Identifier
Created
Classification
Origin
06SANTODOMINGO3482
2006-11-13 16:59:00
UNCLASSIFIED//FOR OFFICIAL USE ONLY
Embassy Santo Domingo
Cable title:  

AMBASSADORS HERTELL AND SANDERSON TOUR

Tags:  DR PGOV PREL ELAB KTEX ECON ETRD EINV HA 
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VZCZCXYZ0001
PP RUEHWEB

DE RUEHDG #3482/01 3171659
ZNR UUUUU ZZH
P 131659Z NOV 06
FM AMEMBASSY SANTO DOMINGO
TO RUEAIIA/CIA WASHINGTON DC PRIORITY
RUEHC/SECSTATE WASHDC PRIORITY 6630
RHEFDIA/DIA WASHDC PRIORITY
RUCPDOC/USDOC WASHDC PRIORITY 1589
RUEHC/DEPT OF LABOR WASHDC PRIORITY
RUMISTA/CDR USSOUTHCOM MIAMI FL PRIORITY
INFO RUEHZA/WHA CENTRAL AMERICAN COLLECTIVE PRIORITY
RUEHPU/AMEMBASSY PORT AU PRINCE PRIORITY 4395
UNCLAS SANTO DOMINGO 003482 

SIPDIS

SENSITIVE
SIPDIS

DEPT FOR WHA/CAR, INR/IAA; SOUTHCOM ALSO FOR POLAD

E.O. 12958: N/A
TAGS: DR PGOV PREL ELAB KTEX ECON ETRD EINV HA
SUBJECT: AMBASSADORS HERTELL AND SANDERSON TOUR
DOMINICAN-OWNED TEXTILE FACTORY IN HAITI

REF: SANTO DOMINGO 3129

UNCLAS SANTO DOMINGO 003482

SIPDIS

SENSITIVE
SIPDIS

DEPT FOR WHA/CAR, INR/IAA; SOUTHCOM ALSO FOR POLAD

E.O. 12958: N/A
TAGS: DR PGOV PREL ELAB KTEX ECON ETRD EINV HA
SUBJECT: AMBASSADORS HERTELL AND SANDERSON TOUR
DOMINICAN-OWNED TEXTILE FACTORY IN HAITI

REF: SANTO DOMINGO 3129


1. (U) SUMMARY: On October 19 U.S. ambassadors to the
Dominican Republic and to Haiti visited a "maquiladora" in
the Haitian CODEVI Free Trade Zone (FTZ) owned by Dominican
corporation Grupo M. The enterprise directly employs around
1,500 Haitian workers in garment assembly. It hopes to expand
this number to 10,000 by 2009. Production costs are nearly 25
percent less in Haiti than across the border. Human rights
reports from the Department of State have cited complaints
about Grupo M's labor practices, but the company's 2005
agreement with labor unions appears to be holding. Grupo M
has lost nearly USD 7 million in the CODEVI facility since
its 2003 inauguration, but remains optimistic about the
future of textile production in Haiti. END SUMMARY.

- - - -
GRUPO M
- - - -


2. (U) Founded in 1986, Grupo M is the largest private sector
employer in the Dominican Republic, with 12,200 employees
working in 13 production facilities, and it is the largest
apparel producer in the Caribbean/Central American region.
Grupo M's main production facilities are located in two
industrial zones developed by the group in Santiago,
Dominican Republic. It supplies to major U.S. brand name
companies such as Liz Claiborne, Polo, Levis, Hanes and Tommy
Hilfiger. Fernando Capellan and family members are the
controlling shareholders.


3. (U) Since 2003 Grupo M has operated two factories in the
CODEVI Free Trade Zone (FTZ) in Ouanamithe, Haiti. The
operations employ approximately 1,500 Haitian workers and are
currently the only major industrial facilities operating
there. The FTZ was developed in a region of northern Haiti
adjacent to the Dominican border and the facility has its own
dedicated border crossing.

- - - - - - - - - - -
THE AMBASSADORS' TOUR
- - - - - - - - - - -


5. (SBU) Grupo M executives invited Ambassador to the

Dominican Republic Hans Hertell and Ambassador to Haiti Janet
Sanderson to tour their facilities on October 19. Grupo M had
invited Ambassador Hertell previously, but labor unrest at
the facility had prompted postponements.


6. (SBU) Grupo M officials appeared eager to seize the
opportunity to generate positive media coverage for their
facility. Company officials had drafted a joint press release
that stated, among other things, that Ambassadors Hertell and
Sanderson were "enthusiastic" about the work being done by
Grupo M in Haiti. At USG request, the press release was toned
down. The company had arranged to have present a television
news crew from Santiago, Dominican Republic, to interview
ambassadors at the visit's conclusion.

- - - - -
WHY HAITI?
- - - - -


7. (U) Garment and textile production in the Dominican
Republic generated nearly 100,000 jobs and over 30 percent of
Dominican export earnings in 2005. But competition from
lower-cost Asian suppliers in recent years had caused company
closures, with the loss of some 40,000 jobs. Dominican
garment and textile production fell by 10 percent between
2004 and 2005. The sector's total manufacturing employment
fell by 30 percent during the same period. This year exports
to the U.S. market are expected to fall by another 20
percent. Reftel predicts that free trade agreement DR-CAFTA
is likely to provide a boost for the industry, but not enough
to sustain it alone.


