US embassy cable - 03TEGUCIGALPA1580

UNCLAS SECTION 01 OF 02 TEGUCIGALPA 001580 
 
SIPDIS 
 
SENSITIVE 
 
STATE FOR DRL/IL, EB/TPP, WHA/PPC, AND WHA/CEN 
STATE PASS USTR 
STATE PASS AID FOR DCHA/DG, EGAT, AND LAC/CEN 
DOL FOR ILAB 
 
E.O. 12958:  N/A 
TAGS: ELAB, ETRD, PHUM, ECON, EINV, PGOV, PREL, KJUS, HO 
SUBJECT:  Minister of Labor Looking to Create Temporary 
Worker Program in Honduras Without Changing Labor Code 
 
Ref: Tegucigalpa 1487 
 
1. (SBU) Summary.  Minister of Labor German Leitzelar has 
proposed a three-year program that seeks to create almost 
132,000 "temporary" jobs in Honduras.  By doing so, 
Leitzelar is seeking to achieve incremental changes in the 
labor situation without confronting head-on the 
politically difficult issue of reforming the Labor Code. 
Businesses back his plan but unions, which at first 
supported the idea, have withdrawn their support delaying 
the planned request for congressional approval.  End 
Summary. 
 
2.  (U) Minister of Labor German Leitzelar is seeking to 
achieve incremental changes in the labor situation without 
confronting head-on the politically difficult issue of 
reforming the Labor Code (reftel).  The Ministry of Labor 
(MOL) has already successfully modified Articles 43-45 of 
the labor law to make more flexible the law covering 
Hondurans working overseas.  The MOL is now planning a 
temporary worker program in Honduras named "New Jobs for 
the People." 
 
3. (U) The idea of the program is to encourage the private 
sector to create additional jobs by carving out a three- 
year program for "temporary workers" in Honduras without 
having to amend the labor code.  In addition to creating 
new jobs, something desperately needed in a country with 
35 percent unemployment and widespread underemployment, 
the MOL hopes to combat the trend of the increasing shift 
to the informal sector (52 percent of the economically 
active workforce and seven out of every 10 new jobs, 
according to Minister Leitzelar).  Leitzelar also hopes to 
create jobs for young adults, citing the lack of jobs as a 
main factor in the growth of gangs.  The program seeks to 
create almost 132,000 temporary jobs over the course of 
three years. 
 
4. (U) Under the ambitious plan, employers: 
-- would not be allowed to fire existing workers to 
replace them with temporary workers, 
-- of businesses with 16 or more employees would not be 
able to have more than 30 percent of their workforce be 
temporary employees (however, new small businesses - 1-15 
workers - could be made up entirely of temporary workers), 
-- must pay workers at least the appropriate minimum wage 
(depending on the industry) and more if skilled labor can 
negotiate a higher wage, and some, but not all, bonuses 
and benefits usually required by law, 
-- must register with the MOL to inscribe their workers in 
the public health system and pay a fee of 10 lempiras (USD 
.58) per employee, and 
-- must provide training/education to these new workers. 
 
5. (U) According to a USAID consultant who has worked with 
the MOL on this and other projects, Honduras has one of 
the highest benefits costs for employees (65 percent of 
men's wages and 88 percent of women's wages).  Employers 
argue that these high benefit costs are a disincentive to 
the creation of new jobs and new businesses.  The 
advantage to the employer of the temporary worker program 
is that by not having to pay several bonuses/benefits 
(educational bonus, paid vacation, 13th and 14th month 
bonuses, contributions toward severance pay) that a 
permanent worker must receive, employers would pay 20 
percent less in benefit costs to temporary workers.  This 
in turn makes it more attractive for employers to create 
new jobs. 
 
6. (U) Funds generated from fee collection would be split 
among the three labor confederations (30 percent per 
confederation) and an unemployed workers organization (10 
percent).  The USAID consultant told EmbOffs that the MOL 
has requested USD 150,000 from the Ministry of Finance for 
administering this program, something that might be paid 
for by the World Bank. 
 
7. (SBU) Minister Leitzelar initially had the support not 
only from the private sector, but also from the three 
labor confederations (CGT, CTH, and CUTH), perhaps due to 
the fact that the labor unions would benefit from the fee. 
However, LabAtt has recently learned from Vice Minister of 
Labor Angel Escobar that the labor confederations have 
withdrawn their support, fearing the program threatens 
traditional jobs and benefits.  Escobar said that the 
program might have to be scaled back in size to recoup 
labor support.  Pending this possible adjustment, the GOH 
has delayed submitting the program to Congress for 
approval. 
 
8. (SBU) Comment:  Since long-term structural changes in 
the labor code are not politically possible in the short 
term, Minister Leitzelar is seeking to make changes on the 
margin and effectively enact incremental reform.  However, 
unlike the non-controversial changes in the law covering 
Hondurans working overseas, the temporary workers idea has 
proven to be somewhat difficult.  If Leitzelar can come to 
an agreement with the union confederations the passage of 
the program is almost assured in congress; without such a 
deal the plan may be dead.  End Comment. 
 
Palmer