Cablegate: Competing Textile Unions Draw Nafta Countries,

DE RUEHME #5639/01 3022044
P 292044Z OCT 07





E.O. 12958: N/A

1. SUMMARY: A dispute among three labor unions for control
of a collective bargaining contract in the southern Mexican
state of Puebla has drawn the attention of US and Canadian
NGO,s and labor unions as well as the concern of American
clothing manufacturers. The dispute began this past May when
workers at a blue jean factory called Vaqueross Navarra
protested what they said was the company,s failure to comply
with the terms of a profit sharing agreement. In pressing to
have their concerns addressed the workers were notably
dissatisfied with their union of record and apparently
decided to change labor affiliation. This decision prompted
two other labor unions to try and win control of the
collective bargaining contract. Meanwhile, as the three
unions fought to &represent8 the workers, the original
profit sharing issue remained unsolved and a major source of
friction between the workers and the company. A variety of
organizations and labor unions in the US, Canada and
elsewhere have been drawn into this complicated dispute and
they have all petitioned the Puebla state government to
resolve the issue. The Puebla authorities are very aware
that this dispute could become the subject of a formal
submission (complaint) under the terms of the NAFTA side
agreement on labor which allows any of the signatory
countries to officially question violations of local labor
law. They are, therefore, scrupulously following the letter
of the law for dispute resolution but at a pace that many of
the parties involved view as overly cautious. The first step
toward a negotiated settlement of the labor union aspect of
this dispute could take place as early as October 31, 2007.


2. This past May a labor dispute broke out at the Vaqueross
Navarra blue jeans plant in the southern Mexican state of
Puebla. Vaqueross Navarra is one of 14 factories in Puebla
owned by the Grupo Navarra, a major producer of denim for
such US brands as The GAP, Levi,s, American Eagle,
Abercombie & Fitch, Target, Walmart and others. The basis of
the dispute is a claim by the workers that the company has
failed to abide by the terms of a profit sharing agreement.
The roots of the disagreement began earlier in the year when
the company claimed that it had made no profits in 2006. The
workers were not convinced by the company,s claim since they
were well aware that the firm produced and exported over
30,000 pairs of jeans per day to the United States.
Consequently, they insisted on being shown Vaqueros
Navarra,s income tax declaration for the year 2006.

3. Vaqueros Navarra was reluctant to make its tax declaration
public but ultimately presented the workers with a document
it claimed was its 2006 income tax return. Upon studying the
document the workers doubted its authenticity since it failed
to record significant legitimate expenses they knew had been
paid out during that tax year. The workers consequently
attempted to obtain the company,s income tax declaration
from the GOM,s federal tax authorities. (Comment: Mexican
firms (and individuals) are notoriously averse to paying
taxes and will reportedly go to great lengths to avoid doing
so. It is said that Mexico has the lowest tax collection
rates in Latin America. End Comment.) This effort failed but
it prompted the company to offer a compromise payment to the
workers roughly equivalent to six days wages. The workers
countered that according to their calculation of company
earnings for 2006 a fair profit sharing payment would amount
to a full month,s wages.

4. The company refused to pay a full month,s wages and
relations between the roughly 650-700 workers and the
management of the Vaqueros Navarra plant steadily
deteriorated. Since the start of the dispute, the company
has reportedly fired 150 workers for labor organizing
activities aimed at obtaining the full benefits of the profit
sharing agreement. The exact number of workers fired and the
reasons for their dismissal are in dispute and range anywhere
from 50 to 300 depending on whose figures one accepts. What
does not appear to be in dispute is that relations between
the worker and management at the Vaqueros Navarro plant were

MEXICO 00005639 002 OF 004

not particularly good even before the profit sharing
disagreement broke out. Verite, the independent non-profit
organization which monitors international labor rights abuses
in off-shore production sites, found credible evidence to
indicate that the company has engaged in forced overtime,
pregnancy testing, abusive treatment and safety and health
violations and numerous freedom of association issues.


