EMBASSY VIEWS ON GOE LABOR DECREE

UNCLAS SECTION 01 OF 02 QUITO 002769

SIPDIS

SENSITIVE

PLEASE PASS TO USTR FOR BUD CLATANOFF AND BENNET HARMON,
DEPARTMENT OF LABOR FOR ILAB: JORGE PEREZ-LOPEZ AND CARLOS
ROMERO, DEPARTMENT FOR WHA/AND, WHA/PPC, DRL/IL AND EB

E.O. 12958: N/A
TAGS: ELAB PGOV EC
SUBJECT: EMBASSY VIEWS ON GOE LABOR DECREE



1. (SBU) Summary: The publication on October 14 of the
presidential decree on subcontracting is an important if not
ideal step forward that comes at some political cost to
President Gutierrez and Labor Minister Raul Izurieta.
Ecuadorian and U.S. private sector interests are already
attacking the decree, confirming our view that this attempt
to regulate subcontracting will raise the costs to employers
of abusing subcontracting to curtail worker rights. Though
not ideal, we believe the decree represents a good faith
effort by the GoE to fulfill one of its commitments under the
ATPDEA. We firmly agree that more substantive labor reform
is needed and will require a sustained USG effort to support
and Congressional action. The decree drafting process shows
that will not be easy; we can best advance the prospects for
reform by welcoming the decree and supporting further reform.
End Summary.

Despite Delays and Disappointments...
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2. (SBU) We have been as frustrated as our colleagues in
Washington by the agonizing process of change and missed
deadlines that plagued the drafting of this decree. Delay
and disappointment with regard to decrees, far from being
exceptional, are the norm here, where any presidential action
has the potential to destabilize a weak and unpopular
government. Labor rights, as elsewhere, are inherently
sensitive political issue here, alternately able to alienate
powerful economic interests and to mobilize the labor sector.
The 75% limitation on subcontracted employees is much higher
than labor unions wanted, but any limitation is too much for
business. The treatment of contracting by individuals in
agriculture may open an unfortunate loophole, but the extent
to which that loophole really allows for abuses will not be
clear until we see how the decree is applied.

...We See Progress
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3. (SBU) Although all of our concerns have most definitely
not been met, it does seem that the decree is a significant
step forward and limits the scope for abuse of subcontracting
to curtail labor rights. Local AFL-CIO Solidarity Center
representative Patricio Contreras characterized it as
positive to LabOff on October 15, although we understand the
AFL-CIO is still considering its position. The decree
imposes regulation specific to subcontracting for the first
time in Ecuador. Registration and reporting requirements
will allow the Ministry to get a handle on subcontracting and
to resolve abuses. Another indication the decree has merit
is the fact that business lawyers are working overtime on the
constitutional challenge they say will be presented within
days (it will focus on the 75% rule and the fines being
levied per worker affected by a violation, rather than per
violation). A U.S. business leader came in to see the
Ambassador before the decree was published to request Embassy
assistance to prevent the issuance of what he considered a
"anti-democratic" labor regulation. In our view the decree
will make it significantly more costly and more difficult for
employers in Ecuador to use subcontracting as a way of
thwarting employees in the exercise of their rights.


4. (SBU) The GoE's efforts on child labor this year have
been even more impressive. We asked for new child labor
inspectors to be appointed by the end of the year. Given
Ecuador's track record, one might have expected appointment
on December 31 followed by months of wrangling about
salaries, transportation, and other facilities. Instead, the
GoE moved very rapidly to appoint and has been working on the
logistical issues diligently ever since. They are not
resolved, but they may be by the end of the year.

The Way Ahead
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5. (SBU) There is no doubt that issuing the decree was
difficult for this government, and we believe the effort
demonstrates the GoE's commitment to labor reform. The
decree comes from a very weak government and in the face of
staunch opposition from the business community. We know the
GoE worked hard to come up with a decree which would meet
U.S. concerns and be acceptable to labor and business here.
Minister of Labor Izurieta has invested his personal
credibility in the effort, as has the President. With all
his flaws, we believe Izurieta is an ally of labor reform and
a star in this government. Any replacement would be very
unlikely to be an improvement. Izurieta is now going to pay
a political price for his efforts, with the constitutional
challenge from the business community. In this context, it
is essential to carefully calibrate our reaction to the
decree to maximize the prospects for labor reform as we go
forward.


6. (SBU) This Embassy defers to and respects the interagency
process to set policy on ATPDEA labor petitions and FTA labor
strategy, and offers the following points for your
consideration. Real labor reform will take time for labor
and business to develop common ground. We believe the USG
can best help focus debate by making it clear that labor
reform is a necessary condition for any FTA with the U.S.,
while being very careful not to convey this message as an
ultimatum. Concluding the review on last year's petitions
would turn the page on the decree, and allow the GoE to move
toward legislative reforms. Accepting the new ATPDEA
petitions for review would also help leverage the reform
process.

KENNEY