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Cablegate: Argentina: Due Diligence On Three Ace Award Nominees

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OO RUEHWEB

DE RUEHBU #0941/01 2301054
ZNR UUUUU ZZH
O 181054Z AUG 09
FM AMEMBASSY BUENOS AIRES
TO RUEHC/SECSTATE WASHDC IMMEDIATE 4230
INFO RUEHRC/DEPT OF AGRICULTURE WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUCPDOC/USDOC WASHDC
RHMFIUU/HQ USSOUTHCOM MIAMI FL
RUCNMER/MERCOSUR COLLECTIVE

UNCLAS BUENOS AIRES 000941

SIPDIS
SENSITIVE


E.O. 12958: N/A
TAGS: ECON EINV EIND ELTN ETRD AR
SUBJECT: ARGENTINA: DUE DILIGENCE ON THREE ACE AWARD NOMINEES

REF: STATE 78538

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Summary
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1. (SBU) Mission Buenos Aires is in the midst of a multi-year
strategy to improve the image of the United States in Argentina to
combat this country's high levels of anti-Americanism -- among the
highest in the Western Hemisphere. A key component of post's public
diplomacy outreach is to draw Argentines' attention to the many
positive contributions made by private American volunteers, NGOs,
academics, and others, particularly American businesses operating
here. Growing public awareness of corporate social responsibility
initiatives by many of the 500 American firms operating in Argentina
has contributed to positive trends in recent poll data.
Highlighting corporate social responsibility initiatives is a large
part of Post's public diplomacy work, and as a result, companies are
proud to work with the U.S. Embassy to highlight their necessary and
valuable community work. It is no surprise that the 2008 survey by
Argentina's Great Place to Work Institute featured United
States-based firms in six of the top ten, as well as 21 of the top
50 best places to work in Argentina. Post hopes to be able to
highlight one or more of the following three short-listed firms as
an ACE Award recipient. End Summary.

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Due Diligence on Three Nominees
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2. (SBU) DuPont.

A) Could there possibly be any downside or embarrassment caused by
the selection of your post's nominee?
On June 24, 2009, AP Newswire carried a story about three former
workers at a DuPont nylon plant in Argentina who took legal action
to claim for damages related to exposure to asbestos. The former
employees suffer from asbestosis, and two have asbestos-related
cancer. The claim contends that the same precautions that DuPont
took to protect against asbestos exposure in the United States in
the 1970s where not implemented in Argentina until the 1980s. See
DuPont's response to this labor dispute in the response to Question
E.

B) Do you have any information concerning job creation in the United
States resulting from the operation of the company you nominated?
DuPont Argentina imports many of their supplies from DuPont's plants
in the United States, accounting for US$30-35 million of U.S.
exports each year. These imports foster job creation in the United
States, where currently more than 14,500 people are employed at
DuPont's manufacturing plants.
C) What is your assessment of the company's trade and investment
activities with regards to helping stimulate economic growth in the
U.S. and increasing American exports (what is the U.S. content of
its products)?
See answer to B above.

D) What is the state of labor conditions in the company's
facilities, and are workers unionized?
"Respect for People" is one of DuPont's core corporate values.
DuPont is committed to developing and maintaining a work environment
appropriate for professional and personal development. Three core
elements for this goal are: work climate, individual development,
and benefits and compensations. DuPont firmly believes that
everyone must be treated with dignity, respect, and fairness. For
that reason, the internal treatment is exactly the same as that
given by each employee to those with whom she/he interacts:
customers, suppliers and members of the community in general. The
company has globally adopted corporate principles to value people,
and implemented them to ensure that all employees are treated fairly
and with respect and to promote an organizational culture to
attract, develop, retain and value an exceptional labor force, based
on cultural diversity.

DuPont's policy is not to discriminate against any individual on the
basis of age, ethnicity, religion, gender, disability, national
origin, ancestry, marital status or sexual orientation. Safety has
always been part of DuPont's corporate culture. With the belief
that all injuries, occupational diseases and environmental and
safety incidents are preventable, the company always works focused
on complying with strict standards in all transactions. In order to
recognize this effort, every year DuPont grants the "Directorio"
Award to those plants or offices that have not had any
safety-related incident in one year.
DuPont acknowledges and adheres to the definition of the World
Health Organization that states that "health is a state of complete
physical, mental and social well-being." DuPont believes it takes
an active relationship between the company and its employees to
reach an optimum health condition. The company has taken several
actions to guarantee its employees enjoy good health, including free
flu vaccination, training sessions on health-related topics, and
other initiatives, all aiming at becoming aware of the health risks
to which they may be exposed.

