VZCZCXYZ0001
PP RUEHWEB

DE RUEHDG #3482/01 3171659
ZNR UUUUU ZZH
P 131659Z NOV 06
FM AMEMBASSY SANTO DOMINGO
TO RUEAIIA/CIA WASHINGTON DC PRIORITY
RUEHC/SECSTATE WASHDC PRIORITY 6630
RHEFDIA/DIA WASHDC PRIORITY
RUCPDOC/USDOC WASHDC PRIORITY 1589
RUEHC/DEPT OF LABOR WASHDC PRIORITY
RUMISTA/CDR USSOUTHCOM MIAMI FL PRIORITY
INFO RUEHZA/WHA CENTRAL AMERICAN COLLECTIVE PRIORITY
RUEHPU/AMEMBASSY PORT AU PRINCE PRIORITY 4395

UNCLAS SANTO DOMINGO 003482 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
DEPT FOR WHA/CAR, INR/IAA; SOUTHCOM ALSO FOR POLAD 
 
E.O. 12958: N/A 
TAGS: DR PGOV PREL ELAB KTEX ECON ETRD EINV HA
SUBJECT: AMBASSADORS HERTELL AND SANDERSON TOUR 
DOMINICAN-OWNED TEXTILE FACTORY IN HAITI 
 
REF: SANTO DOMINGO 3129 
 
¶1. (U) SUMMARY: On October 19 U.S. ambassadors to the 
Dominican Republic and to Haiti visited a "maquiladora" in 
the Haitian CODEVI Free Trade Zone (FTZ) owned by Dominican 
corporation Grupo M. The enterprise directly employs around 
1,500 Haitian workers in garment assembly. It hopes to expand 
this number to 10,000 by 2009. Production costs are nearly 25 
percent less in Haiti than across the border. Human rights 
reports from the Department of State have cited complaints 
about Grupo M's labor practices, but the company's 2005 
agreement with labor unions appears to be holding. Grupo M 
has lost nearly USD 7 million in the CODEVI facility since 
its 2003 inauguration, but remains optimistic about the 
future of textile production in Haiti. END SUMMARY. 
 
- - - - 
GRUPO M 
- - - - 
 
¶2. (U) Founded in 1986, Grupo M is the largest private sector 
employer in the Dominican Republic, with 12,200 employees 
working in 13 production facilities, and it is the largest 
apparel producer in the Caribbean/Central American region. 
Grupo M's main production facilities are located in two 
industrial zones developed by the group in Santiago, 
Dominican Republic. It supplies to major U.S. brand name 
companies such as Liz Claiborne, Polo, Levis, Hanes and Tommy 
Hilfiger. Fernando Capellan and family members are the 
controlling shareholders. 
 
¶3. (U) Since 2003 Grupo M has operated two factories in the 
CODEVI Free Trade Zone (FTZ) in Ouanamithe, Haiti. The 
operations employ approximately 1,500 Haitian workers and are 
currently the only major industrial facilities operating 
there. The FTZ was developed in a region of northern Haiti 
adjacent to the Dominican border and the facility has its own 
dedicated border crossing. 
 
- - - - - - - - - - - 
THE AMBASSADORS' TOUR 
- - - - - - - - - - - 
 
¶5. (SBU) Grupo M executives invited Ambassador to the 
Dominican Republic Hans Hertell and Ambassador to Haiti Janet 
Sanderson to tour their facilities on October 19. Grupo M had 
invited Ambassador Hertell previously, but labor unrest at 
the facility had prompted postponements. 
 
¶6. (SBU) Grupo M officials appeared eager to seize the 
opportunity to generate positive media coverage for their 
facility. Company officials had drafted a joint press release 
that stated, among other things, that Ambassadors Hertell and 
Sanderson were "enthusiastic" about the work being done by 
Grupo M in Haiti. At USG request, the press release was toned 
down. The company had arranged to have present a television 
news crew from Santiago, Dominican Republic, to interview 
ambassadors at the visit's conclusion. 
 
- - - - - 
WHY HAITI? 
- - - - - 
 
¶7. (U) Garment and textile production in the Dominican 
Republic generated nearly 100,000 jobs and over 30 percent of 
Dominican export earnings in 2005. But competition from 
lower-cost Asian suppliers in recent years had caused company 
closures, with the loss of some 40,000 jobs. Dominican 
garment and textile production fell by 10 percent between 
2004 and 2005. The sector's total manufacturing employment 
fell by 30 percent during the same period. This year exports 
to the U.S. market are expected to fall by another 20 
percent. Reftel predicts that free trade agreement DR-CAFTA 
is likely to provide a boost for the industry, but not enough 
to sustain it alone. 
 
¶8. (U) Many see the use of Haitian labor as an attractive 
alternative for the increasingly uncompetitive Dominican 
textile industry, handicapped by the Fernandez 
administration's determination to maintain a moderately 
overvalued peso. Manufacturing labor costs in Haiti are 25 
percent less than across the border, Capellan says, while 
 
Haitian employees are just as skillful and hard-working as 
their Dominican counterparts. Within ten years, he predicted, 
the bulk of the Dominican garment industry will have moved to 
Haiti. 
 
