VZCZCXYZ0010
RR RUEHWEB

DE RUEHKG #0633/01 0891603
ZNR UUUUU ZZH
R 301603Z MAR 06
FM AMEMBASSY KINGSTON
TO RUEHC/SECSTATE WASHDC 2521
INFO RUCNCOM/EC CARICOM COLLECTIVE
RUEHGE/AMEMBASSY GEORGETOWN 2343
RUEHSJ/AMEMBASSY SAN JOSE 1807
RUEATRS/DEPT OF TREASURY WASHDC

UNCLAS KINGSTON 000633 
 
SIPDIS 
 
SENSITIVE 
 
SIPDIS 
 
STATE FOR WHA/CAR (WBENT), WHA/EPSC (JSLATTERY) 
 
SANTO DOMINGO FOR FCS AND FAS 
 
TREASURY FOR L LAMONICA 
 
E.O. 12958:  NA 
TAGS: ECON EFIN JM
SUBJECT:  JAMAICA BRACING FOR STORMY INDUSTRIAL RELATIONS 
IN 2006 
 
 
¶1. (U) Summary:  Jamaica is bracing itself for one of its 
most tumultuous years regarding industrial relations. 
With approximately 48 unresolved wage disputes carrying 
over from 2005 and with many contracts expiring in March, 
work stoppages may prove common in 2006.  Already seen in 
the bauxite sector, this phenomenon could spread to other 
sectors of the economy as workers seek compensation for 
three consecutive years of double-digit inflation and a 
memorandum of understanding (MOU), which froze public 
sector salaries in 2004.  While trade unionists have 
predicted that 2006 will be a challenging year, Portia 
Simpson-Miller's elevation to Prime Minister could calm 
the industrial relations climate, at least for a time.  As 
a former Minister of Labor, some union leaders have 
already welcomed her election.  Her popularity, however, 
will be contingent on her perceived sympathy to the 
workers' cause.  End summary. 
 
---------- 
Background 
---------- 
 
¶2. (U) Current disputes and work stoppages in Jamaica 
suggest that 2006 is shaping up to be one of the most 
turbulent in recent times.  48 unresolved disputes carried 
over from 2005, and there is the pending expiration of a 
number of collective wage agreements.  Higher-than- 
predicted inflation - with prices rising an average of 12 
percent during the last three years - and the imminent 
expiry of the GOJ's MOU with public sector workers will 
only add fuel to the situation.  As early as January, Vice 
President of the National Workers Union (NWU) and chief 
negotiator in the bauxite sector, Norman DaCosta, 
predicted that with many contracts expiring and workers in 
a militant mood, stoppages and strike action could become 
a recurring feature in 2006, a sentiment echoed by many of 
his trade union colleagues. 
 
-------------- 
Bauxite Sector 
-------------- 
 
¶3. (U) DaCosta's prediction appears prescient, as bauxite 
companies and unions have been locked in tense and 
sometimes heated negotiations.  The foundation for a 
difficult 2006 was set from the moment bauxite companies 
reported record production and revenues for 2005.  DaCosta 
immediately expressed disappointment at the protracted 
labor negotiations with bauxite companies when the 
industry was doing well.  "The ability of the sector to 
pay is not in question, yet workers are earning less than 
they did in 1998 in US dollar terms," he asserted. DaCosta 
told emboff that the most recent adjustment at Alumina 
Partners (ALPART) amounted to USD 80 million or an average 
of USD 64,000 per worker.  However, he was quick to 
clarify that this was not an increase, but an adjustment 
to 1998 salaries in US dollar terms.  DaCosta further 
noted that the industry was more than able to pay given 
the unprecedented demand and prices for its product. 
 
 
¶4. (U) In late 2005, a 72-hour strike notice was served on 
the management of Jamaica Aluminum Company (JAMALCO). 
Strike action was temporarily averted through the 
intervention of Minister of Labor Horace Dalley.  On 
January 16, however, the union took action, and threatened 
to request solidarity from other plants in the sector if 
workers' demands were not met.  The dispute was forwarded 
to the Ministry of Labor (MOL) for mediation and settled 
on March 12.  On February 5, ALPART workers followed suit, 
despite an order from the Industrial Disputes Tribunal 
(IDT) for the employees to return to work.  DaCosta opined 
that defying the IDT order was best for the workers and 
ultimately best for the nation.  The defiant workers 
eventually returned to work on February 9 after agreeing 
to a 32 percent increase in salaries and benefits 
amounting to USD 80 million. 
 
