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P 261711Z MAY 09
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INFO RUEHZA/WHA CENTRAL AMERICAN COLLECTIVE PRIORITY
RUEHC/DEPT OF LABOR WASHINGTON DC PRIORITY
RUEAIIA/CIA WASHDC PRIORITY
RUEATRS/DEPT OF TREASURY WASHINGTON DC PRIORITY
RHEFDIA/DIA WASHINGTON DC PRIORITY
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC PRIORITY
RUEHLMC/MILLENNIUM CHALLENGE CORP WASHDC PRIORITY
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RUMIAAA/CDR USSOUTHCOM MIAMI FL//J2/J3/J5// PRIORITY

C O N F I D E N T I A L SECTION 01 OF 03 MANAGUA 000524 
 
SIPDIS 
 
DEPT FOR WHA/CEN KRAAIMOORE & INR/UAA - EMERSON 
DEPT FOR DRL MAGGIO 
STATE PASS USAID 
STATE PASS USOAS 
 
E.O. 12958: DECL: 02/24/2018 
TAGS: ELAB PGOV NU
SUBJECT: TRIPARTITE AGREEMENT OVER MINIMUM WAGE RAISE, BUT REFORM STILL LOOMS
 
REF: A. 2008 MANAGUA 1213 
     ¶B. 2008 MANAUGA 1187 
 
Classified By: Amb. Robert J. Callahan for reasons 1.4 (b & d) 
 
¶1. (C) SUMMARY: On May 14, a tripartite commission of 
industry, labor and government representatives reached an 
agreement over the next minimal wage hike for Nicaraguan 
workers. This is the first time in four previous rounds (see 
reftel B) that all three parties reached agreement without 
the Ministry of Labor (MITRAB) having to issue a formal 
decree.  Beginning May 15, workers in the agriculture sector 
would receive a 13% increase, while basic service workers 
would see an 11% change and industrial and government workers 
an 8% increase to their monthly wages.  The tripartite 
agreement follows a similar March 12 tripartite agreement on 
wage hikes within Nicaragua's Free Trade Zones (FTZ) and 
occurs amidst a political battle to reform the minimum wage 
law.  Post believes that the most important battle over any 
reform to minimum wage laws will be fought within the 
Sandinista National Liberation Front (FSLN).  END SUMMARY 
 
MINIMUM WAGE AGREEMENT OF 8, 11, 13 PERCENT INCREASES 
--------------------------------------------- ---------- 
 
¶2. (SBU) For the first time in recent memory, and after two 
months of negotiations, industry, labor and government 
representatives reached a tripartite consensus over the next 
minimum wage increase (see reftel B).  Effective May 15, 
agricultural workers will receive a 13 percent increase in 
their wages, or approximately 183 cordobas (US$9) more per 
month.  In the basic services sector, which includes 
business, transportation and financial workers, there will be 
an 11 percent increase.  For other labor sectors -- 
industrial workers (outside of FTZs), domestic servants, 
government workers and fisherman, as well as small business 
-- there will be an eight percent increase, or approximately 
150 cordobas (US$7.50) more per month.  With low inflation, 
labor leaders backed away from demanding higher increases on 
assurances from business representatives that a smaller wage 
hike would translate into better job security for Nicaraguan 
workers.  Tripartite commission members noted that the 
worldwide economic crisis and recent wave of job losses in 
the apparel industry have helped foster a more conciliatory 
tone among participants.  The tripartite commission will meet 
next on November 19, 2009. 
 
 
FREE TRADE ZONE MINIMUM WAGE AGREEMENT CAME FIRST 
--------------------------------------------- ----- 
 
¶3. (SBU) This recent general wage hike comes two months after 
a separate deal was reached for FTZ workers.  On March 12, a 
tripartite commission of business, labor unions and MITRAB 
signed a two-year minimum wage agreement for workers within 
Nicaragua,s FTZs. The "Emergency Economic and Labor 
Agreement" established minimum wage increases of 8 percent in 
2009 and 12 percent in 2010 for FTZ workers and calls for the 
creation of an FTZ tripartite labor commission as a forum for 
resolving labor issues.  The accord's preamble acknowledges 
the world economic crisis and declares that this agreement 
was necessary to preserve employment, strengthen FTZ 
stability and attract investment. Parties to the agreement 
included seven labor union representatives led by Sandinista 
Workers, Central (CST) Union President Luis Barbosa, two 
private businesses, and MITRAB Minister Jeannette Chavez. 
(NOTE: The FTZ minimum wage agreement is independent of 
general biennial minimum wage process and incorporates the 
central reform of a predictable, annual wage adjustment. END 
NOTE) 
 
