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Cablegate: Leader of Sugar Workers Union Enjoys The

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RR RUEHCD RUEHGD RUEHHM RUEHHO RUEHJO RUEHMC RUEHNG RUEHNL RUEHPOD
RUEHRD RUEHRS RUEHTM
DE RUEHME #5462/01 2882214
ZNR UUUUU ZZH
R 152214Z OCT 07
FM AMEMBASSY MEXICO
TO RUEHC/DEPT OF LABOR WASHDC
RUEHC/SECSTATE WASHDC 9221
INFO RUEHXC/ALL US CONSULATES IN MEXICO COLLECTIVE
RUEHXI/LABOR COLLECTIVE
RUEHRC/DEPT OF AGRICULTURE WASHDC
RUCPDOC/DEPT OF COMMERCE WASHDC
RHMFIUU/DEPT OF ENERGY WASHINGTON DC
RHEHNSC/NSC WASHDC
RHMFIUU/CDR USSOUTHCOM MIAMI FL

UNCLAS SECTION 01 OF 04 MEXICO 005462

SIPDIS

SIPDIS

DEPT FOR DRL/AWH AND ILCSR, WHA/MEX, USDOL FOR ILAB

E.O. 12958: N/A
TAGS: ELAB EAGR ECON ENRG PGOV PINR MX
SUBJECT: LEADER OF SUGAR WORKERS UNION ENJOYS THE
SWEETNESS OF LIFE

REF: REF: (A) MEXICO 0278 (B) MEXICO 0352

1. SUMMARY: Observers of Mexico,s organized labor sector
and media commentators have both reviled and hailed, Enrique
Ramos Rodriguez, the leader of the country,s largest sugar
workers union. In many ways Ramos typifies everything
average Mexicans most sharply criticize about their
country,s labor leaders (such as unexplained wealth, no
accountability, perpetual re-election, etc.). On the other
hand, he recently negotiated the first major reform in the
legal framework that establishes the relationship between
sugar cane workers and sugar mill owners since 1936. The
deal he brokered has significant flaws, not the least of
which is that it openly ensures Ramos will continue to
exploit, for personal gain, his union leadership position.
Nevertheless, the deal commits the union to accepting a 25
percent cut in jobs industry-wide and commits mill owners to
paying to upgrade worker skills. Overall, there is no
question that the deal is much better for Ramos and Mexico,s
sugar mill owners than it is for most sugar cane workers. At
best the deal could be considered very much a glass half
empty/glass half full kind of arrangement in that it
preserves many of the average workers, more extravagant
benefits. However, given the slow pace of any type of
meaningful reform of Mexican labor unions, it could be argued
that limited reform is better than no reform at all. This is
the first of two reports on the current state of affairs
within Mexico,s largest sugar cane workers union, the
Workers Unions of the Mexican Sugar Industry (STIASRM). END
SUMMARY.


A SWEET LIFE AT THE TOP
-----------------------

2. Labor leaders in Mexico are commonly thought of as being
more interested in their own well being than they are in
looking out for the welfare of the workers. One rarely finds
average Mexicans willing to say anything good about the
leaders of the country,s organized labor sector. This
ill-will most definitely extends to Enrique Ramos Rodriguez,
the Secretary General of Mexico,s largest sugar cane workers
union, the Workers Unions of the Mexican Sugar Industry
(STIASRM). Ramos has been the Secretary General of the
STIASRM since 1995 and a leading figure in the union since
roughly 1975. The STIASRM is a part of the Confederation of
Mexican Workers (CTM), the country,s largest federation of
labor unions, and Ramos serves on its National Executive
Committee; he is also the CTM,s Secretary General for the
southeastern state of Veracruz. Like many labor federations
in Mexico, the CTM is famous for perpetually re-electing
union leaders. Once in union leadership positions, CTM
officials seldom step down in life and Ramos appears to be
doing his best to maintain this union tradition.