At DuPont, some workers are unionized. The company respects their
participation in union activities and works together with internal
representatives. The relationship between union representatives and
DuPont authorities is characterized by dialogue, mutual respect and
collaboration. Today, some workers are unionized in the following
organizations: AEC (commerce), URGARA (seeds), UATRE (rural
employees and longshoreman), AOT (textile workers), and SETIA
(textile employees).

E)Are you aware of any litigation pending in local courts involving
the Company?
DuPont Argentina S.A. has a strong tradition of compliance with
current legislation and core values. Nevertheless, the company has
pending civil, tax, administrative, labor and penal/environmental
disputes, which is unsurprising for a company of its size and scale
of operations in Argentina. DuPont considers that it is important
to highlight the following: DuPont Argentina S.A. had manufacturing
operations in the city of Mercedes, in the province of Buenos Aires.
This plant was acquired by DuPont at the end of the 1960s. The
claims mentioned below were initiated after the plant in Mercedes
was closed in 2004.

Labor Dispute: In late June, the press published the existence of
three judicial claims against DuPont headquarters. These claims
have been supposedly raised by three DuPont Argentina's employees
who worked at the previously mentioned DuPont's plant in Mercedes
over their exposure to asbestos, which was being used at DuPont's
plant as temperature insulator. DuPont Argentina notes that they
have complied with all regulations related to safety and hygiene
during the company's operations in the above-mentioned industrial
plant.

Penal/Environmental Dispute: At the same time that DuPont's plant
was being closed in Mercedes, the company was anonymously accused of
pollution. Since then, a prosecutor began an investigation, and
DuPont Argentina has provided all the required documentation related
to the charges. Likewise, DuPont notes that during the time its
plant was operating in Mercedes, the company complied with all
environmental legislation, including legal authorizations to operate
and close, and all other administrative documentation that was
presented in a timely manner to the corresponding government
officials.

F) The Chief of Mission and others involved in the nominating
process do not hold shares of stock or have other financial
interests in DuPont.
G) Is DuPont active in the province or only in Buenos Aires and/or
urban areas?
Currently, DuPont operates in Argentina through Du Pont Argentina
S.A. and Pioneer Argentina S.R.L. DuPont also holds a 72 percent
interest in the joint venture The Solae Company, a company formed
together with the Bunge Group for the food ingredient market.
DuPont's team is formed by 680 people, assigned to the plants and
offices it has in the City of Buenos Aires; in Berazategui, Martinez
and Salto, in the Province of Buenos Aires; and in Rosario and
Casilda, in the Province of Santa Fe. Furthermore, through the
agricultural business, DuPont is present in several Argentine
provinces such as Santa Fe, Cordoba, Salta, Chaco, Entre Rios, La
Pampa and Rio Negro.

H) In post's opinion, which nominee, DuPont or Staples/Officenet has
made the greatest impact on Argentine society?
Both nominees are making a significant positive impact on Argentine
society. DuPont has a longer history of operations in Argentina and
therefore has an impressive breadth and depth of activities. While
operating in Argentina for only several years, the contributions
that Staples/Officenet has made, and the press they have received as
a result, also make that company's nomination very strong, without
any obvious negatives. A June 24, 2009 news report about a legal
action being taken by former DuPont employees seeking damages for
asbestos-related injuries (see letter E above) provides some concern
about exposing the Secretary and Department to potential negative
press if the cases remain unresolved.
I) Is there additional information which would clarify the
contributions of DuPont?
DuPont wants to highlight their contributions to corporate
excellence in the areas of Ethics and Respect. Because ethics is
one of its corporate values, DuPont runs an annual ethics survey,
which the company's employees must complete stating that they comply
with its ethics policies and Business Conduct Guide. With the
purpose of ensuring the development of all employees in a respectful
environment, DuPont created "Expect Respect," a
theoretical/practical training on respectful treatment of others.
Through this program, employees are trained on the importance of
identifying disrespectful behaviors and on measures that may be
taken to revert or report them. During the training, the
participants receive a work guide that includes the company's
policies on discrimination and harassment, the definitions and
examples of disrespectful behaviors, as well as possible solutions
to detect and stop such behaviors. There are also role-playing
activities which allow participants to represent specific
inappropriate behaviors and the corrective measures to be
implemented.

3. (SBU) Staples/Officenet.

A) Could there possibly be any downside or embarrassment caused by
the selection of your post's nominee?
Post is not aware of any potential downside or embarrassment in
nominating Staples, a publicly listed company with high ethical
standards which are shared 100% by Argentine partner Officenet
(including formal practices such as FCPA). As a reference, Staples
ranks among Institutional Investor's Top Shareholder Friendly
Companies for Retailing and number 30 on CRO Magazine's 100 Best
Corporate Citizens in 2008.

