VZCZCXYZ0000
RR RUEHWEB

DE RUEHME #0020/01 0061820
ZNR UUUUU ZZH
R 061820Z JAN 09
FM AMEMBASSY MEXICO
TO RUEKJCS/SECDEF WASHINGTON DC
RUEHC/DEPT OF LABOR WASHINGTON DC
INFO RUCNCAN/ALL CANADIAN POSTS COLLECTIVE
RUEHXC/ALL US CONSULATES IN MEXICO COLLECTIVE
RHMFISS/CDR USSOUTHCOM MIAMI FL
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RHMFIUU/DEPT OF HOMELAND SECURITY WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC

UNCLAS SECTION 01 OF 04 MEXICO 000020 
 
SIPDIS 
 
DEPT FOR DRL/AWH AND ILCSR, WHA/MEX, USDOL FOR ILAB 
 
E.O. 12958: N/A 
TAGS: ELAB ECON PGOV SOCI PINR MX
SUBJECT: MEXICO ESTABLISHES DAILY MINIMUM WAGE FOR 2009 
 
REF: 08 MEXICO 0013 
 
MEXICO 00000020  001.7 OF 004 
 
 
¶1.  SUMMARY: On December 18, 2008 Mexico,s government 
announced the establishment of the country,s daily minimum 
wage for 2009. Mexico,s minimum wage is set annually by a 
Commission under the auspices of the GOM,s Labor Secretariat 
at the end of each calendar year.  This year the Commission 
proposed and the GOM agreed to a 4.6 percent wage increase. 
As was the case last year, Mexico,s organized labor unions 
had wanted a 10 percent minimum wage increase which they 
stated was the least amount required to meet the basic needs 
of working families.  In addition to seeking a higher minimum 
wage, again as was the case last year, the unions also 
unsuccessfully sought reforms in how the wage is set.  The 
process for establishing Mexico,s daily minimum wage is an 
increasingly frustrating one for the country,s organized 
labor movement and a source of contention between it and the 
private sector.  Mexico,s unions see the minimum wage as a 
constitutionally protected guarantee for ensuring a basic 
standard of living for workers.  However, the country,s 
private sector routinely argues that no one in Mexico 
actually works for the minimum wage and therefore sees it 
more as a standard of reference.  As such the private sector, 
and to significant degree the GOM, use the process of 
establishing a minimum wage as a tool for fighting inflation. 
 The private sector,s assertion notwithstanding, according 
to the unions and some National University (UNAM) 
researchers, 47 percent of all Mexican workers earn just 1-2 
times the daily minimum wage. .  Given current exchange rates 
(approximately 1.00 USD = 12.9 pesos), even with the higher 
minimum wage most Mexican workers will face a cut in real 
terms in their daily minimum salary.  Some of Mexico,s more 
left leaning labor unions are planning a march on January 30 
to protest a minimum wage increase that they consider a 
&joke.8 END SUMMARY. 
 
 
SETTING THE ANNUAL MINIMUM WAGE 
------------------------------- 
 
¶2.  Mexico,s minimum wage is established annually at the 
beginning of the calendar year following a series of intense 
negotiations among the three elements that make up the 
National Commission on Minimum Wages (CNSM); an entity under 
the auspices of the GOM,s Labor Secretariat (STPS).  The 
Commission is composed of representatives from the GOM, the 
private sector and organized labor unions.  In addition to 
setting the minimum wage, the CNSM is also supposed to ensure 
that the wage meets the constitutionally protected guarantee 
of ensuring a Mexican family,s basic needs.  In order to do 
this the Commission can periodically adjust the minimum 
salary throughout the year and it publishes a monthly 
bulletin to officially inform the public of the legal minimum 
wage. 
 
