VZCZCXYZ0001
OO RUEHWEB

DE RUEHZP #0490/01 1691824
ZNY CCCCC ZZH
O 181824Z JUN 09
FM AMEMBASSY PANAMA
TO RUEHC/SECSTATE WASHDC IMMEDIATE 3506
INFO RUMIAAA/HQ USSOUTHCOM MIAMI FL PRIORITY
RUEAIIA/CIA WASHDC PRIORITY
RUCPDOC/DEPT OF COMMERCE WASHDC PRIORITY
RHMFISS/DEPT OF JUSTICE WASHINGTON DC PRIORITY
RUEHC/DEPT OF LABOR WASHDC PRIORITY
RUEATRS/DEPT OF TREASURY WASHDC PRIORITY
RHEHAAA/NSC WASHDC PRIORITY
RHEHAAA/WHITE HOUSE WASHDC PRIORITY

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 
). 
 
------- 
SUMMARY 
------- 
 
¶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. 
 
-------------------------- 
SOME LABOR ISSUES RESOLVED 
-------------------------- 
 
¶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. 
 
------------------------ 
OPPORTUNITY ON RESOLVING 
OUTSTANDING LABOR ISSUES 
------------------------ 
 
¶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. 
 
------------------ 
RELUCTANT TORRIJOS 
------------------ 
 
¶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. 
 
--------------------------- 
MARTINELLI - MIXED MESSAGES 
--------------------------- 
 
¶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