8. (U) Many see the use of Haitian labor as an attractive
alternative for the increasingly uncompetitive Dominican
textile industry, handicapped by the Fernandez
administration's determination to maintain a moderately
overvalued peso. Manufacturing labor costs in Haiti are 25
percent less than across the border, Capellan says, while

Haitian employees are just as skillful and hard-working as
their Dominican counterparts. Within ten years, he predicted,
the bulk of the Dominican garment industry will have moved to
Haiti.

- - - - - - - - - - - - - - -
DEVELOPMENT OF THE CODEVI FTZ
- - - - - - - - - - - - - - -


9. (U) In 2001 Grupo M secured a USD 20 million loan from the
World Bank's International Finance Corporation (IFC) to
develop the CODEVI FTZ. Prior to 2001, Grupo M executives
say, Haitian law did not allow for the creation and
satisfactory operation of FTZs, so the company worked with
the Haitian government to obtain all necessary changes.


10. (U) The project is a phased development of a site of
500,000 square meters in Haiti, contiguous to the Dominican
Republic near Dajabon, Montecristi province. The first phase
of the investment project - development of an area of 150,000
m2 and creation of 1,500 direct jobs - has been more or less
completed.


11. (U) The development plan had envisioned recruiting
further operations to produce apparel, footwear and other
products, in facilities leased or purchased from Grupo M. The
plan had projected that these expansions would create up to
20,000 direct jobs. Though the second phase has not come to
pass, Grupo M maintains that they will expand their own
presence to include up to 10,000 employees by 2009.


12. (U) The company presentation notes that the Haitian
government evicted some 184 farmers and their families from
the site to make possible the construction of the FTZ.
Capellan insists that the action was not an expropriation,
although, tellingly, his own PowerPoint presentation states
that "more than 108 families whose lands, where today
operates the FTZ, were expropriated by the Haitian
government" (sic). The Haitian government has taken no steps
to reimburse the affected families, Capellan said. He
commented that that Grupo M has provided them with some
assistance of its own.

- - - - - - - - - - - - - - - -
CORPORATE SOCIAL RESPONSIBILITY
- - - - - - - - - - - - - - - -


13. (U) Company officials noted that some efforts at
community outreach programs had been implemented, but that
these had had mixed results. Their efforts to provide
vaccinations to their employees, for example, ended in
accusations that the company,s real intent was to sterilize
the community. For these and other reasons, company
officials repeatedly defended their lack of broader community
outreach programs, saying they worried that programs like
HIV/AIDS testing (which they currently do not provide) could
be misinterpreted. They requested USAID assistance in
expanding their community outreach efforts; USAID
representatives replied they would consider their request.

- - - - - -
LABOR ISSUES
- - - - - -


14. (U) The Department's Human Rights Report on Haiti records
that workers began complaining of exploitation and
mistreatment by management of the Grupo M textile company
only months after it opened. Rounds of strikes and violence
by union members, supported by "Batay Ouvriye," a labor
organization of peasant workers, were followed by a series of
employee terminations by the company throughout that summer.
Grupo M was on the verge of terminating its CODEVI
operations, but under pressure from major corporate clients
the firm reversed course, reaching an agreement with Batay
Ouvriye and SUKOWA (the employees' union) last year.


15. (U) Since then, both sides have adhered to their sides of
the bargain. Grupo M has gradually rehired laid-off union
workers, and Batay Ouvriye negotiated responsibly with the
company management. Company officials stressed to visitors
the effectiveness of their collective bargaining arrangement
with the employee unions and expressed satisfaction with the

manner in which it has evolved. Grupo M's General Manager
commented that SUKOWA, the main employee union, had only 15
members; in subsequent e-mail correspondence Batay Ouvriye
disputed this remark.


16. (U) Whatever the problems, Grupo M's labor policies at
CODEVI appear to be more generous than the company's
practices in the Dominican Republic. Dominican unions allege
the company discriminates against labor organizers, fires
their members, and has created a fraudulent "scab union" in
order to circumvent the legitimate one. The company is
currently involved in a legal dispute concerning this last
accusation.


- - - - - - - - - - -
PROFITABILITY CONCERNS
- - - - - - - - - - -


17. (U) Capellan blames labor unrest and political turmoil
for the losses of nearly USD 7 million that Grupo M has
experienced since the project's inauguration in 2003. He says
another company had invested in the FTZ at around the same
time as Grupo M but abandoned the project due to violence and
political instability in Haiti.


18. (U) Still, at their October 19 briefing company officials
were decidedly optimistic in their outlook. Grupo M was
determined to expand employment at its CODEVI facilities,
they said, to 2,250 by next year and to 10,000 by 2009.
Capellan was particularly enthusiastic about the prospect of
using the opportunities provided by the regional free trade
agreement DR-CAFTA to export Haitian-produced garments
duty-free to the U.S. market. Capellan said Grupo M is
seeking to get approval from major clothing companies Liz
Claiborne and Gap to use Haitian facilities. Bad press
generated during Grupo M's labor problems in 2004 has not
helped the company's efforts in this respect.


19. (U) Drafted by Alexander T. Bryan.


20. (U) This report and extensive other material can be
consulted on our SIPRNET site,
http://www.state.sgov.gov/p/wha/santodomingo/
HERTELL