5. Officially, the workers at the Vaqueros Navarra plant in
Puebla are represented by the CROC labor union (Revolutionary
Confederation of Workers and Peasants. The CROC is perhaps
Mexico,s third largest federation of labor unions and it is
closely associated with the PRI (Institutional Revolutionary
Party), Mexico,s former ruling political party. At the
national level, the CROC is a labor organization with
legitimate accomplishments in gaining and protecting worker
rights but like many institutions in Mexico it has its bad
elements. Senior CROC officials in Mexico City have
unofficially acknowledged to Mission Mexico,s Labor
Counselor that they are less than pleased with the way in
which their union leaders in Puebla conduct their operations.

6. According to American and Canadian labor observers active
in Mexico, the CROC operation at the Vaqueros Navarro plant
in question is a &protection contract.8 Protection
contracts are bogus collective bargaining agreements signed
by a company and a union (or individuals claiming to
represent a union) for the sole purpose of creating a
management friendly organization that will control the
workers. In the case of the jeans factory in question, there
are credible reports to suggest that the CROC has never had a
presence in the plant, the workers there have never been
allowed to actually see the collective bargaining contract
their &representatives8 have agreed to on their behalf, the
workers have never participated in any type of union assembly
nor have they ever been allowed the opportunity to elect
their union leadership.


7. As the labor situation at the Vaqueros Navarro plant
deteriorated the workers began to look for new union
representation. The representation they appear to have
settled on is the September 19 Union which filed a petition
with the Puebla state government labor authorities to serve
as the workers representative on July 10. The petition was
reportedly signed by 551 of the plant,s estimated 650
workers. Mexican Federal Labor Law allows the workers at any
plant or company to change union representation at any time
whenever a majority of those workers petition to do so. In
theory, this petition process is relatively simple. In
practice, changing from one union to another is a contentious
process during which coercive methods can and often are used
to get workers to vote one way or another.

8. The September 19 Union is affiliated with the Authentic
Workers Front (FAT), which is a part of the National Workers
Union (UNT). UNT is Mexico,s second largest labor
federation and refers to itself as being an &independent8
organization. The UNT is independent in the sense that it
has no official ties to any political party but unofficially
it is closely tied to Mexico,s main opposition party, the
PRD (Party of the Democratic Revolution).

9. At roughly the same time that the September 19 Union
petitioned to become the legal representative of the workers
at the Vaqueros Navarra plant, another union appeared on the
scene. This union, the CROM (the Regional Confederation of
Mexican Workers), is perhaps Mexico,s fourth largest labor
federation and, like the CROC, is officially associated with
the PRI political party. The CROM is claiming that it can
represent the real interests of the workers at the Vaqueros
Navarro plant better that either the existing union of record
(the CROC) or the one that most workers seem to want as their
representative, the September 19 Union. The only element
that the CROM has in its favor is that it appears to be the

MEXICO 00005639 003 OF 004

union that the company would prefer to deal with; which is
probably an indication of whose interests it would really
represent. The CROM, which has also petitioned the Puebla
authorities for recognition as the workers, representative,
has reportedly been given access to the Vaqueros Navarro
factor in order to solicit worker votes. If true, this would
be violation of Mexican labor law.

--------------------------------------------- ------

10. The ongoing situation at the Vaqueros Navarra plant has
drawn considerable international attention including such
organizations as the Canadian based Maquila Solidarity
Network, the Ontario Public Service Employees Union, the
AFL-CIO, United Electrical, Radio & Machine Workers of
America (UE) and various other US and Canadian NGOs. All of
these organizations have contacted both the labor authorities
in Puebla and the US companies doing business there. The US
and Canadian labor organization have expressed their concerns
that the Puebla government, which is controlled by the PRI,
will be swayed in its efforts to resolve the dispute at the
Vaqueros Navarro plant in favor of either the CROC or the
CROM because both of these unions are officially associated
with that political party.

11. The inquiries/pressure from these organizations and
companies on the Puebla state government has had an effect in
the sense that the authorities there are very much aware that
they have become the focus of international attention.


