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DE RUEHME #5632/01 3021745
ZNR UUUUU ZZH
P 291745Z OCT 07
FM AMEMBASSY MEXICO
TO RUEHC/SECSTATE WASHDC PRIORITY 9360
RUEHC/DEPT OF LABOR WASHDC
INFO RUEHXC/ALL US CONSULATES IN MEXICO COLLECTIVE
RUEHXI/LABOR COLLECTIVE
RUEHRC/DEPT OF AGRICULTURE WASHDC
RUCPDOC/DEPT OF COMMERCE WASHDC
RHMFIUU/DEPT OF ENERGY WASHINGTON DC
RHEHNSC/NSC WASHDC
RHMFIUU/CDR USSOUTHCOM MIAMI FL

UNCLAS SECTION 01 OF 03 MEXICO 005632 
 
SIPDIS 
 
SIPDIS 
 
DEPT FOR DRL/AWH AND ILCSR, WHA/MEX, USDOL FOR ILAB 
 
E.O. 12958: N/A 
TAGS: ELAB EAGR ECON ENGR PGOV PINR MX
SUBJECT: SUBJ: SUGAR WORKER EARN FAR LESS THAN THEIR UNION 
 
REF: (A) MEXICO 5462 B) MEXICO 0278 
 
¶1.  SUMMARY:  Mexican sugar is one of the most expensive to 
produce in the world; costing on average almost 2 1/2 times 
more to produce than its most efficient competitors.  A 
number of reasons exist for this cost difference but one of 
the most frequently cited causes is Mexico,s largest sugar 
workers union which is accused of being corrupt and is blamed 
for demanding "excessive" wages and benefits for its members. 
 There is no doubt that this large union, as opposed to its 
rank and file workers, is doing very well.  However, a closer 
look at conditions for the worker shows that they are not 
doing as well as their union (or its leaders).  Add to this a 
complicated federal law which mandates artificially high 
prices and a startling lack of investment by mill owners and 
the reasons for the high cost of Mexican sugar go far beyond 
what could honestly be attributed to any wages or benefits 
being paid to the workers or their union.  This is the second 
of two reports on the current state of affairs within 
Mexico,s largest sugar cane workers union, the Workers Union 
of the Mexican Sugar Industry (STIASRM). 
 
 
THE HIGH COST OF MEXICAN SUGAR 
------------------------------ 
 
¶2.  The cost of producing Mexican sugar is one of the highest 
in the world.  Brazil, which more or less sets the 
international standard for efficient productions cost, can 
produce a ton of sugar for approximately USD 15.00 per ton. 
That same ton of sugar costs USD 40.00 per ton produce in 
Mexico; or more than twice as much.  The conventional wisdom 
in Mexico has long held that the high cost of sugar was due 
to (1) high prices mandated by a federal &Contract Law8 
(CL) which artificially raised prices over and above the cost 
of normal market factors and (2) the supposedly high wages 
paid to the members of the Workers Union of the Mexican Sugar 
Industry (STIASRM). 
 
¶3.  Contract Laws (see Ref A) are a type of collective 
bargaining agreement negotiated by industry, union and 
government representatives.  Since CLs are negotiated 
arrangements they are established for fixed periods of time 
and vary significantly from industry to industry.  CLs 
establish minimum standards (which can include price floors 
for agricultural and/or manufactured products) that both 
employers and employees are expected to follow over and above 
the permanent guidance contained in Mexico,s Federal Labor 
Law.  In theory CLs are periodically renegotiated like any 
collective bargaining agreement but in practice they rarely 
contain any meaningful change. 
 
¶4.  Since taking office in December of 2006, the 
administration of Mexican President Felipe Calderon has 
steadily worked to modify some of the factors often blamed 
for the cost of Mexican sugar.  In early October, after nine 
months of negotiations, the Calderon government, the mill 
owners, cane producers and the unions reached an agreement 
that is said to significantly change the CL that the sugar 
industry had been operating under without since 1936.  As a 
part of the discussions to re-negotiate the sugar industry,s 
CL, significant give and take was agreed to with regard to 
wages and benefits for the sugar cane workers.  As a result 
of this dual track negotiation, the official GOM position 
states that the members of the Sugar Workers Union are no 
longer seen as one of the main factors contributing to the 
high cost of Mexican sugar. 
 
 
THE NEW SUGAR BAD GUYS 
---------------------- 
 
¶5.  The chief culprits now being blamed for Mexico,s high 
sugar costs are the various elements of the industry,s 
production logistical chain and outdated technology. 
According to the GOM's Secretary of Agriculture, the main 
reason for the high cost of Mexican sugar are the fees 
charged by the individuals and firms that transport or 
warehouse sugar.  Between them these middlemen reportedly 
raise the price of producing Mexican sugar from 5.5 pesos per 
kilo (approximately USD 0.51) to 12.00 pesos per kilo 
(approximately USD 1.12). 
 