3. One of the advantages of being a de facto union leader
for life is that you can get in on the ground floor of many
arrangements. In the case of Enrique Ramos, he was a member
of the STIASRM,s senior leadership in 1976 when the GOM
expropriated 69 hectares (about 170.5 acres) of land
belonging to one of the indigenous groups in the western
state of Jalisco. This land was then transferred to the
STIASRM. The union,s then Secretary General (now deceased)
established a trust to manage the property for the benefit of
the members of the sugar cane workers union and their
families. When the trust was established, at the request of
the STIASRM,s senior leadership, sugar mill owners across
Mexico began deducting a small amount each week from the
workers, union dues to develop the land as recreational
property.

4. Once Enrique Ramos became the STIASRM Secretary General,
he assumed responsibility for administering the land. In
time two up-scale hotels were constructed on the property,
the Blue Bay Village-Los Angles Locos and the Punta Serena.
Initially the income from these hotels was used to cover any
outstanding union financial obligations but at present,
according to an attorney representing dissidents within the
sugar cane workers union, all proceeds are deposited into
bank accounts owned by Enrique Ramos. The first of these
hotels, the Blue Bay Village-Los Angles Loco has 284 rooms, a
lobby bar, restaurant, cafeteria, an auditorium, tennis

MEXICO 00005462 002 OF 004


courts and a horse riding area. The other hotel, the Punta
Serena, has an ocean view, a health spa with a steam room and
sauna, a gym, tennis courts and a dock area for water sports.
The average daily rate for these hotels is approximately USD
140.00; considerably more than the USD 37.50 a day earned by
even the most highly paid sugar cane worker.

5. The recent revelation that the profits from these hotels
is going into bank accounts owned by Ramos have prompted
calls in some quarters for the GOM,s equivalent of the US
Attorney General,s Office to launch an investigation into
his management of union assets. In addition to controlling
the income from the hotels Enrique Ramos is also said to
either control or own outright two sports clubs, two sugar
mills, two office building and 15 homes in Mexico City as
well as an undetermined number of warehouses. An
investigation of Ramos by the Mexican Attorney General,s
Office, if it happens, should prove interesting as the
STIASRM is reportedly the owner of the building that houses
that GOM agency,s Mexico City Regional office (on the same
street but several blocks away from Embassy Mexico City).


RAMOS NEGOTIATES A SIGNIFICANT NEW DEAL
---------------------------------------

6. On an individual basis labor relations between employers
and employees in Mexico are governed by the country,s
Federal Labor Law which establishes a base of permanent rules
and regulations. On a broader level Mexico also has what it
calls &Contract Laws8 which establish the rules for labor
relations on an industry-wide basis. Contract Laws (CL) are
a type of collective bargaining agreement negotiated by
industry, union and government representatives. Since CLs
are negotiated arrangements they are established for fixed
periods of time and vary significantly from industry to
industry. CLs establish minimum standards that both
employers and employees are expected to follow over and above
the permanent guidance contained in Mexico,s Federal Labor
Law. In theory CLs are periodically renegotiated like any
collective bargaining agreement but in practice they contain
any meaningful change. Until now, Mexico,s sugar industry
has been operating on a CL that has not been significantly
changed since 1936.

7. Observers of Mexico,s sugar industry have long pointed
out that Mexican sugar is one of the expensive sugars in the
world. Mexico,s sugar industry is often unfavorably
compared to the sugar industry in Brazil. The average cost
of producing sugar in Brazil is said to be approximately USD
15.00 per ton whereas the cost of producing that same ton of
sugar in Mexico is put at approximately USD 40.00 per ton.
Much of the blame for this substantial price difference is
placed on the sugar industry,s Contract Law which
artificially raises the price of producing sugar in Mexico
over and above the cost of normal market factors.
To the extent that the sugar industry CL is, in fact,
responsible for the high cost of producing Mexican sugar, a
chance now exists to implement a significant change.

