MADRID WEEKLY ECON/AG/COMMERCIAL UPDATE REPORT

UNCLAS SECTION 01 OF 02 MADRID 000396 SIPDIS SENSITIVE SIPDIS EUR/WE E.O. 12958: N/A TAGS: EAGR EAID EAIR ECON EFIN ENRG ETRD SENV TBIO SP, EINV, UK SUBJECT: MADRID WEEKLY ECON/AG/COMMERCIAL UPDATE REPORT MADRID 00000396 001.2 OF 002 SENV: Waste water treatment below standards KIPR: Speaker Visit of Judge Bernice Donald KIPR: Spain - hotbed of digital piracy EAGR/ETRD: Renewable fuels homegrown vs imports EAID: Spain an equal opportunity donor EAGR: Biothechnology corn SPAIN FAILING TO IMPLEMENT EU WASTE WATER TREATMENT DIRECTIVE ¶1. (U) An EU Directive from 1991 requires Member States to treat waste water in towns containing over 2,000 inhabitants to specified standards by December 2005. Spain codified this directive into national law via its 1995 Water Treatment Plan. But it is clear that Spain has failed to implement this directive in an effective fashion. According to the EU, approximately 800 Spanish towns with over 2,000 people (representing a total 6.5 million people) are not treating their waste water to EU standards. To make matters worse, the EU has declared 288 of these towns to be "sensitive areas" which require even stricter waste water treatment standards. Prominent population centers on the EU hit list include Vigo, Oviedo, Burgos, Ibiza, Ourense, Gijon, Badajoz, Ciudad Real, Ubeda, Algeciras, and Moron de la Frontera. Experts cite several reasons for Spain's failure to comply, including: population growth, a building boom, climate change and low rainfall levels. Another key factor is the fact that towns are not required to install water treatment facilities when they approve new residential developments. The GOS counters that it has budgeted 17.5 billion euros to bring all Spanish towns into compliance with the directive by 2015 (10 years after the EU deadline). JUDGE BERNICE B. DONALD MADRID/BARCELONA INTELLECTUAL PROPERTY RIGHTS (IPR) TOUR ¶2. (U) Judge Donald (U.S. District Court for the Western District of Tennessee) spoke February 19-21 about developments in U.S. IPR law and the importance of respecting intellectual property with a variety of audiences in Madrid and Barcelona. Judge Donald was well received, and her Spanish audiences were very interested in what she had to say. Her trip was very useful in confirming that the Spanish judiciary (both acting judges and future judges) are our toughest target. Judge Donald spoke to about 100 future judges at the Judicial Training School in Barcelona who displayed almost unanimous opposition to prosecuting individual illegal internet downloads, in part because the Spanish penal code does not provide for administrative type sanctions for these violations. Embassy's PD section funded and supported the trip. EconOff accompanied the Judge to all her events and provided additional substantive input, especially in dealing with more policy-oriented questions. This was well worth doing. IIP RECOMMENDS SPAIN FOR SPECIAL 301 WATCH LIST ¶3. (U) Financial Times reports Spain is a "hotbed of digital piracy": Box office receipts were down by 2.2 percent in Spain last year. The EU as a whole saw a 4 percent increase in box office receipts. In the U.S., box office receipts were up by 3.4 percent. (Comment: These numbers no doubt explain in part why the International Intellectual Property Alliance (IIPA) has recommended Spain for inclusion on the Special 301 Watch List.) (FT, 2/23/07) RENEWABLE FUELS ¶4. (U) Can Europe meet its currently voluntary "renewable" fuels-use targets using Europe-produced renewable fuels from locally produced feedstock? Without European Commission intervention, when the vagaries of very complex local and world commodity markets turn against European renewable fuels producers, local producers may become hard pressed to remain financially viable. ¶5. (U) One of the Spanish companies that currently leads Europe in the production of ethanol from grains, has just reminded everyone that production of ethanol and bio-diesel, for that matter, can be an economic challenge. Abengoa, an engineering group that operates three grain-to-fuel distilleries in Spain, just announced that it will close its newest and largest ethanol-producing plant during April, May and June of 2007. The reason was not disclosed, but reportedly