This record is a partial extract of the original cable. The full text of the original cable is not available.

UNCLAS SECTION 01 OF 02 GUATEMALA 002849 
 
SIPDIS 
 
SENSITIVE 
 
DEPARTMENT PLEASE PASS TO THE OFFICE TO US TRADE 
 
E.O. 12958: N/A 
TAGS: ELAB ETRD ECON PGOV PHUM EAID ASEC GT
SUBJECT: BIRTH OF A UNION IN GUATEMALA 
 
 
Sensitive but Unclassified.  Please protect proprietary 
business information. 
 
¶1. (U) Summary:  Following months of negotiation and some 
severe conflicts regarding labor rights, the management of a 
major apparel manufacturer agreed to support the 
establishment of a labor union in its workforce.  Potential 
CAFTA benefits and the steady interest of U.S. brands were 
encouraging factors.  Additionally, the relevant labor 
federation greatly supported the company's management and the 
leaders of the fledgling union in their efforts to reach an 
agreement.  End summary. 
 
------------------------------ 
Founding a Union, at Long Last 
------------------------------ 
 
¶2. (U) On December 27, following months of negotiations, 
management of SAE-A, a Korean-owned major apparel producer, 
held a meeting with representatives of their workforce, the 
General Coordination of Guatemalan Workers (CGTG) labor 
federation, the Ministry of Labor, Gap Inc. (a major buyer of 
SAE-A production), and the Embassy's LabAtt to discuss the 
establishment of a union.  At the meeting, management agreed 
to support the fledgling union's request for legal 
recognition by the Ministry of Labor and agreed to begin 
negotiating a collective bargaining agreement with the union. 
 
 
¶3. (U) CGTG organizing director Jorge Jimenez stated that 
this effort in such an important company would set an example 
for collective bargaining throughout Guatemala.  Jimenez 
suggested that both employers and organized labor had not 
always behaved in a positive manner, but that SAE-A and its 
workers were pioneers.  SAE-A Executive Director Sou Young 
Koh noted that SAE-A's sister companies in Nicaragua and 
Mexico have unions and that respecting labor rights is part 
of SAE-A's internal policy. 
 
¶4. (SBU) With this action, SAE-A becomes only the third 
apparel producer in Guatemala to have a union.  Neither of 
the others, however, rival SAE-A's economic importance in 
Guatemala.  The SAE-A conglomerate is the second largest 
apparel operation in Guatemala, with seven factories and 
7,000 employees.  SAE-A produced USD 320 million in exports 
in 2005 for such brands as Gap, Liz Claiborne, Wal-Mart, and 
Target.  (Note:  Of the more than 200 apparel factories, 
approximately 80 percent are Korean-owned, including all 
three unionized firms.  Earlier in 2005, there were already 
three factories with unions, but one of these went bankrupt 
and shut its doors.  End note.) 
 
¶5. (U) CGTG is the most important labor federation in 
Guatemala.  The other two apparel company unions, however, 
are affiliated with another federation (known as FESTRAS) 
that primarily covers the food and beverage industries. 
FESTRAS leaders have decided to focus on their original food 
and beverage industries, so the apparel unions are 
transferring their affiliation to CGTG. 
 
--------------------------------------- 
Gangs, Threats, and Anti-Union Pressure 
--------------------------------------- 
 
¶6. (U) SAE-A's main production facility in the Mixco 
municipality adjacent to Guatemala City has suffered 
extensive difficulties with gang activity in the area and 
within the factory.  Two years ago, SAE-A's Chief Executive 
Officer was kidnapped by gang members.  Although the company 
paid the ransom, the kidnappers shot him through the throat 
and left him for dead.  For several years, employees have 
faced robberies and extortion activities during their 
commutes to and from work. 
 
¶7. (SBU) In early 2005, several gang members concealed their 
gang affiliations in order to get jobs within the factories. 
From their positions within the workplace, the gang members 
were able to provide intelligence to the gangs to target 
robbery and extortion efforts more effectively.  SAE-A's 
human resources manager contacted the local police precinct 
to arrange to have police patrols within the factory. 
Although no formal order was issued, in June police officers 
took up stations in the factory, identified the gang members 
and brought them to the human resources office.  The company 
fired the gang members and the police arrested them for 
extortion. 
 
