US FIRMS AND LABOR MINISTER TOMADA DISCUSS CSR AND

C O N F I D E N T I A L BUENOS AIRES 001459

SIPDIS

SIPDIS

LABOR FOR CHURCH
COMMERCE FOR PEACHER AND BASTIEN
STATE FOR MITTLEHAUSER

E.O. 12958: DECL: 07/25/2017
TAGS: PGOV ECON ELAB AR
SUBJECT: US FIRMS AND LABOR MINISTER TOMADA DISCUSS CSR AND
DECENT WORK INITIATIVES

REF: BUENOS AIRES 914


1. (C) Summary. On July 24, Ambassador Wayne hosted a
roundtable meeting with Labor Minister Carlos Tomada and
representatives from U.S. companies to discuss the Labor
Ministry's initiative to promote formal employment and decent
jobs as well as U.S. companies' corporate social
responsibility (CSR) programs. U.S. company representatives
expressed concern with domestic tax burdens
disproportionately borne by foreign multinational companies,
heavy-handed union negotiating tactics, insufficient GoA
investment in educating qualified workers, and the Argentine
Congress's efforts to legislate CSR initiatives. U.S.
companies shared with the Minister details on their efforts
to improve diversity in the workplace as well as promote the
professional development and work-life balance of their
employees. End Summary.

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Ambassador: U.S. Firms Positive Contributions to Argentina
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2. (C) On July 24, Ambassador Wayne hosted a roundtable
meeting with Labor Minister Carlos Tomada and representatives
from U.S. companies. The Ambassador kicked off the meeting
by noting the many positive contributions U.S. companies have
made in Argentina, boosting domestic productivity by
importing cutting-edge technology and transferring corporate
best practices generating over 150,000 jobs in the local
economy, investing in their employees and providing on the
job training, and supporting the social development of their
communities through various CSR initiatives.

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Tomada: MOL Efforts to Formalize the Workforce
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3. (C) Minister Tomada expressed appreciation for the
positive impact U.S. investment has had in Argentina's
economic recovery. Although Argentina's economic situation
has improved since the 2001-02 crisis, Tomada stated that
more needs to be done to create new jobs and particularly to
formalize the status of informal labor. He noted that 30
percent of informal workers are employed by formal
businesses. For this reason, the Labor Ministry launched a
"Decent Work" initiative and has enlisted the participation
of the largest Argentine companies as well as U.S. companies
to help ensure that the contractors, sub-contractors,
distributors, suppliers, shippers, etc. they work with employ
formal labor as opposed to informal labor. He noted that a
number of U.S. companies already participate in the
initiative, including some of those at the roundtable, and
invited the others to participate. The Ambassador then
opened the floor to U.S. company representatives, asking them
to share with the Minister their efforts to promote formal
employment with suppliers and contractors all along the
production and distribution chains as well as highlight their
CSR programs in Argentina.

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Domestic Tax Burdens Disproportionately Borne by Foreign MNCs
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4. (C) The Duke Energy representative began by noting that
U.S. firms comply with Argentine labor law, but that many
other domestic companies do not, particularly when it comes
to paying taxes for social security and healthcare. He
claimed that for every ten workers the average Argentine
company hires, "five are off the books," putting U.S.
companies at a significant competitive disadvantage viz local
companies. "A few of us end up paying on behalf of everyone
else", he asserted. The GoA should focus on ensuring all
companies comply with the letter and spirit of labor law, he
suggested. The Duke Energy executive assured Minister Tomada
that Duke Energy is open to cooperating on Ministry of Labor
initiatives. Merck representative also noted that his
company complies with existing labor laws and demands that
its suppliers and clients comply as well. He added, that it
was in Merck's best interest to ensure that all private
companies pay their share of social security and healthcare
taxes. In addition, Merck reserves the right to audit
company suppliers to ensure full compliance with current
labor and tax regulations, he stated.

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MOL has Upped Inspections to Improve Local Compliance
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5. (C) Tomada acknowledged that Argentine companies
routinely avoid paying social security and healthcare taxes
for their employees. When he first took office, the MOL only
had 22 inspectors for the whole country. Now, the MOL counts
on 400 inspectors within the Ministry itself and has teamed
up with another 600 inspectors from other GOA agencies, such
as AFIP (the IRS-equivalent) and provincial governments.
This has enabled the MOL to step up inspections to ensure
local firms comply with the law, he explained. The GOA has
also lowered corporate tax rates for companies with less than
80 employees, has simplified the registration process for
informal businesses, and has adopted technology to allow
small and medium-sized enterprises to pay labor and social
taxes via the Internet. The Minister also asserted that when
he took office, over 50 percent of employment was "off the
books", but now 90 percent of new jobs are registered "on the
books". Tomada expressed hope that by the end of his tenure
as Minister, these efforts will have reduced informal
employment by 10 percent.

