SPANISH TELCOM APPEARS TO SUSPEND CODE OF CONDUCT

UNCLAS SECTION 01 OF 03 MEXICO 003513

SIPDIS

DEPT FOR DRL/AWH AND ILSCRO AND WHA/MEX, USDOL FOR ILAB

E.O. 12958: N/A
TAGS: ELAB ECON PGOV PHUM PINR SOCI MX
SUBJECT: SPANISH TELCOM APPEARS TO SUSPEND CODE OF CONDUCT
IN MEXICO


1. SUMMARY: The largest single a call center operation in
Mexico is a subsidiary of the Spanish telecommunication
company Telefonica. The Spanish companyQ,s Mexican
subsidiary, Q&Atento MexicoQ8, employs over 18,000 workers
located in 15 call centers. Telefonica corporate literature
prominently highlights its worker friendly policies as
detailed in its Code of Conduct and embodied in the
agreements it has signed with Union Network International and
two Spanish trade union confederations. The stated aim of
these agreements is to establish an international framework
to regulate the companyQ,s operations in other countries.
Its Code of Conduct notwithstanding, there is credible
information that TelefonicaQ,s subsidiary, Atento, is engaged
in a systematic effort to violate basic labor rights to its
Mexican employees. These violations include such things as
the denial of the right to freedom of association, workplace
discrimination and flagrant breaches of local labor laws.
Moreover, the Atento Mexico workers claim a dubious
collective bargaining agreement has been imposed on them
without their consent. This agreement is being administered,
with tacit GOM concurrence, by a fugitive from justice.
AtentoQ,s alleged abuses have been reported to GOM labor
authorities but thus far no action has been taken. Given the
variance between TelefonicaQ,s Code of Conduct and the
plausible reports of its employment practices in Mexico it
may be appropriate to raise these matters with the companyQ,s
parent office in Spain. END SUMMARY.


BACKGROUND
--------------


2. Most unionized telephone or telecommunications workers in
Mexico belong to the Telephone Workers Union of the Mexican
Republic (STRM). The few telephone workers or
telecommunications unions who do not belong to the STRM
nevertheless look to it for advice and support. According to
a report done by the STRM there are more than 215,000 call
center workstations in Mexico located in 21,000 companies,
which have created over 305,000 jobs. These figures
represent 30 percent of the workstations in Latin America.
The annual rate of growth of this business in Mexico is 21
percent, a rate higher than the rest of Latin America (14.5
percent),and much higher than the global average of 4
percent.


3. In Mexico the largest single call center company is
Q&Atento MexicoQ8. Atento is a privately-held corporation
that is a subsidiary of the Spanish telecommunications
company, Telef"nica. Atento (of which Atento Mexico is only a
part) operates in more than ten countries with a labor force
of more than 100,000 workers. AtentoQ,s second largest
operation is in Mexico where the company employs 18,000
workers. Its largest operation is in Brazil with 60,000
workers.

TELEFONICA HIGHLIGHTS ITS CODE OF CONDUCT
--------------


4. TelefonicaQ,s 2007 Corporate Responsibility Report goes
into great detail about the companyQ,s Code of Conduct. One
of the main points stressed in that report is how, to date,
Telefonica has trained some 36,000 people throughout its
global operations on the principles of its Code of Conduct.
Moreover, the Report stresses that Telefonica runs various
initiatives to clarify its policies on responsible
advertising, child protection, data protection, environmental
management and (of most significance in Mexico) compliance
with ethical standards. The companyQ,s Code of Conduct is
based on a 2000 agreement signed with Union Network
International and two Spanish trade union confederations, the
General Union of Workers and the Worker Commissions.


5. The preamble to the Spanish companyQ,s Code of Conduct
specifically states that its principles would be applied Q&to
maintain trade union and workers rights in all Telef"nica
activities world wideQ8. Among the principles enumerated in
the Code of Conduct are such things as equal pay for equal
work, a guarantee of freedom of association, a right to
collective bargaining, the right to organize without fear of
reprisals and a guarantee of minimum wages and benefits
consistent with national legislation or agreements.

MEXICO 00003513 002 OF 003



ATENTO APPARENTLY INGORES RIGHT TO ORGANIZE
--------------


6. Telefonica is clearly a profitable enterprise and its
written corporate Code of Conduct is admirable. However,
according to the above mentioned STRM report and several
workers who spoke directly with Mission MexicoQ,s Labor
Counselor, TelefonicaQ,s local subsidiary, Atento Mexico is
not implementing a labor policy consistent with the Spanish
companyQ,s stated claims and written Code of Conduct. In
fact, the available information suggests that Atento is doing
everything possible to ignore its parent companyQ,s Code of
Conduct.


