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Cablegate: (U) Nicaragua: Labor Monitoring and Engagement with Free

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RHEHAAA/NATIONAL SECURITY COUNCIL WASHINGTON DC
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UNCLAS SECTION 01 OF 10 MANAGUA 000202

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E.O. 12958: N/A
TAGS: ELAB ECON ETRD PGOV NU
SUBJECT: (U) NICARAGUA: LABOR MONITORING AND ENGAGEMENT WITH FREE
TRADE

REF: 09 STATE 129631; 09 MANAGUA 437

1. (U) As per Ref. A request, the following is U.S. Embassy
Managua's submission regarding Labor Monitoring and Free Trade
Agreements.

A. Labor Issues Scene Setter:

The Right of Association

2. (U) The law provides for the right of all public and private
sector workers, with the exception of those in the military and
police, to form and join independent unions of their choice.
Workers exercise this right in practice. Workers are not required
to notify their employer or the Ministry of Labor (MITRAB) of their
intention to organize a union. According to the latest figures, the
country has a population of 5.7 million people, of which,
approximately four million participate in the workforce. MITRAB
estimates that 180,000 workers are members of approximately 850
trade unions. The unionized workforce represents approximately 4.5
percent of the total workforce between 15 and 60 years old. In
general, labor unions are allied with political parties, and clash
with each other along party lines.

3. (U) The constitution recognizes the right to strike, and the
law allows unions to conduct their activities without government
interference. However, burdensome and lengthy labor code
conciliation procedures impede workers' ability to call strikes.
During a strike, employers cannot hire replacement workers. If a
strike continues for 30 days without resolution, MITRAB has
authority to suspend the strike and submit the matter for
arbitration. MITRAB often declares strikes illegal, even when
workers follow legal strike procedures. The reality for workers in
the private sector is that to prevent strikes employers terminate
or otherwise separate from service those workers who they identify
as potential activists or strong organizers. The prevalence of
employer-controlled unions in workplaces that also have more
traditional unions also impacts the practical ability of private
sector workers and unions to strike.

The Right to Organize and Bargain Collectively

4. (U) The law provides for the right to collective bargaining. A
collective bargaining agreement cannot exceed two years and is
automatically renewed if neither party requests its revision. The
government protected these rights and often sought to foster
resolution of labor conflicts through informal negotiations rather
than formal administrative or judicial processes. Companies in
disputes with their employees must negotiate with the employees'
union, if one exists. By law, several unions may coexist at any one
enterprise. The law permits management to sign collective
bargaining agreements with each union operating at an enterprise.

5. (U) The penal code establishes sanctions against employers who
violate labor rights, such as interfering with the formation of
unions or strikebreaking. In practice, many employers in the formal
sector continued to violate worker rights by blacklisting or firing
union members. Employers also avoid legal penalties by organizing
"white unions" (employer-led unions), which lack independence.
Union leaders assert that employers and union leaders who support
the Ortega administration often pressure workers affiliated with
non-FSLN unions to resign and register with FSLN unions.

6. (U) Although employers must reinstate workers fired for union
activity, MITRAB cannot legally order employers to rehire fired
workers. Formal reinstatement requires a judge's order. The law
allows employers to obtain permission from MITRAB to dismiss any
employee, including union organizers, provided the employer agrees
to pay double the usual severance pay. In practice, employers often
do not reinstate workers due to weak enforcement of the law.

7. (U) Labor leaders complain that employers routinely violated
collective bargaining agreements and labor laws. Through the first
six months of 2009 (the latest statistics available) MITRAB
conducted 3,959 inspections and issued 26 fines, including some to
companies that operate in Free Trade Zones (FTZ).

8. (U) There are no special laws or exemptions from regular labor
laws in the 41 FTZs. Less than 10 percent of the estimated 55,000
FTZ workers are union members. Because a high proportion of FTZ
unions have fewer than 50 members, many lack effective collective
bargaining power (Ref. B). This is primarily due to the effects of
labor law reform in 1996, when the threshold for union formation
was modified from 50 percent of a workforce to only 20 workers.
While this has led to the creation of more unions, these unions are
often weak, divided, and easy to break apart by employers. Though
the law establishes a labor court arbitration process, long delays
and lengthy, complicated procedures have a detrimental effect on
labor resolutions mediated by the courts. As a result, most labor
disputes are reconciled outside of court. The International Labor
Organization (ILO) has been working with the government and labor
leaders in an effort to reform this process and make it more
accessible to those who have disputes with their employers.