¶5. (U) The tension in the sector escalated even further 
when DaCosta became embroiled in a dispute with West 
Indies Alumina Company (WINDALCO).  The tension escalated 
 
on February 28 following an allegation by the company that 
DaCosta had exposed the handle of his firearm during a 
stormy meeting.  The company requested the intervention of 
the MOL, claiming that it was no longer prepared to meet 
with DaCosta.  The Ministry convened a meeting between the 
disputing parties, but it ended in a stalemate after the 
company's demand to have DaCosta removed as the lead 
negotiator was rejected.  The dispute was resolved only 
after Prime Minister-designate Portia Simpson-Miller 
intervened.  The record 33-hour meeting, chaired by 
Simpson-Miller, ended with a settlement similar to that 
with ALPART.  When asked about the role of Simpson-Miller 
in the negotiations, DaCosta told emboff he was impressed 
by her mediation skills and in-depth knowledge of the 
global aluminum industry.  He said the settlement had set 
the stage for a return to normality in the sector, 
although three companies have yet to conclude agreements. 
"If her approach is any indication of how she will handle 
the post of Prime Minister, it augurs well for the 
country," DaCosta said.  However, both parties have  yet 
to sign the agreement, as the trade union is requesting an 
addendum to protect the union delegates from planned 
redundancies at the company. 
 
--------- 
Utilities 
--------- 
 
¶6. (U) The Mirant-owned Jamaica Public Service Company, 
which reported profits of USD 23.1 million for 2005, was 
only able to avert large scale strike action among a cross- 
section of its workforce after it agreed to the unions' 
demand for a signing bonus and a 36 percent increase over 
three years.  Technical employees at the company had held 
a brief strike, but returned to work following the 
persuasion of their union, which subsequently requested 
the intervention of the MOL.  Cool Petroleum, which 
recently bought out the business of Shell International, 
is also involved in what is shaping up to be a major 
battle with the country's two largest trade unions, the 
National Workers Union (NWU) and the Bustamante Industrial 
Trades Union (BITU).  Both unions are accusing Cool of 
refusing to recognize their representation of the workers 
despite Cool's decision to continue their employment.  The 
unions have called the company's action "union busting" 
and have written to the Ministry of Labor requesting 
intervention.  Finally, the Jamaica Association of Local 
Government Officers has also announced that negotiations 
for a new contract with the GOJ-owned National Water 
Commission might be problematic, as the union strives to 
ensure that their workers get what they deserve. 
 
----------------------------------------- 
New Public Sector MOU, But No Wage Freeze 
----------------------------------------- 
 
¶7. (SBU) Public sector workers are also gearing up to 
battle the GOJ, following the expiration of the MOU on 
March 31.  These workers are anticipating a significant 
adjustment in their salaries after accepting a wage freeze 
during the period of high inflation from 2004 until the 
present.  Unions have already indicated their 
unwillingness to consider a wage component as part of a 
new MOU.  Acting Head of the Fiscal Policy Management Unit 
at the Ministry of Finance, Courtney Williams, told emboff 
that while there is no contemplation of a wage freeze, 
there could be a wage cap.  He said increases are expected 
to be in line with inflation (about 25 percent compounded 
over the two-year contract period).  When asked about the 
impact of this adjustment on the budget and the 
possibility of job losses, Williams stated that while the 
increase would be large in nominal terms, the wage bill 
would remain relatively stable as a percentage of GDP. 
Regarding job cuts, Williams suggested that impending 
retirements and attrition should start the rationalization 
process.  Nevertheless, Williams was quick to point out 
that the unions were cognizant of the inevitability of 
downsizing and were therefore pushing for increased 
training as part of any new MOU. 
 
¶8. (U) DaCosta, who refers to the MOU as a "Memorandum of 
 
Misunderstanding," told emboff that dialogue is essential, 
but that each partner must be prepared to bring something 
to the table.  He opined that the last MOU should not have 
included a wage freeze as it runs contrary to market 
philosophy.  DaCosta recognizes that public sector 
rationalization is required, but notes that the union 
movement and the GOJ squandered a golden opportunity in 
2004 to finally cut the service and create a more 
efficient public sector.  Likewise, in the private sector 
there has been general wage restraint over the two-year 
period.  With public sector workers set to receive a major 
adjustment, private sector workers may also agitate for 
significant increases amidst rising profits.  Williams 
told emboff that he expects private sector agreements to 
be in the region of 25 to 30 percent over the two-year 
period and any major deviation from this target could lead 
to disturbances. 
 
------- 
Comment 
------- 
 
¶9. (U) With expectations running high following the 
generous settlements at high-paying bauxite and utility 
companies, the foundation might well have been laid for 
further turbulence during the remainder of 2006.  In fact, 
with so many contracts expiring in 2006 and with inflation 
fresh in the minds of workers and unions, some 
negotiations might spill over into 2007.  In particular, 
private sector workers who accepted minor adjustments 
during two years of relatively high inflation will seek to 
recover their lost purchasing power.  The standoff could 
become even more intense given that these workers have 
seen company profits jump during the period.  The GOJ is 
trying to avert any disturbance in the public sector by 
negotiating a new MOU with a relatively generous wage 
component, but underpaid civil servants might not be 
impressed.  This could lead to industrial action unless 
Simpson-Miller can intervene successfully.  With 
expectations so high - particularly from trade union 
leaders who have already welcomed her election as a 
positive for workers - any deviation from this expectation 
could dent her popularity.  End comment. 
 
JOHNSON