US embassy cable - 03GUATEMALA1814

UNCLAS SECTION 01 OF 02 GUATEMALA 001814 
 
SIPDIS 
 
SENSITIVE 
 
DEPT FOR WHA/PPC: CHARLOTTE ROE 
USTR FOR VIONDETTE LOPEZ AND BUD CLATANOFF 
USDOL FOR ILAB: ROBERT WHOLEY 
 
E.O. 12958: N/A 
TAGS: ELAB, ETRD, PGOV, PHUM, GT 
SUBJECT: CHOI SHIN/CIMATEXTILES LABOR AGREEMENT REACHED 
 
REF: GUATEMALA 1313 
 
1.  (SBU) Summary:  After being threatened with withdrawal of 
tax exemption privileges by the Ministry of Economy, 
management of the Choi Shin/Cimatextiles maquila plants met 
GOG requirements by successfully concluding and signing on 
July 9 a collective bargaining agreement with each plant 
union and achieving two other agreements with the union on 
other pending labor complaints.  On July 10, the GOG 
acknowledged these efforts and withdrew its threat to close 
the plants for labor violations.  The resolution of the Choi 
Shin/Cimatextiles case sets an important precedent in 
Guatemala:  while other collective bargaining agreements have 
been achieved in the sector, all resulted in the closure of 
the plant and loss of unionized jobs.  This agreement is the 
first result of the GOG's new forceful application of a 
mechanism to compel respect for labor rights in the maquila 
sector.  Thirty similar cases of factories with unresolved 
labor complaints under GOG threat of closure remain.  End 
Summary. 
 
Background 
 
2.  (U) The Choi Shin/Cimatextiles plants share Korean 
ownership and are co-located in the same complex in the Villa 
Nueva municipality adjacent to the capital.  They employ a 
total of 1300 workers.  Liz Claiborne Inc. is one of the 
major buyers of clothing made in these factories.  Anti-union 
violence, encouraged by management, broke out in July 2001 
when some workers filed a petition with the Labor Ministry 
announcing a unionization drive.  After international 
attention and GOG intervention, two plant unions (SITRACHOI 
and SITRACIMA) were organized.  Since then, union members 
reported a climate of low-level anti-union harassment which 
prevented the unions from achieving the 25% threshold of 
worker support to compel collective bargaining negotiations. 
Meanwhile workers filed complaints with the Ministry of Labor 
regarding unjustified firings (approximately 40 cases since 
July 2001) and other issues. 
 
Minister's Role 
 
3.  (SBU) Minister of Labor Moreira told visiting USTR and 
USDOL officials in May (RefTel) that President Portillo had 
authorized the use of the Minister of Economy's power to 
grant import and export tax privileges to compel resolution 
of labor complaints pending against maquila employers.  At a 
bilateral labor working group on July 10 (SepTel), Minister 
Moreira told the Ambassador that the Labor Ministry has sent 
a list of 30 maquilas with outstanding labor violations to 
the Minister of Economy.  It chose Choi Shin/Cimatextiles as 
the first case, not to threaten the existence of the only two 
unions currently in existence in the maquila sector, he said, 
but because it is the case that has generated the most 
international attention.  If the GOG's three conditions were 
met by July 10 (two had already been met by an earlier 
deadline of July 7), he said, the GOG's threat to withdraw 
tax privileges would be rescinded.  The outstanding 
requirement was to present a signed collective bargaining 
agreement. 
 
4.  (SBU)  Liz Claiborne's local representative and an agent 
of the Fair Labor Association kept the Embassy informed of 
the status of negotiations between Choi Shin/Cimatextiles' 
management and the unions throughout the negotiation and 
played important roles encouraging an agreement.  Agreement 
was reached on the final issue of a monthly wage raise (of 
$12.85) on July 9.  The GOG acknowledged the agreement on 
July 10. 
 
5.  (SBU) Privately and publicly, industry employer groups 
have reacted strongly against the use of the threat of 
closure by the GOG to compel collective bargaining.  CACIF 
Labor Commission chief Carlos Arias told LabAtt that 
employers believe the GOG should close the plants for 
violations rather than force them to negotiate a CBA "with a 
gun to (management's) head."  VESTEX maquila employer 
association labor advisor Rolando Figueroa accused the GOG of 
"acting under political pressure" from international 
organizations which "don't understand the economic realities 
in Guatemala."  "(The GOG) should give appropriate attention 
to labor violation complaints, but follow the course of the 
law." 
 
Comment: 
 
6.  (SBU) If implemented, the Choi Shin/Cimatextiles 
collective bargaining agreement will be the first in the 
Guatemalan maquila sector (previous agreements prompted 
management to close their plants and reopen elsewhere to 
break their unions).  As such, it will set a precedent not 
lost on other maquila labor violators.  The GOG believes this 
new coercive mechanism is legal and is an important new tool 
to punish and prevent labor violations in plants which 
benefit from export tax privileges.  While the GOG's strategy 
in this case was high-risk (it might have resulted in the 
closure of the only two unionized maquila plants in Guatemala 
and the loss of 1300 jobs), the GOG deserves credit for 
achieving an outcome which may strengthen labor rights and 
cause violators to change their behavior. 
 
HAMILTON