LABOR LAW THREATENS U.S. INTERESTS

UNCLAS SECTION 01 OF 03 MAPUTO 000606

SIPDIS

STATE FOR EEB, L, AND AF
STATE PLEASE PASS TO USTR

E.O. 12958: N/A
TAGS: ETRD EINV ELAB ECON EAID PGOV PREL AMGT APER
ASCH, MZ
SUBJECT: LABOR LAW THREATENS U.S. INTERESTS

REF: A. MAPUTO 493

B. MAPUTO 381

C. JACKSON-ROTH EMAIL 4/22/09

D. ROTH-JACKSON EMAIL 5/12/09


1. SUMMARY/ACTION REQUEST: Mozambique's new labor law sets
complicated requirements for quotas and credential validation
for foreigners. U.S. companies and nonprofits along with the
American school have requested USG advocacy as the law is
significantly hindering their ability to invest and implement
programs in areas where local employees with the needed
skills are scarce. Mission family members are no longer able
to work on the local economy. The GRM has so far been
unresponsive to efforts to negotiate bilateral agreements in
these areas. The labor law appears to conflict with the
U.S.-Mozambique Bilateral Investment Treaty's (BIT) articles
on foreign worker quotas and credential validation, possibly
abrogating the treaty. The Embassy has aggressively pressed
the GRM for resolution to the visas issue, noting that USG
assistance programs cannot be implemented without foreign
specialized labor. We request Washington guidance soonest on
whether the BIT has been violated and whether the BIT can be
used to resolve the growing number of labor-related concerns.
END SUMMARY/ACTION REQUEST.


2. Mozambique's labor code (enacted on December 30, 2008)
requires that, depending on the size of the organization, no
more than five to ten percent of workers can be foreigners
(ref A). Any requests for additional foreign workers above
the quota must be reviewed on a case-by-case basis. All
foreign employees must have their education and professional
credentials validated by the Ministry of Labor before being
approved for work visas. The Ministry of Labor's
bureaucratic process to validate and approve cases has been
so slow that it can often take up to 12 months before
finalization. In many instances, the applicant ultimately
withdraws the application and seeks employment elsewhere.
Furthermore, in cases where no local educational/professional
equivalencies exist, applications have been denied outright.

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U.S. Companies Request USG Advocacy
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3. The AmCit CEO of Opportunity Bank, a U.S.-owned and
supported financial institution, recently had his work visa
denied because the application put the company's number of
foreign workers above quota. The AmCit CEO of Houston-based
Anadarko Petroleum's Mozambique subsidiary initially had his
work visa denied because no local equivalent to his
professional credentials as a petroleum engineer exists.
While his application may be eventually approved upon
appeal--Anadarko has not yet hit its quota limitation--the
CEO expressed concern that when exploratory drilling
commences later this year, the necessary American workers
(petroleum technicians and geophysicists) will not be
approved, even though there are no Mozambicans who are
qualified in these areas. Both companies have now formally
requested USG guidance and advocacy. Other U.S. companies
have informally requested guidance as well.

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U.S. Nonprofits and School Ask for USG Support
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4. U.S.-based nonprofits are also affected. As a group,
more than ten U.S. NGOs have asked for USG support, and some
have begun moving operations across the border into South
Africa or are considering complete withdrawal. For example,
John Snow International (a key USAID implementing partner)
has lost four expat staff in the past month, and is expected
to lose one more soon. These staff include a PhD biochemist
and the software engineer who wrote the logistics program
used by the Ministry of Health to coordinate and deliver
anti-retroviral drugs throughout the country--skill sets not
available in-country. Another implementer of USG assistance,
Vanderbilt University, has had nine foreign medical doctors,
nurses, and other allied health experts suspended or denied
work permits in recent weeks. Other nonprofits also indicate
that foreign medical doctors have been denied
visas--especially worrisome in a nation with one of the
lowest ratios of doctors per capita in the world. In all,

MAPUTO 00000606 002 OF 003


more than 80 expatriate professionals have been denied work
visas for U.S. nonprofits in Mozambique, thus significantly
hindering U.S. investment in the country's social and health
systems.


