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Cablegate: Brazil Cites Largest Sugar Producer for Labor Conditions

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RR RUEHWEB

DE RUEHSO #0074/01 0291621
ZNR UUUUU ZZH
R 291619Z JAN 10
FM AMCONSUL SAO PAULO
TO RUEHC/SECSTATE WASHDC 0330
INFO RUEHAC/AMEMBASSY ASUNCION
RUEHBO/AMEMBASSY BOGOTA
RUEHBR/AMEMBASSY BRASILIA
RUEHBU/AMEMBASSY BUENOS AIRES
RUEHCV/AMEMBASSY CARACAS
RUEHLP/AMEMBASSY LA PAZ
RUEHMN/AMEMBASSY MONTEVIDEO
RUEHRG/AMCONSUL RECIFE
RUEHRI/AMCONSUL RIO DE JANEIRO
RUEHSG/AMEMBASSY SANTIAGO
RUEHSO/AMCONSUL SAO PAULO

UNCLAS SAO PAULO 000074

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: PHUM ELAB EAGR ECON PGOV BR
SUBJECT: BRAZIL CITES LARGEST SUGAR PRODUCER FOR LABOR CONDITIONS

REF: 09 BRASILIA 1044

1. (SBU) Summary: On December 31, 2009, Ministry of Labor (MOL)
inspectors put Cosan, the world's biggest sugarcane producer on its
list of companies, Portaria 540, who allegedly keep workers in
"slave-like" conditions. In Brazil, Portaria 540 is commonly known
as the "dirty list." On January 11, the company was removed from
the list after its lawyers obtained a court injunction against the
MOL's decision. The case continues and could go to the Federal
Supreme Court. Labor rights NGOs support the MOL's decision and
have criticized the court ruling in favor of Cosan. In contrast,
sugar industry representatives say the MOL's inspections are a
politically motivated attack on agribusiness. Despite the
controversy, advocates say the list remains an effective, if
perhaps imperfect tool to fight labor exploitation. End Summary.

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BRAZIL'S DEFINITION OF FORCED LABOR

2. (SBU) Brazilian labor law bans forced labor and, under a 2003
amendment, prohibits workers from being subjected to "slave-like"
or degrading conditions. While forced labor is defined as
"coercion and lack of freedom of mobility through force and/or debt
bondage", the law contains no definition of "degrading" work
conditions. NGOs claim this is a matter of common sense. Mill
owners and Brazil's largest sugar-growers association, UNICA, argue
that the vagueness is a key weakness in the law and that it leads
to unfair and subjective enforcement.

BACKGROUND ON THE DIRTY LIST

3. (U) The Ministry of Labor created the "dirty list" (Portaria
540) in October 2004, based on its constitutional authority to
enforce labor standards. The list is updated every six months and
currently there are 163 companies from 15 states on the list. The
process for adding companies and people is the following:

--The MOL sends Mobile Inspection Teams consisting of a Labor
agent, a Labor prosecutor and Federal Police officers to inspect
sugar plantations and other enterprises for labor violations. The
teams take notes and use pictures and video to record what they
find. If the inspectors find what they determine are "slave-like"
conditions, they "free" those workers, a case is opened and fines
are levied.

--The case passes through an internal administrative process at the
MOL that, depending on a variety of factors, including legal
action, can last from a couple of weeks to a couple of years.
(Note: Cosan's 2009 list appearance, for example, was based on a
2007 inspection. End Note.)

--The company or person's name is published on the list with copies
of formal notification sent to several ministries and public banks.

--The company remains on the list for two years. At the end of
this time, the offending organization is removed if no new
complaints have been filed and it has paid all fines and remedied
the situation of its workers.

HOW COSAN GOT ON AND THEN OFF THE LIST

4. (SBU) In 2007 a tip led the Ministry of Labor to inspect a
Cosan-owned mill (Junquiera) in Igarapava, Sao Paulo. The Mobile
Inspection Team stated that it had "freed" 42 workers of a Cosan
sub-contractor from "slave-like conditions" and found thirteen
infractions including: debt bondage, unregistered employees, lack
of easily accessible fresh/potable water and underage workers in
precarious and unsanitary conditions. (Note: Typically, the MOL
reports "freeing" any workers it finds in "degrading" conditions.
End Note.) No restriction of freedom of movement was found by the
inspectors. According to both UNICA and Reporter Brasil reps,
Cosan fired the sub-contractor, paid all the fines levied by the
MOL in the wake of the inspection, promised to correct any
irregularities and signed a document admitting fault. Cosan reps
believed these actions closed the case in 2007 and thus were
surprised on December 31 when the MOL published their company's
name on the Ministry's 2009 "dirty list" update.