8. Approximately nine months ago the STIASRM union, the
sugar mill owners and the GOM (represented by the Secretariat
of Labor) began an extended series of discussion to
significantly change the sugar industry,s Contract Law.
These discussions ultimately turned into serious negotiation
and on August 29, 2007 the three sides reached agree on the
terms of a major revision of the sugar industry,s Contract
Law. A successful agreement could not have been possible
without concessions and compromises on all sides but the one
person with almost absolute veto power was Enrique Ramos
Rodriguez. By most accounts Ramos took the negotiations
seriously right from the start, and he made sure that if the
union was being asked to accept genuine change then the mill
owner would also have to acknowledge that they could no
longer do business as usual. Ramos made real concessions but
he obtained something real in return of the members of the
sugar cane workers union. Alas, he also made sure to look
out for number one.

MEXICO 00005462 003 OF 004


A NEW CONTRACT LAW FOR MEXICO,S SUGAR INDUSTRY
--------------------------------------------- -

9. Under the terms of the sugar industry,s new CL, the
STIASRM agreed to allow mill owners to permanently cut jobs
by up to 25 percent. Depending on the source consulted this
will translate into a reduction of somewhere between 7-10,000
jobs among unionized workers in the Mexico,s sugar industry.
The union also agreed to the establishment of more flexible
work hours (meaning mill owners can require work on Saturdays
and Sundays), when needed the mill owners will now be allowed
to hire non-union workers (outsourcing) and the union and
mill owners agreed to implement a new wage scale based on
worker productivity and not just seniority as it now the case.

10. In return the mill owners agreed to accept the union,s
terms for the conditions of retirement of some 3,000 workers.
This issue was supposedly resolved earlier this year
(Reftel) but it came up again in the CL discussions. The
mill owners also agreed to invest USD 1 billion over the next
five years in plant modernization and to upgrade worker
skills, particularly with regard to ensuring that workers are
cross-trained to perform a variety of jobs; in addition the
mill owners agreed to an across the board 4.5 percent wage
increase for all STIASRM members and to continue the current
practice of granting three months of paid vacation.


UNION LEADER GETS EXTRA HELPING OF SUGAR
-----------------------------------------

11. In addition to practice of three months of paid vacation
that Ramos was able to keep as a standard benefit for the
workers, he also maintained an annual cash payment from the
mill owners to the union of 50 million pesos (approximately
USD 4.6 million). Supposedly these funds are to be used for
the operation of a hospital for the exclusive use of STIASRM
members. So far there is no firm evidence to document the
existence of this hospital, nor is there any accounting of
what is done with the money given by the mill owners to the
union.

12. Finally, the new Contract Law allows Ramos to charge, on
behalf of the STIASRM, a fee for all outside workers
contracted by the mill owners. The fee established was 2.5
percent of the monthly wages of any non-union worker hired by
the mill owners. At the currently anticipated wages for
these workers, this would mean that if the mill owners
ultimately filed 10,000 outsourced positions the union would
receive 2-3 million pesos a month (approximately USD
278,000.00). Reportedly these funds would be used by the
unions national executive committee for the benefit of the
workers but since neither Mexican Federal Labor Law nor the
Contract Law require unions or their leaders to account for
the use of union funds there is no way to know if this money
will in fact be used for its intended purpose.


COMMENT
-------

13. Although (as yet) there is no court room quality
evidence to definitively indicate that Enrique Ramos
Rodriguez has abused his union leadership position for
personal gain there are certainly a significant number of
credible allegations. To date Ramos has done little to
dispute these allegations, which further adds to the
widespread speculation that he is just another corrupt labor
leader looking out for himself. That said, Ramos has at
least attempted to spread the wealth to a limited degree
among the members of the sugar cane workers union. Moreover,
Ramos has committed himself and the union to the first real
changes in the sugar industry,s Contract Law since 1936.
The changes are not perfect and there is much that could have
been done. Nevertheless, the promise of work hour
flexibility by the union and commitment to invest in both new
plants and work skill upgrade creates a very real possibility
that Mexico,s sugar industry may become more competitive.
These changes are unlikely to put Mexico sugar production on
a par with that of Brazil,s but they do appear to be steps

MEXICO 00005462 004 OF 004


in the right direction.


Visit Mexico City's Classified Web Site at
http://www.state.sgov.gov/p/wha/mexicocity and the North American
Partnership Blog at http://www.intelink.gov/communities/state/nap /
GARZA

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