12. On October 26, Mission Mexico,s Labor Counselor called
on the Puebla state government,s Secretary of Labor and the
President of Labor Conciliation and Arbitration Board to
discuss the situation at the Vaqueros Navarro plant. The two
state officials carefully explained the concerns of the
Puebla government and what the authorities there were doing
to resolve this protracted labor dispute. They seemed very
keen to reach a negotiated settlement to the dispute but were
equally (perhaps excessively) concerned to appear even-handed
with all of the parties concerned.

13. According to the two state officials the Puebla
government is doing everything it can resolve the problems at
the Vaqueros Navarra plant. They state that they have meet
repeatedly with all of the parties concerned and stressed
upon them the need to resolve their differences in strict
accordance with Mexican labor law. They state that the
Puebla government has gotten all sides (meaning the three
competing labor unions) to acknowledge the need for an
election by the workers to determine which labor organization
will serve as their legal representative. What is still at
issue is the what, where, when and how of this election.

14. In scrupulously following the letter of Mexican labor
law the where, when and how of the union election might not
take place for several months; an outcome that is not
acceptable to the September 19 or CROM union since this would
mean the CROC is still officially the workers, legal
representative. What the Puebla government proposes, and
what seems to be acceptable to the September 19 Union and
international interest groups, is the holding ofan interim
election known as an &administrative recount.8. If all
three unions accept an interim election, its results would
authorize the winning union to serve as the workers, legal
representative until a formal election, conducted in full
accordance with all the tightly control procedures of Mexican
labor law. The Puebla authorities have scheduled a meeting
with all three unions for October 31, to try and get them all
to agree to the interim election.

15. In the meantime, Puebla labor authorities were carefully
looking into the circumstances surrounding the fired workers.
According to the two Puebal state officials with the Labor
Counselor met, media reports of hundreds of workers being
fired are gross exaggerations. (Comment: This assessment is
probably true since in a meeting with a September 19 official

MEXICO 00005639 004 OF 004

on October 25, post,s Labor Counselor was told that at most
the Vaqueros Navarra plant in question had only 700
employees. End Comment.) Continuing on, the officials said
that only 35 fired employees had filed formal complaints
about their dismissal and of that number 7 have had their
cases resolved to their satisfaction.

16. Perhaps the most significant detail the two Puebla state
officials related in their meeting with post Labor Counselor
was related to the right to vote in any labor elections that
are ultimately held. According to the officials, any worker
who was employed by Vaqueros Navarro back in May when the
labor dispute first began, and only those employed by the
company at that time, will be allowed to vote to determine
which labor union will serve as the workers legal
representative. This means that the company will not be able
to pad their employment rolls with people whose votes they
control and that even those workers who have been fired since
May can vote in the union election if they so choose. The
limitation on new employees voting and the eligibility of
fired workers to participate in any union election should,
theoretically, go a long way toward ensuring that the Vaquero
Navarra workers obtain the union representation of their


17. The situation at the Vaquero Navarra plant in Puebla is
complicated and the information available to date tends to
indicate that not all of the competing unions have the
workers, best interests at heart. The Vaquero Navarra
company has not been the ideal employer and it is still not
clear whether it will honor its profit sharing agreement or
properly address the labor issues raised by the non-profit
organization Verite. The state labor authorities in Puebla
appear to be sincerely working to resolve this labor dispute
but at times they seemed more interested in staying on
everyone,s good side than in quickly resolving an issue that
could hurt the image of their state as a good place to
invest. If the authorities are able to get the competing
unions to agree to a properly monitored interim election the
situation at the Vaqueros Navarra plant could take a
significant step in the right direction. If a satisfactory
interim election is not held this dispute could ultimately
become the subject of a formal submission (complaint) under
the terms of the under NAFTA,s North American Agreement on
Labor Cooperation allow any of the three signatory countries
to question violations of local labor law.

Visit Mexico City's Classified Web Site at and the North American
Partnership Blog at /

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