US embassy cable - 04QUITO2922

UNCLAS SECTION 01 OF 03 QUITO 002922 
 
SIPDIS 
 
SENSITIVE 
 
SECSTATE PLEASE PASS TO US TRADE REPRESENTATIVE 
 
E.O. 12958: N/A 
TAGS: ELAB, PGOV, EC, Labor 
SUBJECT: MOL CONSIDERS LABOR REFORM; UNIONS URGE RESIGNATION 
 
 
1.  (SBU) Summary:  Meeting in Guayaquil with USTR and 
Department of State officials, two key Ecuadorian labor 
leaders stated they will challenge the recently published 
executive decree on subcontracting as unconstitutional, and 
also repeated a call for Minister of Labor Raul Izurieta's 
removal from office.  They also will file a complaint with 
the ILO and the Inter-American Court of Human Rights 
regarding a decision by Ecuador's Constitutional Tribunal on 
the Civil Service Law, which they feel violates collective 
bargaining rights.  Izurieta told USTR, DOL, and State 
Department representatives in Guayaquil that he was working 
on promoting labor code reform, but was facing difficulties 
in getting the labor sector engaged.  He implied he might 
propose legislation permitting sector-wide unions, but did 
not react to other proposed reforms.  End Summary. 
 
Union Leaders Unhappy With Subcontracting Decree 
--------------------------------------------- --- 
 
2.  (SBU) On October 26, William Clatanoff, AUSTR for Labor; 
Michael Puccetti, WHA/PPC; Greg Maggio, DRL/IL; and LabOff 
met three labor leaders in Guayaquil to discuss the 
recently-issued Presidential decree on subcontracting and 
prospects for further labor law reform in the country.  Jaime 
Arciniegas, President of the labor federation CEOSL; and 
Guillermo Touma, president of the labor union, FENACLE; were 
accompanied by Patricio Contreras, AFL-CIO Solidarity Center 
representative.  The three were in Guayaquil to participate 
in protests against the fifth round of negotiations of the 
Andean Free Trade Agreement, held between October 25th and 
29th. 
 
3.  (SBU) Arciniegas, Touma and Contreras expressed 
displeasure with the content of the decree and stated that 
they would file a lawsuit charging that the document violates 
Ecuador's constitution.  They were particularly opposed to 
Article 9, which states that subcontracting can be used for 
"indefinite" periods of time.  They also believe that the 75% 
cap on subcontracting at any individual primary company will 
not protect workers against employer abuse and, furthermore, 
is contradicted in the same article by a phrase that says 
workers can be subcontracted indefinitely to do the primary 
work of a company "in part or in total."  The unions had 
previously proposed to the Ministry of Labor a 15% cap on 
subcontracted workers.  The three also asserted that because 
there is no Ecuadorian law on subcontracting, it is 
unconstitutional to regulate this activity by means of an 
executive decree.  They did not bring up the provision in the 
decree that allows "natural persons" to act as subcontractors 
in the agriculture sector.  When asked, they stated they were 
very concerned it could be used as a legal loophole by 
companies.  On the positive side, the three conceded that the 
decree at least represents a first attempt to regulate 
subcontracting and prohibits employers from hiring false 
subcontractors directly linked to company management. 
 
4.  (SBU) Arciniegas and Touma expressed concern that the 
decree had never been submitted for review to the National 
Labor Council, which was set up in March 2004 to coordinate 
input from workers, employers and the government on labor law 
reform and related developments.  While the President and 
Minister of Labor (MOL) met with trade union leaders, 
including Arciniegas, to discuss earlier versions of the 
decree, they now asserted that labor's positions and 
suggestions were not taken into account.  Furthermore, they 
said, the MOL had not responded to their recommendations and 
had failed to show them the final version of the text before 
it was published in the official register.  They said the 
labor movement is considering mobilizing workers to protest 
the decree and may even call for a national strike and an 
international campaign to draw attention to the situation. 
They repeated their call for Izurieta's removal, asserting 
that he represents the nation's business interests rather 
than its workers. 
 
