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

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SUMMARY
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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.

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Background
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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.

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CSS Cannot Support More Than 18% Raise
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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.

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COMENAL Resist the Involvement of Radicals
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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.


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COMMENT
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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