US embassy cable - 05TEGUCIGALPA1546

UNCLAS SECTION 01 OF 02 TEGUCIGALPA 001546 
 
SIPDIS 
 
INFO WHA CENTRAL AMERICAN COLLECTIVE 
DEPT OF TREASURY WASHDC 
DEPT OF LABOR WASHDC 
 
STATE FOR WHA/CEN, WHA/ESPC, DRL/IL, AND EB/IFD/OMA 
STATE PASS AID FOR LAC/CEN 
STATE PASS USTR FOR WILLIAM CLATANOFF 
TREASURY FOR DORA DOUGLAS 
DOL FOR ILAB 
 
E.O. 12958: N/A 
TAGS: ELAB, ETRD, EINV, EIND, KTEX, PGOV, HO 
SUBJECT:  One Maquila Improves Working Conditions in 
Anticipation of U.S. NGO Accusations 
 
 
1.  Summary:  In a June 22 press conference, the U.S. NGO 
National Labor Committee's (NLC's) Director Charles 
Kernaghan alleged mistreatment of workers in a Honduran 
maquila that supplies Reebok's NBA and NFL jerseys, a charge 
that the GOH and Honduran businesses quickly denied, 
pointing to union and wage agreements in place.  The story 
is somewhat more complex, however, as these agreements on 
unionization and overtime compensation were apparently 
reached only following intervention by Reebok's lawyers 
after the NLC's plant visit, but before his press 
conference.  The Honduran government and Honduran 
Manufacturer's Association (AHM) both attributed the NLC 
attack on this company and others in the maquila sector to a 
political interest in trying to thwart CAFTA approval in the 
U.S. Congress.  While each side seeks to maximize or 
minimize the impact of these allegations, Post views the 
incident instead as proof that CAFTA's labor provisions can 
work: civil society pressure and domestic labor enforcement 
in this instance identified and quickly remedied weak labor 
protections.  End Summary. 
 
2.  On Friday, June 22, Charles Kernaghan, Director of the 
U.S. nongovernmental organization National Labor Committee 
(NLC), held a press conference in New York City in front of 
an NBA retail store in Manhattan, where he condemned what he 
portrayed as sub-par working conditions in a Korean-owned 
Honduran maquila that assembles NBA and NFL jerseys for 
Reebok.  Between May and July of 2005, The NLC interviewed 
dozens employees at Han-Soll, a Korean-owned maquila 
operating in the department of Santa Barbara, Honduras.  The 
company employs 1,620 workers at two Honduran plants, sewing 
t-shirts, shorts, pants, dresses and skirts.  NLC alleges 
that Han-Soll locked workers in a factory compound, 
underpaid workers, discriminated against pregnant workers, 
and did not recognize rights to organize.  The NLC in its 
press conference also condemned paying workers 19 cents per 
jersey (about 65 cents per hour) when that jersey is sold in 
the U.S. for USD 75.  (Note: Minimum wage in Honduras ranges 
from USD 3.25 to USD 5.19 per day, depending on sector. End 
note.) 
 
3.  Honduran Manufacturer's Association (AHM) Executive 
Director Henry Fransen told EconOff that the allegations 
against Han-Soll, and a similar NLC investigation of a 
nearby American automotive parts company, Lear Automotive, 
were merely part of NLC's (and, by extension, organized 
labor's) effort against CAFTA.  He said that all NLC's 
allegation of illegal treatment of workers were false.  The 
AHM views Kernaghan's organization as an arm of U.S. 
unionized labor, and feels that the organization is focusing 
on Central America rather than China because it is 
convenient to do so while CAFTA is under review in the U.S. 
House of Representatives.  In a press conference, AHM 
President Jesus Canahuati stated that the organization had 
been aware of the investigation conducted by NLC, and noted 
approvingly that Reebok had subsequently sent lawyers down 
to review the situation.  He said that after this visit by 
Reebok lawyers, Han-Soll management and workers reached an 
agreement eliminating obligatory overtime and reached an 
agreement recognizing their right to unionize.  NLC notes 
that in addition to this agreement, the company also 
eliminated obligatory overtime. 
 
 
 
4.  The Ministers of Labor and Commerce told Post that, 
contrary to Kernaghan's allegations, the workforce in the 
plant is unionized, and receives overtime compensation for 
any overtime worked.  Minister of Commerce Irving Guerrero 
denied to EconChief that Han-Soll had prevented 
unionization, saying that it was his understanding the union 
movement in the factory had not at first recruited enough 
members to be recognized under the law.  Once they had done 
so, the union was recognized.  Minster of Labor German 
Leitzelar stressed that while overtime in the factories is 
common, his ministry is vigilant in ensuring that workers 
receive premium overtime compensation, as stipulated in the 
Honduran labor code.  Some businesses do have labor 
problems, he said, but in this instance, the recent 
agreement between Han-Soll and workers assures resolution of 
any issues within the company.  The Ministry of Labor also 
informed LabAtt that officials from the Korean Ministry of 
Labor had come to Honduras to visit the maquila and meet 
with Honduran Ministry of Labor officials to discuss the 
case, Honduran labor law, and the application of the law.an 
and areHe stated that this is further evidence of ongoing 
collaboration between NLC and Honduran labor leader Israel 
Salinas, and that NLC is also investigating a nearby 
American automotive parts company, Lear Automotive 
 
 
5. Israel Salinas, Secretary General of the CUTH labor 
federation, confirmed that the Han-Soll union belongs to his 
confederation.  Salinas said that while there were 
definitely some problems, the CUTH considers the problems 
resolved.  Salinas noted that the CUTH has an ongoing 
relationship with the NLC and supported their work in 
Honduras. 
 
6.  Comment:  It seems to Post a reasonable assumption that 
the NLC's visit to Honduras prompted Reebok to force its 
supplier to clean up its act.  It therefore strikes us as 
somewhat disingenuous for the AHM to claim that Kernaghan's 
claims were entirely false and purely politically motivated. 
It is equally disingenuous, however, for the NLC to 
conveniently ignore that the labor violations they alleged, 
to the extent they existed at the time of his visit, have 
already been rectified.   Perhaps the most ironic aspect of 
the dueling press releases on this incident is the apparent 
failure by both sides to recognize that in this case the 
process seems to have worked.  Civil society inspections of 
labor conditions revealed areas for improvement and the firm 
promptly moved to address them.  This moral pressure exerted 
through the markets, in conjunction with strengthened 
enforcement and monitoring by Leitzelar's well-meaning but 
still understaffed Ministry of Labor, is precisely what 
gives CAFTA labor rules their teeth.  Far from being an 
example of why CAFTA cannot work, this episode serves as an 
example of why CAFTA can. 
 
 
 
Tuebner