VZCZCXYZ0008
RR RUEHWEB

DE RUEHBO #0035 0031742
ZNR UUUUU ZZH
R 031742Z JAN 08
FM AMEMBASSY BOGOTA
TO RUEATRS/DEPT OF TREASURY WASHDC
RUEHC/SECSTATE WASHDC 0764
INFO RUEHLP/AMEMBASSY LA PAZ JAN CARACAS 9744
RUEHPE/AMEMBASSY LIMA 5764
RUEHZP/AMEMBASSY PANAMA 1053
RUEHQT/AMEMBASSY QUITO 6467

UNCLAS BOGOTA 000035 
 
SIPDIS 
 
SIPDIS 
 
WHA/EPSC FOR PMAIER; TREASURY FOR MEWENS 
 
E.O. 12958: N/A 
TAGS: ECON EFIN ELAB PGOV CO
SUBJECT: COLOMBIA'S MINIMUM WAGE INCREASED 6.4% 
 
REF: BOGOTA 2 
 
¶1. SUMMARY: Effective January 1, 2008, nearly two million 
Colombian workers earning the national minimum wage will 
receive a 6.4 percent raise.  President Uribe announced the 
increase after annual talks between labor unions and 
employers to set the new wage broke down.  Although the wage 
increase exceeds inflation and the 2007 hike, legally 
mandated increases in certain public services in 2008 risk 
offsetting some of the salary benefit for low-income 
Colombians. END SUMMARY. 
 
GOC Announcement Breaks Labor-Private Sector Deadlock 
--------------------------------------------- -------- 
 
¶2. After more than two months of negotiations between the 
government, labor unions and private sector representatives 
failed to reach agreement on the amount of the wage increase, 
President Uribe issued a decree December 27 announcing the 
increase of the monthly minimum wage to 461,500 Colombian 
Pesos (approximately USD 230) from 433,700 (approximately USD 
216).  The increase for falls below the 10.5 percent increase 
labor unions had demanded, but exceeded the 6 percent 
increase advocated by the private sector.  The announcement 
represented the fifth time in the last eight years that the 
government has had to set the new minimum wage rate by decree 
following impasses in negotiations between the unions and 
private sector. 
 
¶3. The labor confederations which participated in the 
negotiations represent about 797,000 workers, or almost 11 
percent of Colombia's 7.4 million formal sector workforce. 
The new minimum wage applies to both public and private 
sector workers in the formal economy, but will not directly 
affect the over 10 million Colombians who work in the 
informal economy.  The Ministry of Social Protection 
estimates that over 1.9 million Colombian workers earn the 
minimum wage and stand to benefit from the annual increase. 
The government also raised the transportation allowance that 
employers owe workers by 8.3 percent to 55,000 Colombian 
Pesos (approximately USD 27). 
 
Higher Wages, but Also Higher Cost of Living 
-------------------------------------------- 
 
¶4. While the wage and transportation allowance raise exceeded 
the final 2007 inflation rate of 5.7 percent and 2008 target 
of 4.5 percent, Colombian law mandates annual price increases 
of numerous public services based on the previous year's 
final inflation rate.  Such costs, including the obligatory 
automobile insurance (SOAT), public school tuition, notarial 
fees, transit tolls, and public hospital fees, tend to 
disproportionately impact low-income Colombians, thereby 
offsetting some of the benefit of the salary increase. 
 
¶5. Labor union leaders publicly criticized the 2008 wage 
increase as inadequate.  The unions claim that the minimum 
wage falls short of covering the average family's monthly 
cost of living, which they estimate exceeds 900,000 Colombian 
Pesos (approximately USD 450).  Private sector 
representatives countered that one most consider the 
additional compensation mandated by law -- including social 
security and other benefits -- which add 70% to the total to 
the base wage rate and are part of the wage increase package. 
 
 
¶6. Prominent local economic analyst Mauricio Cardenas 
commended the GOC's decision to set a wage increase closer to 
the overall inflation rate in order to control costs and 
preserve competitiveness.  Cardenas told econoff that he 
considered the moderate increase prudent in light of an 
expected gradual slowdown in Colombia's economy in 2008 
(reftel). 
Nichols