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RUEHBR/AMEMBASSY BRASILIA
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RUEHSO/AMCONSUL SAO PAULO

UNCLAS SAO PAULO 000074 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: PHUM ELAB EAGR ECON PGOV BR
SUBJECT: BRAZIL CITES LARGEST SUGAR PRODUCER FOR LABOR CONDITIONS 
 
REF: 09 BRASILIA 1044 
 
¶1. (SBU) Summary: On December 31, 2009, Ministry of Labor (MOL) 
inspectors put Cosan, the world's biggest sugarcane producer on its 
list of companies, Portaria 540, who allegedly keep workers in 
"slave-like" conditions.  In Brazil, Portaria 540 is commonly known 
as the "dirty list."  On January 11, the company was removed from 
the list after its lawyers obtained a court injunction against the 
MOL's decision.  The case continues and could go to the Federal 
Supreme Court.  Labor rights NGOs support the MOL's decision and 
have criticized the court ruling in favor of Cosan.  In contrast, 
sugar industry representatives say the MOL's inspections are a 
politically motivated attack on agribusiness.  Despite the 
controversy, advocates say the list remains an effective, if 
perhaps imperfect tool to fight labor exploitation.  End Summary. 
 
 
 
BRAZIL'S DEFINITION OF FORCED LABOR 
 
 
 
¶2. (SBU) Brazilian labor law bans forced labor and, under a 2003 
amendment, prohibits workers from being subjected to "slave-like" 
or degrading conditions.  While forced labor is defined as 
"coercion and lack of freedom of mobility through force and/or debt 
bondage", the law contains no definition of "degrading" work 
conditions.  NGOs claim this is a matter of common sense.  Mill 
owners and Brazil's largest sugar-growers association, UNICA, argue 
that the vagueness is a key weakness in the law and that it leads 
to unfair and subjective enforcement. 
 
 
 
BACKGROUND ON THE DIRTY LIST 
 
 
 
¶3. (U) The Ministry of Labor created the "dirty list" (Portaria 
540) in October 2004, based on its constitutional authority to 
enforce labor standards.  The list is updated every six months and 
currently there are 163 companies from 15 states on the list.  The 
process for adding companies and people is the following: 
 
 
 
--The MOL sends Mobile Inspection Teams consisting of a Labor 
agent, a Labor prosecutor and Federal Police officers to inspect 
sugar plantations and other enterprises for labor violations.  The 
teams take notes and use pictures and video to record what they 
find.  If the inspectors find what they determine are "slave-like" 
conditions, they "free" those workers, a case is opened and fines 
are levied. 
 
 
 
--The case passes through an internal administrative process at the 
MOL that, depending on a variety of factors, including legal 
action, can last from a couple of weeks to a couple of years. 
(Note: Cosan's 2009 list appearance, for example, was based on a 
2007 inspection.  End Note.) 
 
 
 
--The company or person's name is published on the list with copies 
of formal notification sent to several ministries and public banks. 
 
 
 
--The company remains on the list for two years.  At the end of 
this time, the offending organization is removed if no new 
complaints have been filed and it has paid all fines and remedied 
the situation of its workers. 
 
 
 
HOW COSAN GOT ON AND THEN OFF THE LIST 
 
¶4. (SBU) In 2007 a tip led the Ministry of Labor to inspect a 
Cosan-owned mill (Junquiera) in Igarapava, Sao Paulo.  The Mobile 
Inspection Team stated that it had "freed" 42 workers of a Cosan 
sub-contractor from "slave-like conditions" and found thirteen 
infractions including: debt bondage, unregistered employees, lack 
of easily accessible fresh/potable water and underage workers in 
precarious and unsanitary conditions.  (Note: Typically, the MOL 
reports "freeing" any workers it finds in "degrading" conditions. 
End Note.)  No restriction of freedom of movement was found by the 
inspectors.  According to both UNICA and Reporter Brasil reps, 
Cosan fired the sub-contractor, paid all the fines levied by the 
MOL in the wake of the inspection, promised to correct any 
irregularities and signed a document admitting fault.  Cosan reps 
believed these actions closed the case in 2007 and thus were 
surprised on December 31 when the MOL published their company's 
name on the Ministry's 2009 "dirty list" update. 
 