¶8. (SBU) At the same time, however, police also detained 16 
employees who had formally submitted paperwork to form a 
union.  The human resources manager told these employees -- 
in the presence of the police officers -- that their 
activities were illegal and that they must resign or go to 
jail.  13 employees resigned, but the three that refused to 
do so were arrested and taken to jail.  After spending the 
weekend in jail, they were brought before a judge where their 
cases were immediately dismissed. 
 
¶9. (SBU) When the Ministry of Labor contacted SAE-A 
management regarding the case, Executive Director Koh 
contacted the Commission for the Verification of Corporate 
Codes of Conduct (COVERCO), a labor rights NGO, to 
investigate the allegation.  COVERCO interviewed over 100 
workers, inside and outside the factory, and reported to 
SAE-A management that the allegation was likely true.  SAE-A 
fired the Korean human resources manager, his Korean deputy, 
and three other locally-engaged staff in the human resources 
department thought to be involved.  SAE-A reinstated the 16 
employees with back-pay and encouraged them to reinvigorate 
their organizing effort. 
 
----------------------------- 
Maintaining Proper Compliance 
----------------------------- 
 
¶10. (SBU) In a November meeting with LabAtt and a Gap Inc. 
compliance inspector, Koh stressed that all labor activists 
and inspectors were welcome in his factory at any time.  In a 
separate meeting with LabAtt, Koh noted that SAE-A's 
production in Guatemala increased by USD 50 million in 2005, 
primarily due to increases in labor productivity.  It was not 
worth it, he said, to risk such investment over minor issues. 
 
 
¶11. (U) Labor costs in Guatemala, Koh continued, are still 
far above those in China and India, but the pending entry 
into force of the Central American Free Trade Agreement 
(CAFTA) raised the importance of SAE-A's presence in Central 
America.  Koh requested that LabAtt visit regularly in 
addition to visits by the U.S. apparel retailers, in order to 
certify SAE-A's adherence to internationally-recognized labor 
rights. 
 
¶12. (U) According to Koh, one problem facing the company was 
that no one in the Government of Guatemala (GOG) could 
explain precisely what a company needed to do in order to be 
in compliance, since the Labor Code was riddled with errors 
and contradictory assertions.  On November 29, however, C&N, 
a private law firm specializing in labor rights, issued the 
results of a two-year project:  a fully up-to-date version of 
the Labor Code, including all revisions, amendments, and 
judicial orders that have affected the code in its 58 year 
existence.  (Note:  the edited Labor Code is now available 
on-line at the U.S. Department of Labor-funded website 
leylaboral.com.  End note.)  In a companion piece to the 
Labor Code, C&N produced a primer on the precise legal 
responsibilities of both employers and workers.  SAE-A's 
administrative and human resources staff told LabAtt that 
they keep both works close at hand. 
 
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Comment 
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¶13. (U) While we are extremely pleased with how this problem 
turned out -- indeed, we see the final steps as a model for 
other businesses and labor organizations in Guatemala -- it 
is a shame that it took such a brazen anti-union action to 
awaken management to the issues facing its workforce.  Still, 
the cooperation between management, labor, government, 
unions, activists, and the international brands is heartening 
and previously unseen in Guatemala.  In particular, the Gap 
compliance officers played an extremely important role in 
bringing people together.  In this situation, a U.S. brand 
and upcoming CAFTA benefits greatly contributed to the 
advance of labor rights. 
 
¶14. (SBU) This issue is far from over.  We expect the 
Ministry of Labor to accept the union soon, given that it is 
merely an administrative process at this point, but the 
actual negotiations of a collective bargaining agreement will 
demonstrate just how serious are both the management and 
workers.  Additionally, we are concerned about the 
union-busting action by police officers in the factory and 
continue to press the National Civilian Police leadership for 
an investigation of this misconduct. 
DERHAM