5. The Director of the American school informed the Charge
in early May that by the end of the school semester, 90
percent of the expatriate teachers there will no longer have
valid work visas. Of all the applications pending before the
Ministry of Labor for validation of academic credentials,
only three have been approved, in spite of a significant
dearth of English-speaking teachers in the country. The
director indicated that teachers would be effectively
relegated to working illegally at the beginning of the new
school year, a factor negatively impacting teacher morale and
recruitment efforts. While the school has not contemplated
closure, any impairment in the school's operations would
reduce Mozambique's attractiveness to U.S. (and other)
investors (and U.S. Embassy personnel) with families. The
GRM has not responded to repeated Embassy efforts to engage
on a bilateral agreement to clarify the school's status.

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Dependents of Diplomats Cannot Work
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6. The labor code also states that dependents of diplomats
who enter the country on diplomatic visas are expressly
prohibited from working in Mozambique, and a literal reading
of the text indicates that the prohibition applies even to
work in diplomatic missions. While the latter point is
likely unenforceable, at this time no/no USG dependents have
been able to find employment on the local economy since
implementation of the law. The GRM and the USG do not have a
Bilateral Work Agreement (BWA) in place, and it would appear
that a de facto BWA is also no longer practicable. We have
updated post's FAMER to reflect this situation. Repeated
Embassy efforts to engage the GRM on a new BWA have been
ignored, even though we have emphasized that there could be
negative consequences for the Mozambican missions in the
United States.

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Conflict with Bilateral Investment Treaty?
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7. The U.S.-Mozambique Bilateral Investment Treaty (BIT)
entered into force on March 3, 2005 after ratification by the
United States Senate and the Mozambican Council of Ministers.
Article 1 gives a broad definition of the types of entities
that are protected by the treaty, which would appear to
include for-profit companies as well as non-profit
organizations and schools. Article 7 also states that U.S.
entities are exempt from quotas on the number of U.S. workers
and from validation requirements of education and
professional credentials. This would suggest a conflict
between the labor law and the BIT (ref C). Local lawyers
informally suggest to Emboffs that in Mozambique,
international treaties do not pre-empt national law, and that
in this case it is possible that the labor code may abrogate
the BIT.

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Embassy Aggressively Pressing GRM
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8. The Charge and other officers in the mission have raised
these concerns at all levels of the GRM, including with
Ministers of the Presidency, Foreign Affairs, Commerce,
Education and Labor, calling for prompt resolution of visa
issues for foreign workers. The Charge has specifically
noted in these meetings that the labor law is having the
unintended effect of hindering foreign investment and also
complicating the delivery of international donor assistance
(refs A & B). We have also shared copies of the BIT with
ministries, and have urged that it be used as a mechanism to
quickly solve these difficulties. To date, we have received
no substantive response on whether there is GRM willingness
to use the BIT in this way.

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COMMENT/ACTION: U.S. Assistance, Investment Harmed

MAPUTO 00000606 003 OF 003


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9. Clearly the intent of the labor law is to protect
Mozambican workers and create new employment opportunities
for them. However, U.S companies and entities are unable to
hire locally for specialized skill sets in health,
engineering, finance and education. GRM refusal of work
visas for American professionals in these areas is a
significant obstacle to investment. Furthermore, USG donor
assistance--clearly an investment in Mozambique's development
and its economy--is also at risk, as U.S. and local entities
that administer USG funds cannot hire the needed
professionals to implement key programs, especially in
health. We ask that State and USTR review the text of
Mozambique's labor law (sent ref D) and advise whether the
BIT has been abrogated, and if not, whether it can be used to
resolve this issue. We believe the BIT represents the most
promising short-term solution for U.S. companies, non-profits
implementing USG assistance and the American school. The BIT
is an agreement that has already entered into force, and one
that the GRM has reiterated its commitment to
respecting--most recently on March 24 in Washington during
Trade and Investment Framework Agreement discussions with the
U.S. Trade Representative.

Chapman
Chapman