5.  (SBU) Arciniegas and Touma also voiced concerns about the 
Constitutional Tribunal's ruling on the Civil Service and 
Administrative Career Law.  The Tribunal classified the law 
as "organic" in a ruling published in the Official Register 
on September 28.  This means the law overrides the labor 
code.  With no additional recourse since the Tribunal has 
ruled, the union leaders stated they would be making formal 
complaints to the ILO and the Inter-American Court of Human 
Rights.  The unions believe this new law, passed in January 
2004, takes away public sector workers' right to collective 
bargaining by setting maximum salaries (while still allowing 
them to form a union).  Under Ecuadorian law, manual laborers 
are defined as "workers" and those that do intellectual tasks 
as "employees."  "Workers" have the right to collectively 
bargain under the labor code, while "employees" fall under 
the Civil Service Law, which prohibits collective bargaining. 
 Union leaders feel the government is labeling many who 
should be "workers" as "employees" to deny them collective 
bargaining rights. 
 
6.  (SBU) Arciniegas said that MOL Izurieta had refused a 
request by cut flower sector workers to form an industry-wide 
union.  Touma stated that there had been no repeat of 
violence similar to what occurred at the Los Alamos 
plantation.  He said this was due to USG attention to labor 
issues in Ecuador. 
 
Minister of Labor Accepts Responsibility for Labor Code Reform 
--------------------------------------------- ----------------- 
 
7.  (SBU) In a meeting on October 26 with AUSTR Clatanoff, 
ADUS Jorge Perez-Lopez (USDOL), PolCouns and LabOff, 
Clatanoff made clear that he believed that the US Congress 
would not pass a Free Trade Agreement (FTA) without Ecuador 
reforming its Labor Code to make it ILO-consistent. 
Perez-Lopez and Clatanoff told Izurieta of a meeting they had 
had with an Inter-American Development Bank staff member, who 
stated there were funds available for a Labor Code reform 
project.  Post is also working on putting MOL staff in 
contact with AID to discuss AID-funded Trade Capacity 
Building projects. 
 
8.  (SBU) Izurieta agreed that additional labor reforms are 
desirable, but complained that labor union leaders had 
perspectives that were out of date and were unwilling to 
negotiate in good faith with him.  Izurieta urged the Embassy 
to intervene and speak with labor leaders to convince them to 
come to the table for Labor Code reform.  Clatanoff offered 
to return to Quito in November to speak with union leaders, 
business leaders and the National Labor Council, an idea that 
pleased Izurieta.  Clatanoff told Izurieta that unions' total 
acceptance of Labor Code reform was not necessary; more 
importantly, he said, the reforms needed to be 
ILO-consistent. 
 
9. (SBU) Izurieta said the National Labor Council was 
currently working on a forthcoming Presidential decree 
regulating the hiring of workers paid by the hour.  Izurieta 
feels there is strong support from all sectors for this 
regulation.  Izurieta seemed to react positively to 
Clatanoff's suggestion to permit industrial or sector unions 
such as the flower-industry union Touma discussed in the 
earlier meeting, although he claimed this would require 
legislative reforms.  Sector-wide unions could serve to 
provide freedom of association to subcontracted workers who 
do not meet the 30-person legal minimum to organize a 
stand-alone union.  Izurieta did not react to other possible 
labor code reforms suggested by Clatanoff, including 
reinstatement of workers fired for union organizing and 
prohibition of hiring discrimination against union members. 
 
10.  (SBU) In meetings with the Ecuadorian business community 
and President of Congress Guillermo Landazuri, AUSTR Regina 
Vargo highlighted the importance of labor reform to building 
US Congressional support for an FTA with Ecuador.  Both 
business leaders and Landazuri understood and accepted her 
point.  Suprisingly, business leaders did not return to their 
well-known objections to the subcontracting decree in the 
meeting, focusing instead on the need to move forward on 
labor reform, and on their other FTA concerns. 
 
Comment 
------- 
 
11.  (SBU) While labor code reform will not be easy, to have 
any chance, Izurieta must show greater leadership.  We will 
continue to push for cooperation with partners such as the 
ILO and IDB, which will also be crucial for this endeavor. 
However, coordination with union leaders will be a challenge. 
 The signing of an FTA may be an incentive for the GOE to 
pass labor code reform.  The business community, which 
expects labor reform to result in a more dynamic and 
competitive labor market, can be an important force 
supporting reform.  Union leaders, who oppose the FTA and any 
increase in labor market flexibility, are unlikely to be 
supportive. 
KENNEY