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FM AMEMBASSY SANTIAGO
TO RUEHC/SECSTATE WASHDC IMMEDIATE 0732
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RUEHC/DEPT OF LABOR WASHINGTON DC IMMEDIATE
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UNCLAS SECTION 01 OF 05 SANTIAGO 000166 
 
SENSITIVE 
SIPDIS 
SIPDIS 
DRL/ILSCR FOR MARK MITTELHAUSER 
DOL FOR ILAB TIMOTHY WEDDING 
COMMERCE FOR KENGLOM 
STATE PLEASE PASS TO USTR FOR CARLOS ROMERO AND KATE KALUTKIEWICZ 
 
E.O. 12958: N/A 
TAGS: ELAB ETRD PGOV CI
SUBJECT: CHILE: Labor Monitoring and Engagement with FTA Countries 
 
REF: A) 09 STATE 129631; B) 09 PARIS 1732; C) SANTIAGO 98 
 
¶1.   (SBU) Summary:  Chile has a developed and steadily growing 
economy and a stable government which generally protects most 
worker rights adequately.  Areas of concern include low levels of 
female and youth participation in the workforce, lack of regulation 
in the informal economy, an inflexible labor market, and some 
limitations on workers' ability to bargain collectively.  More 
severe forms of labor abuses--such as forced labor and child 
labor--occur but are not widespread.  Chile's president-elect, 
Sebastian Pinera, has pledged to create one million new jobs, and 
so may focus substantial attention on labor reform and economic 
stimulus.  Chilean labor officials are eager for expert-level 
technical cooperation with the U.S.  Post efforts to facilitate 
this cooperation have been severely hampered by lack of funding, so 
Post suggests that cooperation activities focus on offering 
technical assistance via in-person expert-level exchange of best 
practices.   End Summary. 
 
 
 
----------------- 
 
SCENESETTER 
 
------------------ 
 
 
 
¶2.  (SBU) Chile is on the cusp of developed nation status and basic 
worker rights are generally enforced.  Nonetheless, there are areas 
where substantial improvement is desirable and possible.  Women's 
participation in the workforce, although increasing, is still one 
of the lowest in the region.  Unemployment in the final quarter of 
2009 stood at 8.6 percent, with 41 percent of Chilean women 
participating in the work force.  The Government of Chile generally 
respects and enforces the rights of workers, although weak 
enforcement of labor laws is one area of worker rights concern. 
Others include the relatively high number of workers hired without 
formal contracts (OECD Economic Survey of Chile 2009), and 
limitations on workers' ability to bargain collectively 
(International Trade Union Confederation's Report for the WTO 
General Council Review of the Trade Policies of Chile, October 
2009).  In addition, the lack of labor flexibility, including 
cumbersome and expensive procedures for terminating employment and 
few part-time and telecommuting options, is a stumbling block to 
economic growth and broader workplace participation. 
 
 
 
Major Changes in 2010:  New President and OECD Accession 
 
--------------------------------------------- ---------------------- 
------------ 
 
 
 
¶3.  (U) Two key developments in the first quarter of 2010 will play 
a major role in shaping Chile's labor market and practices:  the 
inauguration of Chile's first conservative president in twenty 
years, and Chile's accession to the OECD.  On March 11, Sebastian 
Pinera of the center-right Coalition for Change will assume the 
presidency, ushering in the first conservative government since the 
Pinochet dictatorship.  While most analysts expect a great degree 
of policy continuity, labor reforms are one area Pinera may address 
sooner rather than later.  Creating a million new jobs during his 
four-year term is one of Pinera's primary campaign pledges, so his 
government may move quickly to create changes that would generate 
more flexibility and dynamism in the labor market.  A second major 
development occurred on January 11, when Chile signed an accession 
agreement with the Organization for Economic Cooperation 
Development (OECD), paving the way for formal membership sometime 
in the first quarter of 2010.  Chile had to undergo a rigorous 
review of its public policies, including labor policies, during the 
accession process (Ref B).  Chile is the first South American 
country to obtain membership in the OECD. 
 
