FLOWER UNION WITHERS AFTER LABOR DISPUTE

C O N F I D E N T I A L BOGOTA 003301

SENSITIVE
SIPDIS
USTR FOR EISSENSTAT AND HARMAN
DOL FOR ZOLLNER AND QUINTANA

E.O. 12958: DECL: 2019/11/03
TAGS: ELAB EAID ETRD PGOV PHUM PREL USTR LAB CO
SUBJECT: FLOWER UNION WITHERS AFTER LABOR DISPUTE

CLASSIFIED BY: Mark A. Wells, Political Counselor; REASON: 1.4(B),
(D)

SUMMARY

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1. (C) A labor dispute at a bankrupt flower farm is a case of
lose-lose negotiating in Colombia. When workers occupied the
Benilda, S.A. plantation in September to protest unpaid benefits,
the company went into bankruptcy. The owner claimed he was
hamstrung by high labor costs and currency appreciation, but the
union and local authorities said he had in fact transferred Benilda
assets to other companies he secretly owned that do not employ
union workers. Workers will receive severances in two to three
years through a liquidation process, but will face difficulty
finding new jobs in Colombia's flat economy. Meanwhile, the union
has lost most of its members, effectively ceasing to exist. End
Summary.



WORKERS DEMAND THEIR BENEFITS

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2. (SBU) The National Union of Flower Workers (UNTRAFLORES)
President Aide Silva and Legal Advisor Alejandro Torres told us
that Benilda had not paid into workers' pension funds since October
2008, nor had it paid health benefits and payroll taxes since April
2009, despite withholding these funds from workers' paychecks.
UNTRAFLORES made numerous appeals to the Ministry of Social
Protection (MPS),which resulted in sanctions but no change in the
company's accounting practices. Silva explained that the union was
left with no option but to occupy the Benilda plantation in protest
on September 7.



PESO REVALUATION HAS HIT THE INDUSTRY HARD

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3. (SBU) Benilda owner Carlos Mejia blamed high labor costs and
peso appreciation for his company's failure to keep up with
benefits payments. He said his unionized workers (500 of 1300)
earned 40% more than his short-term contractors, who worked for the
minimum wage and more modest benefits. He told us Benilda could
not afford to pay salaries that were higher than the industry
average, especially in the prevailing economy. The growing
strength of the Colombian peso against the dollar had dramatically
reduced sector-wide revenue, leading to fierce competition with
companies that contracted most of their labor. (Note: Producers
receive dollars for exported flowers but pay wages in pesos, such
that their costs effectively increase whenever the peso
appreciates. End Note.)




4. (SBU) The Association of Colombian Flower Exporters
(ASOCOLFLORES) President Augusto Solana confirmed that the
strengthening peso has contributed to a 63% increase in sector-wide
labor costs since 2005. The monthly dollar earnings of a
minimum-wage worker equated to $265 at 2,322 pesos to the dollar in
2005, compared to $431 a month at 1890 pesos to the dollar in 2009.
While producers have identified ways to cut costs and increase
productivity, the potential gains have been limited because labor
accounts for 60-70% of overhead, Solana said. Consequently, there
is tremendous pressure on producers to shed high-wage workers.



BOTH SIDES POINT THE FINGER

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5. (SBU) The union claimed that Mejia used the economic problems of
the industry as an excuse to squeeze concessions out of union
workers or replace them with low-cost contractors. They alleged
that he surreptitiously transferred assets, including employee
withholdings and $500,000 from an employee credit union fund, to
other plantations that he secretly owned. For example, Silva
showed us a tarp fence demarcating a boundary between Benilda and
an adjacent plantation, Copa Flowers. She said the fence did not
exist prior to June 2009, nor did Copa Flowers. Workers wearing
Benilda uniforms worked on both sides and Copa Flowers workers were
former Benilda contractors. She also pointed out that Benilda and
Copa Flowers shared electricity and water systems.




6. (SBU) Mejia denied the union's allegations and offered a rival
theory. He claimed that UNTRAFLORES leaders stood to make a lot of
money by forcing Benilda into bankruptcy. In exchange for securing
favorable severance packages, workers would allot UNTRAFLORES 20%
of the bankruptcy payout obtained through liquidating the company's
assets, estimated at $3.5 million.



AUTHORITIES SUSPECT UNDER-THE-TABLE DEALS

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7. (C) Local MPS official Nancy Pelido and Madrid Mayor Diego
Sicardo sided with the union account of events in telling us that
Mejia was likely the unofficial owner of Copa Flowers and had
stakes in other nearby plantations, though there were no documents
to prove it. Sicardo suspected that Mejia, rather than sell
Benilda "because no one would buy a flower company that had
unions," illegally transferred his assets into Copa Flowers.
Pelido and Sicardo doubted that UNTRAFLORES had negotiated a deal
with workers to get a cut of the bankruptcy settlement.



NEGOTIATIONS END IN BANKRUPTCY, DEMISE OF UNION

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8. (SBU) During negotiations hosted by MPS Vice Minister of Labor
Ricardo Echeverri, Mejia argued that a new collective bargaining
agreement with minimum-wage salaries (a 15% pay cut) was the only
way to preclude bankruptcy and preserve workers' jobs. UNTRAFLORES
insisted that Benilda fulfill its current collective bargaining
agreement even if it meant declaring bankruptcy and liquidating
company assets. MPS officials tried to reconcile the parties in
the interest of preserving jobs, but finally approved bankruptcy
proceedings when neither side would budge. Authorities will
appoint a government liquidator who will oversee the process, which
will take an estimated two or three years.




9. (SBU) The union leaders told us that management was determined
to escape collective bargaining at all costs. Hence, they
concluded that their last resort was to seek adequate severance
packages for workers. Most UNTRAFLORES members had been with the
company for 10-20 years or more. They will each receive severance
packages of about $5,000 dollars, based on seniority. One point on
which everyone cited above agreed was that the workers would be
blacklisted from the flower industry for their role in bringing
down Benilda. In Colombia's sluggish economy, it is likely that
these formerly unionized workers will have to seek work in the
informal sector. UNTRAFLORES leaders predicted that, left with no
employer, members or contract, the union would close up shop.
BROWNFIELD