7. The roots of Atento MexicoQ,s apparent deviation from
TelefonicaQ,s Code of Conduct can be found in a contract it
signed with a Q&protectionQ8 union. Protection unions in
Mexico are labor organizations that exist only on paper who
enter into collective bargaining agreements without either
the knowledge or consent of the workers they purport to
represent. In AtentoQ,s case the company entered into a
collective bargaining agreement with a union known as the
Progressive Trade Union of Workers of Communications and
Transport of Mexico (SPTCTRM).


8. According to the STRM, none of the more than 100 workers
interviewed for its report were aware that they were
represented by SPTCTRM or covered by a union contract. The
workers have never received a copy of their contract, nor has
any worker ever seen a union representative in the workplace.
Workers attempting to organize against the SPTCTRM obtained
a copy of their contract when STRM downloaded it from the
website of the GOMQ,s Secretariat of Labor (STPS). The
contract has subsequently been removed from the STPSQ,
website. (Comment: The SPTCTRM is controlled by Ramon
Salvador Gamez Martinez. Gamez Martinez has a long history
of using violence to break independent union organizing
campaigns and is currently a fugitive from justice fleeing
charges of child molestation. A union contact unrelated to
the STRM confirmed for Labor Counselor that Gamez Martinez
fled Mexican law enforcement authorities when a police raid
of his office discovered video tapes of his illegal
activities with minors.)


9. Reportedly, the Atento contract with SPTCTRM barely meets
the minimum worker protections required by Mexican law, and
in some cases puts the worker at a clear disadvantage in
relation to the company. The contractQ,s apparent purpose is
to prevent workers from exercising their right to freedom of
association in violation of ILO Convention 98, Article 2,
which prohibits acts designed to promote the establishment of
workers' organizations under the domination of employers.
The SPTCTRM contract also violates Article 2 of Telef"nicaQ,s
Code of Conduct which affirms the companyQ,s recognition that
Q&all workers will enjoy the right to form and join unions.Q8


10. Article 2 of TelefonicaQ,s Code of Conduct
notwithstanding AtentoQ,s actions in Mexico is not limited to
signing a dubious collective bargaining. It also allegedly
engages in a campaign of harassment and intimidation against
workers attempting to exercise their right to organize. At
least 40 Atento workers have been fired for organizing
activities and then harassed by a private security firm when
they filed lawsuits against the company seeking reinstatement
in their jobs. Several of the fired workers report being
called at home and threatened by persons who identified
themselves as company representatives.

MINIUMUM WAGE, EQUAL PAY FOR EQUAL WORK?
--------------


11. Atento uses two strategies to avoid complying with
Mexican law with respect to wages. The first strategy
involves basing wages on commission -- the amount a worker
earns depends on the number of sales that he/she completes in
a week. This system eliminates access to other benefits such
as a productivity bonus. The second strategy involves
arbitrarily reducing the salary rate. This is done by
deducting social security benefits based on a putative salary
of between 750 and 900 pesos (USD 75-90) per month, well
below what even its questionable collective bargaining

MEXICO 00003513 003 OF 003


agreement with SPTCTRM establishes. As a result of these
practices, Atento workers take home only between 2000 and
3500 pesos (USD 200-350) per month, well below the 4,500 peso
minimum established in the collective bargaining agreement.
If one assumes that the contract with SPTCTRM is valid then
the legal minimum wage for Atento workers under that accord
would be the rate established by that agreement.


12. In addition to the above infractions Atento also uses
forms of recruitment that violate the Telefonica Code of
Conduct policy of equal pay for equal work. Atento does this
by subcontracting to personnel recruitment using three
additional but different names: Atento SA de C.V., Atento
Servicios S.A. de S.V., and Atento Mexicana. Although the
work done by employees of each of these companies is the same
their salaries vary significantly depending on who their
Q&employerQ8 is. The Atento workers who spoke with Labor
Counselor indicated that it was not unusual to have employees
doing the same job at workstations right next to each other
but with each earning vastly different salaries.
Interestingly, according to these workers, AtentoQ,s solution
to this situation was to fire the higher paid workers as soon
as legally possible and then hire new staff to replace them
at a lower wage.

COMMENT
--------------


13. The information presented to Mission Labor Counselor by
STRM and the fired Atento Mexico workers appears credible.
Consequently, it may be appropriate to follow-up in some way
by highlighting the variance between TelefonicaQ,s Code of
Conduct and the plausible reports of AtentoQ,s employment
practices in Mexico with the companyQ,s parent office in
Spain.
Visit Mexico City's Classified Web Site at
http://www.state.sgov.gov/p/wha/mexicocity and the North American
Partnership Blog at http://www.intelink.gov/communities/state/nap /
GARZA