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Cablegate: Union Uses Federal Funds to Promote Home

VZCZCXRO0533
RR RUEHCD RUEHGA RUEHGD RUEHHA RUEHHO RUEHMC RUEHMT RUEHNG RUEHNL
RUEHQU RUEHRD RUEHRS RUEHTM RUEHVC
DE RUEHME #2348/01 2131658
ZNR UUUUU ZZH
R 311658Z JUL 08
FM AMEMBASSY MEXICO
TO RUEHC/SECSTATE WASHDC 2780
RUEHC/DEPT OF LABOR WASHINGTON DC
INFO RUCNCAN/ALL CANADIAN POSTS COLLECTIVE
RUEHXC/ALL US CONSULATES IN MEXICO COLLECTIVE
RHMFIUU/CDR USSOUTHCOM MIAMI FL
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RHEHAAA/NATIONAL SECURITY COUNCIL WASHINGTON DC

UNCLAS SECTION 01 OF 03 MEXICO 002348

SIPDIS

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

E.O. 12958: N/A
TAGS: ELAB ECON PGOV PINR SOCI MX
SUBJECT: UNION USES FEDERAL FUNDS TO PROMOTE HOME
IMPROVEMENTS

REF: 07 MEXICO 3444

1. SUMMARY: The Confederation of Mexican Workers (CTM),
Mexico,s largest labor federation, is expanding an
initiative it began earlier this year to improve living
conditions for workers into the northern Mexican state of
Coahuila. The initiative being implemented under union
auspices uses GOM federal funds to make short-term interest
free loans for the purposes of home improvement. The loan
amounts are relatively small, ranging from approximately USD
500 ) 2,200 and would only be available to workers whose
effective wage is less than USD 500.00 per month. Despite
the modest amounts involved the potential for this expanded
loan program in a place like Coahuila could be significant
given that the CTM there has been accused promoting job
growth at the expense of work rights, wages and health
conditions (Ref). One of the broader benefits of this
program could also be an expanded sense of pride in home
ownership among workers at the lower end of Mexico,s wage
scale. Increasing this sense of pride among low wage workers
could strengthen their times to Mexico and, to a limited
degree, reduce one of the push factors the prompt Mexicans to
migrate to the US. End Summary.


CTM EXPANDS SOCIAL PROGRAM TO COAHUILA
--------------------------------------

2. The Confederation of Mexican Workers (CTM), the
country,s largest single labor federation, has chosen the
northern Mexican state of Coahuila as the next place to
expand one of its social programs. In its heyday, the CTM,
which is roughly equivalent to the AFL-CIO in the US, often
attempted to be all things to all people in terms of labor
related issues. At one point the CTM even had its own
nationally chartered bank and its own university. To some
extent the federation still conducts a number of social
programs but its membership, influence and resources declined
significantly in recent years because of changes in Mexican
politics and society.

3. The CTM is officially tied to Mexico,s former ruling
political party, the Institutional Revolutionary Party (PRI).
The state of Coahuila is currently governed by the PRI and in
fact has never had a non-PRI Governor. In the past, at least
at the national level, these ties to the PRI, previously the
official government party, helped insure that affiliated
labor unions received favorable hearings with the Mexican
government which in turn would intercede on their behalf with
both public and private employers. Now that the PRI is no
longer in power its ability to support the CTM has been
significantly reduced and in many parts of Mexico the
federation is a shadow of its former self. That said, one of
the places where the CTM remains a dominant force is in
Coahuila. In order to help the union maintain that position
the federation,s national office chose Coahuila as one of
five states (the others being Puebla, Sonora, Tamualipas and
Hidalgo) where it is launching a new housing related social
program.


UNION TO CHANNEL HOME IMPROVEMENT LOANS
---------------------------------------

4. Taking advantage of federally provided funds the CTM has
begun working with a savings and loan type institution to
provide what could best be described as a type of mini loans.
These loans are interest free and can only be used for the
purposes of home improvement for low income workers.
Interestingly, in order to qualify for this loan the home in
question does not need to be in the workers, own name
although it must ultimately belong to a family member. In
theory, under the federal law that authorizes these loans
they can be made available via a government agency or NGO to
almost any qualifying Mexican citizen but in practice the CTM
appears to be the main non-governmental entity facilitating
the disbursement of these funds. The CTM has obtained 50
million pesos (USD 5 million) from the GOM for the specific
uses of home improvement loans in Coahuila.

5. The loans the CTM is helping to disburse will be in the
amounts of $5,000 ) 22,000 peso or roughly USD 500.00 )
2,200.00. In order to qualify the loan applicant,s salary
cannot exceed five times the Mexican daily minimum wage which

MEXICO 00002348 002 OF 003


is approximately USD 4.67 and which would amount to just
under USD 470.00 per month. The standard practice is to
approve these loans and disburse the funds within 48 hours
after receipt of an application with all necessary supporting
documentation. Approved applicants receive their money
directly (via bank deposit or check) and they are free to use
the funds in any mix of material or labor costs that they see
fit.

