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DE RUEHME #2934/01 1562217
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P 052217Z JUN 07
FM AMEMBASSY MEXICO
TO RUEHC/SECSTATE WASHDC PRIORITY 7372
RUEHC/DEPT OF LABOR WASHDC
RHEBAAA/DEPT OF ENERGY WASHINGTON DC
INFO RUEHXC/ALL US CONSULATES IN MEXICO COLLECTIVE
RUEHXI/LABOR COLLECTIVE
RHEHNSC/NSC WASHDC
RHMFIUU/CDR USSOUTHCOM MIAMI FL
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEAHLA/DEPT OF HOMELAND SECURITY

UNCLAS SECTION 01 OF 03 MEXICO 002934 
 
SIPDIS 
 
SIPDIS 
 
DEPT FOR DRL/AWH AND ILCSR, WHA/MEX AND PPC, USDOL FOR ILAB 
DOE FOR INTERNATIONAL AFFAIRS 
NSC FOR FISK 
 
E.O. 12958: N/A 
TAGS: ELAB ECON PGOV ENRG PINR MX
SUBJECT: ELECTRICAL WORKERS, UNION COMPLAINS ABOUT THE HIGH 
COST OF ELECTRICITY 
 
REF: MEXICO 1816 
 
¶1.  SUMMARY: During the week of May 14, the Mexican 
Electrical Workers, Union (SME), an organization closely 
tied to Mexico,s main opposition party, launched a charm 
offensive lamenting the high cost of electricity for average 
consumers.  According to the SME, the cost of electricity to 
the average consumer increased 285 percent during the six 
year administration of former Mexican President Vicente Fox. 
Moreover, the SME says, nearly half of the 13 billion peso 
deficit (over USD 1.2 billion) accrued by its employer, the 
state-owned Central Light and Power Company (LyFC), results 
from the fact that federal, state and local governments do 
not pay their bills.  Labor leaders in other unions, a 
businessman and a knowledgeable labor lawyer expressed 
skepticism about what they view as the SME,s newfound 
concern for the Mexican consumer.  These labor observers 
speculated that the SME,s charm offensive is mostly likely a 
preemptive move prompted by rumors that the Mexican 
government was contemplating some form of action to reign in 
one of the most combative and politically partisan labor 
unions in the country.  If this rumor proves to be true, it 
would be the first time the administration of Mexico,s 
current President, Felipe Calderon, has moved to discipline 
any of the country,s major labor unions.  END SUMMARY. 
 
 
SME: A SMALL(ER) UNION FIGHTING FOR THE LITTLE GUY? 
--------------------------------------------- ----- 
 
¶2.  The Mexican Electrical Workers Union (SME) is the smaller 
of Mexico,s two such unions.  Its estimated 40,000 members 
work for the government-owned Central Light and Power Company 
(LyFC) which provides electricity to 24 million people in the 
Greater Mexico City area and the larger part of five 
neighboring states.  The SME refers to itself as one of a new 
breed of &independent unions8 in Mexico in the sense that 
it is not formally associated with any of the country,s 
major political parties.  In reality, the SME is closely 
linked to the country,s main opposition political party, the 
Party of the Democratic Revolution (PRD) and it one of the 
most combative and politically partisan labor unions in 
Mexico. 
 
¶3.  SME members can often be found at the barricades or in 
the forefront of a wide range of politically motivated 
demonstrations protesting government policies which they 
believe are in conflict with the union,s avowedly leftist 
principals.  For example the SME can always be counted on to 
protest the privatization of anything.  In fairness to the 
SME, their strong stand against privatizations, especially in 
areas related to the country,s energy sector, are widely 
shared by a significant percentage of Mexico,s population. 
 
¶4.  With some 40,000 members the SME is small but only in 
comparison with Mexico,s other electrical workers union; the 
Sole Union of the Electrical Workers of the Mexican Republic 
work (SUTERM).  SUTERM,s union members are employed by 
Mexico,s Federal Electricity Commission (CFE).  The CFE and 
the estimated 70,000 members of SUTERM generate and provide 
electricity to the other 27 states in Mexico (compared to the 
five states and Mexico City covered by the SME and its 
employer the Central Light and Power Company (LyFC).  The CFE 
generates 97% of the electricity sold by LyFC.  In practice, 
LyFC is only a distribution company.  .  That said, SUTERM, 
allied with Mexico,s former ruling PRI, is probably as 
opposed to the privatization of Mexico,s electricity sector 
as the SME.  The main difference between the two unions on 
this point is that the SUTERM is reportedly trying to become 
a modern and efficient power company thereby showing it can 
obtain the hoped for benefits of privatization without being 
privatized.  The SME,s preferred response to possible 
privatization is massive street demonstrations in which they 
proclaim themselves to be the protectors of the nation,s 
patrimony. 
 
 
IT,S THE GOVERNMENT,S FAULT 
--------------------------- 
 
 
MEXICO 00002934  002 OF 003 
 
 
¶5.  During the week of May 14 the SME launched a charm 
offensive to protest the high cost of electricity for the 
average Mexican consumer.  The charm offensive consisted of a 
series of radio interview and press conferences aimed at 
getting out their messages.  The message, according to the 
SME, was that the cost of electricity for the average Mexican 
consumer increased 285 percent during the six year 
administration of former President Vicente Fox.  The SME 
partially blamed this increase on an ill-conceived rate 
structure implemented during the Fox administration.  This 
rate structure, the SME said, favored businesses and large 
users of electricity at the expense of small and domestic 
(private homes) users.  The SME also accused the Fox 
administration of eliminating subsidies that had helped to 
contain the cost of electricity to families.  Consequently, 
the SME averred, electricity for small users is now twice as 
expensive as it is in the US. 
 
