VZCZCXRO3493
PP RUEHCD RUEHGD RUEHHM RUEHHO RUEHJO RUEHMC RUEHNG RUEHNL RUEHRD
RUEHRS RUEHTM
DE RUEHME #0278/01 0192315
ZNR UUUUU ZZH
P 192315Z JAN 07
FM AMEMBASSY MEXICO
TO RUEHC/SECSTATE WASHDC PRIORITY 4999
RUEHC/DEPT OF LABOR WASHDC
RUEHRC/DEPT OF AGRICULTURE WASHDC
INFO RUEHXC/ALL US CONSULATES IN MEXICO COLLECTIVE
RUEHXI/LABOR COLLECTIVE

UNCLAS SECTION 01 OF 03 MEXICO 000278 
 
SIPDIS 
 
SIPDIS 
 
DEPT FOR DRL/AWH AND ILCSR,WHA/MEX AND PPC, USDOL FOR ILAB, 
AGRICULTURE FOR USDA/FAS/OGA 
 
E.O. 12958: N/A 
TAGS: ELAB EAGR ECON PGOV PINR MX
SUBJECT: SUGAR UNIONS SEEK SWEETER DEAL ON RETIREMENT 
BENEFITS 
 
 
¶1. SUMMARY: Mexico,s largest sugar workers unions have 
threatened to go on strike beginning January 21, if an 
agreement is not reached on member retirement benefits.  At 
issue is a disagreement with the sugar mill operators over 
whom (the industry, the Mexican Social Security Agency or 
both) is responsible for paying retirement benefit and at 
what age workers are allowed to retire. Conflicting 
interpretations of an arbitration ruling made by Mexican 
government labor authorities initially allowed both parties 
to claim the law was on their side.  The intervention of 
Mexican Labor Secretary, Javier Lozano, has convinced the two 
sides to back away from their initial hard line positions but 
it has not removed the possibility of a strike.  The threat 
of a sugar workers strike raises the possibility of an 
increase in the cost of sugar at a time when Mexico is 
already experiencing unpleasant political moments and concern 
for possible economic difficulties resulting from recent 
increases in the cost of tortillas and milk.  The question of 
worker retirement benefits is an issue that has broader 
public finance ramifications beyond the sugar workers unions. 
 END SUMMARY. 
 
 
--------------------------- 
Sugar Workers Set to Strike 
--------------------------- 
 
¶2.  Over the past week, Enrique Ramos Rodriguez, the leader 
of the Workers Unions of the Mexican Sugar Industry 
(STIASRM), has repeatedly stated that his organization is 
prepared to go strike at one minute after mid-night on 
January 21 if the union,s concerns are not addressed.  The 
STIASRM, with some 45,000 registered members, is perhaps 
Mexico,s largest sugar worker union.  The threatened January 
21, strike is a continuation of a one week labor stoppage 
that began on November 16, 2006.  Of the 58 major sugar mills 
in the country 51 would be impacted by the strike should it 
take place.  The January 21 date of the strike would occur 
right at the high point of the 2006-2007 harvest season. 
Industry sources indicate that a strike of much more than a 
week would seriously disrupt this year,s harvest. At issue 
is the question of worker retirement benefits. 
 
¶3.  According to STIASRM, the union is prepared to strike in 
order to obtain the benefits negotiated in a 1998 labor 
agreement.  Under the terms of that agreement union workers 
were eligible for retirement at age 60 and once retired were 
entitled to a pension from the Mexican Social Security 
Agency, IMSS, with a matching 100 percent contribution paid 
by mill operators of the sugar industry. The union is 
insisting that the mill operators honor the terms of this 
agreement which it estimates would, at most, increase the 
industry,s labor cost by approximately 14 percent over an 
extended period.  The union also claims that since sugar 
workers, on average, earn very low wages the cost of the 1998 
labor agreement would be gradual beginning with some 3,000 
workers schedule to retire in 2007. 
 
--------------------------------------------- 
Mill Operators Claim the Law Is On Their Side 
--------------------------------------------- 
 
¶4.  Not surprisingly, Mexico,s sugar mill operators see 
things a bit differently and their position is not without 
reason.  In August of 2002 the Mexican government issued a 
broad labor arbitration ruling that could be seen as 
invalidating the 1998 agreement.  Under the terms of the 
GOM,s 2002 ruling various industrial workers were required 
to convert from private retirement plans to the national 
pension plan administered by IMSS.  At the time this 
conversion seemed logical since all employers in the sugar 
industry were already required to pay into the IMSS 
retirement/pension plan. Moreover, under the normal terms of 
the IMSS national pension plan workers are not eligible to 
retire until age 65. 
 