 
 
¶5. (U) Upon release of the list, Brazil's National Development Bank 
BNDES (the country's largest source of corporate loans) temporarily 
suspended all transactions with Cosan.  Walmart Brazil (WB) also 
stopped purchasing Cosan sugar brands and Petrobras and Shell 
considered restrictions against the firm.  On January 11, Cosan was 
removed from the MOL's list after its lawyers obtained a court 
injunction.  In his decision approving the injunction, Judge Raul 
Gualberto Fernandes Kaspar de Amorim said that the MOL possessed 
insufficient evidence of conditions analogous to slave labor.  He 
also noted that the labor infractions allegedly committed had been 
carried out by one of Cosan's many labor sub-contractors.  The 
Labor prosecutor in charge of the inspection, Carina Rodrigues 
Bicalho, disagreed with the Judge's ruling.  She cited several 
conditions that violated the law, including:  debt bondage, 
degrading conditions and precarious work, as well as poor housing 
and transport.  The Ministry of Labor plans to challenge Judge 
Fernandez Kaspar's decision. 
 
 
 
NGO LAUDS EFFECT OF "THE DIRTY LIST" 
 
 
 
¶6. (SBU) Following the court injunction, Poloff met with Leonardo 
Sakamoto and Mauricio Hashizume of the labor rights NGO Reporter 
Brasil.  Reporter Brasil has been following Cosan for several years 
and is not surprised that the company appeared on the MOL's list. 
Hashizume noted that several legal experts known to Reporter Brasil 
consider the January decision by Judge Fernandes to be a weak one. 
As a substitute judge in the 10th Regional Labor Tribunal where the 
injunction was requested, Fernandes is unfamiliar with forced labor 
cases -- including the notion that most sugar cane companies 
regularly use labor sub-contractors and are legally responsible for 
their actions.  Further, both Sakamoto and Hashizume lauded the 
"dirty list" as a powerful tool that aids transparency and creates 
market-driven punishment for employers that engage in inhumane 
labor practices.  Reporter Brasil stated that very few, if any, 
companies have repeat appearances on the list.  In their view, 
Cosan's inclusion on the list shows that the MOL is dedicated to 
going after slave labor, irrespective of company size and clout. 
 
 
 
SUGARCANE GROWERS ASSOCIATION CRITIQUES 
 
 
 
¶7. (SBU) DPO and Poloff also met with Adhemar Altieri, Director of 
Communications, at UNICA for the sugar industry's view of the case. 
Altieri criticized the MOL's methodology and stated that the 
industry has improved conditions for workers.  In June 2009, UNICA 
was one of the major proponents of a historical tripartite 
agreement between the government, industry and workers to 
ameliorate the working conditions of cane cutters.  (Ref. A) 
 
¶8. (SBU) Alteiri characterized the MOL's criticisms of agribusiness 
as politically motivated by the leftist Democratic Worker's Party 
(PDT), whose president is also Minister of Labor Carlos Lupi.  He 
stated that the MOL targets the sugar cane industry because the 
government can get more political "bang for the buck" by going 
after sugar growers.  Similar labor inspections of cattle ranches 
usually only result in the "freeing" of one or two people (due to 
the dispersed nature of the industry).  In contrast, a labor 
inspection of a sugar plantation can lead to an announcement that 
"hundreds" of workers were freed from "slave-like conditions," for 
citations including a stopped toilet or broken showerhead.  Altieri 
complained that the laws regarding forced labor are too vague, the 
MOL's Mobile Inspection Teams have little oversight, and the 
publishing of names on the "dirty list" punishes companies 
financially and socially in public without due process.  He also 
criticized the MOL's rhetoric, which announces that its teams are 
"freeing" workers.  He says this promotes a vision that does not 
characterize the contemporary sugar industry.  Altieri further 
complained that USG reporting of "flawed" facts and figures put out 
by the MOL and the Brazilian press gives such reports greater 
credibility than they deserve. 
 
 
 
WALMART STUCK IN THE MIDDLE 
 
 
 
¶9. (SBU)Just one week after Cosan's appeared on the list, Walmart 
Brazil (WB) temporarily suspended product purchases from Cosan.  WB 
Sustainability and Institutional Relations Manager Carolina Costa 
(Note: Costa worked with UNICA until mid-2009. End Note.) stated 
that WB had a long-standing (15-year) relationship with Cosan. 
However, as a signatory to the 2005 National Pact Against Forced 
Labor, WB had no choice but to act once Cosan appeared on the 
"dirty list."  When Cosan was dropped from the list, Walmart Brazil 
immediately resumed purchases from the company. 
 
 
 
COMMENT: 
 
 
 
¶10. (SBU) While controversial, imperfect, and possibly subject to 
political agenda, the list, with its low recidivism rate, has 
pushed Brazilian employers' adherence to the 2005 Pact to Eliminate 
Slave Labor.  Over the long run, controversy over labor conditions 
in the sugar industry should ease as manual cutting continues to 
diminish and regulatory-mandated machine-cutting is implemented in 
most of Brazil by 2017.  In the meantime, as Cosan's case generates 
a lengthy legal battle on the constitutionality of the "dirty 
list", further MOL cases involving the industry are likely given 
the vague definition of "slave-like" working conditions. 
White