P 171926Z JUN 09
FM AMEMBASSY PORT AU PRINCE
TO SECSTATE WASHDC PRIORITY 0061
INFO HAITI COLLECTIVE PRIORITY
HQ USSOUTHCOM J2 MIAMI FL PRIORITY

C O N F I D E N T I A L PORT AU PRINCE 000583


STATE FOR WHA/EX, WHA/CAR, EEB
STATE PASS SOUTHCOM FOR POLAD

E.O. 12958: DECL: 06/16/2019
TAGS: PGOV PREL ECON EAID ETRD EINV HA
SUBJECT: HAITIAN PRESIDENT'S DECISION ON MINIMUM WAGE LAW

REF: PORT AU PRINCE 00553

Classified By: Charge d'Affaires Thomas C. Tighe
for Reasons 1.4 (a,d).

¶1.  (SBU) Summary:  Haitian President Rene Preval, after
intensive discussion with private sector and parliamentary
representatives, plans to return the minimum wage law to
Parliament with a proposal to modify the bill with a
phased-in wage increase for the assembly sector.  A 200
Haitian gourde (HTG) minimum salary would be applied to the
local commercial and non-textile industrial sectors.  The
minimum wage law author expressed dissatisfaction with
Preval's decision and is not convinced that the wage increase
proposed in the bill, as currently written, would
significantly damage economic growth or force job cuts. End
Summary.

¶2. (SBU)  Following several days of meetings at the National
Palace, President Rene Preval reached a compromise with
industry representatives and some members of Parliament that
would avoid a blow to the assembly/textile sector in Haiti.
Industry representatives, led by the Association of Haitian
Industry (ADIH), objected to the immediate HTG 130 (USD 3.25)
per day wage increase in the assembly sector, saying it would
devastate the industry and negatively impact the benefits of
the Haitian Hemispheric through Opportunity Partnership
Encouragement Act (HOPE II).  Recent ADIH and USAID funded
studies on the impact of near tripling of the minimum wage on
the textile sector found that an HTG 200 Haitian gourde
minimum wage would make the sector economically unviable and
consequently force factories to shut down.

¶3. (C) President Preval is expected to return the bill to
Parliament with objections on June 17 or 18.  Preval's
Economic Advisor Gabriel Verret (protect) told Embassy
representatives on June 13 that Preval had brokered a deal
with Parliament members.  ADIH President Georges Sassine told
Econ/Poloff June 16 that Preval would propose the following
modifications to the bill, applicable to the assembly sector
only: an increase of from HTG 70 to HTG 100 in October 2009,
a further increase to HTG 125 by October 2010 and then to HTG
150 by October 2011 (Note: Preval reportedly discussed with
industry representatives possible measures the government
could take to help absorb other costs of production, such as
by subsidizing electricity (i.e., providing uninterrupted
electricity from 0600 to 1800) and subsidizing taxes on
diesel fuel. (Note: many factories, for lack of outside
electricity, are forced to provide their own using diesel
generators.  End note.) It is unclear whether these measures
would be offered if the phased-in wage increases were enacted
into law. End note)

¶4. (C) A majority of Haitian private sector representatives
support enactment of the law in October, based on reports
that wages in the Dominican Republic and Nicaragua
(competitors in the garment industry) will increase also.
ADIH member and factory owner Clifford Apaid told Econ/Poloff
June 8 that Haitian Chamber of Commerce President Reginald
Boulos said he supports immediate implementation of the wage
increase to HTG 200 for the commercial and industrial sectors
and a phased-in increase for the textile sector.  Some
members of the commercial and non-textile industrial sectors,
such as Bernard Fils-Aime, part-owner of telecommunications
company Voila, and Ricky Hicks, owner of Haitian-American
tobacco company Comme Il Faut, welcome the minimum wage
increase and stated that their companies already pay wages
above that proposed in the bill.  Sassine told Econ/Poloff
that textile sector wages make up more than fifty percent of
factory costs, whereas wages in the commercial and local
industry sectors represent an average of twelve percent.

¶5. (SBU) Preval's proposed modifications can be rejected by
Parliament.  If Preval returns the bill on June 17 or 18, the
Chamber of Deputies would be able to examine his proposal on
June 23.  HOPE Commission member Lionel Delatour told
Econ/Poloff that the worst case scenario is that Parliament
returns the original bill unchanged to the President for
signature.  Delatour predicts that there is a less than 15
percent chance that this would happen.  Although a
prospective compromise was brokered between the President and
members of Parliament (including bill sponsor Deputy Steven
Benoit), Benoit's public criticism of Preval's decision
continues, and Benoit is adamant that the HTG 200 per day be
applied to both the commercial and industrial sectors --
including the textile industry.  Senate President Kely
Bastien told the press on June 17 that the opinions of the
Parliamentarians who met with Preval should not be
interpreted as representative of the entire body.  Therefore,
Preval should not assume that his decision represents a
compromise with Parliament as a whole.

¶6. (C) Comment:  Preval's proposed compromise on the minimum
wage appears to be acceptable to the textile sector.  Recent
statements by some members of Parliament, however, may
portend a rancorous debate on the issue if and when it comes
back to them for amendment.  Students continue to
demonstrate-- sometimes peacefully, sometimes not-- for an
increase in the minimum wage and its application to all
sectors, including the textile industry.  Parliament's
inconsistent and after-the-fact dialogue with Preval and
members of the private sector has only added to the
confusion.  Because negotiations have been conducted with
select Parliamentarians and behind closed doors, it is
unclear whether they represent the majority view or are
waffling on the issue perhaps to appease Preval and/or
industry.  Nobody knows for sure how the Chamber of Deputies,
which gets the first crack, will respond to Preval's
suggestions.

TIGHE