Chile aims to rewrite its labor laws

By Louise Egan

SANTIAGO (Reuters): Chilean Manuel Guzman could not believe it when his boss fired 300 unionized workers last year because, he says, they opposed a company move to freeze wages for the next eight years.

"It was almost as bad as the dictatorship," he said, referring to Gen. Augusto Pinochet's 1973-1990 rule.

New workers were hired and a combination of layoffs, threats and videotaped union meetings eventually persuaded the remaining employees to sign the long-term contract, said Guzman, union president at a large Santiago department store.

He filed a complaint with the Labor Board, which in May found the store guilty of anti-union practices. Since then employee groups have challenged dozens of similar cases of abuse at other companies.

While local human rights groups have caught the world's eye recently for their efforts to try Pinochet for alleged human rights crimes, Chile is also trying to overcome a lesser-known legacy of military rule: labor laws that businesses say are "flexible" but workers claim are anti-union.

"From 1990 on the dictatorship in this country was defeated, but it has been impossible to defeat it inside companies," union activist Miguel Soto said.

Today's labor code reflects broad reforms made in 1981, two years after Pinochet legalized unions again after a six-year ban. The law restricts forming unions, making it difficult to create them in small companies, for example, prohibits collective bargaining at the multicompany level and allows companies to hire replacement workers during a strike. Sanctions for anti-union practices are weak and poorly enforced.

In 1990, the government made minor changes to the law without significantly altering its overall effect.

Before narrowly defeating a right-winger in January's election, President Ricardo Lagos promised Chile's 5.9 million workers that his moderate left-wing government would overhaul labor legislation, which dates back largely to the free-market economic shakeup imposed under Pinochet in the early 1980s.

Lagos vowed to bolster the collective bargaining powers of unionized workers, who make up 10 percent of the work force, and bring local legislation in line with International Labor Organization (ILO) conventions ratified by Chile in January 1999.

ILO Conventions 87 and 98 establish the right to unionize and engage in collective bargaining, rights that experts say are not fully protected in Chile.

In an impassioned Labor Day speech, Lagos referred to Guzman's plight and warned that he "will not accept situations that clearly diminish workers' right to fight for what is fair: more productivity (and) higher salaries."

Despite the fiery rhetoric, however, he is wary of provoking a backlash by the country's powerful business elite and has involved it in the process of drafting legislation.

In March, he began roundtable talks on labor reform in what has become his trademark formula for carving out accords on thorny issues ranging from indigenous land claims to human rights. The talks aim to find common ground on key points of reform among labor, business and government representatives.

Labor Minister Ricardo Solari, a Socialist Party veteran, said the emphasis on consensus-building meant the reforms may not be as grand as unions had hoped.

On Sept. 14, Solari unveiled an initial reform package to be sent to Congress this year covering only a portion of issues covered in the talks. The more controversial reforms would be postponed until next year, he said.

The two key points excluded from the bill are eliminating replacement workers during a strike and extending collective bargaining to the multicompany level, considered nonnegotiable items by business and labor.

Under the proposal that will go to Congress, replacement workers and part-time employees could receive protection under a labor contract for the first time, and companies and their unions could form a pact to reduce the monthly work schedule to 180 hours from the current 192 if desired.

Also, the bill would reduce the number of workers needed to form a union, which varies depending on the size of the firm.

Businesses said little about the first set of changes but were pleased at the omission of the more prickly issues.

Entrepreneurs are spooked by the prospect of higher labor costs and have argued that investor uncertainty about changes to the labor market is hindering economic recovery.

Although Chile is recovering from its 1998-1999 recession, unemployment rose to 10.6 percent in June-August.

"There is some apprehension. ... This issue is very sensitive and investors need to know what to expect in terms of stable rules in the labor market," said Raul Garcia, chairman of the labor committee of the country's largest business lobby, the Confederation of Production and Commerce.

Arturo Martinez, president of the United Workers' Center labor group, said the government's plan looked like a desperate attempt to improve dismal unemployment figures.

"We want to deal with the real issues and not just the ones that are convenient for the government," he said.