VZCZCXYZ0004
OO RUEHWEB

DE RUEHTG #0013/01 0081840
ZNR UUUUU ZZH
O 081840Z JAN 10
FM AMEMBASSY TEGUCIGALPA
TO RUEHC/SECSTATE WASHDC IMMEDIATE 1427
INFO RUEHZA/WHA CENTRAL AMERICAN COLLECTIVE
RHMFISS/CDR JTF-BRAVO
RUEAIIA/CIA WASHDC
RUEHC/DEPT OF LABOR WASHDC
RHEFDIA/DIA WASHINGTON DC
RUEIDN/DNI WASHINGTON DC
RHEHAAA/NATIONAL SECURITY COUNCIL WASHINGTON DC
RUEHTG/USDAO TEGUCIGALPA HO
RUEHTG/USMILGP TEGUCIGALPA HO
RUMIAAA/USSOUTHCOM MIAMI FL
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEATRS/DEPT OF TREASURY WASHDC

UNCLAS TEGUCIGALPA 000013 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ECON EFIN EIND ELAB HO
SUBJECT: NEGOTIATIONS BEGIN ON MINIMUM WAGE 
 
REF: A. 09 TEGUCIGALPA 1266 
     ¶B. 09 TEGUCIGALPA 542 
     ¶C. 09 TEGUCIGALPA 106 
     ¶D. 08 TEGUCIGALPA 1161 
 
¶1.  (U) Summary:  A tripartite commission of public, private, 
and labor sector representatives has begun discussions on 
raising the minimum wage, attempting to find a compromise 
between widely diverging demands.  Any wage hike will be a 
strain on both public and private employers, since the 
minimum wage is already high compared to GDP and because 
teachers' salaries are tied to the minimum wage by formula. 
Many Hondurans are unsympathetic to teachers' demands for a 
rise in the minimum wage and hence in their salaries, given 
the amount of time teachers failed to teach in 2009.  The 
commission hopes to make its recommendation to de facto 
president Roberto Micheletti before the president-elect takes 
office at the end of January.  End Summary. 
 
¶2.  (U)  A commission comprised of representatives from 
government, business and labor was formed December 29 to 
negotiate a new minimum salary, and began deliberations on 
January 5.  It is expected that the commission will continue 
to meet in the next few weeks in an attempt to make its 
recommendation to the de facto regime before the January 27 
presidential inauguration.  This is an annual practice.  If 
the commission fails to reach an agreement, the issue goes 
for decision to the President.  In most previous years, this 
increase has been around 9 percent.  At the end of 2008, 
after business leaders declared an impasse, President Manuel 
"Mel" Zelaya increased the minimum wage by more than 60 
percent, a move widely condemned by the business community. 
Business leaders and even mayors claimed that they were 
forced to lay off workers to be able to meet the new payroll 
(reftels).  Recent media reports indicate that 180,000 jobs 
were lost last year because of the combined effects of the 
global economic crisis, the steep wage hike, and the 
political crisis engendered by the June 28 coup.  According 
to the Tegucigalpa Chamber of Commerce and Industry, almost 
half of small and medium enterprises already fail to pay the 
minimum wage because they cannot afford to. 
 
¶3.  (U)  The current minimum wage is 5,500 lempiras per month 
(approximately 291 dollars) in urban areas, and 4,055 
lempiras (approximately 215 dollars) in rural areas.  The 
labor representatives started the discussions demanding a 150 
percent increase in the minimum wage, while the business 
representatives pushed for no increase at all.  More 
recently, the press has reported that the business leaders 
will propose a monthly increase of 800 lempiras 
(approximately 42 dollars or 15 percent), while labor leaders 
will ask for 3000 lempiras (approximately 158 dollars or 55 
percent) more.  Workers representatives are also asking that 
"maquiladoras" (manufacturers for export) and cigar makers be 
included in the minimum wage.  Normally their increases are 
negotiated separately; they received a much smaller increase 
last year. 
¶4.  (U)  Honduras's current minimum wage is the third highest 
in Central America, behind Panama and Costa Rica.  But, 
measured as a percentage of per capita GDP, the urban minimum 
wage is three times higher than the minimum wage in either of 
those two countries.  As reported in local press, the entire 
cost of Honduras's central administration is 10.8 percent of 
the GDP, with payroll eating up more than 75 percent of those 
costs.  In contrast, infrastructure projects reportedly 
amount to only 2 percent of GDP. 
 
¶5.  (U)  The most powerful voice for labor comes from the 
teachers' unions, with some 60,000 members.  Beginning this 
year, teachers are also the only public employees whose 
salaries are indexed to the minimum wage, rather than to the 
expected rate of inflation.  Some local editorials decry the 
teachers' demands, noting that their request for an 
"educational bonus" along with a wage hike is undeserved, 
since they only worked about 100-120 days of the required 200 
last year.  In addition to frequent strikes at the beginning 
of the 2009 school year, many teachers participated in 
pro-Zelaya marches after the coup, while many others simply 
did not show up for work every day.  Teachers again flexed 
their muscle when they refused to  begin in-service training 
scheduled for January 4, but announced through labor 
organizations that they would not start work until February 1. 
 
¶6.  (SBU)  Comment:  As seen in last year's steep wage hike, 
any large increase in the minimum wage could lead to 
additional layoffs.  If Honduras loses more of its 
competitive edge because labor costs, more manufacturers may 
pick up and move to countries with lower wages.  Even a small 
increase will impose a difficult strain on an already ailing 
public finances.  However, if the increase is negligible, it 
will be strongly opposed by an increasingly polarized and 
potentially radicalized labor movement.  The timing of making 
a recommendation prior to the inauguration may be seen as an 
effort to have de facto leader Roberto Micheletti make the 
final decision, rather than burden president elect Porfirio 
"Pepe" Lobo with a decision that could prove to be unpopular 
with one side or the other.  Either way, he will need to deal 
with any fallout early on in his administration.  End comment. 
LLORENS