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Cablegate: Mexican Government Prepares to Take On Labor

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RR RUEHCD RUEHGA RUEHGD RUEHHA RUEHHM RUEHHO RUEHJO RUEHMC RUEHNG
RUEHNL RUEHPOD RUEHQU RUEHRD RUEHRS RUEHTM RUEHVC
DE RUEHME #0354/01 0391849
ZNR UUUUU ZZH
R 081849Z FEB 08
FM AMEMBASSY MEXICO
TO RUEHC/SECSTATE WASHDC 0436
RUEHC/DEPT OF LABOR WASHDC
INFO RUCNCAN/ALL CANADIAN POSTS COLLECTIVE
RUEHXC/ALL US CONSULATES IN MEXICO COLLECTIVE
RUEHXI/LABOR COLLECTIVE
RHMFIUU/CDR USSOUTHCOM MIAMI FL
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEAHLA/DEPT OF HOMELAND SECURITY
RUEAWJA/DEPT OF JUSTICE WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RHEHNSC/NSC WASHDC

UNCLAS SECTION 01 OF 03 MEXICO 000354

SIPDIS

SIPDIS

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

E.O. 12958: N/A
TAGS: ELAB ECON PGOV PHUM PINR MX
SUBJECT: MEXICAN GOVERNMENT PREPARES TO TAKE ON LABOR

REFORM

REF: (A) 07 MEXICO 6285 (B) 07 MEXICO 5963

1. SUMMARY: Since taking office in December 2006, the
government of Mexican President Felipe Calderon has launched
a number of reform initiatives aimed at making long range
national improvements. To date his administration has worked
with the Congress to move forward in areas like fiscal,
electoral and pension reform and it was widely expected that
it would next take on the complex issue of energy reform.
Energy reform however, is an extremely controversial topic in
Mexico; one sure to generate considerable opposition from
across the political spectrum. Perhaps because of this the
GOM recently decided to hold off on energy reform during the
current legislative session and on February 1, it announced
that labor reform would now be given a higher priority. Any
real reform of Mexico,s labor law would require a change in
the country,s constitution. Constitutional change in Mexico
is much less complicated process than a similar legal
modification would be in the US. That said, most of
Mexico,s organized labor unions and the political parties
that support them are vehemently opposed to constitutional
change in this area. At present there is no publicly
available information on the specific reforms the GOM intends
to propose. Speculation on possible proposals includes items
like changing from a daily to an hourly minimum wage, legal
changes to facilitate outsourcing, restrictions on collective
bargaining contracts and the right to strike, and increased
legal status for individual employment contracts. The GOM is
expected to present its reform proposals to Congress at the
end of February. END SUMMARY.


LABOR REFORM GETS HIGER PRIORITY
--------------------------------

2. From the very beginning of his administration in December
2006 Mexican President Felipe Calderon has devoted
considerable time and effort to carrying out much needed
economic and political reforms. Thus far the GOM under
Calderon has worked with Mexico,s national legislature to
promote change in areas like fiscal, civil service pension
and electoral reforms. One of the most talked about topics
of needed reformed is in the area of Mexico,s energy sector
and until very recently it was widely assumed that this
important industry would be the next focus of the GOM,s
attention. However, for both historical reasons and Mexican
perceptions of national sovereignty, energy is one of the
more controversial items on the GOM,s reform agenda; one
sure to generate opposition from across the political
spectrum. Perhaps because of this the GOM decided to hold off
on energy reform during the current legislative session and
on February 1, it announced that labor reform would now be
given a higher priority.

3. As late 2007 the topic of labor reform often became the
subject of speculation with regard to when the GOM would take
on this complicated issue. More recently this speculation
has grown as the GOM,s Secretary of Labor, Javier Lozano
Alarcon, made an increasing number of public statements about
the government,s intention to propose far reaching changes
to Mexico,s labor laws. One of the themes stressed by
Secretary Lozano in his public statements was that any reform

SIPDIS
proposals would be developed in consultation with both
organized labor and the private sector. The ultimate goal of
the GOM,s reform proposals, the Labor Secretary stated,
would be to promote productivity and facilitate job creation.
Public statements by other senior Labor Secretariat (STPS)
officials offered assurances to organized labor that the
reforms the GOM ultimately proposed would not alter
fundamental worker rights currently protected by the relevant
articles of the constitution which serve as the basis for
Mexico,s &Federal Labor Law.8


LABOR RIGHTS IN THE MEXICAN CONSTITUTION
----------------------------------------

4. Mexico,s Federal Labor Laws are derived from the
country,s constitution, specifically Article 123, which
establishes a set of principals and rules applicable to all

MEXICO 00000354 002 OF 003


laws regulating labor relations. Over time these rules have
developed into an intricately detailed set of regulations
primarily covering the obligations employers have towards
employees. Article 123 and the laws derived from it
establish such basic protections as the rights to organize,
bargain collectively and to strike. Federal Labor Law also
covers such topics as union autonomy, mandatory profit
sharing as well as compensation guidelines and the formation
and regulation of unions and their activities.

