Cablegate: Mol Considers Labor Reform; Unions Urge Resignation

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





E.O. 12958: N/A

1. (SBU) Summary: Meeting in Guayaquil with USTR and
Department of State officials, two key Ecuadorian labor
leaders stated they will challenge the recently published
executive decree on subcontracting as unconstitutional, and
also repeated a call for Minister of Labor Raul Izurieta's
removal from office. They also will file a complaint with
the ILO and the Inter-American Court of Human Rights
regarding a decision by Ecuador's Constitutional Tribunal on
the Civil Service Law, which they feel violates collective
bargaining rights. Izurieta told USTR, DOL, and State
Department representatives in Guayaquil that he was working
on promoting labor code reform, but was facing difficulties
in getting the labor sector engaged. He implied he might
propose legislation permitting sector-wide unions, but did
not react to other proposed reforms. End Summary.

Union Leaders Unhappy With Subcontracting Decree
--------------------------------------------- ---

2. (SBU) On October 26, William Clatanoff, AUSTR for Labor;
Michael Puccetti, WHA/PPC; Greg Maggio, DRL/IL; and LabOff
met three labor leaders in Guayaquil to discuss the
recently-issued Presidential decree on subcontracting and
prospects for further labor law reform in the country. Jaime
Arciniegas, President of the labor federation CEOSL; and
Guillermo Touma, president of the labor union, FENACLE; were
accompanied by Patricio Contreras, AFL-CIO Solidarity Center
representative. The three were in Guayaquil to participate
in protests against the fifth round of negotiations of the
Andean Free Trade Agreement, held between October 25th and

3. (SBU) Arciniegas, Touma and Contreras expressed
displeasure with the content of the decree and stated that
they would file a lawsuit charging that the document violates
Ecuador's constitution. They were particularly opposed to
Article 9, which states that subcontracting can be used for
"indefinite" periods of time. They also believe that the 75%
cap on subcontracting at any individual primary company will
not protect workers against employer abuse and, furthermore,
is contradicted in the same article by a phrase that says
workers can be subcontracted indefinitely to do the primary
work of a company "in part or in total." The unions had
previously proposed to the Ministry of Labor a 15% cap on
subcontracted workers. The three also asserted that because
there is no Ecuadorian law on subcontracting, it is
unconstitutional to regulate this activity by means of an
executive decree. They did not bring up the provision in the
decree that allows "natural persons" to act as subcontractors
in the agriculture sector. When asked, they stated they were
very concerned it could be used as a legal loophole by
companies. On the positive side, the three conceded that the
decree at least represents a first attempt to regulate
subcontracting and prohibits employers from hiring false
subcontractors directly linked to company management.

4. (SBU) Arciniegas and Touma expressed concern that the
decree had never been submitted for review to the National
Labor Council, which was set up in March 2004 to coordinate
input from workers, employers and the government on labor law
reform and related developments. While the President and
Minister of Labor (MOL) met with trade union leaders,
including Arciniegas, to discuss earlier versions of the
decree, they now asserted that labor's positions and
suggestions were not taken into account. Furthermore, they
said, the MOL had not responded to their recommendations and
had failed to show them the final version of the text before
it was published in the official register. They said the
labor movement is considering mobilizing workers to protest
the decree and may even call for a national strike and an
international campaign to draw attention to the situation.
They repeated their call for Izurieta's removal, asserting
that he represents the nation's business interests rather
than its workers.

5. (SBU) Arciniegas and Touma also voiced concerns about the
Constitutional Tribunal's ruling on the Civil Service and
Administrative Career Law. The Tribunal classified the law
as "organic" in a ruling published in the Official Register
on September 28. This means the law overrides the labor
code. With no additional recourse since the Tribunal has
ruled, the union leaders stated they would be making formal
complaints to the ILO and the Inter-American Court of Human
Rights. The unions believe this new law, passed in January
2004, takes away public sector workers' right to collective
bargaining by setting maximum salaries (while still allowing
them to form a union). Under Ecuadorian law, manual laborers
are defined as "workers" and those that do intellectual tasks
as "employees." "Workers" have the right to collectively
bargain under the labor code, while "employees" fall under
the Civil Service Law, which prohibits collective bargaining.
Union leaders feel the government is labeling many who
should be "workers" as "employees" to deny them collective
bargaining rights.

6. (SBU) Arciniegas said that MOL Izurieta had refused a
request by cut flower sector workers to form an industry-wide
union. Touma stated that there had been no repeat of
violence similar to what occurred at the Los Alamos
plantation. He said this was due to USG attention to labor
issues in Ecuador.

Minister of Labor Accepts Responsibility for Labor Code Reform
--------------------------------------------- -----------------

7. (SBU) In a meeting on October 26 with AUSTR Clatanoff,
ADUS Jorge Perez-Lopez (USDOL), PolCouns and LabOff,
Clatanoff made clear that he believed that the US Congress
would not pass a Free Trade Agreement (FTA) without Ecuador
reforming its Labor Code to make it ILO-consistent.
Perez-Lopez and Clatanoff told Izurieta of a meeting they had
had with an Inter-American Development Bank staff member, who
stated there were funds available for a Labor Code reform
project. Post is also working on putting MOL staff in
contact with AID to discuss AID-funded Trade Capacity
Building projects.

8. (SBU) Izurieta agreed that additional labor reforms are
desirable, but complained that labor union leaders had
perspectives that were out of date and were unwilling to
negotiate in good faith with him. Izurieta urged the Embassy
to intervene and speak with labor leaders to convince them to
come to the table for Labor Code reform. Clatanoff offered
to return to Quito in November to speak with union leaders,
business leaders and the National Labor Council, an idea that
pleased Izurieta. Clatanoff told Izurieta that unions' total
acceptance of Labor Code reform was not necessary; more
importantly, he said, the reforms needed to be

9. (SBU) Izurieta said the National Labor Council was
currently working on a forthcoming Presidential decree
regulating the hiring of workers paid by the hour. Izurieta
feels there is strong support from all sectors for this
regulation. Izurieta seemed to react positively to
Clatanoff's suggestion to permit industrial or sector unions
such as the flower-industry union Touma discussed in the
earlier meeting, although he claimed this would require
legislative reforms. Sector-wide unions could serve to
provide freedom of association to subcontracted workers who
do not meet the 30-person legal minimum to organize a
stand-alone union. Izurieta did not react to other possible
labor code reforms suggested by Clatanoff, including
reinstatement of workers fired for union organizing and
prohibition of hiring discrimination against union members.

10. (SBU) In meetings with the Ecuadorian business community
and President of Congress Guillermo Landazuri, AUSTR Regina
Vargo highlighted the importance of labor reform to building
US Congressional support for an FTA with Ecuador. Both
business leaders and Landazuri understood and accepted her
point. Suprisingly, business leaders did not return to their
well-known objections to the subcontracting decree in the
meeting, focusing instead on the need to move forward on
labor reform, and on their other FTA concerns.


11. (SBU) While labor code reform will not be easy, to have
any chance, Izurieta must show greater leadership. We will
continue to push for cooperation with partners such as the
ILO and IDB, which will also be crucial for this endeavor.
However, coordination with union leaders will be a challenge.
The signing of an FTA may be an incentive for the GOE to
pass labor code reform. The business community, which
expects labor reform to result in a more dynamic and
competitive labor market, can be an important force
supporting reform. Union leaders, who oppose the FTA and any
increase in labor market flexibility, are unlikely to be

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