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Cablegate: Chile: Labor Monitoring and Engagement with Fta Countries

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DE RUEHSG #0166/01 0361951
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O 051949Z FEB 10
FM AMEMBASSY SANTIAGO
TO RUEHC/SECSTATE WASHDC IMMEDIATE 0732
INFO LABOR COLLECTIVE IMMEDIATE
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC IMMEDIATE
RUEHC/DEPT OF LABOR WASHINGTON DC IMMEDIATE
RUEHGV/USMISSION GENEVA IMMEDIATE

UNCLAS SECTION 01 OF 05 SANTIAGO 000166

SENSITIVE
SIPDIS
SIPDIS
DRL/ILSCR FOR MARK MITTELHAUSER
DOL FOR ILAB TIMOTHY WEDDING
COMMERCE FOR KENGLOM
STATE PLEASE PASS TO USTR FOR CARLOS ROMERO AND KATE KALUTKIEWICZ

E.O. 12958: N/A
TAGS: ELAB ETRD PGOV CI
SUBJECT: CHILE: Labor Monitoring and Engagement with FTA Countries

REF: A) 09 STATE 129631; B) 09 PARIS 1732; C) SANTIAGO 98

1. (SBU) Summary: Chile has a developed and steadily growing
economy and a stable government which generally protects most
worker rights adequately. Areas of concern include low levels of
female and youth participation in the workforce, lack of regulation
in the informal economy, an inflexible labor market, and some
limitations on workers' ability to bargain collectively. More
severe forms of labor abuses--such as forced labor and child
labor--occur but are not widespread. Chile's president-elect,
Sebastian Pinera, has pledged to create one million new jobs, and
so may focus substantial attention on labor reform and economic
stimulus. Chilean labor officials are eager for expert-level
technical cooperation with the U.S. Post efforts to facilitate
this cooperation have been severely hampered by lack of funding, so
Post suggests that cooperation activities focus on offering
technical assistance via in-person expert-level exchange of best
practices. End Summary.

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SCENESETTER

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2. (SBU) Chile is on the cusp of developed nation status and basic
worker rights are generally enforced. Nonetheless, there are areas
where substantial improvement is desirable and possible. Women's
participation in the workforce, although increasing, is still one
of the lowest in the region. Unemployment in the final quarter of
2009 stood at 8.6 percent, with 41 percent of Chilean women
participating in the work force. The Government of Chile generally
respects and enforces the rights of workers, although weak
enforcement of labor laws is one area of worker rights concern.
Others include the relatively high number of workers hired without
formal contracts (OECD Economic Survey of Chile 2009), and
limitations on workers' ability to bargain collectively
(International Trade Union Confederation's Report for the WTO
General Council Review of the Trade Policies of Chile, October
2009). In addition, the lack of labor flexibility, including
cumbersome and expensive procedures for terminating employment and
few part-time and telecommuting options, is a stumbling block to
economic growth and broader workplace participation.

Major Changes in 2010: New President and OECD Accession

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3. (U) Two key developments in the first quarter of 2010 will play
a major role in shaping Chile's labor market and practices: the
inauguration of Chile's first conservative president in twenty
years, and Chile's accession to the OECD. On March 11, Sebastian
Pinera of the center-right Coalition for Change will assume the
presidency, ushering in the first conservative government since the
Pinochet dictatorship. While most analysts expect a great degree
of policy continuity, labor reforms are one area Pinera may address
sooner rather than later. Creating a million new jobs during his
four-year term is one of Pinera's primary campaign pledges, so his
government may move quickly to create changes that would generate
more flexibility and dynamism in the labor market. A second major
development occurred on January 11, when Chile signed an accession
agreement with the Organization for Economic Cooperation
Development (OECD), paving the way for formal membership sometime
in the first quarter of 2010. Chile had to undergo a rigorous
review of its public policies, including labor policies, during the
accession process (Ref B). Chile is the first South American
country to obtain membership in the OECD.

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4. (SBU) Pinera's labor advisor (and potential future Labor
Minister) Fernando Coloma, told Pol Specialist on January 6 (prior
to Pinera's election to office) that the Pinera administration's
main labor priorities will revolve around generating employment,
with a special focus on women and youth (18 - 29 years old), and
improving Chile's human capital through the creation or reform of
training programs. In addition, one area a Pinera Administration
would look to change is Chile's mandatory severance pay
regulations. Coloma said that the campaign program envisions
reducing severance pay and increasing payments into the
unemployment insurance system. The OECD Economy Study of Chile
2010, released on January 27, makes a similar recommendation.