5. Many of the rules and regulations contained in Mexican
Federal Labor Law are extremely complex. In the majority of
instances the law tilts heavily toward workers and against
employers. These regulatory statutes are viewed by many in
Mexico,s organized labor movement as if they all had the
force of constitutional law. Any meaningful change of these
regulations would probably require some modification of the
constitution. Consequently, despite STPS assurances about
not changing fundamental worker rights, it is difficult to
envision a situation that would permit significant labor
reform without in some way changing Article 123 of the
Mexican constitution.


GOM TRIAL BALLOONS ON LABOR REFORM
----------------------------------

6. The assurances given by the STPS with regard to
protecting fundamental worker rights were recently
re-affirmed by President Calderon himself in separate
meetings with the leaders of two of the three largest
national labor federations in Mexico. Neither Calderon, nor
anyone authorized to speak on behalf of his administration on
labor related issues, have provided much detailed information
on the proposed reform the GOM will ultimately present to
congress. A lack of specific detailed information
notwithstanding, STPS officials have floated a number of
trial balloons on possible labor reform proposals.

7. During some initial meetings with Mexican Federal
Deputies (equivalent to US Congressmen), Secretary Lozano
offered up for discussion the possibility of proposed
legislation to both strengthen and promote the use of
individual employment contracts. Mexico,s national
petroleum company, Pemex, has already began using individual
employment contracts as a way to standardize employment rules
for thousands of workers classified as technical staff and/or
mid level management (Reftel A). Lozano also raised the
possibility of proposing legislation that would allow the
authorities to withdraw legal recognition from any union that
failed to update its membership list every six months. The
aim of this proposal would be to address a growing problem in
which the threat of a strike is used, often by bogus unions,
to extort money from businesses (Reftel B).

8. At approximately the same time Secretary Lozano
discussing possible labor reform proposals with appropriate
Federal Deputies, a senior STPS official used a forum
organized by Mexico,s banking industry to float some
additional trial balloons. The official informed forum
participants that the STPS was in the process of studying the
viability of 196 different potential reform proposals. Some
of the possible proposals aired during the forum included
such things as bringing some balance to the tilt that current
Federal Labor Law has toward the worker and against the
employer; particularly with regard to the extremely expensive
procedures for firing unsatisfactory or unnecessary workers,
facilitating the hiring of skilled foreign nationals
(implement something similar to the H-1B Visa program used by
US employers), and the establishment of national standards
for sub-contracting and outsourcing work.


ORGANIZED LABOR,S REACTION
--------------------------

9. The reaction of Mexico,s organized labor movement to the
GOM,s reform trial balloons has ranged from a heavily
condition expression of willing to work with the government
on its proposal to outright rejection. None of Mexico,s

MEXICO 00000354 003 OF 003


large national labor federations is prepared at this time to
accept any significant modification of Article 123 of the
constitution. Most have stated that the only problem they
see with Article 123 is that the laws and regulations derived
from it are not fully enforced.

10. At least two of the larger national federations, the
Confederation of Mexican Workers (CTM) and the Confederation
of Workers and Peasants (CROC), both of whom are officially
linked to Mexico,s former ruling party, have indicated that
they will reserve judgment on the GOM,s reform proposal
until they have actually been presented in writing to the
legislature. A third large federation, the National Workers
Union (UNT), which is un-officially linked to Mexico,s
current main opposition party, has rejected the GOM,s
possible proposals sight unseen.

11. To varying degrees, all of the major players within
Mexico,s organized labor movement have reacted with
skepticism to the currently available information on the
GOM,s proposed labor reforms. A widely quoted and highly
respected lawyer and labor expert, Justiniani Alcalde, has
described the proposed reforms as a method of &stacking the
decks8 against Mexican workers. According to Alcalde, the
currently available information about the GOM,s proposed
reforms, show that the government,s intent is to use
outsourcing as a way of reducing the power of organized labor
and to use individual employment contract as a way to
undermine the effectiveness of collective bargaining.
Alcalde also says that the reform proposals would nullify the
current provisions of Federal Labor Law that require
employers to implement profit sharing mechanisms and, most
importantly, severely restrict the constitutionally protected
right to organize and to strike.


COMMENT
-------

12. The majority of Mexico,s labor laws were written for a
different time for use under very different conditions than
those which prevail in today,s global economy. As currently
written the current laws are not up to the task of either
helping Mexico become more competitive or of protecting basic
worker rights. This is not to say that the intent of
Mexico,s labor laws is or should be to do one thing or the
other but as things now stand these laws fail to accomplish
either of these goals. The Calderon administration is right
to try and tackle the issue of labor reform but the task will
not be easy. Labor unions in Mexico genuinely believe that
workers already suffer from having too few legal protections
of their basic rights and they are unlikely to quietly accept
what they perceive as a further diminution of those rights.

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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