US embassy cable - 04QUITO2769

UNCLAS SECTION 01 OF 02 QUITO 002769 
 
SIPDIS 
 
SENSITIVE 
 
PLEASE PASS TO USTR FOR BUD CLATANOFF AND BENNET HARMON, 
DEPARTMENT OF LABOR FOR ILAB: JORGE PEREZ-LOPEZ AND CARLOS 
ROMERO, DEPARTMENT FOR WHA/AND, WHA/PPC, DRL/IL AND EB 
 
E.O. 12958: N/A 
TAGS: ELAB, PGOV, EC, Labor 
SUBJECT: EMBASSY VIEWS ON GOE LABOR DECREE 
 
 
1.  (SBU) Summary:  The publication on October 14 of the 
presidential decree on subcontracting is an important if not 
ideal step forward that comes at some political cost to 
President Gutierrez and Labor Minister Raul Izurieta. 
Ecuadorian and U.S. private sector interests are already 
attacking the decree, confirming our view that this attempt 
to regulate subcontracting will raise the costs to employers 
of abusing subcontracting to curtail worker rights.   Though 
not ideal, we believe the decree represents a good faith 
effort by the GoE to fulfill one of its commitments under the 
ATPDEA.  We firmly agree that more substantive labor reform 
is needed and will require a sustained USG effort to support 
and Congressional action.  The decree drafting process shows 
that will not be easy; we can best advance the prospects for 
reform by welcoming the decree and supporting further reform. 
 End Summary. 
 
Despite Delays and Disappointments... 
------------------------------------- 
 
2.  (SBU) We have been as frustrated as our colleagues in 
Washington by the agonizing process of change and missed 
deadlines that plagued the drafting of this decree.  Delay 
and disappointment with regard to decrees, far from being 
exceptional, are the norm here, where any presidential action 
has the potential to destabilize a weak and unpopular 
government.  Labor rights, as elsewhere, are inherently 
sensitive political issue here, alternately able to alienate 
powerful economic interests and to mobilize the labor sector. 
 The 75% limitation on subcontracted employees is much higher 
than labor unions wanted, but any limitation is too much for 
business.  The treatment of contracting by individuals in 
agriculture may open an unfortunate loophole, but the extent 
to which that loophole really allows for abuses will not be 
clear until we see how the decree is applied. 
 
...We See Progress 
------------------ 
 
3.  (SBU) Although all of our concerns have most definitely 
not been met, it does seem that the decree is a significant 
step forward and limits the scope for abuse of subcontracting 
to curtail labor rights.  Local AFL-CIO Solidarity Center 
representative Patricio Contreras characterized it as 
positive to LabOff on October 15, although we understand the 
AFL-CIO is still considering its position.  The decree 
imposes regulation specific to subcontracting for the first 
time in Ecuador.  Registration and reporting requirements 
will allow the Ministry to get a handle on subcontracting and 
to resolve abuses.  Another indication the decree has merit 
is the fact that business lawyers are working overtime on the 
constitutional challenge they say will be presented within 
days (it will focus on the 75% rule and the fines being 
levied per worker affected by a violation, rather than per 
violation).  A U.S. business leader came in to see the 
Ambassador before the decree was published to request Embassy 
assistance to prevent the issuance of what he considered a 
"anti-democratic" labor regulation.  In our view the decree 
will make it significantly more costly and more difficult for 
employers in Ecuador to use subcontracting as a way of 
thwarting employees in the exercise of their rights. 
 
4.  (SBU) The GoE's efforts on child labor this year have 
been even more impressive.  We asked for new child labor 
inspectors to be appointed by the end of the year.  Given 
Ecuador's track record, one might have expected appointment 
on December 31 followed by months of wrangling about 
salaries, transportation, and other facilities.  Instead, the 
GoE moved very rapidly to appoint and has been working on the 
logistical issues diligently ever since.  They are not 
resolved, but they may be by the end of the year. 
 
The Way Ahead 
------------- 
 
5.  (SBU) There is no doubt that issuing the decree was 
difficult for this government, and we believe the effort 
demonstrates the GoE's commitment to labor reform.  The 
decree comes from a very weak government and in the face of 
staunch opposition from the business community.  We know the 
GoE worked hard to come up with a decree which would meet 
U.S. concerns and be acceptable to labor and business here. 
Minister of Labor Izurieta has invested his personal 
credibility in the effort, as has the President.  With all 
his flaws, we believe Izurieta is an ally of labor reform and 
a star in this government.  Any replacement would be very 
unlikely to be an improvement.  Izurieta is now going to pay 
a political price for his efforts, with the constitutional 
challenge from the business community.  In this context, it 
is essential to carefully calibrate our reaction to the 
decree to maximize the prospects for labor reform as we go 
forward. 
 
6.  (SBU) This Embassy defers to and respects the interagency 
process to set policy on ATPDEA labor petitions and FTA labor 
strategy, and offers the following points for your 
consideration.  Real labor reform will take time for labor 
and business to develop common ground.  We believe the USG 
can best help focus debate by making it clear that labor 
reform is a necessary condition for any FTA with the U.S., 
while being very careful not to convey this message as an 
ultimatum.  Concluding the review on last year's petitions 
would turn the page on the decree, and allow the GoE to move 
toward legislative reforms.  Accepting the new ATPDEA 
petitions for review would also help leverage the reform 
process. 
 
KENNEY