MADRID WEEKLY ECON/AG/COMMERCIAL UPDATE REPORT

UNCLAS SECTION 01 OF 02 MADRID 003037 SIPDIS SENSITIVE SIPDIS EUR/WE E.O. 12958: N/A TAGS: ECON ETRD KIPR EAGR TBIO SP EINV EWWT SUBJECT: MADRID WEEKLY ECON/AG/COMMERCIAL UPDATE REPORT MADRID 00003037 001.2 OF 002 ¶1. EWWT: Prestige wreck leaking fuel ¶2. ECON: Spain's economic situation ¶3. EUR/ERA Deputy Director for Econ visit to Madrid ¶4. EAGR: Spanish coexistence decree update ¶5. EAGR: Water levels/drought conditions in Spain Prestige May Be Leaking Fuel Again: ¶1. (U) The Spanish Oceanographic Institute (IEO) mounted an early November expedition to the site of the sunken wreckage of the Prestige, the oil tanker carrying 37,500 tons of fuel that sank off the coast of Galicia on November 19, 2002, resulting in the largest oil spill in Spanish history. The IEO confirmed reports that the Prestige was indeed leaking oil and recommended that these leaks be "controlled." They did not recommend the removal of the remaining 700 tons of fuel left in the Prestige's tanks following earlier efforts to mitigate the disaster. As a result of the IEO's recommendations, Spanish Vice President Maria Teresa Fernandez de la Vega announced December 2 that the GOS would contract with Spanish oil giant REPSOL to send technicians to the site of the wreckage, 250 kilometers off the Galician coastline, in early 2007 to ascertain the extent of the problem. She said the possibility of a major leakage of oil was "remote" and the leaks "would not have an impact on the maritime or coastal ecosystems" of Galicia. Some scientists believe that oil-eating bacteria that was deposited in the tanks during earlier mitigation efforts and was supposed to slowly eliminate the petroleum, has instead acted as a corrosive and has been destroying the tanks as well, thus producing the leaks. One in five living below poverty level in Spain ¶2. (U) According to a recent report by Spain,s National Statistics Institute, 19.8 percent of the country,s population was living below the poverty line in 2005. The report was based on a survey of living conditions that will be included in a European Union study to be released in 2007. Drawing on data from 2005, the Institute said the average household net income was 22,418 euro (29,798 USD at 1.327 euro/dollar),while for individuals it was 7,925 euro (10,516 USD). Of those who lived under the poverty threshold, which was defined as an annual net income of 6,347 euro (8,422 USD) for a household and 9,520 euro (12,633 euro) for an individual, 47.3 percent were over 65 years of age and living alone, while 36.9 percent were single parents with at least one child. The report also noted that 40.4 percent of households are unable to afford an annual one week vacation away from home. ¶3. (U) The results of the study are surprising given that Spain has had one of the fastest growing economies in the euro zone, with continuous growth for over a decade. However, this is primarily the result of strong domestic demand driven by population (immigration) growth, as well as robust growth in the construction sector. Another report by the National Statistics Institute noted that immigrants have also played an increasing role in the growing economy, thus this segment of the population may well make up a significant part of those living below the poverty line. The autonomous communities with the lowest family income are Extremadura and Castilla-La Mancha. The autonomous communities of Navarra and Madrid surpass the national average by 20 percent. EUR/ERA Deputy Director for Economic Affairs visits Madrid ¶4. (U) Post hosted the visit of EUR/ERA Deputy Director for Economic Affairs Eric Luftman on Monday, November 27. Luftman met with Felipe de la Morena, Deputy Director for Bilateral Economic Relations with Developing Countries (non-OECD) at the Ministry of Foreign Affairs. In a cordial meeting, de la Morena discussed Spain,s increased role in Latin America, energy policy, and Plan Africa, a development plan geared to stem the flow of immigration. Luftman also met with Cristina Serrano, Deputy Director for Economic and Financial Affairs for the European Union, and with Eleutorio Alcocer, Director of Coordination and Legal Communitarian Affairs at the MFA. The latter two meetings focused on Spain,s interaction within the EU on the implementation of economic-related EU directives. Agriculture: ¶5. (U) The Spanish coexistence decree (Decree),previously expected in final form this calendar year, appears to be on hold again. This time the delay is reported to be a new disagreement between the Ministry of the Environment (MOE) and the Ministry of Agriculture (MOA) over the perceived MADRID 00003037 002.2 OF 002 terms that led to the current Decree, with its exorbitant 220-meter buffer zone. We were told in July, by one of the Ambassador's contacts within the Spanish President's inner circle, that the Decree could not be changed/influenced by us (the U.S. Government) or by anyone else, and that it would be promulgated yet during 2006. However, our contacts now tell us that the Decree will not see the light-of-day until February 2007 at the earliest, which may open the window for biotechnology corn production for the tenth straight year with the planting of next year's crop in February 2007. ¶6. (U) While we are not certain of the exact points of discrepancy between the agencies (some suggests that the MOE now wants a 400 meter buffer zone),we do know that we have seen an upsurge in anti-biotechnology activity in recent weeks. It began with an article in El Pais, one of Spain's most-read dailies. The article has since been reproduced in press all over Europe, including in the paper and online versions of Agri-Net/Agri Europe. In the original article, anti-biotechnology activists/corn producers claim that biotechnology corn is destroying organic corn production in Spain, because of cross-pollination said to be occurring even within the currently recommended 50-meter buffer zone. Drought Fears Washed Away: ¶7. (U) After suffering two years of severe drought and water use restrictions, record fall rains throughout Spain (the second wettest autumn since 1990) have brought relief to most, but not all, of the affected regions. During the course of the last week, total Spanish water reserves surpassed the 10 year average for this time of the year. Nationwide, dams were at 54.7 percent of their capacity in early December, 11 percentage points higher than at this time last year and 16 points higher than late September 2005 (when water levels reached the lowest point recorded since the 1995 drought). In the Madrid region, water reserves now stand at 72 percent above levels measured at this time in 2005. As a result of the rains, government authorities have lifted most water use restrictions throughout Spain (which had generally focused on water used for crop irrigation). Nonetheless, water reserves in a few areas in the southern region of Andalucia (e.g., the Jucar and Segura river-based systems) are still dangerously low. AGUIRRE