¶3.  In theory, and according to Mexican law, the country,s 
new annual minimum wage should take effect on the first day 
of a new calendar year.  Moreover, the minimum wage the CNSM 
ultimately announces should be based on a signed agreement 
between the three parties to the Commission.  In practice 
agreement on a minimum wage occasionally slips into mid 
January and there have been times when all parties within the 
CNSM failed to agree.  When that happens, the minimum wage 
decreed by the CNSM is considered a suggested wage floor that 
employers are expected but not legally obliged to follow. 
 
¶4.  Another facet of the minimum wage in Mexico is the fact 
that the country actually has three minimum wages (wage A, B 
and C), each determined by geographic regions.  The highest 
minimum wage is in urban areas designated as region A and the 
lowest are in rural areas or areas with low levels of 
industrialization designated as region C.  The previous 
presidential administration of former President Fox had 
promised that it would establish a single wage region for all 
of Mexico but failed to implement the legal and 
administrative changes that would have made this promise a 
reality.  The current administration under President Felipe 
Calderon has expressed a general desire to establish a single 
minimum wage for the entire country but has yet to take any 
concrete steps to make this happen. Mexico,s organized labor 
movement had hoped that the Calderon administration would 
establish a single minimum wage for the entire country and, 
as was the case last year, had again lobbied for this goal in 
this year,s negotiations.  Unfortunately, from the union 
 
MEXICO 00000020  002.5 OF 004 
 
 
perspective, the other two parties to the CNSM were unwilling 
to establish a single national daily minimum wage for 2009. 
The most that they were willing to propose was to either 
freeze or establish a smaller increase in high wage area A to 
allow the lower wage areas of B and C to ultimately catch up. 
 Needless to say this proposal was totally unacceptable to 
the unions. 
 
 
MINIMUN DIALY WAGE FOR 2009 INCREASED BY 4.6 PERCENT 
--------------------------------------------- -------- 
 
¶5.  Mexico,s organized labor sector went into the 
negotiation for the 2009 daily minimum wage publicly 
insisting on an increase of at least 10 percent.  Last year 
the labor sector had privately hoped for a 6 percent increase 
and would probably have been happy getting five percent. 
This year however, the unions were extremely concerned about 
high price increases for basic goods in 2008 and an inflation 
rate that in their estimation would be at least 6.23 percent. 
The 4.6 percent increase the CNSM announced for 2009 was an 
improvement over the increase of 4 percent announced for 2008 
(Ref) but not by very much in the few of Mexico,s organized 
labor unions.  The announced wage increase for 2009 was 
sharply criticized by Federal Deputies (members of the lower 
house of Mexico,s congress) in Mexico,s two largest 
opposition parties, the PRD (Party of the Democratic 
Revolution) and the PRI (Institutional Revolutionary Party). 
The PRD, Mexico,s most vocal opposition party, was 
particularly harsh in its criticism of the new minimum wage 
correctly pointing out that at most the country,s lowest 
paid workers would only receive a salary increase of 2.40 
pesos per day.  This increase, a prominent PRD Federal Deputy 
decried was not even enough to buy a can of soda. 
 
¶6.  The new daily minimum wage took effect on January 1, 
¶2009.  The new minimum wage by geographic region in Mexico is 
as follows:  In Region A which includes areas like Mexico 
City and selected parts of the states of Mexico, Baja 
California, Chihuahua and Guerrero the wage is ) 54.80 
(approx. USD 4.25); in Region B with areas like the cities of 
Monterrey, Guadalajara, Hermosillo and Tampico, the wage is 
) 53.26 (USD 4.12); while in Region C with cities like 
Aguascalientes, Puebla, Oaxaca, San Luis Potosi and Zacatecas 
the rate is ) 51.95 (USD 4.03). Given current exchange 
rates, approx. 1.00 USD = 12.9 pesos, even with the higher 
minimum wage most Mexican workers will face a cut in real 
terms in their daily minimum salary.  To place this in 
comparison, at the end of 2007 the dollar/peso exchange rate 
was approx. 1.00 USD = 10.9 pesos.  This means that in US 
dollar terms a worker in area A who earned USD 4.82 a day in 
2008 will only receive USD 4.25 in 2009.  In areas B and C, 
respectively the USD equivalent of a worker,s daily salary 
will drop from USD 4.67 to 4.12 and from 4.54 to 4.03. 
 
