US embassy cable - 05QUITO159

UNCLAS SECTION 01 OF 02 QUITO 000159 
 
SIPDIS 
 
SENSITIVE 
 
SECSTATE PLEASE PASS TO US TRADE REPRESENTATIVE 
 
E.O. 12958: N/A 
TAGS: ELAB, PGOV, EC, Labor 
SUBJECT: LABOR CODE REFORM PROPOSALS AND PROSPECTS 
 
REF: QUITO 82 
 
1.  (U) Summary:  Minister of Labor Raul Izurieta plans to 
announce a labor code reform package in February, which he 
expects to submit to Congress in April.  The reforms would 
permit the formation of industry-wide unions, as well as 
include various pro-business competitiveness initiatives. 
Izurieta is making efforts to bring business and union 
leaders together and is proposing candidates to head the 
MOL's tripartite National Labor Council.  Izurieta also said 
a new round of labor inspections would begin this month with 
newly hired labor inspectors (bringing the total of child 
labor inspectors to 24). 
 
2.  (SBU) In our view, the MOL initiative is encouraging, but 
insufficient to answer USG concerns on freedom of association 
and child labor.  To supplement the GOE's current reform 
package, we hope to use an independent consultant to help 
guide the GOE toward ILO-consistent reforms and short-term 
non-legislative remedies.  To do so, we need to convince the 
GOE to formally request this technical assistance of AID.  We 
are prepared to do this, unless Washington agencies object. 
Izurieta has extended an invitation to the AUSTR for Labor to 
visit Ecuador, which could offer another opportunity to press 
for near-term progress.  End Summary. 
 
Minister to Announce Labor Reform Proposal 
------------------------------------------ 
 
3.  (SBU) Izurieta told LabOff on January 19 that he expects 
to publicize a labor reform in February and give the public 
two months to review it.  Izurieta also extended an 
invitation to AUSTR for Labor William Clatanoff to visit 
Ecuador in February to observe the labor situation.  Izurieta 
plans on sending the proposal to Congress in April.  He says 
he cannot yet predict its chances of passing through Congress 
as the new Labor Commission has just formed.  Izurieta said 
he is worried it will be hard to work with its new president 
since he is a member of the far-left MPD party.  Izurieta 
denied the President had called a meeting to discuss labor 
code reform where Izurieta, the Minister of Jose Chavez of 
the CEOSL confederation, and others were present (reftel). 
Izurieta said Dr. Marcos Ponce of the ILO is helping draft 
the labor code reform proposal.  He is an independent 
consultant and will give Izurieta his work this week.  The 
Inter-American Development Bank is paying him $5000 for this 
project. 
 
4.  (U) Izurieta has previously told LabOff and press of 12 
points that he would like to reform.  In the meeting with 
LabOff, Izurieta said hourly work will be regulated with an 
upcoming Presidential decree.  Izurieta also stated the 
following points would be included in the upcoming labor code 
reform proposal:  industry-wide unions, company retirement, 
profit sharing, limiting length of strikes, job creation and 
dismissal notices.  Izurieta did not list the full 12 points. 
 
5.  (U) LabOff asked Izurieta if reinstatement or anti-union 
discrimination in hiring would be included in the reform 
proposal.  He said that the labor code guarantees not only 
freedom of association, but also freedom in hiring, and for 
that reason the government cannot force a private company to 
hire someone.  Izurieta said reinstatement does exist in the 
public sector. 
 
Industry-Wide Unions To Be Included in Reform 
--------------------------------------------- 
 
6.  (U) Izurieta told LabOff that the labor code reform would 
explicitly permit industry-wide unions in Ecuador.  He said 
that currently these are neither explicitly permitted nor 
prohibited in Ecuadorian law.  Regarding the flower 
industry-wide union whose application had been denied three 
times, he said the reason they were denied previously was 
that the three companies that had employed the workers all 
had closed.  He said after the labor reform, there should be 
no impediment to the formation of industry-wide unions, 
however, workers have to be employed by an active company. 
 
Izurieta Meets with Business and Unions 
--------------------------------------- 
 
7.  (U) Izurieta said that on January 18, he brought Roberto 
Pena, president of the Chamber of Industries, and union 
leader Mesias Tatamuez, together for a three-hour meeting. 
Izurieta said his goal is to lower the tensions and improve 
business-labor relations.  He said he is planning another 
meeting with the two leaders.  Izurieta also said on January 
18 he met with union leaders to discuss difficulties in 
registering unions.  He said his staff is meetings with 
unions to analyze the situation. 
 
Subcontracting Decree May Be Changed 
------------------------------------ 
 
8.  (U) Izurieta said he is planning a meeting with unions to 
discuss the probable modification of the subcontracting 
decree.  Izurieta said Jaime Arciniegas, leader of the 
largest union confederation, has told him he would support 
the decree if the percentage of workers that can be 
subcontracted were taken out.  Business leader Alberto Dassum 
has told Izurieta he thinks the percentage should be 
unlimited.  Izurieta said the Constitutional Tribunal will 
have the final say on the percentage issue, since business 
has appealed it. 
 
9.  (U) Izurieta had previously told LabOff that the Ministry 
had extended the deadline for companies to register with the 
MOL in order for them to have time to change their by-laws. 
Registration with the MOL is a requirement of last October's 
Presidential subcontracting decree.  Izurieta explained to 
LabOff that subcontracting companies had to change their 
by-laws because the decree says subcontracting companies can 
only perform subcontracting and other related activities, 
such as training.  This clause is intended to prevent phantom 
companies. 
 
New Round of MOL Inspections 
---------------------------- 
 
10.  (U) Izurieta said a round of inspections for compliance 
with the labor code, health and safety, subcontracting 
companies, and child labor will begin next week.  He said 
there are now 24 child labor inspectors, with one in each 
province except for Pichincha and Guayas, which each have 
two.  He said there are many new inspectors and there will be 
a training workshop for them next week. 
 
Comment: The Way Forward 
------------------------ 
 
11.  (SBU) We are most encouraged by the MOL's willingness to 
work with the ILO on a labor code reform package to permit 
industrial unions (a reversal for this Government) and 
encourage better business-labor relations.  However, in our 
view, the MOL's reforms do not sufficiently address USG labor 
rights concerns.  We therefore recommend that we use a 
contractor to help the GOE develop a more balanced labor 
reform proposal, preferably involving short-term remedies 
that do not require legislation.  In addition, without 
labor/management consensus, the MOL's reforms or any labor 
code reforms are unlikely to flourish in the current 
fractious Congress. 
 
12.  (SBU) We and visiting USG labor officials have 
encouraged the ILO reps in Ecuador to work with the MOL, 
business, and unions on labor code reform, with limited 
success.  We therefore believe it is necessary for outside, 
but ILO-consistent, assistance.  We also suggest that USTR 
consider accepting the Minister's invitation to visit Ecuador 
in the upcoming months.  Ideally, a USTR visit would coincide 
with a visit from the new consultant. 
Chacon