9. (U) Labor unions have continued to complain that companies
which operate in the FTZs attempt to block unionization efforts by
any means necessary, including by closing down operations. Also,
they allege that when the companies close, many avoid making the
payments as required by law. Despite the fact that the majority of
worker complaints reported to MITRAB involve companies which
operate in the FTZs, the government has been slow to take
substantial action in reforming labor practices in these areas.
However, the FTZs often represent more worker complaints and
government inspections because the sector is easier to monitor than
the larger informal or agricultural sectors. In addition, the
majority of workers' unions operate in the free trade zones, and
therefore more complaints are registered against FTZ companies.

Prohibition of Forced or Compulsory Labor

10. (U) The law prohibits forced or compulsory labor, including by
children; however, labor advocates report that such practices
occur. The law does not prohibit the trafficking of persons for
forced labor. The government does not have the resources to
effectively enforce the law or implement programs to combat forced
labor. There are instances of forced domestic servitude, primarily
of female minors, and of forced prostitution by minors who are
trafficked to urban centers from other countries or from rural
areas within the country.

Prohibition of Child Labor and Minimum Age for Employment

11. (U) Although the law provides for the protection of children's
rights and prohibits any type of economic or social exploitation of
children, child labor is a widespread problem (Ref. C). The
government does not effectively enforce the law to protect children
from workplace exploitation. The 2005 National Survey of Adolescent
and Child Labor, the most recent available, estimated that there
were approximately 239,000 working children between 5 and 17 years
old, of whom 36 percent were less than 14 years old. The NGO Save
the Children has noted that, although school enrollment increased
from 2007-2008, it fell in 2009 due to the economic situation as
well as budget cuts in education and health. Lower enrollment rates
typically correlate with a higher incidence of child labor.

12. (U) The law establishes the minimum age for employment at 14
years and limits the workday to six hours and the workweek to 30
hours. Children between 14 and 16 years of age must have parental
approval to work. The law prohibits teenage domestic workers from
sleeping in the house of their employers. MITRAB is legally
responsible for caring for those teenage domestic workers unable to
return each evening to their families, though the law is not
generally enforced. It is also illegal for minors to work in places
identified by MITRAB to be harmful to their health or safety such
as mines, garbage dumps, and night entertainment venues. However,
children as young as 14 are allowed to work as prostitutes.
Nicaragua does have laws against trafficking in persons, including
minors.

13. (U) All employees more than 14 years old must be enrolled in
the Nicaraguan Social Security Institute (INSS). The law also
provides for eight-year prison terms and substantial fines for
persons employing children in dangerous work and permits inspectors
to close facilities employing child labor. The government does not
provide adequate resources for MITRAB to effectively enforce the
law except in the small formal sector. Though the annual budget for
MITRAB was cut in 2009, the percentage of the budget allocated to
enforcement increased by 10 percent, from approximately 18 million
cordobas ($874,000) to 21 million cordobas ($1 million).

14. (U) Most child labor occurs in the large informal sector,
including on coffee plantations and subsistence farms, and in
forestry, fishing, and hunting. According to the ILO's
International Program on the Elimination of Child Labor, children
engage in the worst forms of child labor in plantation agriculture,
shellfish harvesting, pumice and limestone quarrying, artisanal
gold mining, industrial manufacturing, construction,
commercial/retail, hospitality, and housekeeping. Employers also
use child laborers to cross major land borders with drugs and other
contraband.

15. (U) Children working in agriculture suffer from exposure to
the sun, extreme temperatures, humidity, and dangerous pesticides
and other chemicals. Hundreds of children working with their
families face exposure to sun, extreme temperatures, water
pollution, and powerful ocean tides in harvesting black clams for
ceviche.

16. (U) In 2008, the government inaugurated Programa Amor (love),
a social welfare program headed by first lady Rosario Murillo with
a stated goal of eradicating the worst forms of child labor. While
there is some evidence that the program was operative in early
2009, quantitative information regarding its effectiveness has been
largely absent due to lack of accessibility. The government
continues activities to incorporate working adolescents into the
formal workforce by transferring children from the worst forms of
child labor into non-dangerous activities. NGOs offer vocational
training to help adolescents develop job skills for FTZ factory
employment. Through its inspections network, MITRAB removed 51
child workers from employment and incorporated 783 adolescents into
the formal sector during the first six months of 2009.