it has to do with the information outlined in the graph found at USDA.FAS.com (Attache 2007 reports SP7011). Immediately after the announcement, local barley and wheat prices reportedly dropped four Euros/ton, and some analysts MADRID 00000396 002.2 OF 002 believe they will drop another three-to-four Euros/ton, in particular, as the new-crop comes on in late June-to-early July. When in full-out production, the Salamanca plant in question uses 50,000 tons of grain feedstock per month. ¶6. (U) Abengoa's Spanish ethanol plants are landlocked and highly dependent on local barley and wheat production and stocks. In December 2006, Abengoa announced that it was switching from wheat to barley, perhaps due to barley's lower price and greater availability in Spain (GAIN SP6034). But, the switch may not have been enough, because just as grain prices increased steeply in late 2006 (see graph),crude oil prices moved just as hard and quickly in the opposite direction, setting up Abengoa's current dilemma. ¶7. (U) European grain prices are Euros per ton, FOB (Source: CESFAC - FEGA-MAPA) European fuel prices are USD per barrel in the Brent spot market (source: DOE-EIA at http://www.eia.doe.gov/emeu/international/oil price.html) FOREIGN ASSISTANCE FOR EVERYONE ¶8. (U) Continuing the Zapatero policy of dramatically expanding Spanish foreign assistance levels, Spain in recent weeks announced several disaster-relief related donations: -- On February 23, the Spanish Agency for International Cooperation (AECI) announced that Spain had provided 450,000 euros in emergency assistance to Mozambique in the aftermath of cyclone Favio. 250,000 euros will be used to buy in South Africa 500 tents, two electricity generators, 600 water tanks, 100 shelters, and 500 food and medicine kits. 200,000 euros was provided via a February 16 AECI airlift of emergency supplies to the stricken country. This airlift included four potable water treatment plants. -- On February 22, AECI announced that it had increased it assistance to Bolivian flood victims to a total of 600,000 USD. 100,000 USD was provided via UNDP on February 12. On February 21, AECI sent an additional 131,000 USD via UNDP, as well as 269,000 USD to the AECI office in Bolivia to locally purchase food, tents, hammocks, mosquito nets, and tools. Finally, AECI provided 100,000 USD to the Spanish Red Cross to purchase foodstuffs for the flood victims. -- In response to food shortages experienced by Western Sahara refugees in Tindouf, Algeria, AECI announced February 16 that it would both send emergency food supplies from Spain and help feed the refugees via locally purchased foodstuffs. 850,000 tons of corn flour was dispatched from Spain while 800,000 tons of lentils and 450 tons of oil was purchased locally for the refugees. An additional 1,000,000 tons of rice and 152 tons of sunflower oil was also provided (it is not clear if they were dispatched from Spain or purchased locally). The total cost of this emergency food assistance was about 1.5 million euros, bringing total 2006 Spanish support for the Sahara refugees to over 6 million euros. INCREASING POLEMICS OVER BIOTECH IN SPAIN ¶9. (U) The Basque Autonomous Regional Government has declared the Basque Country a transgenic-free zone, the third of Spain's 17 autonomous regional governments to do so, after Asturias and the Balearic Islands. In addition, in Murcia, an association of agricultural cooperatives publicly petitioned their regional government to declare its own transgenic-free zone. The three transgenic-free Autonomous Regions do not have corn-borer infestations, so, they had very little to lose since only biotechnology-derived, corn-borer resistant corn has been approved for planting in Spain. However these regions do have feed manufacturers that use corn and/or corn gluten feed that is of likely biotechnology origin. We expect that very little will be said by these local governments about the use of biotechnology corn/products to keep their animal industries supplied with feed. We also note that there is not any anti-GMO legislation currently being contemplated in Autonomous Regions such as Catalonia and Aragon where corn farmers have adopted biotechnology corn in response to corn borer infestations (see FAS Gain Report No. SP7001). AGUIRRE