Identifier
Created
Classification
Origin
03TEGUCIGALPA1580
2003-07-03 15:41:00
UNCLASSIFIED//FOR OFFICIAL USE ONLY
Embassy Tegucigalpa
Cable title:  

Minister of Labor Looking to Create Temporary

Tags:  ELAB ETRD PHUM ECON EINV PGOV PREL KJUS HO 
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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

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supported the idea, have withdrawn their support delaying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