The Elimination of Discrimination in Respect of Employment and
Occupation

17. (U) An ongoing area of employment discrimination in Nicaragua
is based on gender. Nicaragua still possesses a strongly
"machista" culture, which affects Nicaraguan women's rights
especially in the workplace. Local magistrate Ligia Molina, during
a Public Forum on Gender in 2009, commented that while gender-based
discrimination has decreased within the last decade, it is still
prevalent in Nicaragua. On a national level, local media report
that women still struggle for equality in education, equal
salaries, and access to competitive job positions within the
government and business world. One of the most debilitating
effects of machista culture in the development of women's labor
equality is the persistent lack of emphasis on education for girls.

18. (U) The other principal area of employment discrimination is
based upon political affiliation. Labor activists report that more
than 11,000 non-unionized public employees were fired in 2009 after
rebuffing pressure to join the FSLN party, participate in political
marches, and join the FSLN National Union of State Employees (UNE).
The leader of the FSLN National Front of Workers (FNT), Gustavo
Porras, told the media that he wanted to make the rival Sandinista
Central of Workers (CST) "disappear" from state institutions, a
sentiment which the FNT has backed up through directing illegal
firings of a number of CST union leaders and activists.

19. (U) Another case of a pattern of politically-motivated firings
carried out by large government entities occurred in February 2009,
when the Tax Administration (DGI) fired nearly 400 employees for
refusing to join Sandinista Leadership Councils (CLS), government
groups dedicated to strengthening the organizational power of the
FSLN. The DGI also failed to pay the proper severance as required
by law. Though most of these firings have been ruled illegal by the
courts, none of the large government entities involved have abided
by rulings mandating payment of severance.

Acceptable Conditions of Work

20. (U) The national Minimum Wage Law establishes a statutory
minimum wage for nine different economic sectors and is set through
tripartite negotiations involving business, government, and labor
(Ref. D). The National Assembly must approve any wage increases.
During 2009 the government increased the minimum wage by an average
of 11 percent across all sectors. The monthly minimum wage ranged
from 1,573 cordobas ($76) in the agricultural sector to 3,588
cordobas ($174) in the financial sector. The highest minimum wage
remains significantly below the MITRAB's estimated basic cost of
goods for an urban family, which is 8,670 cordobas ($401). Also,
the minimum wage is generally enforced only in the formal sector
and is thus only applicable to approximately one-third of the
population.

21. (U) The standard legal workweek is a maximum of 48 hours, with
one day of rest; however, this provision is often ignored by
employers who claimed that workers readily volunteer for extra
hours for additional pay. While the law mandates premium pay for
overtime and prohibits excessive compulsory overtime, these
requirements were not always effectively enforced.

22. (U) The law establishes occupational health and safety
standards, but the government does not allocate adequate staff or
resources to enable the Office of Hygiene and Occupational Safety
to enforce these provisions. The labor hygiene and security law
mandates the creation of regional offices for the National Council
of Labor Hygiene and Safety. The council is responsible for worker
safety legislation, collaboration with other government agencies
and civil society organizations in developing assistance programs,
and promoting training and prevention activities. The government
does not enforce the new law effectively. MITRAB had conducted
1,096 health and safety inspections in the first half of 2009, the
most recent data available. Also, 1,154 workplace accidents were
reported in this period, a drop from 5,497 reported in the first
half of 2008.

23. (U) The law provides workers with the right to remove
themselves from dangerous workplace situations without jeopardizing
continued employment, but many workers are unaware of this right
due to the lack of dissemination of information by the government.

24. (U) The point of contact for FTA labor matters at MITRAB is
Dr. Jose Malespin, General Secretary. Other key organizations
involved in labor rights issues in Nicaragua are the International
Labor Organization (ILO), human rights NGOs such as the Permanent
Committee on Human Rights (CPDH) and the Nicaraguan Center for
Human Rights (CENIDH), and the Labor Committee at the Superior
Council of Private Enterprise (COSEP).

B. Strategy Recommendations:

Labor Code Reform for Employment Stability

25. (U) Labor rights advocates, union leaders and employers have
complained that the MITRAB is often inflexible in its
interpretation of the existing labor code, often to the detriment
of preserving employment. In fact, unions within the FTZs recently
signed a tripartite agreement to interpret the labor code in a way
that would improve job security while respecting labor rights.
Reforms include changing the bi-yearly minimum salary adjustment
process to a single-year review; increasing work-hour flexibility
to allow for 4 x 4 shifts popular in assembly plants; and allowing
vacation rules to be more flexible for workers and employers.

Labor Courts Reform and Anti-Corruption

26. (U) Unions and labor rights advocates all decry the lack of
labor justice for Nicaragua's workers. The current case backlog
and long conciliation procedures are only part of the problem.
Labor advocates believe that a program to reform the courts and
conciliation procedures to increase efficiency would improve the
situation. Fundamentally, the rampant corruption within the
Nicaraguan judicial system need to be addressed before real,
sustainable change can occur.