 
UNIONS SEE MINIMUM WAGE PROCESS AS EXTREMELY FLAWED 
--------------------------------------------- ------ 
 
¶7.  Although Mexico,s organized labor sector again had to 
accept a minimum wage lower than it had hoped it was very 
vocal in expressing its dissatisfaction with the new wage. 
From the perspective of Mexico,s labor sector the minimum 
wage should be adequate to meet a family,s basic needs. 
Various spokespersons for Mexico,s organized labor unions 
repeatedly pointed out that the country,s constitution 
guarantees that the minimum wage must ensure a basic standard 
of living and the 2009 salary increase falls far short of 
this legal requirement  Representatives of the Confederation 
of Mexican Workers (CTM), the Mexican Electrical Workers 
Union (SME) which is part of the confederation called the 
National Workers Union (UNT), and the Revolutionary 
Confederation of Workers and Campesinos (CROC), respectively 
the country,s three largest labor federations, pointedly 
remarked that the minimum wage was not a living wage. 
Furthermore they questioned the utility of an entity (the 
CNSM) and a process (the minimum wage negotiations) that 
failed so completely in one of its main responsibilities as 
stated in the Mexican constitution. 
 
¶8.  The criticisms of these labor federations were picked up 
and expanded on by several national newspapers.  Many of 
these news media outlets focused on the comments made by the 
SME who called the 2009 minimum wage increase an &immoral 
 
MEXICO 00000020  003.6 OF 004 
 
 
joke8. In the SME,s estimation the wage increase should 
have been at least two points above the projected rate of 
inflation of 6.23 percent.  By that calculation unions state 
that the new minimum wage should have been 8.23 just to keep 
up with inflation.  In the face of an inflation of over 6 
percent the SME called for an emergency salary increase over 
and above the increase announced by the CNSM.  It also called 
for government price controls on 20 basic food items such as 
edible oils, rice, sugar, beef, beans, eggs, tomatoes, milk, 
bread, potatoes, chicken and tortilla.  Finally the SME 
announced that it is in the process of organizing a mass 
demonstration on January 30 2009 to protest the 4.6 percent 
minimum wage increase and to demand the abolition of the CNSM 
which it says no longer serves any useful function.  Post 
notes that throughout 2008 many of Mexico,s larger labor 
federations repeatedly called for emergency wages to help 
workers cope with a spiraling increase in the cost of basic 
food items.  In response these calls the GOM has firmly 
declared its opposition to any type of emergency increase. 
None of Mexico,s other unions have called for price controls 
of basic food items.  The GOM did not respond to the SME,s 
call for government price controls but the Calderon 
administration has called on food producers to implement 
voluntary price controls in the past and it is conceivable 
that it could resort to this practice again if it believed 
the situation required such drastic action. 
 
 
PRIVATE SECTOR SEES CNSM AS TOOL TO FIGHT INFLATION 
--------------------------------------------- ------ 
 
¶9.  Perhaps the main reason why the CNSM is viewed as such a 
failure by Mexico,s organized labor movement is that the 
Commission is seen so differently by it and the country,s 
private sector.  Mexico,s private sector representatives on 
the CNSM are convinced that no workers actually accept jobs 
paying only the minimum wage; therefore they see no reason to 
try and raise the minimum wage to a level that would cover 
the cost of a basic basket of goods.  What the private sector 
representatives do see, and they are not really wrong in this 
matter, is that over time the minimum wage has changed from a 
floor for maintaining a worker,s basic standard of living 
into a standard of reference that impacts all aspects of 
Mexico,s economy. 
 
