PANAMA: DOCTORS' STRIKE ENDS WITH 26.8 PERCENT

UNCLAS PANAMA 001900 SIPDIS SENSITIVE SIPDIS E.O. 12958: N/A TAGS: ELAB PGOV ECON SOCI PM SUBJECT: PANAMA: DOCTORS' STRIKE ENDS WITH 26.8 PERCENT RAISE -------------- SUMMARY -------------- ¶1. (SBU) Ending 39 days on strike, the National Medical Commission of Negotiation (COMENAL) reached agreement with the GOP on a 26.8% raise, on December 14. COMENAL, which launched its strike on November 6 with demands for a 60% raise, has also agreed to make up the estimated 600 thousand appointments lost during the strike. COMENAL's economic advisor Dr. Alexis Soto explained to POLOFF on December 11 that, despite reforms in 2005 to Panama's social security system (Caja de Seguro Social - CSS),the CSS could not handle over the long-term a raise of more than 18% for health workers. Soto pointed out that the GOP would need to increase the level of overall contributions to the CSS, which currently solely relies on payroll deductions, to ensure the long-term sustainability of the system. This raise undermines the GOP's 2005 reform of the CSS, as the CSS would now face insolvency in 2011 instead of 2016. This will force the next administration to address the CSS's solvency challenges, including consideration of direct GOP budgetary support for the system. -------------- Background -------------- ¶2. (U) In 2005, the GOP realized that its social security system would be insolvent by 2009 and proposed raising mandatory payroll contributions while simultaneously striving to incorporate more workers in the system. The Torrijos Administration's efforts to put the CSS on more sound financial footing ran head-long into strong public protests. To secure the support of healthcare works, the GOP offered them raises ranging from 30% to 60%. Only one nurse, however, actually received a raise of 60% due to a unique convergence of criteria, the most salient of which was that she had been in the healthcare system for more than 30 years. This sole outlier was the genesis of COMENAL's initial negotiating position to seek an across the board 60% raise. ¶3. (U) Striking healthcare workers were also motivated by opposition to the GOP's proposal to establish a Unified Health System (Sistema Unica de Salud) that would combine the Ministry of Health's and the CSS's healthcare systems. This proposal included provisions that would privatize the social security system, transfer more responsibility from the GOP's Ministry of Health to the CSS, facilitate the entry of foreign doctors to Panama, and outsource certain services. As a result, the workers have feared that merging into a unified system would lead the GOP to eliminate many positions. -------------- CSS Cannot Support More Than 18% Raise -------------- ¶4. (U) Soto maintained that the CSS system is overburdened with 800,000 workers supporting a population 3.3 million Panamanians. According to Soto, the GOP was transferring the responsibility of providing nationwide healthcare to the CSS without transferring the necessary funding. The expanding responsibilities of CSS could not be sufficiently financed solely with payroll contributions, Soto asserted. The GOP's reform of the CSS through Law 51 of Dec 27, 2005 extended the solvency of the system from 2009 to 2016 via increases in payroll contributions. As the salaries of public health workers come from this funding pool, an increase of 18% under the current structure would jeopardize the solvency of CSS by ¶2011. -------------- COMENAL Resist the Involvement of Radicals -------------- ¶5. (SBU) Soto explained that radical groups, such as the SUNTRACS construction worker's union and the "FRENADESSO" group created to fight the GOP's earlier CSS reform efforts, had sought to join COMENAL's strike activities. They had apparently believed that COMENAL could become isolated and weakened by a prolonged strike and, therefore, susceptible to outside influence. However, COMENAL resisted their overtures and, following President Torrijos' initial personal intervention at a December 10th meeting, COMENAL and the GOP ultimately settled the strike on December 14. During the December 10th meeting in which COMENAL's leadership rejected an offer of 20%, one of the doctors outside of the leadership spoke up saying they would accept a 25% raise. This may have been the pivotal moment that broke the ice. -------------- COMMENT -------------- ¶6. (U) COMENAL achieved a significant victory on two fronts. One, it secured a sizable pay raise (about double the 14% increase of the minimum wage recently agreed upon in a private deal struck by industry and other labor unions.) Second, COMENAL also forestalled the radicalization that was knocking at its doors. Conversely, the Torrijos Administration's settlement with COMENAL could be costly. By granting CSS a raise of 26.8%, the GOP has undermined one of its signal achievements, i.e., ensuring the CSS's solvency. This puts the future of the CSS and its workers on a collision course with fiscal realities, but that will be a matter for the next administration to address. ARREAGA