US embassy cable - 05MADRID114

UNCLAS MADRID 000114 
 
SIPDIS 
 
DEPARTMENT FOR EUR/EX AND A/OPR/ALS 
TREASURY FOR TRACI PHILLIPS 
 
E.O. 12958: N/A 
TAGS: ECON, AMGT, ALOW, SP, ELTN, EFIN 
SUBJECT: MADRID PRICES CONTINUE TO RISE 
 
1.  SUMMARY.  During 2004 there was a general increase in the 
cost of living in Madrid and the CPI rose 2.9%.  The 
transportation and food sectors experienced the highest cost 
increases, whereas domestic utilities, property taxes and 
leisure activity prices remained relatively stable.  Many of 
the increases in the cost of living can be attributed to 
measures taken by the municipal government. END SUMMARY. 
 
2. In 2004, the cost of living in Madrid rose by 2.9%. Food 
prices and transportation costs rose most substantially over 
the past year, while domestic utility prices, property taxes 
and leisure activity costs increased by amounts close to the 
2.9% CPI level. 
 
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FOOD PRODUCTS 
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3.  Food product prices increased significantly in the past 
year.  The typical food product in Madrid markets rose 17.35% 
during 2004.  Despite this figure, prices for certain 
products, notably chocolate and beans, have decreased.  Fish, 
a main component of the Spanish diet, has experienced 
particularly high cost increases. 
 
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TRANSPORTATION 
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4.  One of the largest cost increases in Madrid has occurred 
in the transportation sector.  Public transportation costs 
increased an average of 6% beginning in January 2005.  Metro 
and city bus ticket prices increased more than 13% while 
intercity bus fares increased only marginally (about 2%). 
The government has yet to decide when and by how much Renfe 
(national rail system) fares will increase.  Street parking 
will become significantly more expensive in 2005, with meter 
fees to increase up to 48%. 
 
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PROPERTY TAX 
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5.  Property taxes on most residences  will increase at the 
same rate as the CPI, 2.9%.  Larger increases in property tax 
will affect the most valuable 10% of property.. 
 
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DOMESTIC UTILITIES 
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6.  Domestic utility costs remained relatively stable, or 
even decreased relative to the CPI measure.  Electricity 
prices rose by 1.71% in 2004 and the cost of water increased 
by 2.3% (or one cent per day).  The cost of natural gas 
remains equal to its cost a year ago. However, a small 
increase in gas prices is expected at the end of the quarter. 
 Fixed line telephone rates will increase by 2%, or about .26 
euro per month, beginning in February. 
 
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SPORT, LEISURE AND CULTURE 
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7. The cost for most sport, leisure and cultural activities 
remained stable throughout 2004. However, beginning in 2005, 
the Prado Museum doubled its entrance fees from three to six 
euros. 
 
8. Comment. The cost of living in Madrid increased noticeably 
in 2004.  This trend will most likely continue in 2005 as the 
Spanish economy grows.  This will be compounded by inflation 
rates which tend to grow faster in Spain, and especially 
Madrid, than in the rest of Europe. Madrid is quickly 
becoming one of Europe,s more expensive cities for 
Americans, even without the falling dollar. 
MANZANARES