¶5.  As a consequence of the GOM,s 2002 ruling the sugar mill 
operators believe that by paying into IMSS they are already 
meeting their legal obligations to workers.  The mill 
operators position is that for them to have to match what 
retiring workers received from IMSS would be tantamount to 
doubling the pension benefit of each retiring employee. 
Moreover, the mill operators argue, since all workers 
receiving IMSS pension benefits retire at age 65, they do no 
see any legal basis for STIASRM,s insistence that its 
members be treated differently than all other Mexican 
 
MEXICO 00000278  002 OF 003 
 
 
workers.  As a gesture of good faith the mill operators have 
offered to pay STIASRM members who retire at age 65 an 
additional benefit that would raise overall labor costs by 
approximately 4 percent. This offer has been rejected by the 
sugar workers union. 
 
--------------------------------------------- -- 
Labor Secretary Dilutes the Tensions ( A Little 
--------------------------------------------- -- 
 
¶6.  Because of the very real possibility of a disruptive 
strike the GOM,s recently appointed Secretary of Labor, 
Javier Lozano, personally intervened in the negotiations 
between the sugar workers union and the mill operators. 
Initially both parties to the negotiations insisted that the 
law was on their side and refused to move very much from 
their original positions.  However, after considerable arm 
twisting Secretary Lozano convinced both side to step away 
from their hard line negotiating stances. 
 
¶7.  On the plus side, both the STIASRM and the mill operators 
have now agreed to negotiate a resolution to their 
differences that sets aside both the 1998 labor agreement and 
the 2002 arbitration ruling by the GOM.  On the negative 
side, the union has not changed the start date for its 
schedule strike which means that parties have less than two 
days to resolve an issue that has been ongoing since November 
of last year.  Both sides claim they want a reasoned 
resolution to their differences but the union as reaffirmed 
it willingness to strike and mill operator spokespersons have 
stated that the industry has sufficient sugar stocks to meet 
current consumer needs. 
 
--------------------------------- 
More Than Just Sugar On the Table 
--------------------------------- 
 
¶8.  As a backdrop to the negotiations between the STIASRM and 
the mill operators Mexico is currently experiencing a number 
of unpleasant political moments and concerns for possible 
economic difficulties resulting from recent increases in the 
cost of tortillas and milk.  Considerable government time and 
media attention has been devoted to discussing the reasons 
for and dealing with the possible consequences resulting from 
the rise in the cost of these two basic food items. 
Politicians have been accused of grand standing, private 
business have been accused of speculating and the Mexican 
public appears increasingly frustrated over what seems to 
many as an unreasonable raise in the cost of items that are 
basic necessities for the country,s poorest citizens. No one 
can predict the economic or political consequences that would 
happen if a strike in the sugar industry caused a price 
increase in another basic food items. 
 
------- 
Comment 
------- 
 
¶9.  Over and above the consequences of a possible sugar price 
increase is the question of pension/retirement benefits.  One 
of the major issues facing Mexican industry and organized 
labor is the topic of retirement benefits.  If the mill 
operators are exempt from any responsibility for negotiated 
labor agreements, it could set a precedent for other 
industries to follow.  Most Mexican employers over a certain 
size are required to pay into the IMSS administered national 
pension plan based on the wages paid to each employee.  A 
significant number of employers do not make these payments 
claiming that it would make their businesses unprofitable. 
Many who do pay into Mexican Social Security Agency 
under-report their employees salaries so as to reduce the 
cost of their payments to IMSS. 
 
¶10.  This lack of payment (or under payment) makes the 
financial stability of IMSS extremely questionable.  That in 
turns complicates the process of legal labor reform since 
many workers believe that the generous protections currently 
enshrined in law may be the thing that they can count on in 
their retirement.  Few, if any Mexicans, believe that they 
will be able to live on whatever retirement benefits that 
perhaps, someday, they might get from IMSS.  These factor 
complicate labor bargaining issues and underscore the 
increasing public worries of the GOM about the large negative 
impact of pension obligations on public finances. 
 
 
 
MEXICO 00000278  003 OF 003 
 
 
 
 
 
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