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Cablegate: Labor Delegation Consultations in Ecuador

This record is a partial extract of the original cable. The full text of the original cable is not available.

UNCLAS SECTION 01 OF 04 QUITO 002480

SIPDIS

SECSTATE FOR USTR
USTR FOR BUD CLATANOFF, USDOL FOR JORGE PEREZ-LOPEZ, DRL/IL
FOR GREG MAGGIO, EB FOR AMY HOLMAN

E.O. 12958: N/A
TAGS: ELAB PGOV EC
SUBJECT: LABOR DELEGATION CONSULTATIONS IN ECUADOR


1. (U) Summary. During a September 1-3 visit to Ecuador, an
interagency labor delegation met with GoE officials, labor
and business representatives and Ecuadorian civil society
representatives, fulfilling the Trade Promotion Authority
mandate to consult on labor law and practice and begin the
fact-finding process necessary to prepare the meaningful
labor rights report to Congress. Their meetings helped
clarify the significant labor rights challenges facing the
GoE, including possible labor code reform. End Summary.

Background
----------

2. (U) The USG delegation consisted of William Clatanoff,
Assistant US Trade Representative for Labor Affairs, USTR;
Jorge Perez-Lopez, Associate Deputy Under Secretary for
International Affairs, DOL; Amy Holman, Trade Economist,
Bureau of Economic and Business Affairs, DOS; Greg Maggio,
Foreign Affairs Officer, DRL, DOS; and Carlos Romero,
International Economist, International Labor Affairs Bureau,
DOL. The delegation met with the Ambassador and selected
Country Team members shortly after their arrival and were
accompanied to all meetings by LabOff, and joined in Quito by
PolCouns, and in Guayaquil by CG. The Embassy issued a press
release about the visit but press coverage was light on
substance, with the exception of a positive article in major
national daily "El Comercio" on September 4.

Private Sector Wants Labor Flexibility
--------------------------------------

3. (SBU) On September 1 in Quito the delegation met with
members of the Chambers of Commerce and Industry. Chamber
leaders offered a power point presentation showing what they
feel to be disadvantages (especially when compared to
neighboring countries) in the current labor laws for business
owners in Ecuador. Some of the labor laws they feel are too
rigid include the 40-hour work week and 13-hour work day, the
cost of contracting a worker, cost of firing a worker
(including company retirement) and the 15% annual
profit-sharing required by law. As a result, only 3,900 of
some 80,000 businesses in Ecuador report profits. To be more
competitive, business leaders believe Ecuador needs to
lengthen the work week and the work day, and lower costs of
hiring and firing workers. The Chambers agreed that if
consensus were found in the National Labor Council, it would
be much easier to approach the government with a labor
reform.

4. (SBU) In Guayaquil on September 3, the delegation met
with Alberto Dassum, President of the Chamber of Industry of
Guayaquil; Miguel Pena, Alternate President of the same
Chamber; and Teodoro Maldonado, Executive Vice President of
the Chamber of Commerce of Guayaquil. Chamber leaders in
Guayaquil agreed with their counterparts in Quito that more
labor law flexibility was needed. Dassum said the workweek
should be extended to 44 hours. Some labor laws were part of
the Constitution and therefore could not be changed easily.
Pena, however, said that if the unions and the business
community could jointly propose reforms to Congress, they
could serve as an example for the world.

Unions Want Greater Protection
------------------------------

5. (SBU) On September 1, the delegation met with Jaime
Arciniegas, President of CEOSL, the largest union federation
in Ecuador; Mesias Tatamuez, President of the union
federation CEDOCUT and rotating head of the United Workers
Front, which includes the five largest labor federations;
Santiago Yagual, head of the union federation CTE; and
Patricio Contreras of the Solidarity Center (AFL-CIO). The
union leaders expressed concern about business community
desires to reduce wages and (in the union's view) curtail
worker rights in order to be more competitive. The unions
have proposed their own reforms of the labor code. In their
view, real collective bargaining does not exist in the
country. They believe workers currently have little
protection on paper and none in practice, with no guarantee
of stability. While laws such as profit-sharing exist, CEOSL
believes that no more than 220 unionized workers and 4,000
workers overall actually receive it. The unions are also
worried about worker rights in the flower sector where there
are serious health problems arising from the use of
pesticides without proper protection and child labor issues.
They believe the MOL needs to do more to monitor health and
safety standards in the flower and banana sectors.

6. (SBU) The unions estimate that 75% of Ecuador's workers
are hired through subcontracting. They feel the MOL needs to
do more to regulate subcontracting. The union leaders did
not express much faith in the current Minister of Labor and
his Ministry; Arciniegas said the country would be better off
without the Ministry. The unions believe the ILO should play
a more active role helping the GoE comply with international
labor standards. Union leaders estimate union membership at
less than one percent; business leaders put union membership
at five percent or lower. The union leaders believe the
Gutierrez government lacks the credibility to sign a Free
Trade Agreement with the U.S. at this time.