Staples/Officenet represents the United States in a positive,
ethical fashion, and is highly regarded by Argentines. Worker
morale is high, and the company consistently operates in an ethical
manner. For example, Staples Argentina has implemented the Staples
United States Code of Ethics, which has assisted the company in
making significant achievements in terms of handling in a
constructive fashion any and all unethical behaviors, and thus
boosting Argentine human capital.

B) Do you have any information concerning job creation in the United
States resulting from the operation of the company you nominated?
Staples features a team of four professionals supporting high-growth
markets, in which there is one Project Manager (PM) based in
Framingham, Massachusetts, who specifically supports
Staples/Officenet's Argentine market development efforts. For
example, Staples Retail Team in the United States developed the
layout of Staples/Officenet's stores in Argentina.

From a capital market perspective, under the current U.S. stock
market climate, it's worth noting that Staples' market
diversification helps reduce the variance (risk) of U.S. citizens'
investments and savings. In fact, while many U.S. companies' market
value declined, Staples' market value has maintained moderate growth
in the last year.

Undoubtedly, Staples' international market diversification provides
further sustainability to its operation in the U.S. domestic market.
At a time when other U.S. chains are closing stores throughout the
United States, Staples is expanding its business both domestically
and overseas, thereby supporting its domestic workforce.
C) What is your assessment of the company's trade and investment
activities with regards to helping stimulate economic growth in the
U.S. and increasing American exports (what is the U.S. content of
its products)?
Staples Corporation is a United States-based $16 billion market cap
corporation started in 1986 in Brighton, MA. Staples' brand equity
in the United States grows with the introduction and development of
its brand through other operations worldwide. Staples, as stated in
the "Staples for Success" book, written by founder Tom Stemberg, was
created as "...a chain of stores dedicated to selling the widest
possible range of office supplies and business machines - at the
lowest possible price."

During 2008, Staples Argentina imported over US$85,000 worth of
United States manufactured products. Globally, Staples, Inc.
purchased US$4.4 million from American companies for its worldwide
operations in 2008.

D)What is the state of labor conditions in the company's facilities
and are workers unionized?
Half of Staples/Officenet's workforce is unionized, under the
Commercial Employees' Union (Sindicato de Empleados de Comercio -
SEC), a duly registered union. Reportedly, some of
Staples/Officenet best practices, such as their fluid communication
and proactive negotiations with the union, are used as benchmarks of
exemplary corporate excellence by the union.

In 2007, the "Great Place to Work Institute" ranked
Staples/Officenet number 30 among the top 50 best companies for
which to work in Argentina. Top scores in the survey were related
to fairness (non-discrimination) and employee pride. The latter
distinction is directly related to Staples/Officenet's social
responsibility programs. Due to the huge success of these programs,
Mr. Leo Piccioli, Staples/Officenet's General Manager for Argentina,
was invited last year to deliver a presentation on Corporate Social
Responsibility to more than 4000 associates at the opening ceremony
for Staples worldwide annual managers meeting in Las Vegas. Mr.
Piccioli shared the stage with Staples's CEO, CFO and COO, and
figures such as Colin Powell, Joss Stone, and John Cougar.
E) Are you aware of any litigation pending in local courts involving
the Company?
Officenet has filed suits against some local companies to recover
significant outstanding debt, after having exhausted all means for
collection to avoid legal recourse. None of the legal proceedings
imply or reflect negligence, unfair treatment, or illegal conduct by
Staples/Officenet's operation in Argentina.

F) The Chief of Mission and others involved in the nominating
process do not hold shares of stock or have other financial
interests in Staples/Officenet.
G) In post's opinion, which nominee, DuPont or Staples/Officenet has
made the greatest impact on Argentine society?
Both nominees are making a significant positive impact on Argentine
society. DuPont has a longer history of operations in Argentina and
therefore has an impressive breadth and depth of activities. While
operating in Argentina for only several years, the contributions
that Staples/Officenet have made, and the press they have received
as a result, also makes that company's nomination very strong,
without any obvious negatives. A June 24, 2009 news report about a
legal action being taken by former DuPont employees seeking damages
for asbestos-related injuries (see paragraph 2 E above) provides
some concern about exposing the Secretary and Department to
potential negative press if the cases remain unresolved.

H) Is there additional information which would clarify the
contributions of Staples/Officenet?
It is estimated that Staples/Officenet's contributions to the over
70 NGOs that the company supports in Argentina benefit over one
million people.

