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### Viewing cable 04QUITO2480, LABOR DELEGATION CONSULTATIONS IN ECUADOR

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Reference ID | Created | Released | Classification | Origin
--- | --- | --- | --- | ---
04QUITO2480 | 2004-09-13 20:23 | 2011-05-02 00:00 | UNCLASSIFIED | Embassy Quito

`

    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

`