MOL Committed to Reform
-----------------------

7. (SBU) Also on September 1, the delegation met with the
Minister of Labor Dr. Raul Izurieta, Vice Minister Beatriz
Garcia, and several other key officials from the MOL. The
Minister discussed the possibilities of labor reform, yet
most of his suggestions seemed to fall on the side of making
it easier to hire and fire workers. The Minister agreed with
the Chambers that the current labor laws are over-protective
of workers and need to be changed so businesses can be more
competitive. The Minister said he would introduce reforms to
allow payment of workers per hour, changing vacation
requirements and altering company retirement laws.
Currently, after 20 years of work, a worker is entitled to an
additional retirement package. Because of this, many
employers fire their workers just before they reach this
threshold. The Minister said he believed it would be
impossible to lower the 30 person minimum requirement to form
a union.

8. (SBU) The Minister said he has asked the ILO and two
Ecuadorian lawyers to work on proposals for labor code
reform. He has also asked the ILO to identify an
international expert who could help. Izurieta claimed it has
had some success in dealing with child labor in the banana
sector with the tripartite Social Banana Forum. They are
also considering supporting a similar program for the flower
sector. The Minister said that flower and agricultural
workers prefer to resolve their conflicts directly, without
the interventions of union federations. Minister Izurieta
said three more child labor inspectors would be named soon,
in addition to the 19 that are already in place, to comply
with the labor law that requires one inspector per province.

9. (SBU) The delegation met on September 2 with the
newly-created National Labor Council. Representatives from
the union federations, the Chambers of Commerce and Industry,
the small business community, and artisans attended. CEOSL
union representative Jose Chavez expressed concern that ILO
conventions still were not being lived up to. Ramiro Leon of
the Chamber of Industry of Pichincha province said both
unions and businesses share the same goal which is to
increase jobs in the formal sector and that if change is made
through consensus, it could benefit everyone.

10. (SBU) With the US delegation later that evening, the
Minister said he had spoken earlier with Congressman Andres
Paez (head of the Labor Commission in Congress) and would
include him in future meetings of the National Labor Council
(see para 14 on the delegation meeting with Paez). The
Minister said he had reached an agreement with Paez that the
Minister would table reform proposals in the National Labor
Council by the end of September. He told delegation member
Clatanoff that he intended to urge the Council to engage in
discussions about those reforms after national local
elections on October 17, with a view toward submitting
revised changes to Congress by early November.

Trade Ministry Willing to Help With Industry
--------------------------------------------

11. (SBU) In a meeting on September 2, with Minister of
Trade Ivonne Baki and Christian Espinosa, Under Secretary of
Foreign Commerce and Integration and Ecuador's Chief FTA
negotiator, Mr. Espinosa said both business and labor are
hesitant to re-open the labor code issue as it is a Pandora's
Box; both sides fear that they will end up worse off than
they were to begin with. Minister Baki said it would be
impossible to lower the number of 30 workers needed to form a
union, even though ILO reports suggest this number is too
high. (The number was raised from 15 to 30 in a 1991
reform.) Mr. Espinosa said it was important to make clear to
the National Labor Council that this could be an opportunity
where both sides could gain and to have them look at positive
examples of labor reform from other countries, like Morocco.

ILO Willing to Help
-------------------

12. (SBU) On September 2, the delegation met with Ricardo
Hernandez Pulido, ILO's Regional Director from Lima; Adolfo
Ciudad, the ILO's labor specialist in Lima; Jorge Viteri,
consultant to the ILO in Quito; and Magne Svartbekk, Director
of ILO/IPEC's program in Ecuador. Mr. Hernandez said the
Ministry of Labor had requested the ILO institutionalize
social dialogue on labor reform. He expressed concern about
lack of communication between the ILO and the Inter-American
Development Bank and World Bank in support of labor code
reform. The delegation agreed that it would be logical for
the ILO to play an important role in creating a foundation
for a modern, balanced labor code reform.

13. (SBU) Magne Svartbekk spoke to the group about IPEC's
child labor program which started seven months ago. He has
insisted that the program be tripartite including the
Ministry of Labor, Ministry of Government, Police, Unions and
Chambers of Commerce. IPEC played a role in organizing
training for the child labor inspectors, but Mr. Svartbekk
believes the new inspectors are still weak and lack
resources. He is also working on a reform proposal to
harmonize the labor code with the more recent Code on
Children and Adolescents, which has stronger protections
against child labor.