Improve Employer Compliance

27. (U) When a company suddenly closes, it often has not set aside
sufficient funds to liquidate its workers' claims and pay their
severances. The law makes it difficult for workers to get redress,
especially when foreign owners are involved. Labor rights
advocates recommend reforming the labor laws to require employers
to contribute to an "escrow" account that would be released only
after all worker liabilities were settled. Alternatively, labor
rights advocates recommend reforming labor laws to immediately
confiscate equipment of companies that close, and use the proceeds
from the sale of equipment to settle workers' claims.

Improving Worker Productivity & Developing National Certification

28. (U) Labor rights advocates have repeatedly stressed the need
to improve worker productivity through better education and skills
development (both professional and personal). They note that most
Nicaraguan workers do not complete the 3rd grade, and that they
often have not developed the basic work habits (for example,
getting to work on time and making arrangements for child care
during work hours). They recommend that the GON improve and expand
the national system of vocational institutes for students, as well
as a national certification process for technical vocations.
Nicaragua currently does not have a national certification process
for electricians, carpenters, plumbers, mechanics, etc. Such a
system would improve consumer confidence, as well as the
employability of many workers. The need for specialized skills
increases as many unskilled agricultural jobs are being lost to
automation.

Labor Education and National Training Institute Reform

29. (U) Labor leaders have called for increased labor rights
education, including the development of a "labor rights" curriculum
that could be included in the public school system and vocational
institutes. The labor rights curriculum should include teaching
Nicaraguan students their fundamental rights as well as the role of
the government in defending those rights.

30. (U) Labor leader have also recommended reforming the National
Technological Institute (INATEC), a GON entity dedicated to
training workers. INATEC is currently controlled by FSLN/FNT
leader Damas Vargas and receives 2% of each worker's gross salary;
however, the institution is grossly inefficient. INATEC allegedly
spends 66% on administrative costs and has only 33% left to perform
its core mission. In addition, INATEC is limited to the Pacific
side of Nicaragua. The Atlantic Coast is an area with high
unemployment and no real government training programs.

Eliminating Gender Discrimination in the Workplace

31. (U) Eliminating gender discrimination from the workplace is a
long-term challenge in Nicaragua. On factory floors within the
FTZs, most of the employees are women, and almost all of the
managers are men. A similar dynamic is also observed in the public
sector. This is most likely due to lack of access to higher
education for girls, leaving many women in unskilled positions. A
public awareness campaign to promote the benefits of girls'
education could help slowly transform cultural attitudes that leave
women with fewer employment options. Programs to increase
awareness of gender discrimination in the workplace are still
needed. Another recommendation from women's groups is offering
more scholarships for women to attend vocational training programs,
entrepreneur workshops, and management certification programs.

Strengthening Labor Unions and Leadership

32. (U) The 1996 Labor Reform that changed the rules to allow for
unions to organize with only 20 members has had the unintended
effect of dividing and conquering organized labor in Nicaragua,
which is currently fragmented and weak. Union leaders believe that
if this law were repealed, it would immediately strengthen the
bargaining power of unions in collective agreements and make it
more difficult for employer-created "white" unions to derail the
bargaining process.

33. (U) Another identified need is providing training programs for
union leaders. Often, Nicaraguan union leaders are more concerned
with politics than defending workers' interests. Any training
that reinforces the purposes of unions and the proper role of union
leaders could help strengthen the labor movement in Nicaragua.

Addressing Child Labor

34. (U) Existing child labor programs in Nicaragua are not
sufficient to eliminate this pervasive problem, and MITRAB lacks
the resources (financial and personnel) to effectively inspect and
monitor/assess the problem. Experts in the field recommend that
eliminating child labor requires changing fundamental public
attitudes about it, helping parents to value education for their
children over the immediate economic benefits of having them work
to support the family. In certain sectors, such as coffee, the
approach should be two-fold: (1) a continuous in-country public
awareness campaign that is pro-education and against child labor,
including a hotline to anonymously report abuses, and (2) an
external international campaign to coffee consumers to prefer
"child-labor free" coffee.

Improving MITRAB Inspections

35. (U) Labor leaders report that MITRAB is arbitrary and
ineffective, and often loses sight of the right to work (by
maintaining conditions which foster economic growth) as one of the
most fundamental of labor rights. Training for MITRAB leaders to
help them effectively carry out the law in an impartial way would
potentially improve the institution.

