US embassy cable - 04QUITO2480

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