C O N F I D E N T I A L PANAMA 000490

SIPDIS

WHSR PLEASE PASS TO AUSTR EISSENSTAT

E.O. 12958: DECL: 06/10/2019
TAGS: ECON EFIN EFTA ELAB ETRD PGOV PM PREL
SUBJECT: PANAMA FTA LABOR REFORMS: TIME IS TICKING AWAY.

REF: A. PANAMA 439

B. PANAMA 454

Classified By: AMBASSADOR BARBARA J. STEPHENSON FOR REASONS 1.4(b) & (d
).

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SUMMARY
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1. (C) President Torrijos issued four executive decrees on
June 5 to bring the Panamanian labor code into alignment with
International Labor Organization (ILO) standards, as he
continues his attempt to fulfill his Free Trade Agreement
(FTA)-related promises to the Obama Administration. However,
the Torrijos Administration still needs to implement further
labor reforms. Unfortunately, his administration is almost a
completely spent force with only two weeks left in office and
there is political sentiment by business elites and segments
of the public that the Americans are unfairly moving the
goalposts by insisting on labor and other reforms. After
broadcasting discouraging signals, the incoming Martinelli
Administration is sending a more reassuring message, albeit
quietly, on playing a constructive role on labor reforms.
Another labor vote in the lame duck National Assembly has
created one final opportunity to pass labor reform
legislation, if the outgoing Torrijos and incoming Martinelli
Administrations have the shared will to shepherd these
measures through the National Assembly. Post will continue
to advocate that the Torrijos Administration, with support
from the incoming Martinelli Administration, complete all
labor reforms that were discussed between USTR and the
Torrijos Administration.

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SOME LABOR ISSUES RESOLVED
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2. (SBU) President Torrijos issued four executive decrees on
June 5 to bring the Panamanian labor code further into
alignment with ILO standards, a key precondition for FTA
passage in the U.S. Congress. Combined with the three

labor-related executive decrees from May 20 (see ref B), the
Torrijos Administration has responded to five of the nine
primary labor issues discussed between USTR and the GOP. Of
the June 5 decrees, the first provides for an inspection and
enforcement system to inhibit the use of temporary workers as
a substitute for permanent workers. The second and third
limit the scope of strike restrictions on essential services
in transportation. The fourth protects employees against
employer interference with union rights, including employer
directed unions and the misclassification of "confidence"
workers. Confidence workers are high-level executive and
managerial workers that are exempt from the labor code.

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OPPORTUNITY ON RESOLVING
OUTSTANDING LABOR ISSUES
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3. (SBU) The four outstanding labor issues remaining are:
reducing the minimum number of workers to form a union from
40 to 20, providing for workers to collectively bargain in
the first two years of a business's existence, changing
various labor provisions in the Export Processing Zone labor
code, and precisely applying the labor code to Maritime
workers. The first issue will require legislative changes to
the politically sensitive labor code and the next two issues
will require legislative changes to other laws. A decree can
clarify the application of the labor code to Maritime
workers. The window for labor legislation is closing rapidly
for the Torrijos Administration. Torrijos dejected from a
bruising electoral defeat in the May 3 election and poisonous
infighting in Torrijos's PRD party, squandered the last two
legislative vehicles (an increase in the cap on the budget
deficit and limiting pay for National Assembly deputies to
the length of their term) that could have been used to pass
the necessary labor reforms. However, President Torrijos
recently decided to appoint four union leaders to the Board
of the Social Security Administration before he leaves
office. The appointments must be approved before the PRD
controlled National Assembly adjourns for the last time on
June 30. These appointments may provide the last opportunity
to pass FTA related labor legislation during the Torrijos
Administration. However, Torrijos is unlikely to weigh down
passage of his appointment with difficult labor reforms
attached.

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RELUCTANT TORRIJOS
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4. (C) The Torrijos Administration has enacted the measures
that are "relatively easy," since there is building pressure
from business and labor organizations against perceived
concessions to the Americans. See ref A. Many in the public
view the labor reforms as being imposed by the United States
Government, an infringement of Panamanian dignity, and adding
extra conditions after negotiating the FTA in good faith.
Labor unions, some of whom were supporters of the FTA,
recently opposed the labor decrees and proposed legislation,
especially changes to the near sacrosanct labor code. See
ref A. The labor unions generally view the reforms enacted
thus far as neutral or marginally positive to their vital
interests, but fear opening a Pandora's Box of broader labor
changes sponsored by the business community. For instance,
Panama's business community has long sought to change the law
that allows enterprise at which there is a strike to be shut
down. Labor leaders, in contrast, view this law as a vital
tool to satisfy worker demands. On June 12, ECON Counselor
met with Mariano Mena, General Secretary of the Confederation
General of Workers of Panama, which covers 54,000 Panamanian
workers. While Mena endorsed the idea of decrees that
advance Panamanian compliance with ILO norms, he opposes
changes made for the sake of the FTA (although the FTA
requires basic ILO compliance, Mena does not view trade as a
legitimate vehicle for advancing labor rights). He expressed
alarm about the labor environment in the Martinelli
Administration (including the Martinelli-led majority
alliance in the incoming National Assembly), especially
efforts by Martinelli's key constituency - business - to
change the labor code.

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MARTINELLI - MIXED MESSAGES
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5. (C) Martinelli and his closest advisors have stated they
will not spend political capital to push for FTA related
labor reforms. See ref B. Labor Minister designate Alma
Cortes announced on June 11 that "What I can assure you is
that at this time (labor reforms) are not on the new
government's agenda." However, Vice-President and Foreign
Minister designate Varela told the Ambassador on June 17 that
Martinelli designated officials have been sharing "personal
and undisciplined musings" on the FTA and potential reforms.
He assured the Ambassador that "the Martinelli Administration
is committed to doing whatever it takes to get to a completed
FTA." Varela added that it is much easier to sell the
reforms in the guise of general ILO compliance rather than
explicitly tied to the FTA. He told the Ambassador that he
would be in contact with the Torrijos government to
coordinate FTA measures. He specifically wants the union
friendly Torrijos Administration to pass all the labor
reforms in the next two weeks and promised political support
in the National Assembly. Thus, post will continue to
advocate that the Torrijos Administration in their remaining
two weeks complete all labor reforms that were discussed
between USTR and the Torrijos Administration. The position
of President Torrijos as of June 18 is that further labor
reforms are simply politically impossible.
STEPHENSON