending 
in the next few years to get its deficit back down.  The 
government,s proposed 2010 budget hikes the value-added tax 
and other taxes and is widely unpopular; lacking a 
legislative majority, Zapatero will need to compromise with 
small parties to gain approval. 
 
6.(U) Spain is a major investor in the United States, 
particularly in banking, road construction, and wind and 
solar power.  Spanish companies are interested in 
participating in infrastructure projects in the U.S., 
especially in the development of high-speed rail.  Spanish 
businesses have invested heavily in Latin America and are 
among the region,s most important banking, electricity, and 
telecommunications firms. 
 
THE U.S.-SPAIN COUNCIL AND THE U.S.-SPAIN FORUM 
 
7.(U) The United States-Spain Council, based in Miami, was 
established in 1996 by then-Vice President Gore and 
then-President Aznar to encourage Spanish and U.S. corporate 
leaders, government officials, and educational and cultural 
leaders to promote better relations between the two 
countries.  It seeks to stimulate international trade and 
investment and to increase educational exchanges and cultural 
programs.  Its Spanish counterpart, run out of the Foreign 
Ministry, is the Fundacion Consejo Espana-Estados Unidos. 
The Fundacion sponsors annual visits to Spain by young 
American and Hispanic-American leaders, places recent 
American graduates in Spanish companies for six-month 
internships, and arranges conferences and art exhibits on 
topics related to U.S.-Spanish relations. The Council and the 
Fundacion meet at annual Fora that alternate between the U.S. 
and Spain. 
 
8.(U) This year's Forum, held in Valencia October 9-11, will 
include a Friday night dinner at which Foreign Minister 
Moratinos will speak, Saturday sessions on the economy, 
renewable energy, transportation, and Latin America, a 
Saturday lunch at which Crown Prince Felipe will speak, and a 
Saturday dinner hosted by the Valencia Autonomous Community 
(region) President Camps.  On Sunday, the executive boards of 
the Council and the Fundacion will meet separately and then 
jointly, followed by a lunch for the boards hosted by the 
Mayor of Valencia.  The importance the Spanish give to the 
Forum is demonstrated by the high level of GOS participation, 
and they welcome the number and level of official 
participants from the U.S. as a sign of our desire for a 
close relationship. 
 
FORUM SESSION TOPIC - RENEWABLE ENERGY 
 
9.(U) Renewable energy is an increasingly important part of 
the Spanish economy and of our bilateral relationship. 
Abundant wind and sun and generous feed-in tariffs have 
helped make Spain a world leader in wind and solar power. 
Iberdrola is the world's largest producer of wind power, and 
Acciona is the second largest.  Gamesa, partially owned by 
Iberdrola, is one of the world,s largest manufacturers of 
wind turbines as well as operating wind farms.  Spain is also 
the world,s third largest generator of solar power, and many 
firms are seeking approval to build photovoltaic and 
concentrated solar projects.  While U.S. companies are 
investing in (AES) and supplying (GE and others) renewables 
projects in Spain, Spanish investment in renewables in the 
U.S. is much greater. 
 
10.(U) Spanish companies own wind farms in about 20 U.S. 
states and continue to expand.  Iberdrola,s 
 
multi-billion-dollar acquisition of Energy East last year 
reportedly was delayed over the company,s insistence that 
New York regulators allow it to keep Energy East,s wind 
assets.  Iberdrola plans to invest another 6 billion dollars 
in U.S. renewable projects by 2012.  Iberdrola-owned wind 
projects have received over $500 million in stimulus funds in 
grants it took in place of production tax credits, and 
Acciona expects to receive significant amounts as well. 
Gamesa and Acciona own four wind turbine manufacturing plants 
in Iowa and Pennsylvania.  Acciona owns the world,s third 
largest solar plant, the 64-MW Nevada Solar One concentrated 
solar (parabolic trough) project.  Abengoa Solar is building 
a 280-MW concentrated solar plant in Arizona that will be the 
world,s largest.  Abengoa Biofuels has several ethanol 
plants in the U.S.  In addition to the many investments 
mentioned above, Spanish companies and government bodies 
collaborate with DOE,s National Renewable Energy Laboratory 
on research.  Abengoa Solar has received five DOE or NREL 
contracts to develop parabolic trough and power tower 
technology.  Abengoa has won DOE grants for second-generation 
ethanol projects. 
 
FORUM SESSION TOPIC - TRANSPORTATION 
 
11.(U) With several population centers on the coast averaging 
350 miles from Madrid, Spain is well suited for high-speed 
rail.  Its high-speed train service, the AVE, boasts 
punctuality and prices competitive with airline travel, and 
Spanish officials say it is on track to pass China, France 
and Japan next year to become the world,s largest network. 
The AVE between Madrid and Seville has greatly reduced air 
traffic on this route, and since service between Madrid and 
Barcelona was inaugurated last year, rail has taken much of 
the market for this route as well.  High-speed rail is also 
popular with the government because it generates fewer CO2 
emissions per passenger-mile than air travel. 
 
12.(U) The development of the AVE has benefitted from EU 
subsidies as well as strong GOS support.  The Infrastructure 
Development (&Fomento8) Ministry has purview over all 
federal transportation issues, and its two sub-organizations, 
ADIF and RENFE, are responsible for rail.  At present, lines 
connect Madrid to Seville and Malaga, Zaragoza and Barcelona, 
and Segovia and Valladolid.  Service from Madrid to Valencia 
is expected to begin in 2010.  The Zapatero government 
welcomes U.S. interest in the AVE as a sign of support from 
our very popular president.  It has welcomed visits by 
Transportation Secretary LaHood, a Federal Railway 
Administration delegation, and a Congressional staff 
delegation in the last four months.  The GOS also sees U.S. 
interest as an opportunity for Spanish railway, construction, 
and infrastructure companies to sell to the U.S. market. 
 
13.(U) Spanish companies are world leaders in highway 
construction, and they operate toll roads around the world, 
including in the U.S. 
 
FORUM SESSION TOPIC - LATIN AMERICA 
 
14.(U) Because of investment, language, immigration in both 
directions, and cultural ties, Latin America occupies a 
special place in Spanish foreign affairs.  The U.S. and Spain 
are in broad agreement on Latin America: both of us are 
interested in democracy, the rule of law, and free markets. 
However, we have disagreed on approaches towards Cuba and 
Venezuela.  Spain participates in annual Iberoamerican 
summits, and the Iberoamerican Secretariat General is in 
Madrid.  Spain also participates in biannual EU-Latin America 
summits and in biannual EU-Rio Group summits.  Spain is 
influential within the EU on Latin American issues.  40% of 
Spain's 2008 development assistance budget of 5.5 billion 
euros went to Latin America. 
 
PERSONAL SECURITY 
 
15.(U) In general, Spain is safe.  However, Madrid and other 
large cities, including Valencia, attract a large number of 
criminals and pickpockets, and frequent crimes of opportunity 
against the unwary do occur.  It is best to carry only 
essential items, including a photocopy of your passport's 
photo page.  Visitors can protect themselves against crime by 
 
 
being street-smart, alert, and aware of their surroundings. 
Travelers are encouraged to review the most recent Worldwide 
Caution issued by the Department of State.  As the Department 
of State continues to develop information on any potential 
security threats to Americans overseas, it shares credible 
threat information through its Consular Information Program, 
available on the Internet at http://travel/state.gov. 
Additional information regarding safety and security in Spain 
is available on the U.S. Department of State's website 
(www.embusa.es). 
CHACON