Identifier
Created
Classification
Origin
07MEXICO278
2007-01-19 23:15:00
UNCLASSIFIED
Embassy Mexico
Cable title:
SUGAR UNIONS SEEK SWEETER DEAL ON RETIREMENT
how-toVZCZCXRO3493 PP RUEHCD RUEHGD RUEHHM RUEHHO RUEHJO RUEHMC RUEHNG RUEHNL RUEHRD RUEHRS RUEHTM DE RUEHME #0278/01 0192315 ZNR UUUUU ZZH P 192315Z JAN 07 FM AMEMBASSY MEXICO TO RUEHC/SECSTATE WASHDC PRIORITY 4999 RUEHC/DEPT OF LABOR WASHDC RUEHRC/DEPT OF AGRICULTURE WASHDC INFO RUEHXC/ALL US CONSULATES IN MEXICO COLLECTIVE RUEHXI/LABOR COLLECTIVE
UNCLAS SECTION 01 OF 03 MEXICO 000278
SIPDIS
SIPDIS
DEPT FOR DRL/AWH AND ILCSR,WHA/MEX AND PPC, USDOL FOR ILAB,
AGRICULTURE FOR USDA/FAS/OGA
E.O. 12958: N/A
TAGS: ELAB EAGR ECON PGOV PINR MX
SUBJECT: SUGAR UNIONS SEEK SWEETER DEAL ON RETIREMENT
BENEFITS
UNCLAS SECTION 01 OF 03 MEXICO 000278
SIPDIS
SIPDIS
DEPT FOR DRL/AWH AND ILCSR,WHA/MEX AND PPC, USDOL FOR ILAB,
AGRICULTURE FOR USDA/FAS/OGA
E.O. 12958: N/A
TAGS: ELAB EAGR ECON PGOV PINR MX
SUBJECT: SUGAR UNIONS SEEK SWEETER DEAL ON RETIREMENT
BENEFITS
1. SUMMARY: Mexico,s largest sugar workers unions have
threatened to go on strike beginning January 21, if an
agreement is not reached on member retirement benefits. At
issue is a disagreement with the sugar mill operators over
whom (the industry, the Mexican Social Security Agency or
both) is responsible for paying retirement benefit and at
what age workers are allowed to retire. Conflicting
interpretations of an arbitration ruling made by Mexican
government labor authorities initially allowed both parties
to claim the law was on their side. The intervention of
Mexican Labor Secretary, Javier Lozano, has convinced the two
sides to back away from their initial hard line positions but
it has not removed the possibility of a strike. The threat
of a sugar workers strike raises the possibility of an
increase in the cost of sugar at a time when Mexico is
already experiencing unpleasant political moments and concern
for possible economic difficulties resulting from recent
increases in the cost of tortillas and milk. The question of
worker retirement benefits is an issue that has broader
public finance ramifications beyond the sugar workers unions.
END SUMMARY.
--------------
Sugar Workers Set to Strike
--------------
2. Over the past week, Enrique Ramos Rodriguez, the leader
of the Workers Unions of the Mexican Sugar Industry
(STIASRM),has repeatedly stated that his organization is
prepared to go strike at one minute after mid-night on
January 21 if the union,s concerns are not addressed. The
STIASRM, with some 45,000 registered members, is perhaps
Mexico,s largest sugar worker union. The threatened January
21, strike is a continuation of a one week labor stoppage
that began on November 16, 2006. Of the 58 major sugar mills
in the country 51 would be impacted by the strike should it
take place. The January 21 date of the strike would occur
right at the high point of the 2006-2007 harvest season.
Industry sources indicate that a strike of much more than a
week would seriously disrupt this year,s harvest. At issue
is the question of worker retirement benefits.