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Concern over Radicalization of Union Tactics
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6. (C) Turning to a discussion on heavy-handed labor union
tactics in Argentina to win salary increases, the Chevron
representative argued that unions fail to recognize that
gains in productivity vary from sector to sector, and that
salaries should be linked to sector-specific gains in
productivity. In communities, for example, where hydrocarbon
exploration and development business is prominent, energy
sector workers earn ten times more than police and teachers.
As a result, teacher and police unions will stage protests
demanding salaries equivalent to their energy sector peers,
he noted. He urged the GoA to take measures to curb the
unions' excessive power and moderate their demands.


7. (C) While stressing that the GOA does not support
aggressive labor tactics, Tomada acknowledged that labor
unrest has impacted key sectors of the productive economy,
but claimed that the situation could be worse. In general,
he claimed, most labor disputes have been resolved peacefully
with the assistance of MOL officials. To avoid
confrontation, Tomada encouraged employers to use all
negotiating tools at its disposal.


8. (C) The Citibank representative echoed Chevron's
concerns, but noted that an equilibrium had been reached with
the unions under the Kirchner administration. He cautioned,
however, that without policy continuity at the Labor Ministry
after the October elections, unions will become increasing
more radicalized. He asked Minister Tomada whether he would
stay on in a new government or if his successor will try to
maintain the course he set as Minister. Tomada declined to
comment but assured U.S. company representatives that a
likely Christina Fernandez de Kirchner government will
continue the "positive course" Tomada had begun.

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Concern over Legislating CSR
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9. (C) Chevron also expressed concern that the Argentine
Congress is looking to pass CSR legislation that would compel
companies to make contributions to their communities.
Mandating CSR initiatives by law will not help increase CSR
programs, he argued.

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Concern over Qualified Labor Shortage
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10. (C) While the American Express representative cited a
highly-qualified workforce as the main reason why Amex is
looking to expand its Argentine operations, Dow Chemical and
Intel expressed a concern with a shortage of qualified
workers due to Argentina,s lack of investment in education.
Representatives of Dow Chemical, Intel, and Ford discussed
initiatives their companies have undertaken to provide
on-the-job training. Intel executive suggested that the GOA
should do more to invest in education starting with improving
teacher's salaries. When truck drivers earn ten times more
than school teachers, there is no incentive for people to
pursue education as a career, and this will eventually hurt
Argentina's prospects for the future, he cautioned. When he
expressed interest in the MOL's public-private partnership

with Microsoft and Oracle, the Minister invited Intel to
participate in the initiative. (Note: Microsoft and Oracle
have engaged the MOL in a public-private partnership through
which these companies provide IT training to students in
their final year of university to enhance their employment
prospects. They also provide scholarships for qualified
students from low-income families. Independently, Intel
offers a sizeable IT training program for tecahers.)


11. (C) Ford's CSR programs also focus on education and job
training. The Ford official explained that the company is
refurbishing 43 schools it helped to build in the 1960,s and
1970,s in remote border and rural areas where access to
education is difficult. As a learning organization, Ford
prepares its employees for increasingly more complex jobs
through on-the-job training. As a testament to the success
of this approach, he noted that many of Ford's employees have
been with the company for 20 years or more. Ford also runs a
private technical school for high school drop-outs to give
them the technical skills necessary for future employment, he
stated.

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Amex Efforts to Promote Work-Life Balance and Diversity
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12. (C) American Express (Amex) executive noted that Amex
promotes compliance with labor laws among all of their
suppliers. Since the economic crisis, Amex has doubled its
workforce to 1200 employees and intends to hire even more as
it looks to increase services to Latin America, Europe, and
Asia-Pacific. She noted that Amex was voted best place to
work in Argentina based on employee surveys, and she credits
employee satisfaction to Amex's efforts to improve work-life
balance. This is fostered through family-friendly policies
such as flexible working hours and solid health benefits.
Amex has also committed itself to diversifying its workforce,
by hiring disabled employees and offering opportunities to
disabled students in its existing internship program.

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Participants
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13. (U) Representatives from American Express, Chevron,
Citibank, Dow Chemical, Duke Energy, Ford, IBM, Intel,
McDonald's, Merck, and the American Chamber of Commerce
participated in the meeting. Minister Tomada was accompanied
by Senior Advisor Nydia Neer. The Ambassador was accompanied
by the Economic Counselor, Commercial Counselor, Labor
Attache, Foreign Commercial Specialist, and Political Intern.
WAYNE