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Viewing cable 06LIMA3887, GOP MEDIATES END OF SIX-DAY PORT STRIKE

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Reference ID Created Released Classification Origin
06LIMA3887 2006-09-29 16:24 2011-08-25 00:00 UNCLASSIFIED//FOR OFFICIAL USE ONLY Embassy Lima
VZCZCXYZ0001
RR RUEHWEB

DE RUEHPE #3887/01 2721624
ZNR UUUUU ZZH
R 291624Z SEP 06
FM AMEMBASSY LIMA
TO RUEHC/SECSTATE WASHDC 2514
INFO RUEHBO/AMEMBASSY BOGOTA 3958
RUEHBU/AMEMBASSY BUENOS AIRES 2595
RUEHCV/AMEMBASSY CARACAS 9796
RUEHQT/AMEMBASSY QUITO 0715
RUEHLP/AMEMBASSY LA PAZ SEP SANTIAGO 0871
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RHEHAAA/NATIONAL SECURITY COUNCIL WASHINGTON DC
UNCLAS LIMA 003887 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
DEPT FOR WHA/AND, WHA/EPSC, EB/TPP 
COMMERCE FOR 4331/MAC/WH/MCAMERON 
USTR FOR BHARMAN AND MCARRILLO 
GENEVA FOR USTR 
 
E.O. 12958: N/A 
TAGS: ETRD ECON EINV ELAB PGOV PE
SUBJECT: GOP MEDIATES END OF SIX-DAY PORT STRIKE 
 
SUMMARY 
------- 
 
1. (SBU) A late-night deal on September 25, mediated by the Prime 
Minister and the Ministers of Labor and Trade, ended a strike that 
had closed Callao, Peru's largest port, for six days.  Under the 
deal, the daily minimum wage for longshoremen was increased from USD 
9.26 to USD 12.35, with specialized longshoremen (such as crane 
operators) receiving USD 13.89.  Although the port closure had sent 
negative signals to international business, the Garcia 
Administration's successful intervention -- avoiding escalation and 
resulting in higher wages -- should score the ruling APRA party some 
points in the November 19 regional elections.  End Summary. 
 
LABOR DEMANDS 
------------- 
 
2. (U) Longshoremen at the Port of Callao -- Peru's largest port, 
moving 80 percent of Peru's international port trade -- went on 
strike on September 20, demanding sector-wide wage increases.  These 
demands for higher wages were partly fueled by increased port 
activity resulting from Peru's export boom.  Exports have increased 
every month for the past four and a half years.  The employers, 
represented by the business groupings APAM (Peruvian Maritime Agents 
Association) and ASPPOR (Peruvian Port Operators Association), have 
long opposed sector-wide negotiations because some firms manage huge 
volumes of containers while others have very small operations and 
cannot pay the same salaries.  These employers refused to meet with 
the complaining workers as a group, leading to the strike.  The 
strike completely closed the port, just outside of Lima, to imports 
and exports.  The longshoremen threatened to escalate their protests 
to include hunger strikes and picketing of export-import companies. 
 
SUCCESSFUL GOP MEDIATION 
------------------------ 
 
3. (U) The Ministry of Labor tried to convince the employers to 
negotiate, but failed.  Prime Minister Jorge del Castillo, Labor 
Minister Susana Pinilla, and Trade and Tourism Minister Merecedes 
Araoz then became personally involved and succeeded in bringing both 
parties to the table on September 24.  Congressman Luis Negreiros 
(APRA Party), who represents the district of Callao, also 
participated in the negotiations on behalf of the workers. 
President Alan Garcia himself announced that a late-night deal 
ending the strike was finally worked out on September 25. 
 
THE DEAL 
-------- 
 
4. (U) Under the deal, the daily minimum wage for longshoremen was 
increased from 30 soles (about USD 9.26) to 40 soles (about USD 
12.35) per eight-hour day, with specialized longshoremen (e.g. 
machine operators) receiving 45 soles (about USD 13.89).  To account 
for the differences in workloads, each employer was also tasked with 
working with his/her employees to establish company-specific 
additional wage bonuses based on productivity by September 28. 
President Garcia also announced the creation of a committee -- 
including the Ministries of Labor, Transportation and Trade, the 
National Port Authority (APN), APAM, ASSPOR, and labor unions -- 
that will discuss the problem of informal labor in the sector, 
limits on the number of shifts per month per worker, and 
restructuring of the longshoremen's registry. 
 
THE STRIKE'S COSTS 
------------------ 
 
5. (U) The Peruvian Association of Exporters (ADEX) estimated that 
Peru lost USD 44 million in exports and USD 30 million in imports 
each day the port was closed.  Trade Ministry and other estimates 
cite total losses of between USD 20 million and 79 million per day. 
During the closure, more than two dozen ships lined up at sea 
awaiting access to the port, and at least six ships proceeded to 
other ports.  According to press reports, the daily additional 
operating cost per ship of waiting at sea was USD 35,000. 
 
CALLAO'S INEFFICIENCY 
--------------------- 
 
6. (U) The Port of Callao is already perhaps the least efficient and 
most costly of the ports in the region, and these wage increases may 
make Callao even less competitive.  A 2004 study by the well 
regarded Peruvian Institute of Economy (IPE) found that on a scale 
of 1 (least efficient) to 7 (most efficient), the port of Callao 
scored 4.8.  Every other port in the study scored higher:  Guayaquil 
(Ecuador) 4.9, Arica (Chile) 5.0, Cartagena (Colombia) 6.4, and 
Matarani (Peru) 6.4.  Callao's international competitiveness ranking 
dropped from 56 in 2001 to 97 in 2005, due largely to a lack of 
infrastructure investment.  Callao has the second-worst port 
infrastructure in the region and the twentieth-worst in the world 
(IPE).  According to Crecer and the World Bank, the Port of Callao 
has $217 million per year in logistical overage charges, 70 percent 
higher than the regional average.  While competitor Valparaiso 
(Chile) moves 28 containers per hour, Callao moves only 10 and costs 
50 percent more.  Of the top ten ports in the region by volume, 
Callao is the only one without any cranes (dock-mounted or 
portable), so ships must have cranes on board to offload and load 
containers, reducing their cargo capacity.  Work is currently 
underway to add cranes and a new container terminal by 2010. 
 
COMMENT 
------- 
 
7. (SBU) The closure of Peru's biggest port was a costly 
international embarrassment that could still send some business 
elsewhere.  Callao has a long way to before it even approaches its 
regional competitors' levels of efficiency.  This wasn't the first 
strike at the Port of Callao, and the longshoremen will surely 
continue to push for sector-wide collective bargaining rights, 
especially since international competition and modernization will 
further erode the need for their services.  However, the successful 
intervention by the Garcia Administration is likely to bolster the 
GOP's approval ratings and win the ruling APRA party some points in 
the November 19 regional elections.  As Labor Minister Pinilla 
announced, "this agreement shows that through dialogue, positive 
outcomes for workers are possible."  End Comment. 
STRUBLE