BIRTH OF A UNION IN GUATEMALA

UNCLAS SECTION 01 OF 02 GUATEMALA 002849

SIPDIS

SENSITIVE

DEPARTMENT PLEASE PASS TO THE OFFICE TO US TRADE

E.O. 12958: N/A
TAGS: ELAB ETRD ECON PGOV PHUM EAID ASEC GT
SUBJECT: BIRTH OF A UNION IN GUATEMALA


Sensitive but Unclassified. Please protect proprietary
business information.


1. (U) Summary: Following months of negotiation and some
severe conflicts regarding labor rights, the management of a
major apparel manufacturer agreed to support the
establishment of a labor union in its workforce. Potential
CAFTA benefits and the steady interest of U.S. brands were
encouraging factors. Additionally, the relevant labor
federation greatly supported the company's management and the
leaders of the fledgling union in their efforts to reach an
agreement. End summary.

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Founding a Union, at Long Last
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2. (U) On December 27, following months of negotiations,
management of SAE-A, a Korean-owned major apparel producer,
held a meeting with representatives of their workforce, the
General Coordination of Guatemalan Workers (CGTG) labor
federation, the Ministry of Labor, Gap Inc. (a major buyer of
SAE-A production),and the Embassy's LabAtt to discuss the
establishment of a union. At the meeting, management agreed
to support the fledgling union's request for legal
recognition by the Ministry of Labor and agreed to begin
negotiating a collective bargaining agreement with the union.



3. (U) CGTG organizing director Jorge Jimenez stated that
this effort in such an important company would set an example
for collective bargaining throughout Guatemala. Jimenez
suggested that both employers and organized labor had not
always behaved in a positive manner, but that SAE-A and its
workers were pioneers. SAE-A Executive Director Sou Young
Koh noted that SAE-A's sister companies in Nicaragua and
Mexico have unions and that respecting labor rights is part
of SAE-A's internal policy.


4. (SBU) With this action, SAE-A becomes only the third
apparel producer in Guatemala to have a union. Neither of
the others, however, rival SAE-A's economic importance in
Guatemala. The SAE-A conglomerate is the second largest
apparel operation in Guatemala, with seven factories and
7,000 employees. SAE-A produced USD 320 million in exports
in 2005 for such brands as Gap, Liz Claiborne, Wal-Mart, and
Target. (Note: Of the more than 200 apparel factories,
approximately 80 percent are Korean-owned, including all
three unionized firms. Earlier in 2005, there were already
three factories with unions, but one of these went bankrupt
and shut its doors. End note.)


5. (U) CGTG is the most important labor federation in
Guatemala. The other two apparel company unions, however,
are affiliated with another federation (known as FESTRAS)
that primarily covers the food and beverage industries.
FESTRAS leaders have decided to focus on their original food
and beverage industries, so the apparel unions are
transferring their affiliation to CGTG.

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Gangs, Threats, and Anti-Union Pressure
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6. (U) SAE-A's main production facility in the Mixco
municipality adjacent to Guatemala City has suffered
extensive difficulties with gang activity in the area and
within the factory. Two years ago, SAE-A's Chief Executive
Officer was kidnapped by gang members. Although the company
paid the ransom, the kidnappers shot him through the throat
and left him for dead. For several years, employees have
faced robberies and extortion activities during their
commutes to and from work.


7. (SBU) In early 2005, several gang members concealed their
gang affiliations in order to get jobs within the factories.
From their positions within the workplace, the gang members
were able to provide intelligence to the gangs to target
robbery and extortion efforts more effectively. SAE-A's
human resources manager contacted the local police precinct
to arrange to have police patrols within the factory.
Although no formal order was issued, in June police officers
took up stations in the factory, identified the gang members
and brought them to the human resources office. The company
fired the gang members and the police arrested them for
extortion.


8. (SBU) At the same time, however, police also detained 16
employees who had formally submitted paperwork to form a
union. The human resources manager told these employees --
in the presence of the police officers -- that their
activities were illegal and that they must resign or go to
jail. 13 employees resigned, but the three that refused to
do so were arrested and taken to jail. After spending the
weekend in jail, they were brought before a judge where their
cases were immediately dismissed.


9. (SBU) When the Ministry of Labor contacted SAE-A
management regarding the case, Executive Director Koh
contacted the Commission for the Verification of Corporate
Codes of Conduct (COVERCO),a labor rights NGO, to
investigate the allegation. COVERCO interviewed over 100
workers, inside and outside the factory, and reported to
SAE-A management that the allegation was likely true. SAE-A
fired the Korean human resources manager, his Korean deputy,
and three other locally-engaged staff in the human resources
department thought to be involved. SAE-A reinstated the 16
employees with back-pay and encouraged them to reinvigorate
their organizing effort.

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Maintaining Proper Compliance
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10. (SBU) In a November meeting with LabAtt and a Gap Inc.
compliance inspector, Koh stressed that all labor activists
and inspectors were welcome in his factory at any time. In a
separate meeting with LabAtt, Koh noted that SAE-A's
production in Guatemala increased by USD 50 million in 2005,
primarily due to increases in labor productivity. It was not
worth it, he said, to risk such investment over minor issues.



11. (U) Labor costs in Guatemala, Koh continued, are still
far above those in China and India, but the pending entry
into force of the Central American Free Trade Agreement
(CAFTA) raised the importance of SAE-A's presence in Central
America. Koh requested that LabAtt visit regularly in
addition to visits by the U.S. apparel retailers, in order to
certify SAE-A's adherence to internationally-recognized labor
rights.


12. (U) According to Koh, one problem facing the company was
that no one in the Government of Guatemala (GOG) could
explain precisely what a company needed to do in order to be
in compliance, since the Labor Code was riddled with errors
and contradictory assertions. On November 29, however, C&N,
a private law firm specializing in labor rights, issued the
results of a two-year project: a fully up-to-date version of
the Labor Code, including all revisions, amendments, and
judicial orders that have affected the code in its 58 year
existence. (Note: the edited Labor Code is now available
on-line at the U.S. Department of Labor-funded website
leylaboral.com. End note.) In a companion piece to the
Labor Code, C&N produced a primer on the precise legal
responsibilities of both employers and workers. SAE-A's
administrative and human resources staff told LabAtt that
they keep both works close at hand.

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Comment
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13. (U) While we are extremely pleased with how this problem
turned out -- indeed, we see the final steps as a model for
other businesses and labor organizations in Guatemala -- it
is a shame that it took such a brazen anti-union action to
awaken management to the issues facing its workforce. Still,
the cooperation between management, labor, government,
unions, activists, and the international brands is heartening
and previously unseen in Guatemala. In particular, the Gap
compliance officers played an extremely important role in
bringing people together. In this situation, a U.S. brand
and upcoming CAFTA benefits greatly contributed to the
advance of labor rights.


14. (SBU) This issue is far from over. We expect the
Ministry of Labor to accept the union soon, given that it is
merely an administrative process at this point, but the
actual negotiations of a collective bargaining agreement will
demonstrate just how serious are both the management and
workers. Additionally, we are concerned about the
union-busting action by police officers in the factory and
continue to press the National Civilian Police leadership for
an investigation of this misconduct.
DERHAM