The Staples/Officenet business model, featured in two Harvard
Business School case studies, is also having a strong social impact
among business students in Argentina. It is estimated that in
Argentina alone over 2,000 students a year use the Staples/Officenet
case study at local Universities. As stated by Officenet's
co-founder, Santiago Bilinkis: "Serial entrepreneurship is the only
way to change (Argentina)."

In a recent TV interview, Buenos Aires City Mayor Mauricio Macri
stated that thanks to Staples, the City Government was able to cut
down on office supplies expenditures from ARP$50 million (US$13
million) per year to approximately ARP$12 million (US$3 million) per
year. Even more impressive to Mayor Macri was an increase in speed
and customer service for the delivery of supplies to the City
Government. Thanks to Staples/Officenet's services, the City
Government was able to use the US$10 million in savings for
high-priority City programs.

4. (SBU) Toms Shoes.

A)Could there possibly be any downside or embarrassment caused by
the selection of Argentina's nominee?
Post is not aware of any potential downside or embarrassment in
nominating Toms Shoes (TOMS), which has won multiple awards in the
U.S., and has been featured positively in many press articles around
the globe, including The Los Angeles Times, Time Magazine, People
Magazine, and The Sunday Times (United Kingdom). While TOMS knows
that its margins are likely lower than most other shoe
manufacturers, providing thousands of needy children and adults with
a basic need such as shoes proves to be well worth it, benefitting
not only the heart but the bottom line. This business model and
practice quickly demonstrated its value, as it resulted in increased
publicity and sales, an outcome that makes up for the decreased
margin.

In October 2007, TOMS received the People's Design Award, as
determined by an online popularity contest run by the Cooper-Hewitt
National Design Museum, and has been noted as a successful model of
social entrepreneurship. Also in 2007, Blake Mycoskie, Founder and
Main Shoe Giver, was invited to speak along with President Bill
Clinton at the Opening Plenary of the Second Annual CGI U Meeting.
This meeting in Austin, Texas hosted over 1300 students and
activists from around the world. In February 2009, Mycoskie also
spoke at the TED conference (Technology, Entertainment, Design), a
meeting of peers that included people such as Bill Gates and JJ
Abrams. On March 6, 2009, Blake also attended a meeting with senior
officials in the Obama Administration and other business leaders to
present viable solutions and ideas regarding U.S. economic policy to
support small businesses in the U.S.

More recently, Mycoskie was featured along with the owner of
Frontera Foods, Rick Bayless, in a CNBC segment titled "The
Entrepreneurs." On April 8, 2009, an AT&T commercial aired during
the Masters Golf Tournament featuring TOMS Shoes. It was the first
time the AT&T mobile unit has featured a real company during a
commercial.

B) Do you have any information concerning job creation in the United
States resulting from the operation of the company in Argentina?
Toms Shoes was created by the two co-founders, one American and one
Argentine. The 50 people working in the United States for Toms
Shoes is a result of this American-Argentine partnership.

C) What is your assessment of the company's trade and investment
activities with regards to helping stimulate economic growth in the
U.S. and increasing American exports (what is the U.S. content of
its products)?
TOMS products are not manufactured in the United States. However
much of the design and product management is done in the United
States.

D) What is the state of labor conditions in the company's facilities
and are workers unionized in Argentina?
TOMS does not produce directly, but contracts production in
factories in China, Ethiopia, and Argentina. In all cases, TOMS
ensures that all their factories operate using sound labor
conditions where they maintain proper conditions for workers and pay
fair wages and follow local labor standards. A code of conduct is
signed by all factories. TOMS' production staff routinely visits
these factories to make sure they are maintaining these working
standards. TOMS also contracts third parties to audit the factories
at least once a year to ensure they adhere to proper labor
regulations. TOMS' three employees in Argentina are unionized,
under the Argentine Commerce Union (Secoa).

E)Are you aware of any litigation pending in local courts involving
the Company?

We are not aware of any litigation pending in local courts.

F) The Chief of Mission and others involved in the nominating
process do not hold shares of stock or have other financial
interests in Toms Shoes.
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Comment
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5. (SBU) Embassy Buenos Aires is proud to provide this additional
due diligence information on three of our Award for Corporate
Excellence (ACE) nominees. These companies embody the spirit of
corporate social responsibility and are setting great examples for
others. They are making positive contributions to Argentine
society, and in the process they are improving the image of the
United States in Argentina. With the support of the Committee, post
will be able to use ACE award finalists as another tool in our
public diplomacy efforts to further reduce the strong anti-American
sentiment in Argentina.

KELLY

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