Recent Reforms: Labor Justice and Regulating Outsourced Work

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5. (U) In October 2009, the Directorate of Labor (within the
Ministry of Labor) concluded a wide-ranging national labor reform
program, "New Labor Justice," begun in March 2008. The new system
of labor courts allows for oral presentation of arguments (not
previously allowed) as well as free legal defense for plaintiffs
and the implementation of collections courts to resolve wage
disputes. Major components of the reform include an increase in
the number of courts and the implementation of new labor code
procedures to address specific grievances, ranging from workplace
discrimination to small claims. According to the Labor
Directorate, prior to the reform, there were not adequate legal
structures to effectively and swiftly protect the fundamental labor
rights of workers in Chile. The new labor court system is designed
to reduce wait times by increasing the number of courts and
providing specialized training to judges on labor law.

6. (U) A new law regulating the use of temporary and outsourced
labor took effect in January 2007. Under the law, firms can
outsource part of their work--meaning that another firm takes full
responsibility for a task or process, carrying it out with their
own employees--but are prohibited from outsourcing their main
economic activity. The law also allows firms to hire
contract-based employees outside the regular system of labor
protection, but limits this to "temporary" labor, defined as those
employed for periods of up to 90 days (or 180 days in some cases)
for the duration of an "emergency." In addition, only firms that
register as suppliers of temporary labor and set up guarantees
against their obligations to their own workers are allowed to
fulfill this function. The law also limits the number of staff
that can be used on short-term jobs. In Chile, more than 50% of
companies are estimated to subcontract part of their production,
while 20.7% subcontracted their main economic activity. Prior to
the law, a full 35% of Chile's labor force was estimated not to
have a direct contractual link with the main company (Ref C).

Status of Key Labor Rights

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7. (U) FREEDOM OF ASSOCIATION: Workers have the right to form and
join unions without prior authorization. Approximately 13 percent
of the workforce is unionized. Multiple unions exist in many
companies, and management can negotiate collective agreements with
any of the unions or with ad hoc groups of workers. Unions can
form confederations or nationwide labor umbrella organizations and
can affiliate with international labor federations. The law
allows unions to conduct their activities without interference (see
Chile Human Rights Report 2009 [HRR] and Ref C).

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8. (U) While employees in the private sector have the right to
strike, the government regulates this right and some restrictions
are imposed. Employers must show cause and pay severance benefits
if they dismiss striking workers. The law proscribes employees of
32 private sector companies, largely providers of services such as
water and electricity, from striking. Strikes by agricultural
workers during the harvest season are also prohibited. The law
stipulates compulsory arbitration to resolve disputes in the
aforementioned industries. Public employees do not enjoy the right
to strike, but some do so anyway, including public school teachers
in 2009 and civil servants in 2008 (Ref C; HRR09).

9. (U) COLLECTIVE BARGAINING is protected by law, but the right of
some workers to bargain collectively is limited. While protected
by law, the right of entertainers and temporary agricultural,
construction, and port workers to bargain collectively is limited.
Contracts are normally negotiated at the company level;
multi-company bargaining is permitted on a voluntary basis (Ref C,
HRR09).

10. (U) FORCED LABOR/CHILD LABOR: The law prohibits compulsory or
forced labor; however, such practices occur on a limited basis,
primarily for domestic servitude and forced prostitution. While
child labor is an issue in Chile, it is not widespread and
typically occurs in the informal economy. Chilean law allows
children to perform light work that does not require hard physical
labor or constitute a threat to health and childhood development,
if their parents/guardians give permission (HRR09). Children in
urban areas work as grocery baggers, domestic servants, waiters,
parking attendants and assist in construction activities. Children
in rural areas are involved in farm work, fishing, and forestry.
Children are subject to commercial sexual exploitation and are used
in the production, sale and transport of illicit drugs (Chile Worst
Forms of Child Labor Report [WFCL] 2008).

11. (U) The GOC has a national child labor action plan that
focuses on raising awareness; collecting data; promoting
legislative reform in compliance with ILO conventions; developing
social and educational programs; and conducting monitoring and
evaluation. The government implemented public education programs
to raise awareness and worked with the International Labor
Organization to operate rehabilitation programs. The Ministry of
Labor convened regular meetings of a business-labor-government
group to monitor progress in eradicating child labor. In June
2009, the Ministry of Labor signed an agreement with one of the
major business associations, the Confederation of Production and
Commerce (CPC), to help eradicate child labor in Chile by raising
awareness among companies, their suppliers, and subcontractors (Ref
C; WFCL 2008).

12. (U) GENDER DISCRIMINATION IN EMPLOYMENT: The labor code
provides specific benefits for pregnant workers and recent mothers,
including a prohibition against dismissal. Layoffs are not
permitted between conception and one year after a female employee
has returned from maternity leave. However, some women feel that
the protections have the adverse effect of discouraging employers
from hiring women of child-bearing age. On December 19, a new law
guaranteeing equal pay for equal work went into effect. The law
requires companies with 10 or more workers to establish a formal
internal complaint procedure, while those with 200 or more workers
must also generate a registry detailing employee positions and
functions (Ref C; HRR09).