3. According to STIASRM, the union is prepared to strike in
order to obtain the benefits negotiated in a 1998 labor
agreement. Under the terms of that agreement union workers
were eligible for retirement at age 60 and once retired were
entitled to a pension from the Mexican Social Security
Agency, IMSS, with a matching 100 percent contribution paid
by mill operators of the sugar industry. The union is
insisting that the mill operators honor the terms of this
agreement which it estimates would, at most, increase the
industry,s labor cost by approximately 14 percent over an
extended period. The union also claims that since sugar
workers, on average, earn very low wages the cost of the 1998
labor agreement would be gradual beginning with some 3,000
workers schedule to retire in 2007.
--------------
Mill Operators Claim the Law Is On Their Side
--------------
4. Not surprisingly, Mexico,s sugar mill operators see
things a bit differently and their position is not without
reason. In August of 2002 the Mexican government issued a
broad labor arbitration ruling that could be seen as
invalidating the 1998 agreement. Under the terms of the
GOM,s 2002 ruling various industrial workers were required
to convert from private retirement plans to the national
pension plan administered by IMSS. At the time this
conversion seemed logical since all employers in the sugar
industry were already required to pay into the IMSS
retirement/pension plan. Moreover, under the normal terms of
the IMSS national pension plan workers are not eligible to
retire until age 65.
5. As a consequence of the GOM,s 2002 ruling the sugar mill
operators believe that by paying into IMSS they are already
meeting their legal obligations to workers. The mill
operators position is that for them to have to match what
retiring workers received from IMSS would be tantamount to
doubling the pension benefit of each retiring employee.
Moreover, the mill operators argue, since all workers
receiving IMSS pension benefits retire at age 65, they do no
see any legal basis for STIASRM,s insistence that its
members be treated differently than all other Mexican
MEXICO 00000278 002 OF 003
workers. As a gesture of good faith the mill operators have
offered to pay STIASRM members who retire at age 65 an
additional benefit that would raise overall labor costs by
approximately 4 percent. This offer has been rejected by the
sugar workers union.
-------------- --
Labor Secretary Dilutes the Tensions ( A Little
-------------- --
6. Because of the very real possibility of a disruptive
strike the GOM,s recently appointed Secretary of Labor,
Javier Lozano, personally intervened in the negotiations
between the sugar workers union and the mill operators.
Initially both parties to the negotiations insisted that the
law was on their side and refused to move very much from
their original positions. However, after considerable arm
twisting Secretary Lozano convinced both side to step away
from their hard line negotiating stances.
7. On the plus side, both the STIASRM and the mill operators
have now agreed to negotiate a resolution to their
differences that sets aside both the 1998 labor agreement and
the 2002 arbitration ruling by the GOM. On the negative
side, the union has not changed the start date for its
schedule strike which means that parties have less than two
days to resolve an issue that has been ongoing since November
of last year. Both sides claim they want a reasoned
resolution to their differences but the union as reaffirmed
it willingness to strike and mill operator spokespersons have
stated that the industry has sufficient sugar stocks to meet
current consumer needs.
--------------
More Than Just Sugar On the Table
--------------
8. As a backdrop to the negotiations between the STIASRM and
the mill operators Mexico is currently experiencing a number
of unpleasant political moments and concerns for possible
economic difficulties resulting from recent increases in the
cost of tortillas and milk. Considerable government time and
media attention has been devoted to discussing the reasons
for and dealing with the possible consequences resulting from
the rise in the cost of these two basic food items.
Politicians have been accused of grand standing, private
business have been accused of speculating and the Mexican
public appears increasingly frustrated over what seems to
many as an unreasonable raise in the cost of items that are
basic necessities for the country,s poorest citizens. No one
can predict the economic or political consequences that would
happen if a strike in the sugar industry caused a price
increase in another basic food items.
--------------
Comment
--------------
9. Over and above the consequences of a possible sugar price
increase is the question of pension/retirement benefits. One
of the major issues facing Mexican industry and organized
labor is the topic of retirement benefits. If the mill
operators are exempt from any responsibility for negotiated
labor agreements, it could set a precedent for other
industries to follow. Most Mexican employers over a certain
size are required to pay into the IMSS administered national
pension plan based on the wages paid to each employee. A
significant number of employers do not make these payments
claiming that it would make their businesses unprofitable.