¶10.  Mexico,s minimum wage was originally established to 
provide a basic standard of living and apparently it 
initially succeeded.  However, an unintended consequence of 
this success was that everyone knew exactly what the daily 
minimum wage was.  This widespread knowledge of the exact 
amount of the minimum wage soon lent itself to other 
unintended purposes.  First job offers, then private service 
fees and ultimately government fines, tax tables and a broad 
range of other financial indicators were increasingly 
determined by multiples of the daily minimum wage.  This 
practice has now become so prevalent throughout Mexican 
society that a clear link can arguably be drawn between 
increases in the daily minimum wage and the level of 
inflation in Mexico.  Consequently, the private sector 
members of the CNSM see their role as that of holding the 
line against inflation.  The GOM,s actions on the CNSM in 
consistently voting with the private sector in minimum wage 
negotiations and against the labor unions, demands for 
higher wages seem to imply that the government too sees the 
Commission as a tool for controlling inflation. 
 
 
CNSM BOTH FIGHTS INFLATION AND SETS REAL WAGES 
--------------------------------------------- - 
 
¶11. Because of the widespread use of the official minimum 
wage by both the private sector and all levels of government 
in Mexico as a standard of reference it would be hard (and 
probably futile) to argue that it does not have a very real 
impact on inflation.  What has not been very successfully 
argued for some time is the proposition that for many Mexican 
workers the minimum wage is their real wage.  The thinking of 
many in the private sector and apparently some levels of the 
Mexican government is that since no one could live on the 
minimum wage then clearly no one does. Consequently, they see 
nothing to be gained by trying to raise the wage to a level 
that would actually enable a worker to cover the costs of the 
basic basket of goods and a great deal to be lost in terms of 
sparking inflation. 
 
MEXICO 00000020  004.6 OF 004 
 
 
 
¶12.  This perspective has been challenged by an NGO named the 
Center for Labor Investigations and Union Consultants (CILAS) 
and researchers in the Faculty of Economics at the Autonomous 
National University of Mexico (UNAM).  According to CILAS, 
some 30 million Mexicans live on 30 pesos a day, another 20 
million live on 12-22 pesos per day.  CILAS argues that many 
of these people are not only a part of the working poor but 
that they earn so little that in order to survive their only 
options are to beg, engage in criminal activities or 
immigrate. 
 
¶13.  A study done by the UNAM researchers which focused 
mainly, but not exclusively, on workers in Mexico,s 
manufacturing sector vigorously contested the CNSM argument 
that few if any Mexicans actually work for the official 
minimum wage.  According to the researchers some 10.8 million 
Mexicans work for the daily minimum wage or less.  Mission 
Mexico,s Labor Counselor has personally met janitorial and 
retail store workers in Mexico City, and Maquiladora (foreign 
owned assembly plants) in the state of Puebla who work for 
only twice the daily minimum wage or less.  This figure, the 
researchers said, represented 23.9 percent of all working age 
Mexican.  Moreover, UNAM researchers added, another 9.56 
million workers make only 2 times the minimum wage which at 
best would be 109.60 pesos (approx. USD 8.50 at current 
exchange rates).  Together, the UNAM team asserted, these two 
groups represent 67 percent of all working age Mexicans. 
 
 
COMMENT 
------- 
 
¶14.  The process of establishing a minimum wage in Mexico 
continues to be severely complicated by the fact that the 
three elements who determine the wage see the process very 
differently and to a significant degree all three are right. 
The private sector and the GOM see the minimum wage process; 
correctly it would appear, as a tool for combating inflation. 
 Mexico,s organized labor sector views the process, also 
apparently correctly, as a way to maintain a basic minimum 
standard of living for workers. The results of these 
differing perspective on the goals of establishing an 
official minimum wage contributes to a process that is 
somewhat effective in fighting inflation but which leave much 
to be desired in terms of providing workers with a basic 
standard of living that discourages recourse to begging, 
crime or immigration. 
 
 
 
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