Congress Takes Middle Course
----------------------------

14. (SBU) On September 2, the delegation met with
Congressman Andres Paez, member of the Democratic Left party,
and head of the Labor Commission in Congress. Paez claimed
that while the businesses and trade unions have opposing
points of view, his viewpoint is only the interest of the
country as a whole. Paez said he did not think freedom of
association was a problem in Ecuador. He believes rules on
collective bargaining in the private and public sectors
should be different, to prevent excessive salary increases
from burdening the national budget. Paez told the delegation
that currently no political party supports lowering the
number of 30 workers needed to form a union. Paez also said
he believed that subcontracting has been abused by employers
to avoid their responsibilities to workers, and has
introduced legislation to harmonize the labor code with the
stronger Code for Children and Adolescents. Paez said it is
important for labor code reforms to have social legitimacy.
He agreed with the delegation about the importance of
ensuring that any reforms are ILO-consistent. Paez also said
he believed that to succeed, labor reforms must have social
legitimacy. The National Labor Council could help build that
legitimacy for labor law reform that can gain Congressional
approval. He noted that the Congressional Labor Commission
is diverse and includes seven Congress members -- two from
the Democratic Left party, two from the Social Christian
Party, and one each from the Communist party, the Ecuadorian
Roldosista Party, and the National Institutional Renewal
Action Party.

Going Bananas
-------------

15. (SBU) On September 3, the group traveled to Guayaquil
where they met with Sergio Seminario, a former Minister of
Agriculture and head of SONICONTI, a group that analyzes
international banana markets, and owner of a banana
plantation. Seminario said that Ecuadorian labor law does
not respond to rural realities. For example, a cow needs to
be milked seven days a week, not only between Monday and
Friday as the labor code allows. Rigidities in the law have
forced banana producers to resort to subcontracting.
Seminario also claimed that it was not in producer interests
to get certified as organic producers or labor standard
compliant, because they did not get a better price in the
international market as a result.

16. (SBU) The group also met with the Banana Social Forum in
Guayaquil. The Forum is active in three provinces: Guayas,
Los Rios and El Oro. Guillermo Touma, head of the trade
union FENACLE and a Forum member, said the creation of the
Forum was a positive outcome of Human Rights Watch's 2003
report on the banana sector in Ecuador. Touma said
conditions for adult workers need to be improved before child
labor can be eradicated. Touma said of 200-300,000 direct
banana employees, only 1,350 were unionized. Touma said
"union" is still a "taboo" word in Ecuador. A representative
from the Noboa banana company claimed that over 1,800
unionized workers exist on just one plantation, Hacienda
Clementina. Touma in a later meeting charged that the Noboa
union is a "yellow" union controlled by management.

17. (SBU) According to Maria Antonieta Reyes of the Forum, a
second round of child labor inspections began August 4, 2004.
She did not discuss the first round of inspections in depth.
The Foro has helped find monitors to accompany the
inspectors when they go out on inspections. Reyes said that
there was just one case of a minor under the age of 15
working. In this case, it was a 14-year old father of two
children. Reyes said none of the minors were at any health
risk and only worked one to two days a week.

18. (SBU) The delegation also met in Guayaquil on September
3 with Guillermo Touma, president of the FENACLE union
federation, Jaime Arciniegas, President of CEOSL. and Gina
Carangui, a former banana worker. Touma said banana workers
receive a monthly salary of $80-140 and work over ten hours a
day. This is far from enough to purchase the basic basket of
goods which costs $380 a month. Employers use six-month
contracts for banana workers, rotating them from one
subcontractor to another, to avoid having to pay social
security or other benefits. Touma said there is no
government commitment to respect labor rights, including
freedom of association. Banana producers are too strong
politically and economically for the government to control
them. As evidence, they cited the government's weak
investigation and prosecution of anti-union violence at the
Los Alamos plantation, owned by prominent businessman and
politician, Alvaro Noboa. Touma said a labor dispute had
been resolved the day before at La Viscaya plantation, where
FENACLE was able to have workers reinstated after being fired
for unionizing. The businesses gave them a new contract and
social security but still would not allow them to unionize.
Arciniegas said he does not want the unions to be an obstacle
to commerce, but wants the GoE to permit the formation of
horizontal (industrial) unions, especially in the banana,
flower and sugar sectors.

Comment: The Way Ahead
----------------------

19. (SBU) Labor code reform will be very difficult
politically, and Izurieta may be overly optimistic about his
timetable for reform. Both labor and management want
changes, but want different (not wholly irreconcilable)
things. The Minister's priorities seem heavily weighted
toward business interests. We can help by urging him to work
together with business and labor, the ILO and Congress to
produce a balanced and politically feasible reform package.
The National Labor Council appears an ideal venue for any
labor-business accord to be blessed by both sectors before
going to Congress. Meanwhile, we continue to press for
issuance of the long-delayed Presidential Decree on
subcontracting.
KENNEY

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