- - - - - - - - - - - - - - - 
DEVELOPMENT OF THE CODEVI FTZ 
- - - - - - - - - - - - - - - 
 
¶9. (U) In 2001 Grupo M secured a USD 20 million loan from the 
World Bank's International Finance Corporation (IFC) to 
develop the CODEVI FTZ. Prior to 2001, Grupo M executives 
say, Haitian law did not allow for the creation and 
satisfactory operation of FTZs, so the company worked with 
the Haitian government to obtain all necessary changes. 
 
¶10. (U) The project is a phased development of a site of 
500,000 square meters in Haiti, contiguous to the Dominican 
Republic near Dajabon, Montecristi province. The first phase 
of the investment project - development of an area of 150,000 
m2 and creation of 1,500 direct jobs - has been more or less 
completed. 
 
¶11. (U) The development plan had envisioned recruiting 
further operations to produce apparel, footwear and other 
products, in facilities leased or purchased from Grupo M. The 
plan had projected that these expansions would create up to 
20,000 direct jobs. Though the second phase has not come to 
pass, Grupo M maintains that they will expand their own 
presence to include up to 10,000 employees by 2009. 
 
¶12. (U) The company presentation notes that the Haitian 
government evicted some 184 farmers and their families from 
the site to make possible the construction of the FTZ. 
Capellan insists that the action was not an expropriation, 
although, tellingly, his own PowerPoint presentation states 
that "more than 108 families whose lands, where today 
operates the FTZ, were expropriated by the Haitian 
government" (sic). The Haitian government has taken no steps 
to reimburse the affected families, Capellan said. He 
commented that that Grupo M has provided them with some 
assistance of its own. 
 
- - - - - - - - - - - - - - - - 
CORPORATE SOCIAL RESPONSIBILITY 
- - - - - - - - - - - - - - - - 
 
¶13. (U) Company officials noted that some efforts at 
community outreach programs had been implemented, but that 
these had had mixed results.  Their efforts to provide 
vaccinations to their employees, for example, ended in 
accusations that the company,s real intent was to sterilize 
the community.  For these and other reasons, company 
officials repeatedly defended their lack of broader community 
outreach programs, saying they worried that programs like 
HIV/AIDS testing (which they currently do not provide) could 
be misinterpreted.  They requested USAID assistance in 
expanding their community outreach efforts; USAID 
representatives replied they would consider their request. 
 
- - - - - - 
LABOR ISSUES 
- - - - - - 
 
¶14. (U) The Department's Human Rights Report on Haiti records 
that workers began complaining of exploitation and 
mistreatment by management of the Grupo M textile company 
only months after it opened. Rounds of strikes and violence 
by union members, supported by "Batay Ouvriye," a labor 
organization of peasant workers, were followed by a series of 
employee terminations by the company throughout that summer. 
Grupo M was on the verge of terminating its CODEVI 
operations, but under pressure from major corporate clients 
the firm reversed course, reaching an agreement with Batay 
Ouvriye and SUKOWA (the employees' union) last year. 
 
¶15. (U) Since then, both sides have adhered to their sides of 
the bargain. Grupo M has gradually rehired laid-off union 
workers, and Batay Ouvriye negotiated responsibly with the 
company management. Company officials stressed to visitors 
the effectiveness of their collective bargaining arrangement 
with the employee unions and expressed satisfaction with the 
 
manner in which it has evolved. Grupo M's General Manager 
commented that SUKOWA, the main employee union, had only 15 
members; in subsequent e-mail correspondence Batay Ouvriye 
disputed this remark. 
 
¶16. (U) Whatever the problems, Grupo M's labor policies at 
CODEVI appear to be more generous than the company's 
practices in the Dominican Republic. Dominican unions allege 
the company discriminates against labor organizers, fires 
their members, and has created a fraudulent "scab union" in 
order to circumvent the legitimate one. The company is 
currently involved in a legal dispute concerning this last 
accusation. 
 
 
- - - - - - - - - - - 
PROFITABILITY CONCERNS 
- - - - - - - - - - - 
 
¶17. (U) Capellan blames labor unrest and political turmoil 
for the losses of nearly USD 7 million that Grupo M has 
experienced since the project's inauguration in 2003. He says 
another company had invested in the FTZ at around the same 
time as Grupo M but abandoned the project due to violence and 
political instability in Haiti. 
 
¶18. (U) Still, at their October 19 briefing company officials 
were decidedly optimistic in their outlook. Grupo M was 
determined to expand employment at its CODEVI facilities, 
they said, to 2,250 by next year and to 10,000 by 2009. 
Capellan was particularly enthusiastic about the prospect of 
using the opportunities provided by the regional free trade 
agreement DR-CAFTA to export Haitian-produced garments 
duty-free to the U.S. market. Capellan said Grupo M is 
seeking to get approval from major clothing companies Liz 
Claiborne and Gap to use Haitian facilities. Bad press 
generated during Grupo M's labor problems in 2004 has not 
helped the company's efforts in this respect. 
 
¶19. (U) Drafted by Alexander T. Bryan. 
 
¶20. (U) This report and extensive other material can be 
consulted on our SIPRNET site, 
http://www.state.sgov.gov/p/wha/santodomingo/  
HERTELL