POLITICAL BATTLE OVER MINIMUM WAGE REFORM 
----------------------------------------- 
 
¶4. (SBU) With this round of wage negotiations now concluded the stage is set for a political battle over reforms to the minimum wage law, which currently mandates a biennial review of wages in nine different economic sectors (see reftel B). The Federation of Nicaraguan Business Association (COSEP) proposed and lobbied the National Assembly for reforms that require only an annual review. Business owners believe that this change would improve the investment climate by increasing the predictability of production costs during the year and would eliminate some of the uncertainty of populist policies by the Ortega government. The Constitutional Liberal Party (PLC), the FSLN-aligned Nicaraguan Liberal Alliance party (ALN), as well as some prominent Sandinistas support the proposed reforms. In February 2009, PLC National Assembly Deputy and President of the Labor Committee Carlos Noguera expressed his support for the reform. However, organized labor affiliated with the FSLN opposes any change, while other labor unions seem interested in compromise and dialogue.
 
FSLN PUBLIC OPPOSITION - PRIVATE SUPPORT 
---------------------------------------- 
 
¶5. (U) During a March session of the GON's Social Cabinet, 
First Lady and Communication Coordinator Rosario Murillo 
insisted that it was fundamental to the Sandinista movement 
to improve the minimum wage at least twice a year, a position 
also shared by the MITRAB Minister Chavez.  FSLN National 
Assembly Deputy and head of the FSLN caucus Edwin Castro 
publicly opposed the reforms, echoing populist rhetoric that 
changing the law would make "Nicaragua's poor poorer and the 
rich, much richer," and that any opposition deputies who 
supported the reform would be the potential beneficiaries. 
 
¶6. (C) Embassy contacts in COSEP's labor committee told us 
that several prominent FSLN members privately supported 
reforms, including Vice President Jaime Morales, Presidential 
Advisor for Economic Issues Bayardo Arce, and President of 
the Nicaraguan Central Bank Antenor Rosales.  Both Arce and 
Rosales have publicly stated that the GON should adopt a more 
flexible position on reform to the minimum wage law, arguing 
that such reforms would help the GON to preserve employment 
in the formal sector.  When the measure comes to a vote, our 
contacts believe that there would be enough support in the 
National Assembly to approve the reforms despite FSLN 
populist rhetoric. 
 
INTERNATIONAL SUPPORT FOR REFORM? 
--------------------------------- 
 
¶7. (C) COSEP representatives told us that they were also 
developing an additional lobbying strategy for minimum wage 
reform through international fora.  Nicaragua is the only 
country within the CAFTA-DR free trade agreement and the 
Central American Integration System (SICA) that has a 
bienniel minimum wage review process.  This runs counter to 
initiatives for greater integration and harmonization of 
labor laws for the region. COSEP representatives believe that 
pressure from neighboring countries, nearly all of which are 
now led by left of center presidents, could also be a factor 
in helping Nicaragua to change its existing laws. 
 
LABOR UNION REACTION MIXED 
--------------------------- 
 
¶8. (SBU) In February 2009 FSLN Deputy and Secretary General 
of the National Workers Front (FNT) trade union Gustavo 
Porras insisted that the minimum wage law should not be 
changed.  Porras was joined by CST union Secretary General 
Luis Barbosa in opposing any change, and both leaders 
threatened to call their union members out into the streets 
to defend their labor rights.  Meanwhile, some non-FSLN 
affiliated union leaders seemed more amenable to proposed 
reforms, declaring that it was more important to maintain 
employment than guarantee biennial wage increases.  These 
leaders from non-FLSN labor unions also emphasized the need 
for dialogue rather than rhetoric in minimum wage 
negotiations. 
 
 
COMMENT 
------- 
 
¶9. (C) Although the wage increase is below recent hikes of 15 
and 18 percent, it comes at a critical time for Nicaraguan 
businesses looking to stay afloat in turbulent economic 
conditions.  Moving to a once-a-year review would give the 
private sector the opportunity to better estimate labor costs 
and make investments accordingly, and have increased 
employment stability. 
 
¶10. (C) Post believes that the next phase of the political 
battle over minimum wage reform could take place publicly 
between FSLN and Liberal Deputies in the National Assembly, 
with labor unions, COSEP and MITRAB providing the ammunition. 
 However, the most important fight will be the private one 
within the FSLN -- between its successful business owners and 
populist ideologues. In the end, post believes that cooler 
heads may prevail in the National Assembly to pass reforms to 
the minimum wage law.  If anything, the recent national and 
FTZ minimum wage agreements, which involved prominent FSLN 
union leaders, may be prototypes of how the issue could be 
resolved. 
CALLAHAN