¶6.  Moreover, the SME claimed, the situation in the area of 
power distribution covered by the LyFC is complicated even 
more by the fact that company now has a deficit of 13 billion 
pesos (over USD 1.2 billion).  Almost half of this deficit, 
the SME says, it a direct result of the fact that all levels 
of government )-federal, state and local )- routinely fail 
to pay their electricity bills. One of the worst offenders, 
the SME stated, was the municipal government of Mexico City, 
in its press conferences the SME made a concerted effort to 
explain that its employer, the LyFC, is powerless to collect 
from federal government agencies, hospitals and water 
companies when these organizations refuse to pay their 
electricity bills. Mexican government sources refute this 
noting the Federal Government and the Mexico City Government 
do pay their bills, but the five states and many 
municipalities surrounding the capital are in arrears. 
Additionally, new state and local administrations regularly 
refuse to pay the debts left by their predecessors. 
(Comment: The SME also alleged that &Los Pinos8, the 
Mexican White House, was among a long list of offenders that 
habitually fails to pay its electric bills but this 
allegation has been denied by federal authorities.) 
 
¶7.  (Electricity rates are actually set by the federal 
government)  The main SME spokesperson during the charm 
offensive, Exterior Secretary Fernando Amezcua, expressed 
concern over what he said was a public perception that the 
union was largely responsible for the high cost of 
electricity in the LyFC area.  Amezcua noted that the public 
appears to believe that the high cost of SME salaries 
(Reftel) and benefits (SME,s 40,000 members get free 
electricity) are the reasons that electricity in the LyFC 
area costs so much.  In fact, rates are set by the federal 
government.  LyFC,s billing does not cover its own costs for 
a variety of reasons including (1) many of the Sates and 
municipalities do not pay for the electricity they use. (2) 
LyFC suffers from massive electricity thefts. and (3) LyFC,s 
unions garner very high wages.       He firmly denied this 
and advised that the union was currently working with two 
Federal Deputies (equivalent to US Congressmen) to legislate 
an entirely new schedule of rates that would more fairly 
adjust the cost of electricity to all users. One government 
source noted that both CFE and LyFC receive payments from the 
federal government to ensure that operating costs are 
covered.  He added that the government finds it useful to 
adjust these payments to treat the firms differently based on 
political considerations. 
 
 
GENUINE PUBLIC CONCERN OR ENLIGHTEND SELF-INTEREST 
--------------------------------------------- ----- 
 
¶8.  There is no doubt among businessmen, labor lawyers and 
even other unions that Post,s Labor Counselor has contacted 
that the cost of electricity in Mexico, and especially in the 
LyFC area, is much more expensive than it should be.  To the 
extent that the SME charm offensive would focus attention on 
the high cost (and some hoped the quality) of electricity in 
Mexico, all of these observers welcomed the SME,s efforts to 
begin a public discussion on the issue.  However, all of 
these labor observers expressed doubts as to the SME,s 
motives. 
 
MEXICO 00002934  003 OF 003 
 
 
 
¶9.  None of Post,s labor contacts knew the reason for the 
SME charm offensive but several speculated on a rumor they 
had heard about the union. (Comment: Labor Counselor has been 
awaiting a promised meeting with the SME for several months.) 
According to this rumor, Mexican President Felipe Calderon,s 
administration was contemplating some as yet to be determined 
action to reign in the political activities and combative 
attitude of the SME.  Consequently, Post,s labor contacts 
conjectured, the SME,s newfound concern for the consumer was 
really just a preemptive move to defend itself from whatever 
action the GOM might be contemplating.  Thus far there has 
been no publicly available information to confirm the rumor 
relayed by post,s labor contacts.  Moreover, since talking 
office in December of 2006, the Calderon administration,s 
dealings with Mexico,s organized labor unions have been 
characterized by negotiation and conciliation and not/not by 
confrontation. 
 
 
COMMENT 
------- 
 
¶10.  The SME,s concern for the high cost of electricity in 
the LyFC area is undoubtedly justified. There appears to be 
no easily explainable reason why cost of electricity to the 
average Mexican consumer should twice as high as electricity 
in the US.  There are a wide range of technical reasons such 
as outdated technology or inefficient distribution systems 
that explain the price difference in electricity between 
Mexico and the US.   However, the SME said nothing about 
possible technical reasons for the high cost of electricity 
and to the extent that it said anything about the LyFC it 
only pointed out (correctly)  that it was the government and 
not the unions that sets rates for electricity. 
 
¶11.  Almost the entire argument made by the SME was that the 
high cost of electricity was the fault of the administration 
of former President Fox.  No specific mention was made of the 
Calderon administration in the charm offensive that began May 
14, but the SME has rarely passed up an opportunity to 
support the PRD in criticizing the current Mexican government 
on a wide range of issues (the rising cost of tortillas, the 
low minimum wage, pension and health care systems reforms for 
civil service employees, fiscal reform and the list goes on). 
Given the negative attitude the SME has had toward the 
Calderon government it would not be unreasonable for the 
current administration to react in some way to what it might 
see as provocation.  However, such reaction would be out of 
character for the way the current GOM has managed its 
relation with the country,s organized labor unions. 
 
¶12.  It is certainly possible that SME is bringing attention 
to the high cost of electricity in Mexico as a service to the 
public.  However, as an editorial in an openly labor friendly 
newspaper pointed out, it would have been much better if the 
SME had raised its concerns for the consumer during the 
previous administration when the price raises in the cost of 
electricity were actually taking place. 
 
 
 
 
 
 
 
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 / 
BASSETT