5. (U) Upon release of the list, Brazil's National Development Bank
BNDES (the country's largest source of corporate loans) temporarily
suspended all transactions with Cosan. Walmart Brazil (WB) also
stopped purchasing Cosan sugar brands and Petrobras and Shell
considered restrictions against the firm. On January 11, Cosan was
removed from the MOL's list after its lawyers obtained a court
injunction. In his decision approving the injunction, Judge Raul
Gualberto Fernandes Kaspar de Amorim said that the MOL possessed
insufficient evidence of conditions analogous to slave labor. He
also noted that the labor infractions allegedly committed had been
carried out by one of Cosan's many labor sub-contractors. The
Labor prosecutor in charge of the inspection, Carina Rodrigues
Bicalho, disagreed with the Judge's ruling. She cited several
conditions that violated the law, including: debt bondage,
degrading conditions and precarious work, as well as poor housing
and transport. The Ministry of Labor plans to challenge Judge
Fernandez Kaspar's decision.

NGO LAUDS EFFECT OF "THE DIRTY LIST"

6. (SBU) Following the court injunction, Poloff met with Leonardo
Sakamoto and Mauricio Hashizume of the labor rights NGO Reporter
Brasil. Reporter Brasil has been following Cosan for several years
and is not surprised that the company appeared on the MOL's list.
Hashizume noted that several legal experts known to Reporter Brasil
consider the January decision by Judge Fernandes to be a weak one.
As a substitute judge in the 10th Regional Labor Tribunal where the
injunction was requested, Fernandes is unfamiliar with forced labor
cases -- including the notion that most sugar cane companies
regularly use labor sub-contractors and are legally responsible for
their actions. Further, both Sakamoto and Hashizume lauded the
"dirty list" as a powerful tool that aids transparency and creates
market-driven punishment for employers that engage in inhumane
labor practices. Reporter Brasil stated that very few, if any,
companies have repeat appearances on the list. In their view,
Cosan's inclusion on the list shows that the MOL is dedicated to
going after slave labor, irrespective of company size and clout.

SUGARCANE GROWERS ASSOCIATION CRITIQUES

7. (SBU) DPO and Poloff also met with Adhemar Altieri, Director of
Communications, at UNICA for the sugar industry's view of the case.
Altieri criticized the MOL's methodology and stated that the
industry has improved conditions for workers. In June 2009, UNICA
was one of the major proponents of a historical tripartite
agreement between the government, industry and workers to
ameliorate the working conditions of cane cutters. (Ref. A)

8. (SBU) Alteiri characterized the MOL's criticisms of agribusiness
as politically motivated by the leftist Democratic Worker's Party
(PDT), whose president is also Minister of Labor Carlos Lupi. He
stated that the MOL targets the sugar cane industry because the
government can get more political "bang for the buck" by going
after sugar growers. Similar labor inspections of cattle ranches
usually only result in the "freeing" of one or two people (due to
the dispersed nature of the industry). In contrast, a labor
inspection of a sugar plantation can lead to an announcement that
"hundreds" of workers were freed from "slave-like conditions," for
citations including a stopped toilet or broken showerhead. Altieri
complained that the laws regarding forced labor are too vague, the
MOL's Mobile Inspection Teams have little oversight, and the
publishing of names on the "dirty list" punishes companies
financially and socially in public without due process. He also
criticized the MOL's rhetoric, which announces that its teams are
"freeing" workers. He says this promotes a vision that does not
characterize the contemporary sugar industry. Altieri further
complained that USG reporting of "flawed" facts and figures put out
by the MOL and the Brazilian press gives such reports greater
credibility than they deserve.

WALMART STUCK IN THE MIDDLE

9. (SBU)Just one week after Cosan's appeared on the list, Walmart
Brazil (WB) temporarily suspended product purchases from Cosan. WB
Sustainability and Institutional Relations Manager Carolina Costa
(Note: Costa worked with UNICA until mid-2009. End Note.) stated
that WB had a long-standing (15-year) relationship with Cosan.
However, as a signatory to the 2005 National Pact Against Forced
Labor, WB had no choice but to act once Cosan appeared on the
"dirty list." When Cosan was dropped from the list, Walmart Brazil
immediately resumed purchases from the company.

COMMENT:

10. (SBU) While controversial, imperfect, and possibly subject to
political agenda, the list, with its low recidivism rate, has
pushed Brazilian employers' adherence to the 2005 Pact to Eliminate
Slave Labor. Over the long run, controversy over labor conditions
in the sugar industry should ease as manual cutting continues to
diminish and regulatory-mandated machine-cutting is implemented in
most of Brazil by 2017. In the meantime, as Cosan's case generates
a lengthy legal battle on the constitutionality of the "dirty
list", further MOL cases involving the industry are likely given
the vague definition of "slave-like" working conditions.
White

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