VZCZCXYZ0003
PP RUEHWEB
DE RUEHPE #2135/01 1701834
ZNR UUUUU ZZH
P 191834Z JUN 07
FM AMEMBASSY LIMA
TO RUEHC/SECSTATE WASHDC PRIORITY 5901
INFO RUEHBO/AMEMBASSY BOGOTA PRIORITY 4780
RUEHBU/AMEMBASSY BUENOS AIRES PRIORITY 2940
RUEHCV/AMEMBASSY CARACAS PRIORITY 0480
RUEHLP/AMEMBASSY LA PAZ JUN 4308
RUEHMN/AMEMBASSY MONTEVIDEO PRIORITY 9204
RUEHQT/AMEMBASSY QUITO PRIORITY 1288
RUEHSG/AMEMBASSY SANTIAGO PRIORITY 1333
RUEHGL/AMCONSUL GUAYAQUIL PRIORITY 4416
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 002135
SIPDIS
SENSITIVE
SIPDIS
USEU FOR DCM MCKINLEY
E.O. 12958: N/A
TAGS: ELAB ETRD PGOV PHUM ECON PE
SUBJECT: CONGRESS LABOR COMMITTEE ON THE GENERAL LABOR LAW
REF: A. 06 LIMA 4547
B. LIMA 240
C. LIMA 1805
D. LIMA 1850
1. (SBU) Summary: Two pro-labor members of Congress's labor
committee described efforts to overcome remaining obstacles
to the draft General Labor Law (GLL) and their hope that
Congress will approve the law by the end of the year. They
warned that critics were nitpicking to death an historic
piece of legislation that represents a necessary first step
in reforming Peru's labor law. Committee Chairman Aldo
Estrada (UPP) criticized the business community for being
disingenuous and for allowing "the perfect to become the
enemy of the good." Deputy chair Luis Negreiros claimed that
quick passage of the PTPA could undermine support for the
GLL. Business leaders counter that Peru's labor legislation
should reflect the government's market-oriented policies.
Widespread criticism of the draft law throughout its
evolution underscores the difficulty of genuine labor reform.
End Summary.
Overcoming Committee Deadlock
-----------------------------
2. (SBU) Congressmen and staffers on Congress's labor
committee are seeking to negotiate the draft General Labor
Law (GLL) through the remaining persistent obstacles in its
path. When the committee presented the draft law to the full
Congress May 8, it received a broadside of criticism.
Article 165, which required labor judges to determine
compensation for workers fired without cause (reftel D), was
particularly controversial. Committee staffers told poloff
recently that Congress planned to appoint a five-person
commission to study the problem and that compromise was
likely. Congressional leaders would quietly ask the
commission to recommend that fired workers be eligible for
monetary compensation but not re-employment and that a "third
party," rather than labor judges, determine the level of that
compensation. They said the former fix was intended to
please business while the latter was meant to placate labor,
and they speculated that the third party could be the
Ministry of Labor.
3. (SBU) Staffers said a special commission was necessary
because the labor committee was hopelessly deadlocked by
ideological and personal disagreements. Only five of eight
committee members signed the draft law. Congressman Oswaldo
de La Cruz of the Fujimorista bloc refused to sign because
the draft GLL went too far in strengthening worker rights and
threatened to undermine economic growth. Juan Huancahuari of
the Nationalist Party refused because the draft law did not
go far enough in protecting labor rights and took away
protections that had already been agreed to in public
hearings. UPP Congressman Victor Mayora opposed the bill
simply because he does not like his fellow UPP-ista Estrada,
according to staffers.
Anger at Business Groups
------------------------
4. (SBU) While Estrada and Negreiros expressed annoyance
with their congressional colleagues, their real anger was
aimed at business groups involved in the GLL negotiations.
Estrada said the committee had made every change requested by
business, even adopting verbatim the language they proposed,
only to have business spokesmen caricature these efforts as
attempts to create absolute labor stability. Estrada called
the Peruvian businessmen responsible for these
mischaracterizations "devious" and "short-sighted." Both
congressmen said that business groups failed to understand
the true significance of the GLL as an umbrella piece of
legislation that promised to codify and simplify the
confusing patchwork of existing labor laws and regulations.
(Comment: Our own conversations with business representatives
over the last several months do not bear out Estrada's
claims. While they appreciated the chairman's willingness to
listen and consider their viewpoint, they have consistently
opposed the provisions ultimately adopted in a number of
areas, particularly forced rehiring of dismissed workers.
End Comment.)
Deal Hostage to Bickering
-------------------------
5. (SBU) Negreiros and Estrada further emphasized that
agreement had been reached on 415 out of the 430 articles in
the bill, and lamented that the whole package could be
undermined by nitpicking over Article 165, which concerns the
rights of workers fired without cause. Negreiros insisted
that the committee had remained even-handed in its approach.
He noted that, even after the GLL was passed, most unions
would be unable to organize sector-wide; the minimum wage
would remain at USD 1.50 per hour; and workers fired without
cause would not be entitled to regain their old jobs.
Negreiros insited that the real threat to job growth was
legislation tilted so far in favor of business that social
unrest was inevitable. (Comment: Negreiros comments should
be viewed in context. A former labor official himself,
Negreiros is seen by many in his own party, including
President Garcia, as being statist and favoring strong labor
stability. End Comment.)
6. (SBU) Negreiros also speculated that quick passage of the
PTPA in the US Congress could undermine the GLL. He noted
that most Peruvian congressmen believed the GLL was a
necessary precondition for the PTPA, and with the PTPA in
hand, support for the General Labor Law could fade. Even if
the PTPA was not approved in the US Congress, Estrada and
Negreiros rated the GLL's odds as no better than 60/40 in
favor. Both expected the bill would die in committee if it
was not approved by December.
Business Interests Disagree
---------------------------
7. (SBU) Business interests disagree with the analysis of
Estrada and Negreiros. Business groups are continuing to
negotiate "in good faith", according to Harry Stewart,
General Counsel for ADEX, Peru's association for exporters.
The problem, he said, was the GLL needed to reflect the
government's market-oriented economic policy. Otherwise,
Peru could face a return to a "state-controlled economy," and
risk undermining its strong economic performance of recent
years Stewart rejected criticisms from the bill's
supporters, noting that it lacked support in the full
congress.
Comment: The Fruitless Frustration of Finding Compromise
--------------------------------------------- -----------
8. (SBU) After a year of steady and at times sharp criticism
from labor, business, the media, the Ministry of Labor and
their own parties, Estrada and Negreiros are running out of
gas. At one point during the meeting with poloff, Estrada
rose to his feet and pounded the table to emphasize his anger
at business groups. Negreiros said that seeking a viable
compromise among the competing interests involved had been
"brutal." Palpably frustrated by the challenges of bringing
more workers into the formal economy and strengthening the
government's ability to enforce labor protections, both
congressmen believe the General Labor Law is a necessary
first step and that its critics are merely seeking to retain
the short-term benefits provided by a chaotic and unregulated
labor market. End Comment.
STRUBLE