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Viewing cable 07LIMA1850, LABOR LAW REVISIONS CRITICIZED

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Reference ID Created Released Classification Origin
07LIMA1850 2007-05-23 21:20 2011-08-25 00:00 UNCLASSIFIED//FOR OFFICIAL USE ONLY Embassy Lima
VZCZCXYZ0019
PP RUEHWEB

DE RUEHPE #1850/01 1432120
ZNR UUUUU ZZH
P 232120Z MAY 07
FM AMEMBASSY LIMA
TO RUEHC/SECSTATE WASHDC PRIORITY 5587
INFO RUEHBO/AMEMBASSY BOGOTA PRIORITY 4680
RUEHBU/AMEMBASSY BUENOS AIRES PRIORITY 2895
RUEHCV/AMEMBASSY CARACAS PRIORITY 0406
RUEHLP/AMEMBASSY LA PAZ MAY 4240
RUEHMN/AMEMBASSY MONTEVIDEO PRIORITY 9179
RUEHQT/AMEMBASSY QUITO PRIORITY 1229
RUEHSG/AMEMBASSY SANTIAGO PRIORITY 1292
RUEHGL/AMCONSUL GUAYAQUIL PRIORITY 4409
RUEHBS/USEU BRUSSELS PRIORITY
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC PRIORITY
RHMFIUU/CDR USSOUTHCOM MIAMI FL PRIORITY
RUEHC/DEPT OF LABOR WASHINGTON DC PRIORITY
UNCLAS LIMA 001850 
 
SIPDIS 
 
SENSITIVE 
 
SIPDIS, USEU FOR DCM MCKINLEY 
 
E.O. 12958: N/A 
TAGS: ELAB ETRD PE PGOV
SUBJECT: LABOR LAW REVISIONS CRITICIZED 
 
REF: A. LIMA 240 
 
     B. LIMA 1805 
 
1.  (U) Summary: The congressional labor committee on May 8 
submitted a revised draft of the General Labor Law to the 
full congress.  Almost everyone involved in the process -- 
political parties, business groups, labor unions and the 
Minister of Labor -- found something to criticize, although 
when pressed, many admitted that a bad law was better than no 
law at all.  The criticisms centered on proposed language 
defining the rights of workers fired without cause: 
businesses claimed the changes would reduce labor flexibility 
and increase unemployment; unions called the revisions a step 
backward in protecting labor rights.  Lost in the hubbub were 
articles regarding collective bargaining and subcontracting 
-- which remained unchanged from previous drafts -- and 
questions about the GOP's ability to enforce whatever 
legislation emerges.  The General Labor Law has been in 
committee for six years; its reception in congress suggests a 
long journey towards passage ahead. End Summary 
 
 
---------------------------------- 
Criticism of the General Labor Law 
---------------------------------- 
 
2.  (U) Labor committee president Aldo Estrada submitted the 
draft General Labor Law to the full congress May 8.  Progress 
on the bill broke down in December 2005 when committee member 
Luis Negreiros of the ruling APRA party sought to 
dramatically strengthen labor rights (see reftel A). 
Business groups and some committee members argued that Peru 
already enjoys some of the strongest worker protections in 
the region, and more regulations would only choke off 
economic growth.  In March, Estrada opened public hearings to 
seek compromise on three core issues: the rights of fired 
workers, methods of sub-contracting, and sector-wide 
bargaining for unions. 
 
3.  (U) The results pleased few.  Congressional parties 
across the board, including APRA, criticized the revisions, 
and four congressmen representing four different parties 
worked together to call public hearings on the law's 
shortcomings.  One of the four, Carlos Bruce of the 
Parliamentary Alliance, complained the law reduced the labor 
flexibility necessary to generate growth and did nothing for 
the unemployed or for workers in the informal economy. 
Minster of Labor Susanna Pinilla said the law, in some 
places, was "incoherent," disrupted the equilibrium between 
business and labor, and gave judges too much discretion to 
decide complicated labor issues. 
 
4.  (U) Criticism focused on Article 165.  The original draft 
allowed workers fired without cause to choose between 
returning to their old jobs or receiving monetary 
compensation.  The revisions took the choice away from 
workers and placed it in the hands of the judiciary.  Jaime 
Caceres Sayan, president of Peru's largest business 
association, said the change worsened an already bad law, 
making it impossible -- in practice -- to discharge workers, 
and threatened to overwhelm an already dysfunctional court 
system.  On the other hand, Juan Jose Gorritti, the former 
head of Peru's largest labor union, complained the commission 
was taking away employee rights that had already been agreed 
to in public hearings.  Gorritti, in private, said that 
organized labor has few friends in the congress, and the 
debate at its core is about who will share in the fruits of 
Peru's economic expansion. 
 
----------------------------------- 
In Defense of the General Labor Law 
----------------------------------- 
 
5. (U) Estrada responded to the criticisms by pointing out 
the law included more than 438 articles covering the gamut of 
labor protections, and serious disagreement existed on less 
than "15 percent" of the text.  Estrada complained that all 
sides in the debate were criticizing the law without offering 
compromises necessary for the bill to move forward, and he 
found it "incomprehensible" that a country could go so long 
without basic regulations governing employment.  Estrada also 
defended Negreiros by saying the draft represented the views 
of all committee members, not just the work of Negreiros. 
 
6. (U) Congressional staffers, however, say that Negreiros 
is, in fact, the driving force behind efforts to strengthen 
labor protections.  According to these sources, Negreiros 
introduced language that would have allowed all unions in 
Peru to negotiate with businesses sector-wide, instead of by 
individual enterprises.  Negreiros also pushed to eliminate 
the means by which employers can subcontract work.  These 
changes would have had a far-reaching impact on labor 
conditions in Peru: the use of sub-contractors, for example, 
was the central issue in the recently concluded mining strike 
(see reftel B).  Congressional insiders say Negreiros was 
pressed by senior APRA leaders to drop his demands, and the 
articles on sub-contracting and collective bargaining remain 
unchanged. 
 
---------------------------- 
The Real Problem: The Courts 
---------------------------- 
 
6.  (U) Pinilla's observation that Peruvian courts are a poor 
venue for resolving labor issues resonated with all sides. 
Both business and labor groups fear submitting disputes to 
the overworked, cumbersome, and corrupt labor courts, which 
are part of the judicial branch.  Even the simplest cases 
take, on average, five to six years to resolve -- and 
sometimes much longer.  In 1992, for example, the National 
Confederation of State Workers filed suit to protest the 
firing of 200 workers by the Ministry of Labor as part of a 
general belt-tightening.  The union won the case -- in 2006. 
The long delays inherent in the judicial process explain why 
businesses, unions, and the MOL oppose language in the 
General Labor Law that would increase the role of the 
judiciary in labor arbitration. 
 
---------------------------- 
The Importance of the Debate 
---------------------------- 
 
7. (U) Comment: Contacts within the MOL predicted the 
congressional debate would be prolonged, although the labor 
committee is respected for at least trying to bring order to 
the briar patch of labor legislation that has grown unchecked 
since the Fujimori administration.  Nearly everyone following 
the bill sees the General Labor Law as creating a framework 
that will affect labor discussions past the next presidential 
elections.  At the same time, the GOP is facing a tide of 
rising expectations from workers and businessman who are 
tired of the ad hoc solutions to labor disputes offered by 
the current laws.  A long view on the General Labor Law is 
necessary because progress is likely to remain glacial.  Post 
has scheduled follow-up meetings with Estrada, Negreiros, 
union leaders, business groups, congressional staffers, and 
the Ministry of Labor to learn what additional changes may 
lie in store.  End Comment 
STRUBLE