Cohesive, Comprehensive USG Strategy

36. (U) There is an assortment of labor programs currently
underway in Nicaragua funded by the USG. These programs focus on
completely different sectors and regions, each with a unique
purpose. Sometimes there is overlap and redundancy between
programs. The attached documents summarize ongoing labor programs
in Nicaragua operated by the U.S. Agency for International
Development (USAID), the U.S. Department of Labor (DOL), and U.S.
Department of State's Bureau of Democracy, Human Rights, and Labor
(DRL). It is recommended that DOL, DRL and USAID work together to
create a comprehensive and cohesive approach to addressing labor
issues in Nicaragua going forward.

C. Cooperation Needs:

GON-USG Cooperation Challenging

37. (U) The return of President Daniel Ortega and the FSLN party
to the executive branch has complicated bilateral cooperation,
including on labor-related programs funded by the USG. The Ortega
government is sharply critical of the United States and cooperation
is becoming increasingly difficult for embassy officials even on
routine issues. Meanwhile, budget cuts to MITRAB prevent it from
pursuing institutional development and reforms without the
assistance of outside donors. DOL, DRL or USAID-hired contractors,
who bring financial resources and new programs to improve MITRAB,
are able to have an amicable relationship with the ministry, while
embassy officials are rebuffed or ignored when completing routine
program oversight and reporting requirements.

Towards a Cohesive, Comprehensive USG Strategy

38. (U) With the hodgepodge of USG-funded labor programs currently
underway in Nicaragua, future cooperation with the GON would
improve if there was a comprehensive and cohesive strategy for US
labor policy. Instead of trying a shotgun approach to solving all
of the labor issues in country, we should focus on the top two or
three problems where we can make a substantial difference. MITRAB
may even engage with the USG about this, under the right
circumstances.

Better Work - A Model for Cooperation

39. (U) Department of Labor ILAB Deputy Undersecretary Sandra
Polaski visited Nicaragua from January 17th to the 19th, exploring
the possibility of implementing the ILO's Better Work program here
as a pilot project for expanding it to all of the CAFTA-DR
countries. Polaski and the ILO representatives were well received
by labor unions, private sector representatives, and GON officials.
The Better Work program might be an ideal strategy to align
business, labor, and government interests in Nicaragua in way that
can meaningfully improve both labor conditions and economic
competitiveness in Nicaragua's apparel section. Viewed as an ILO
program more than a USG one, Better Work may not meet with as much
GON resistance as we have seen in other cooperative programs.

Labor Code Reform for Employment Stability

40. (U) DOL labor experts could assist a recent effort led by the
ILO to facilitate legislation to reform Nicaragua's labor code to
better harmonize the global labor market.

Labor Courts Reform & Anti-Corruption

41. (U) USG-funded anti-corruption programs in addition to current
labor justice programs may be effective.

Improve Employer Compliance

42. (U) DOL could work with MITRAB to help US-owned companies
already established in country, and those seeking to do business in
Nicaragua, to better understand the labor law and their obligations
to workers, should their businesses close.

Improving Worker Productivity & Developing National Certification

43. (U) In connection with the Better Work program, DOL/ILO
working with MITRAB could develop a series of "telenovelas" TV
programs that show how workers demonstrate good work habits with
real life situations (for example, getting to work on time and
making arrangements for child care during work hours).

44. (U) USG funding could help reform INATEC or launch a national
system of vocational institutes for students, as well as a national
certification process for technical vocations such as electricians,
carpenters, plumbers, mechanics, etc.

Labor Education and Reforming National Training Institute

45. (U) DOL working with MITRAB and the Ministry of Education
could develop a "labor rights" curriculum for the public school
system and vocational institutes that teach the fundamental labor
rights as well as the role of the government in defending those
rights. INATEC could also be revitalized through this USG-funded
worker education initiative.

Eliminating Gender Discrimination in the Workplace

46. (U) DOL could expand existing programs to increase awareness
of gender discrimination in the workplace and explore offer
scholarships for women to attend vocational training programs,
entrepreneur workshops, and management certification programs under
a worker education initiative. In addition, the DOL could work
with existing women's rights NGOs to add a labor rights component
to their work.

Strengthening Labor Unions & Leadership

47. (U) Repealing the 1996 Labor Reforms that weakened unions may
be outside the scope of a USG-funded project. However, providing
training programs for union leaders that reinforces the purposes of
unions and the proper role of union leaders could be appropriately
launched.

Addressing Child Labor

48. (U) A USG-funded program that promotes education and makes it
easier to report child labor abuses thro

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