MEXICO 00005632  002 OF 003 
 
 
 
¶6.  The other main bad guy according to the current official 
line is outdated technology.  In some instances sugar mill 
plants are operated with 40 years old technology.  Blaming 
technology is a polite way for the GOM to be politically 
correct; thereby allowing it to avoid saying that the mill 
owners have done little or nothing to modernize their 
industry.  Reportedly this under investment or lack of 
investment will change as a result of the modifications in 
the sugar industry,s new Contract Law (Ref A). 
 
¶7.  None of the above elements should be taken to mean that 
the sugar workers and their union are completely blameless. 
For example, the new CL does not change the rules under which 
sugar workers can allegedly receive as much as three months 
of paid vacation per year.  The workers have what mill owners 
consider a fairly generous retirement plan based on a 
collective bargaining agreement negotiated in 1998.  The 
workers also reportedly get a fifty percent reduction in any 
and all sugar they purchase for &personal8 use as well as 
subsidized electricity for residential, union office use and 
for the schools where their children study.  To be fair to 
the sugar workers, it must be acknowledged that these last 
benefits are not outside the norms that most other organized 
unions in Mexico have obtained for their members.  That said, 
it can also not be denied that these benefits come at a price 
that ultimately adds to cost of production. 
 
 
THE REAL TAKE HOME PAY OF A SUGAR WORKER 
---------------------------------------- 
 
¶8.  Reftel A outlined some of the good and bad points of 
Enrique Ramos Rodriguez, the leader of the STIASRM, Mexico,s 
largest sugar union.   The STIASRM leader appears to 
personally oversee the income from two up-scale hotels 
constructed with union funds.  In addition to controlling the 
income from these hotels the STIASRM leader is also said to 
either control or own outright two sports clubs, two sugar 
mills, two office building and 15 homes in Mexico City as 
well as an undetermined number of warehouses.  The Mexican 
media have gone into extensive detail on the perks, 
privileges and properties of the Secretary General of the 
STIASRM, but very little has been said about the real wages 
of the average sugar worker. 
 
¶9.  According to most union observers the labor component of 
producing Mexican sugar is only four percent of the total 
production cost.  At the start of the dual track discussions 
that produced the new sugar industry CL in early October, the 
union had requested a 15 percent wage increase for the 
workers but it ultimately accepted a raise of only 4.5 
percent.  Ramos eventually saw the need to accept a lower 
wage for the workers (one of his good points) but he did so 
in exchange for a commitment from the mill owners to invest 
heavily in new plant and in worker training.  According to 
the GOM,s Secretary of Agriculture these two steps should 
reduce the cost of producing Mexican sugar by as much as 15 
percent. 
 
¶10.  These expected productivity improvements are to be 
applauded but even after the 4.5 percent wage increase sugar 
union workers do not earn particularly high wages.  A general 
laborer in Mexico,s sugar industry (cane field or mill 
worker) earns 76 pesos per day (roughly USD 7.22).  The 
maximum salary of a highly skilled sugar worker is 232 pesos 
per day (roughly USD 21.48).  The highest daily wage of a 
senior worker employed just below the management level is 375 
pesos per day (approximately USD 37.72).  These salaries are 
all above the Mexican minimum daily wage (about USD 4.47) and 
by comparison these amounts earned by skilled sugar workers 
are substantial.  However, the Mexican minimum wage is a very 
poor standard of comparison in terms of the quality of life a 
worker earning that amount could afford.  The higher skilled 
workers are clearly better off than those at the bottom but 
these upper limit wages are not earned by the majority of 
sugar workers and even if they were a salary that amounts to 
under USD 38.00 a day can hardly be called lavish. 
 
 
COMMENT 
------- 
 
 
MEXICO 00005632  003 OF 003 
 
 
¶11.  There is no doubt that STIASRM union members are better 
off than most agricultural and even some manufacturing 
laborers.  That said, is it difficult to understand the long 
held view that the relatively modest wages cites above could 
realistically have been considered the most significant 
contributing factor to the high cost of Mexican sugar.  The 
STIASRM and its leader (especially its leader) clearly 
deserve a share of the blame for high Mexican sugar prices 
but up until now they have been portrayed as much worse than 
they actually were.  Now that the union and the workers are 
no longer the worst villains of the sugar industry the usual 
suspects, i.e. the middlemen, have moved more toward front 
and center.  Interestingly, the mill owners and came 
producers have not seriously been singled out of a portion of 
the blame.  These two private sector elements, and not the 
workers or their union, are the main beneficiaries of the 
price floors mandated by the Contract Law.  In all 
probability, union wage and benefit demands were calculated 
with an eye on the guaranteed profits of the sugar 
industry,s private sector but such a negotiating tactic 
could be justified, from their perspective, as simply asking 
for what the market would allow. 
 
 
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