Identifier
Created
Classification
Origin
06MEXICO6314
2006-11-07 13:25:00
UNCLASSIFIED
Embassy Mexico
Cable title:  

BONUS, BONUS, EVERYONE GETS A BONUS

Tags:  ELAB ECON PGOV PINR MX 
pdf how-to read a cable
VZCZCXRO1946
PP RUEHCD RUEHGD RUEHHM RUEHHO RUEHJO RUEHMC RUEHNG RUEHNL RUEHRD
RUEHRS RUEHTM
DE RUEHME #6314/01 3111325
ZNR UUUUU ZZH
P 071325Z NOV 06
FM AMEMBASSY MEXICO
TO RUEHC/SECSTATE WASHDC PRIORITY 4078
RUEATRS/DEPT OF TREASURY WASHDC
RUEHC/DEPT OF LABOR WASHDC
INFO RUEHXC/ALL US CONSULATES IN MEXICO COLLECTIVE
RUEHXI/LABOR COLLECTIVE
UNCLAS SECTION 01 OF 02 MEXICO 006314 

SIPDIS

SIPDIS

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

E.O. 12958: N/A
TAGS: ELAB ECON PGOV PINR MX
SUBJECT: BONUS, BONUS, EVERYONE GETS A BONUS


UNCLAS SECTION 01 OF 02 MEXICO 006314

SIPDIS

SIPDIS

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

E.O. 12958: N/A
TAGS: ELAB ECON PGOV PINR MX
SUBJECT: BONUS, BONUS, EVERYONE GETS A BONUS



1. Summary: Recently, a joint statement by the head of
Mexico,s federal civil service union (FSTSE) and a senior
GOM Treasury Secretariat official announced that all federal
employees would receive an end of term bonus. The union
leader described the bonus as an established employee benefit
traditionally paid to civil servants in recognition of
faithful service by an outgoing presidential administration.
The exact cost to the federal government of this bonus is
unclear since different sources cite varying figures for the
exact number of federal employees. One estimate calculated
the cost of this bonus as roughly 4 billion pesos (USD 367
million). Once it became clear that federal employees would
receive an end of term bonus Mexico City,s municipal
employees petitioned for a bonus as well and hinted at a
strike if their request was denied. In order to avoid a
strike during the December 1 change of administrations,
federal authorities agreed to cover the cost of a bonus for
Mexico City,s municipal workers. This bonus will be paid
near the end of November and is over and above the Christmas
bonus (&aguinaldo8) of 45 days of salary that nearly all
Mexican workers, both public and private, are legally
entitled to. The combination of these two payments will make
the end of 2006 a very expensive time for Mexico,s federal
government. End Summary.

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Bonus Officially Announced
--------------


2. It has long been common practice in Mexico for outgoing
presidential administrations to pay all federal employees an
end of term bonus. With the end of the Fox government fast
approaching (the next administration takes office December 1)
there was considerable media speculation as to whether the
bonus established by the former ruling party would be
continued. That speculation ended on October 26, when Joel
Ayala Almeida, the head of Mexico,s federal employees,
union, FSTSE (Federation of Unions of State Workers),and
Guillermo Bernal, a senior GOM Treasury official publicly
signed an agreement announcing the payment of the bonus. The
signing took place in the offices of the GOM,s Treasury

Secretariat.

SIPDIS


3. The agreement between the GOM and the FSTSE committed the
outgoing Fox administration to pay the equivalent of some USD
250.00 to all federal employees. The FSTSE leader Joel Ayala
described the bonus as a well-established employee benefit
traditionally paid to civil servants in recognition of
faithful service by an outgoing presidential administration.
Speaking for the Secretariat, Guillermo Bernal, the Director
of the Treasury,s Budget Policies and Control Unit, said the
bonus was an &economic stimulus8 consistent with the
federal government,s labor policies. The Treasury
Secretariat expects to pay the bonus sometime around November

SIPDIS

22.

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How Much Is This Going to Cost?
--------------


4. The total cost to the GOM of this end of term bonus is
difficult to determine because of several complicating
factors. One of the main factors complicating the
calculation of the bonus, total cost is the fact that there
are no consistent figures on the total number of federal
employees. The figure most commonly cited in the media for
the total number of federal workers is 1.6 million employees.
Were each of these employees to receive a bonus equivalent
to USD 250.00 the cost to the GOM would be around 400 million
dollars. FSTSE claims that there are really are 1.6 million
federal employees but there is no hard evidence to support
this claim.



5. Another complicating factor was a request by the 115,000
municipal employees of Mexico City,s government that they
also be paid an end of term bonus. According to a senior
staffer in the Mexican senate, the municipal workers hinted
at a massive strike during the December 1 inauguration of
Mexico,s new president if their request was denied. In
response to this request the City government immediately
stated that its budget could not cover cost of the bonus.
Moreover, the Mexico City government pointed out that there
was no legal basis for the municipal employees, request
since the end of term bonus is a benefit paid by the GOM to
&federal8 employees. That said, the Mexico City government
quickly added that it had no objection to the federal
government paying some type of bonus to the municipal workers.

MEXICO 00006314 002 OF 002




6. This statement of no objection by the Mexico City
government was taken up by the head of FSTSE as an invitation
to petition the Treasury Secretariat on the municipal
workers, behalf even though they are not federal employees
and despite the fact that they have their own separate union.
Ultimately, FSTSE leader Joel Ayala (and apparently the
threat of a strike) prevailed on the GOM and the Treasury
agreed to cover the cost of the bonus for the municipal
worker. Thus, at the cost of paying a bonus to an additional
115,000 employees the cost of the end of term benefit went up
another 28.75 million USD. One reason the GOM quickly agreed
to pay a bonus to federal employees was, according to the
senate staffer, because it had already budgeted and obligated
roughly seventy-five percent of the cost of paying the end of
term benefit to federal employees. Consequently, adding a
bonus for another 115,000 employees was not that much of a
stretch.



--------------
And Then There is Christmas
--------------


7. In his remarks at the signing of the agreement between
the GOM and FSTSE, Guillermo Bernal, the Treasury Secretariat
representative took pains to point out that the end of term
bonus was independent of whatever other benefit employees
were entitled to. Thus, the GOM essentially affirmed that
the bonus was over and above the Christmas &aguinaldo8. The
aguinaldo is a payment of 45 days of salary all Mexican
workers, both public and private, are legally entitled to.
The cost of this benefit to the GOM cannot be as easily
estimated as the end of service bonus since the payment the
employees receive will be determined by their actually salary
and not by a fixed amount per employee.

On the bright side, from a budget perspective, the aguinaldo
is an annual benefit that governments (and businesses) have
to plan for so the cost of this payment should already be
budgeted for. Also, since the aguinaldo is something all
employers are legally required to pay the GOM will not be
expect to provide this benefit to anyone other that federal
employees.

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Comment
--------------

Between the end of service bonus in November and the
&aguinaldo8 the GOM will pay federal employees in December,
the end of 2006 could be an expensive time for the Mexican
government. Added to all this is the extra money the GOM
agreed to pay to Mexico City,s municipal employees (in order
to avoid even the possibility of a strike during inauguration
of the new administration). The estimated 28.75 million USD
that this bonus will cost will certainly not bust Mexico,s
budget but it was also an expense that was not planned for.



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GARZA