US embassy cable - 05TEGUCIGALPA1842

C O N F I D E N T I A L SECTION 01 OF 02 TEGUCIGALPA 001842 
 
SIPDIS 
 
STATE FOR WHA/CEN, WHA/EPSC, DRL/IL, OES, AND EB 
STATE PASS USAID FOR LAC/CAM (LLIBANATI) 
STATE PASS USTR FOR AMALITO 
TREASURY FOR DDOUGLASS 
LABOR FOR ILAB 
GUATEMALA FOR COMMATT MLARSEN AND AGATT 
 
E.O. 12958: DECL: 09/08/2015 
TAGS: ECON, EFIN, EINV, ELAB, ETRD, PGOV, SENV, KCRM, HO 
SUBJECT: HONDURAN PRESIDENT CALLS FOR BONUS PAYMENT TO 
WORKERS; PRIVATE SECTOR BALKS 
 
REF: A) TEGUCIGALPA 1833 
 
Classified By: Classified by EconChief PDunn for reasons 1.5(b,d) 
 
1. (SBU) Summary: In an attempt to mitigate the impact on 
Honduran workers of Friday's sharp increases in fuel and 
consumables prices, President Maduro has proposed that 
businesses with fewer than 20 employees pay bonuses of 1000 
lempiras (about USD 53), with larger businesses to pay 2000 
lempiras (about USD 106) to each employee. The private sector 
has loudly rejected the proposal, and is pressuring Congress 
to reject the plan when it is formally submitted on September 
7.  Some businesses have threatened layoffs or shut-downs if 
the bill is passed.  End Summary. 
 
2. (U) In the face of sharp increases in fuel and consumables 
prices, on Friday, September 2, the GOH Council of Ministers 
met to consider requiring the private sector to pay bonuses 
to all workers.  That same afternoon, the GOH-controlled 
price of gasoline was increased by 17 lempira (nearly one 
dollar) to 85 lempira per gallon (USD 4.50), and price 
increases of 10 percent for foodstuffs were announced. 
 
3. (U) The current proposal calls for businesses with fewer 
than 20 employees to pay bonuses of 1000 lempiras (about USD 
53), with larger businesses to pay 2000 lempiras (about USD 
106) to each employee.  All bonuses would be payable in 
lump-sum or in monthly installments through the end of the 
year.  According to American Chamber of Commerce Deputy 
Executive Director Patricia Lopez, the GOH did not consult 
with the AmCham or other business groups before making the 
decision, nor has it indicated it would subsidize the 
payments in any way. 
 
4. (U) The private sector responded immediately and 
negatively, pointing out that many businesses, stung by 
sharply higher fuel and transportation costs, could not 
afford to pay current wages.  To add to this burden makes 
little sense, particularly when there is no guarantee that 
prices will fall in the near future.  President of the 
Honduran Industrialists Association (ANDI) Adolfo "Fito" 
Facusse is publicly quoted saying, "Even if they take us to 
jail, we're not paying this bonus." 
 
5. (U) Even before the bonus was made public, some firms are 
openly warning they might have to lay off workers if costs 
continue to rise.  Oscar Galleano, President of the Cortes 
Chamber of Commerce (the second-largest chamber in the 
country and host to much of the maquila sector), has publicly 
stated that a number of firms have already approached him to 
warn that if this bonus requirement is enacted into law, they 
will have to lay off workers, and might have to consider 
relocation to Nicaragua. 
 
6. (SBU) EconChief spoke to Jose Maria Agurcia, President of 
the Honduran Private Sector Council (COHEP), who said that 
his membership was furious and had been in meetings with the 
GOH for much of September 6 seeking to have the proposal 
rescinded.  COHEP has taken a firm stand against the bonus 
payments, noting that small and medium enterprises will be 
unable to make such payments, resulting in job losses and 
business failures.  Worse, Agurcia said, the poorest 
Hondurans, those the payment is allegedly aimed to help, are 
not formally employed but rather work in the informal sector, 
and so will not receive the bonus in any case.  No one wins, 
Agurcia said, and the private sector loses. 
 
7. (C) EconChief also spoke to Vice President of Congress 
Johnny Handal, who noted that the bond idea was so far only 
an executive proposal that will not be submitted to Congress 
for formal consideration until September 7.  "What the 
President does is one thing," he said, "wait to see what the 
Congress does (on September 7)."  Despite these words of 
reassurance, Agurcia later told EconChief that he fears 
Congressional President (and National Party presidential 
candidate) Porfirio "Pepe" Lobo "will take this issue and run 
with it.  We (the private sector) could really get screwed 
tomorrow in Congress," he said.  "He's done it to us before." 
 
8. (U) Comment:  Post will continue to follow this issue 
closely, as it directly impacts the economic viability of 
numerous U.S. investments in the maquila sector.  Many of 
those businesses are medium-sized and are already struggling 
with slackening orders due to increased competition from 
China (reftel A), higher shipping fees (septel forthcoming), 
and higher fuel prices.  End Comment. 
Williard 
Williard