MADRID WEEKLY ECON/AG/COMMERCIAL UPDATE REPORT -

UNCLAS SECTION 01 OF 02 MADRID 001295 SIPDIS SIPDIS EUR/WE E.O. 12958: N/A TAGS: EAGR ECON EFIN EIND ELAB ETRD TBIO SP EINV UK, SMIG SUBJECT: MADRID WEEKLY ECON/AG/COMMERCIAL UPDATE REPORT - JUNE 25 - JUNE 29 MADRID 00001295 001.2 OF 002 ECON/ENRG: Ambassador and AMCHAM promote renewable energy ECON/EINV: UN report warns real estate crisis is inevitable in Spain ECON: Spaniards unhappy with their job situation SENV: Proposed amendment to tax cars based on CO2 emissions EINV/ETRD: Spanish economic outreach abroad - China, South Korea, and Senegal ENRG/ETRD: Gas pipeline woes between Spain and Algeria ETRD: New plan to market Spanish wine abroad ELTN: Increased high speed trains to northern Spain AMBASSADOR PROMOTES ENERGY EFFICIENCY AT AMCHAM CONFERENCE ¶1. (U) In a June 25 energy conference organized by the American Chamber of Commerce, the Ambassador spoke on the security, environmental and economic benefits of diversifying our energy sources. The Ambassador discussed the President's new initiative on climate change and our commitment to renewable energy sources. Other speakers at the two-day conference included Minister of Industry, Tourism, and Commerce Joan Clos as well as high-level representatives from the US Department of Energy, and notable industry leaders. The two day conference was a success, bringing together Spanish and US counterparts including executives and entrepreneurs of leading edge renewable energy firms from both countries. THE UN WARNS THAT SPAIN WILL FACE A REAL ESTATE CRISIS ¶2. (U) According to the UN Special Rapporteur on Adequate Housing, Miloon Kothari, Spain should intervene more in the real estate market and adopt a transparent approach on informing investors and citizens of the risks of a potential housing price bust. According to Spanish press, this advice will be presented in a report to the UN in November. Kothari notes that in the long term, the housing market is not sustainable, particularly given that a large portion of Spaniards dedicate more than 40 percent of their income on variable-interest rate mortgages. Kothari further believes that the average Spaniard might not be able to absorb the increases in interest rates to already existing mortgages. Kothari urges the government to intervene and curb speculation while also be more open to the public about potential problems related to the volatility of the market. According to various local surveys, the potential collapse of the real estate market ranks alongside concerns about terrorism and unemployment. SPANIARDS ARE UNHAPPY WITH THEIR WORK SITUATION ¶3. (U) According to a 2007 European barometer on work issues, 45 percent of Spanish workers reported that they were dissatisfied with their work situation, primarily due to low salaries and weakened purchasing power. In fact, Spain has one of the highest index of dissatisfied workers in Europe, surpassed only by Turkey with a rate of 55%. However, those Spanish workers with higher level or management responsibilities reported higher satisfaction rates (82%). PROPOSED NEW AMENDMENT TO TAX CARS BASED ON CO2 EMISSIONS ¶4. (U) The Spanish Congress is scheduled to debate two amendments to the Air Quality law that would charge car owners for their CO2 emissions. The first proposal would exempt ecologically sound cars from the currently mandated vehicle registration tax, while the second would increase registration taxes on "polluting cars" by about 14.5 and 17 percent of the total value of the vehicles. If both of these measures were adopted, experts estimate that this could significantly impact the market for different kinds of vehicles. SPAIN ECONOMIC OUTREACH ABROAD - CHINA, SOUTH KOREA, AND SENEGAL ¶5. (U) The week of June 25 was busy for Spanish economic diplomacy. A delegation from the telecom giant Telefonica visited South Korea to strengthen ties with Korean companies. The King and Queen of Spain's visit to China received positive press over the past week. The Spanish leaders were accompanied by 300 business representatives representing 163 Spanish companies from a wide range of sectors such as agriculture, finance, tourism, and telecommunications. In fact, thanks to these efforts, the Chinese may be eating more Spanish ham next year given a recent promise by the Chinese to lift trade restrictions on ham products beginning next MADRID 00001295 002.2 OF 002 February. Meanwhile, the Spanish Labor and Interior Ministry officials traveled to Senegal last week accompanied by 30 Spanish businessmen in an effort to promote legal immigration. GAS PIPELINE WOES BETWEEN SPAIN AND ALGERIA ¶6. (U) Members of the Spanish-Algerian gas pipeline cooperative Medgaz issued a condemnation this past week against the Spanish National Commission of Energy's (CNE) decision to prevent Algeria's Sontrach from obtaining more shares in the pipeline cooperative. The Presidents of the various Medgaz member companies say that they will appeal this decision directly to the GoS Ministry of Industry. This issue created considerable anger in Algeria where the Minister of Energy Chakib Khalil suggested several weeks ago that Algeria might cut off gas supplies to Spain over this. MORE SPANISH WINE EXPORTS ¶7. (U) The Ministry of Agriculture announced June 25 its new plan to market Spanish wine abroad. Spain faced an unexpected fall in domestic demand in 2006, leaving producers with an unused surplus of wine. The Ministry of Agriculture says that they will not only invest in promoting Spanish wines abroad, particularly to non-European countries such as the US, they will also more actively promote long-term improvements in the quality and diversity of wines throughout Spain. INFRASTRUCTURE: INCREASED HIGH SPEED TRAINS TO THE NORTH ¶8. (U) As part of the Ministry of Fomento's 10-year plan, Spain will soon expand their high speed velocity trains (known as AVE) to northern Spain. The AVE trains have opened up increased travel options, both tourist and otherwise. Until now, however, these high speed trains have been focused primarily on southern Spain. By the end of 2007, the AVE will expand to the north, shortening travel times considerably to Cantabria, the Basque Country, Asturias, and Castilla y Leon. These investments may also provide subcontracting opportunities for U.S. businesses. AGUIRRE