Many who do pay into Mexican Social Security Agency
under-report their employees salaries so as to reduce the
cost of their payments to IMSS.
10. This lack of payment (or under payment) makes the
financial stability of IMSS extremely questionable. That in
turns complicates the process of legal labor reform since
many workers believe that the generous protections currently
enshrined in law may be the thing that they can count on in
their retirement. Few, if any Mexicans, believe that they
will be able to live on whatever retirement benefits that
perhaps, someday, they might get from IMSS. These factor
complicate labor bargaining issues and underscore the
increasing public worries of the GOM about the large negative
impact of pension obligations on public finances.
MEXICO 00000278 003 OF 003
Visit Mexico City's Classified Web Site at
http://www.state.sgov.gov/p/wha/mexicocity
GARZA
SIPDIS
SIPDIS
DEPT FOR DRL/AWH AND ILCSR,WHA/MEX AND PPC, USDOL FOR ILAB,
AGRICULTURE FOR USDA/FAS/OGA
E.O. 12958: N/A
TAGS: ELAB EAGR ECON PGOV PINR MX
SUBJECT: SUGAR UNIONS SEEK SWEETER DEAL ON RETIREMENT
BENEFITS
1. SUMMARY: Mexico,s largest sugar workers unions have
threatened to go on strike beginning January 21, if an
agreement is not reached on member retirement benefits. At
issue is a disagreement with the sugar mill operators over
whom (the industry, the Mexican Social Security Agency or
both) is responsible for paying retirement benefit and at
what age workers are allowed to retire. Conflicting
interpretations of an arbitration ruling made by Mexican
government labor authorities initially allowed both parties
to claim the law was on their side. The intervention of
Mexican Labor Secretary, Javier Lozano, has convinced the two
sides to back away from their initial hard line positions but
it has not removed the possibility of a strike. The threat
of a sugar workers strike raises the possibility of an
increase in the cost of sugar at a time when Mexico is
already experiencing unpleasant political moments and concern
for possible economic difficulties resulting from recent
increases in the cost of tortillas and milk. The question of
worker retirement benefits is an issue that has broader
public finance ramifications beyond the sugar workers unions.
END SUMMARY.
--------------
Sugar Workers Set to Strike
--------------
2. Over the past week, Enrique Ramos Rodriguez, the leader
of the Workers Unions of the Mexican Sugar Industry
(STIASRM),has repeatedly stated that his organization is
prepared to go strike at one minute after mid-night on
January 21 if the union,s concerns are not addressed. The
STIASRM, with some 45,000 registered members, is perhaps
Mexico,s largest sugar worker union. The threatened January
21, strike is a continuation of a one week labor stoppage
that began on November 16, 2006. Of the 58 major sugar mills
in the country 51 would be impacted by the strike should it
take place. The January 21 date of the strike would occur
right at the high point of the 2006-2007 harvest season.
Industry sources indicate that a strike of much more than a
week would seriously disrupt this year,s harvest. At issue
is the question of worker retirement benefits.
3. According to STIASRM, the union is prepared to strike in
order to obtain the benefits negotiated in a 1998 labor
agreement. Under the terms of that agreement union workers
were eligible for retirement at age 60 and once retired were
entitled to a pension from the Mexican Social Security
Agency, IMSS, with a matching 100 percent contribution paid
by mill operators of the sugar industry. The union is
insisting that the mill operators honor the terms of this
agreement which it estimates would, at most, increase the
industry,s labor cost by approximately 14 percent over an
extended period. The union also claims that since sugar
workers, on average, earn very low wages the cost of the 1998
labor agreement would be gradual beginning with some 3,000
workers schedule to retire in 2007.
--------------
Mill Operators Claim the Law Is On Their Side
--------------
4. Not surprisingly, Mexico,s sugar mill operators see
things a bit differently and their position is not without
reason. In August of 2002 the Mexican government issued a
broad labor arbitration ruling that could be seen as
invalidating the 1998 agreement. Under the terms of the
GOM,s 2002 ruling various industrial workers were required
to convert from private retirement plans to the national
pension plan administered by IMSS. At the time this
conversion seemed logical since all employers in the sugar
industry were already required to pay into the IMSS
retirement/pension plan. Moreover, under the normal terms of
the IMSS national pension plan workers are not eligible to
retire until age 65.