6. As mentioned above, these loans are interest free but
they must be repaid in full during a period not to exceed 9
months. The way repayment is being handled in Coahuila is
via automatic deductions from the worker,s salary. The
Coahuila CTM states that these automatic deductions are
possible because of the close relationship it has with the
private companies with whom it has signed collective
bargaining agreements. Once the loan is repaid the
recipients can apply for another for a total of five separate
loans. However, to ensure that the loans are being used for
their intended purpose the CTM (or whatever other entity that
is handling disbursement) must undertake to conduct on-site
inspection to verify that the home improvements where
actually carried out in accordance with the terms of the
approved loan applications. The CTM in Coahuila expects that
is members will be able to start receiving home improvement
loans prior to the end of August 2008.


A WIN FOR THE WORKER AND A BIGGER ONE FOR THE CTM
--------------------------------------------- ----

7. The CTM in Coahuila announced the launch of this home
improvement loan program at its state level offices in the
capital city of Saltillo before an assembly of union
delegates (shop stewards). Mission Mexico,s Labor Counselor
was present for the announcement which took place on July 23
and the high level of excitement interest and excitement
among the delegates was unmistakable. A CTM official from
the federation,s national office who was also at the event
commented on the excitement by explaining to Labor Counselor
that nearly sixty percent of all CTM union members earn only
five times the daily minimum wage or less. Consequently, the
official said, this type of program would automatically
include more than half of all CTM union members nationwide.

8. The remarks by this national level union official
essentially confirmed for Mission Labor Counselor comments
made previously about the labor situation in Coahuila. In
2007, a knowledgeable American labor observer with long
experience with both the US and Mexican organized labor
movements noted that while Coahuila has done very well
generating jobs in recent years most of these jobs pay only
the equivalent of between USD 45-65 per week (REF). These
wages, the American observer stated, were too low to deter
local residents from leaving Mexico when they have the clear
example of how much more people are paid for similar
manufacturing (or unskilled) jobs in the United States.
However, the American averred, these wages were more than
enough to prompt the migration of workers into Coahuila from
other parts of Mexico to backfill jobs being abandoned.

9. Continuing on, the American labor contact stated that the
wages of these newly arriving workers were so low that they
often lived in dilapidated and crowded housing conditions
which were reportedly creating serious and grow health
problems in Coahuila. Thus, by launching a social program
specifically aimed at those most likely to live in poor
housing one could conclude that the Coahuila CTM was taking
steps to improve the lot of its members and responding to
international criticism. In other words, while the CTM in
Coahuila was undoubtedly helping the workers it was helping
itself by beginning to put to rest criticisms that appear to
have at least some basis in fact.


COMMENT
-------

10. It should be noted that the salary figures mentioned in
para 8 above by the American and Mexican labor officials
differ from the official statistics provided by the GOM.
According to INEGI, the GOM,s National Statistics Institute,
the average salary of a typical worker in Coahuila is nearly
USD 90.00 per week. The higher wages given by GOM figures

MEXICO 00002348 003 OF 003


certainly give a better picture of worker salaries in
Coahuila than those supplied by the union officials but in
looking at the two sets of numbers one should consider their
respective sources. Mexican labor union officials are
(theoretically) supported by member dues which are collected
based on a percentage of a worker,s salary. These officials
would have no reason to under-report wages since that would
mean intentionally forgoing potential income. In is,
therefore, in their own self interest to know exactly how
much workers get paid. The GOM figures are the official
numbers and INEGI is generally viewed as a reliable
government agency. However, it is not too difficult to
imagine that a GOM agency might be inclined to provide salary
figures that portray government efforts to create good paying
jobs and fight poverty in as favorable a light as possible.

11. Finally, with respect to the home improvement loan
initiative that the CTM is undertaking using GOM federally
provided funds, there is a chance that this program could
have some unexpected benefits; especially in a place like
Coahuila. It must be noted that this is not the only housing
related program the GOM is supporting and its other
initiatives appear to be making a positive difference.
However, this initiative is the only one being overseen by a
national labor federation for its lowest income union members
and if the CTM,s experience in other Mexican states is any
indication, the initiative will be extremely popular with
unionized workers. In fact the CTM was concerned that the
funds allocated for Coahuila might be insufficient to matter
pent up demand. Helping workers improve their housing will
undoubted increase their pride in home ownership and could
indirectly increase these individuals, ties to Mexico. In
hard dollars and cents (or peso and centavos) terms it would
certainly be better for the workers if they were paid wages
high enough to provide them with sufficient disposable income
to improve their own homes. However, in the absences of
something like this happening an interest free loan repaid
through direct salary deductions is potentially a very
attractive alternative. An increase in pride of home
ownership will most likely also increase these workers ties
to Mexico. If that happens they might be less likely to
abandon Mexico and migrate to the US in search of jobs and
better living conditions. Right now this is all very
speculative but the potential exists and, if nothing else,
recent experience with the home improvement program shows
that workers are taking out loans in significant numbers and
universally using the funds for its intended purpose.


12. This message was cleared with AmConsul Monterrey.
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 /
WILLIAMS

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