13. (U) ACCEPTABLE CONDITIONS OF WORK: The minimum wage is set by
law and is subject to adjustment annually. The current monthly
minimum wage (approximately USD 288 using the 2009 average exchange
rate) was designed to serve as the starting wage for an unskilled
single adult worker entering the labor force and does not provide a
worker and family with a decent standard of living. In addition to
the minimum wage, working hours, overtime, paid annual vacations,

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and holidays are all established by law. The law protects the
continued employment of workers who remove themselves from
dangerous situations if labor inspectors from the Labor Directorate
and occupational safety and health inspectors from the country's
Safety Association determine that dangerous conditions exist (Ref
C; HRR09).

14. (U) The law sets the legal work week at six days or 45 hours.
The maximum work day length is 10 hours (including two hours of
overtime pay), but positions such as caretakers and domestic
servants are exempt. The law mandates at least one 24 hour rest
period during the work week, except for workers at high altitudes,
who may exchange a rest day each week for several consecutive rest
days every two weeks. The law establishes fines for employers who
compel workers to work in excess of 10 hours a day or do not
provide adequate rest days. (HRR09).

15. (U) Key labor rights organizations: there are few
organizations working on labor issues, apart from the Ministry of
Labor and Unions. The primary NGO in the field is the Program on
the Economy of Work (PET) at the Academy of Christian Humanism
University. The ILO's regional office for Chile, Paraguay, and
Uruguay is based in Santiago.

16. (U) Point of Contact for FTA Labor Matters in Chile: Jeff
Peet, Desk Officer for U.S. Trade Policy, Directorate General of
International Economic Relations (DIRECON), Ministry of Foreign
Affairs of Chile, jpeet@direcon.cl, (56 2) 827-5522. This contact
may change in March, when the Pinera administration assumes office.

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STRATEGY RECOMMENDATIONS

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17. (SBU) Chile's Ministry of Labor, employers, and unions are
generally capable, credible organizations with well-developed
understandings of labor rights, economics, and public policy
tradeoffs. Such organizations are eager for expert-level technical
information exchanges and sharing of best practices.

18. (SBU) Post does not have this expert-level knowledge or
experience in-house and, without funding to support such
activities, has been severely constrained in our ability to bring
U.S. and Chilean practitioners together to share expertise. We
have attempted to find no-cost/low-cost opportunities and to find
other funding sources, and have been able to facilitate a handful
of small-scale activities this way. Post and DOL worked together
with the Chileans to submit a proposal for OAS Inter-American
Network for Labor Administration (RIAL, by its Spanish acronym)
funding, which was accepted and led to a 2009 visit by Labor
Directorate staff to DOL call centers. In addition, post and DOL
have begun coordinating a series of low-cost digital video
conferences (DVCs) for Chilean labor inspectors held at Post.
DOL's Wages and Hours Division presented in July 2009, DOL's
Occupational Safety and Health Administration presented in December
2009, and we hope to hold additional DVCs in 2010. IDB funding
allowed a Bureau of Labor Statistics expert to attend a Ministry of
Finance conference in early 2009.

19. (SBU) Notwithstanding these examples of successful
cooperation, informational exchanges so far have been short,
isolated events. A modest but consistent and dedicated funding
stream would allow post and DOL to facilitate exchanges and
relationships between US and Chilean labor officials, employers,

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and union leaders, helping to further improve Chile's reasonably
successful current labor practices.

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COOPERATION NEEDS AND AREAS FOR DIALOGUE

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20. (SBU) Chile has few ongoing labor cooperation relationships
with other countries. Ministry of Labor International Relations
Advisor Jose Maria Hurtado told Pol Specialist on January 7 that
Chile's only ongoing cooperation relationships are with Argentina
and the U.S. Chile currently has several proposals pending for OAS
RIAL funding, including with Peru and Bolivia.

21. (SBU) Post recommends the following labor cooperation
assistance areas:

Tier 1

-- Technical assistance to strengthen labor law enforcement, in the
form of travel funding for Chilean labor inspectors to travel to
U.S. and apprentice with U.S. Department of Labor inspectors and to
bring UDOL speakers/experts to Chile;

-- Technical assistance to Chile on the formation and
implementation of summer youth work programs;

-- Technical assistance on work subsidy programs for women and
youth;

Tier 2

--Travel funding for Chilean labor leaders and employers to travel
to meet with peers in the U.S. and exchange best practices or
participate in conferences or trainings. Such travel could perhaps
be facilitated by the AFL-CIO's Solidarity Center and the Center
for International Private Enterprise. One industry focus for such
exchanges could be agriculture as the U.S. and Chile share a
complementary trading relationship in this area and Chile and
California have an ongoing cooperation agreement in place.

22. The U.S. and Chile recently signed a Memorandum of
Understanding to coordinate development assistance activities in
third countries within the Western Hemisphere, a concept termed
"trilateral development cooperation." The first projects will
likely begin in El Salvador and Paraguay. Given Chile's relatively
high labor standards, labor could be a fruitful area for future
trilateral development cooperation, particularly in the areas of
labor law enforcement and pensions.
URBAN

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