5. As a consequence of the GOM,s 2002 ruling the sugar mill
operators believe that by paying into IMSS they are already
meeting their legal obligations to workers. The mill
operators position is that for them to have to match what
retiring workers received from IMSS would be tantamount to
doubling the pension benefit of each retiring employee.
Moreover, the mill operators argue, since all workers
receiving IMSS pension benefits retire at age 65, they do no
see any legal basis for STIASRM,s insistence that its
members be treated differently than all other Mexican
MEXICO 00000278 002 OF 003
workers. As a gesture of good faith the mill operators have
offered to pay STIASRM members who retire at age 65 an
additional benefit that would raise overall labor costs by
approximately 4 percent. This offer has been rejected by the
sugar workers union.
-------------- --
Labor Secretary Dilutes the Tensions ( A Little
-------------- --
6. Because of the very real possibility of a disruptive
strike the GOM,s recently appointed Secretary of Labor,
Javier Lozano, personally intervened in the negotiations
between the sugar workers union and the mill operators.
Initially both parties to the negotiations insisted that the
law was on their side and refused to move very much from
their original positions. However, after considerable arm
twisting Secretary Lozano convinced both side to step away
from their hard line negotiating stances.
7. On the plus side, both the STIASRM and the mill operators
have now agreed to negotiate a resolution to their
differences that sets aside both the 1998 labor agreement and
the 2002 arbitration ruling by the GOM. On the negative
side, the union has not changed the start date for its
schedule strike which means that parties have less than two
days to resolve an issue that has been ongoing since November
of last year. Both sides claim they want a reasoned
resolution to their differences but the union as reaffirmed
it willingness to strike and mill operator spokespersons have
stated that the industry has sufficient sugar stocks to meet
current consumer needs.
--------------
More Than Just Sugar On the Table
--------------
8. As a backdrop to the negotiations between the STIASRM and
the mill operators Mexico is currently experiencing a number
of unpleasant political moments and concerns for possible
economic difficulties resulting from recent increases in the
cost of tortillas and milk. Considerable government time and
media attention has been devoted to discussing the reasons
for and dealing with the possible consequences resulting from
the rise in the cost of these two basic food items.
Politicians have been accused of grand standing, private
business have been accused of speculating and the Mexican
public appears increasingly frustrated over what seems to
many as an unreasonable raise in the cost of items that are
basic necessities for the country,s poorest citizens. No one
can predict the economic or political consequences that would
happen if a strike in the sugar industry caused a price
increase in another basic food items.
--------------
Comment
--------------
9. Over and above the consequences of a possible sugar price
increase is the question of pension/retirement benefits. One
of the major issues facing Mexican industry and organized
labor is the topic of retirement benefits. If the mill
operators are exempt from any responsibility for negotiated
labor agreements, it could set a precedent for other
industries to follow. Most Mexican employers over a certain
size are required to pay into the IMSS administered national
pension plan based on the wages paid to each employee. A
significant number of employers do not make these payments
claiming that it would make their businesses unprofitable.
Many who do pay into Mexican Social Security Agency
under-report their employees salaries so as to reduce the
cost of their payments to IMSS.
10. This lack of payment (or under payment) makes the
financial stability of IMSS extremely questionable. That in
turns complicates the process of legal labor reform since
many workers believe that the generous protections currently
enshrined in law may be the thing that they can count on in
their retirement. Few, if any Mexicans, believe that they
will be able to live on whatever retirement benefits that
perhaps, someday, they might get from IMSS. These factor
complicate labor bargaining issues and underscore the
increasing public worries of the GOM about the large negative
impact of pension obligations on public finances.
MEXICO 00000278 003 OF 003
Visit Mexico City's Classified Web Site at
http://www.state.sgov.gov/p/wha/mexicocity
GARZA