SANTIAGO 00000166  002 OF 005 
 
 
¶4.  (SBU) Pinera's labor advisor (and potential future Labor 
Minister) Fernando Coloma, told Pol Specialist on January 6 (prior 
to Pinera's election to office) that the Pinera administration's 
main labor priorities will revolve around generating employment, 
with a special focus on women and youth (18 - 29 years old), and 
improving Chile's human capital through the creation or reform of 
training programs. In addition, one area a Pinera Administration 
would look to change is Chile's mandatory severance pay 
regulations.  Coloma said that the campaign program envisions 
reducing severance pay and increasing payments into the 
unemployment insurance system.  The OECD Economy Study of Chile 
2010, released on January 27, makes a similar recommendation. 
 
 
 
Recent Reforms:  Labor Justice and Regulating Outsourced Work 
 
--------------------------------------------- ---------------------- 
------------------ 
 
 
 
¶5.  (U) In October 2009, the Directorate of Labor (within the 
Ministry of Labor) concluded a wide-ranging national labor reform 
program, "New Labor Justice," begun in March 2008. The new system 
of labor courts allows for oral presentation of arguments (not 
previously allowed) as well as free legal defense for plaintiffs 
and the implementation of collections courts to resolve wage 
disputes.  Major components of the reform include an increase in 
the number of courts and the implementation of new labor code 
procedures to address specific grievances, ranging from workplace 
discrimination to small claims.  According to the Labor 
Directorate, prior to the reform, there were not adequate legal 
structures to effectively and swiftly protect the fundamental labor 
rights of workers in Chile.  The new labor court system is designed 
to reduce wait times by increasing the number of courts and 
providing specialized training to judges on labor law. 
 
 
 
¶6.  (U) A new law regulating the use of temporary and outsourced 
labor took effect in January 2007.  Under the law, firms can 
outsource part of their work--meaning that another firm takes full 
responsibility for a task or process, carrying it out with their 
own employees--but are prohibited from outsourcing their main 
economic activity.  The law also allows firms to hire 
contract-based employees outside the regular system of labor 
protection, but limits this to "temporary" labor, defined as those 
employed for periods of up to 90 days (or 180 days in some cases) 
for the duration of an "emergency."  In addition, only firms that 
register as suppliers of temporary labor and set up guarantees 
against their obligations to their own workers are allowed to 
fulfill this function.  The law also limits the number of staff 
that can be used on short-term jobs.  In Chile, more than 50% of 
companies are estimated to subcontract part of their production, 
while 20.7% subcontracted their main economic activity.  Prior to 
the law, a full 35% of Chile's labor force was estimated not to 
have a direct contractual link with the main company (Ref C). 
 
 
 
Status of Key Labor Rights 
 
---------------------------------- 
 
 
 
¶7.  (U) FREEDOM OF ASSOCIATION:  Workers have the right to form and 
join unions without prior authorization.  Approximately 13 percent 
of the workforce is unionized.  Multiple unions exist in many 
companies, and management can negotiate collective agreements with 
any of the unions or with ad hoc groups of workers.  Unions can 
form confederations or nationwide labor umbrella organizations and 
can affiliate with international labor federations.   The law 
allows unions to conduct their activities without interference (see 
Chile Human Rights Report 2009 [HRR] and Ref C). 
 
SANTIAGO 00000166  003 OF 005 
 
 
¶8.  (U) While employees in the private sector have the right to 
strike, the government regulates this right and some restrictions 
are imposed.  Employers must show cause and pay severance benefits 
if they dismiss striking workers.  The law proscribes employees of 
32 private sector companies, largely providers of services such as 
water and electricity, from striking.  Strikes by agricultural 
workers during the harvest season are also prohibited.  The law 
stipulates compulsory arbitration to resolve disputes in the 
aforementioned industries.  Public employees do not enjoy the right 
to strike, but some do so anyway, including public school teachers 
in 2009 and civil servants in 2008 (Ref C; HRR09). 
 
 
 
¶9.  (U) COLLECTIVE BARGAINING is protected by law, but the right of 
some workers to bargain collectively is limited.  While protected 
by law, the right of entertainers and temporary agricultural, 
construction, and port workers to bargain collectively is limited. 
Contracts are normally negotiated at the company level; 
multi-company bargaining is permitted on a voluntary basis (Ref C, 
HRR09). 
 
 
 
¶10.  (U) FORCED LABOR/CHILD LABOR:  The law prohibits compulsory or 
forced labor; however, such practices occur on a limited basis, 
primarily for domestic servitude and forced prostitution.  While 
child labor is an issue in Chile, it is not widespread and 
typically occurs in the informal economy.  Chilean law allows 
children to perform light work that does not require hard physical 
labor or constitute a threat to health and childhood development, 
if their parents/guardians give permission (HRR09).  Children in 
urban areas work as grocery baggers, domestic servants, waiters, 
parking attendants and assist in construction activities.  Children 
in rural areas are involved in farm work, fishing, and forestry. 
Children are subject to commercial sexual exploitation and are used 
in the production, sale and transport of illicit drugs (Chile Worst 
Forms of Child Labor Report [WFCL] 2008). 
 
 
 
¶11.  (U) The GOC has a national child labor action plan that 
focuses on raising awareness; collecting data; promoting 
legislative reform in compliance with ILO conventions; developing 
social and educational programs; and conducting monitoring and 
evaluation.  The government implemented public education programs 
to raise awareness and worked with the International Labor 
Organization to operate rehabilitation programs.  The Ministry of 
Labor convened regular meetings of a business-labor-government 
group to monitor progress in eradicating child labor.  In June 
2009, the Ministry of Labor signed an agreement with one of the 
major business associations, the Confederation of Production and 
Commerce (CPC), to help eradicate child labor in Chile by raising 
awareness among companies, their suppliers, and subcontractors (Ref 
C; WFCL 2008). 
 
 
 
¶12.  (U) GENDER DISCRIMINATION IN EMPLOYMENT:  The labor code 
provides specific benefits for pregnant workers and recent mothers, 
including a prohibition against dismissal.  Layoffs are not 
permitted between conception and one year after a female employee 
has returned from maternity leave.  However, some women feel that 
the protections have the adverse effect of discouraging employers 
from hiring women of child-bearing age.  On December 19, a new law 
guaranteeing equal pay for equal work went into effect.  The law 
requires companies with 10 or more workers to establish a formal 
internal complaint procedure, while those with 200 or more workers 
must also generate a registry detailing employee positions and 
functions (Ref C; HRR09). 
 
 
 
¶13.  (U) ACCEPTABLE CONDITIONS OF WORK:  The minimum wage is set by 
law and is subject to adjustment annually. The current monthly 
minimum wage (approximately USD 288 using the 2009 average exchange 
rate) was designed to serve as the starting wage for an unskilled 
single adult worker entering the labor force and does not provide a 
worker and family with a decent standard of living.  In addition to 
the minimum wage, working hours, overtime, paid annual vacations, 
 
SANTIAGO 00000166  004 OF 005 
 
 
and holidays are all established by law.  The law protects the 
continued employment of workers who remove themselves from 
dangerous situations if labor inspectors from the Labor Directorate 
and occupational safety and health inspectors from the country's 
Safety Association determine that dangerous conditions exist (Ref 
C; HRR09). 
 
 
 
¶14.  (U) The law sets the legal work week at six days or 45 hours. 
The maximum work day length is 10 hours (including two hours of 
overtime pay), but positions such as caretakers and domestic 
servants are exempt.  The law mandates at least one 24 hour rest 
period during the work week, except for workers at high altitudes, 
who may exchange a rest day each week for several consecutive rest 
days every two weeks.  The law establishes fines for employers who 
compel workers to work in excess of 10 hours a day or do not 
provide adequate rest days. (HRR09). 
 
 
 
¶15.  (U) Key labor rights organizations:  there are few 
organizations working on labor issues, apart from the Ministry of 
Labor and Unions.  The primary NGO in the field is the Program on 
the Economy of Work (PET) at the Academy of Christian Humanism 
University.  The ILO's regional office for Chile, Paraguay, and 
Uruguay is based in Santiago. 
 
 
 
¶16.  (U) Point of Contact for FTA Labor Matters in Chile:  Jeff 
Peet, Desk Officer for U.S. Trade Policy, Directorate General of 
International Economic Relations (DIRECON), Ministry of Foreign 
Affairs of Chile, jpeet@direcon.cl, (56 2) 827-5522.  This contact 
may change in March, when the Pinera administration assumes office. 
 
 
 
------------------------------------------- 
 
STRATEGY RECOMMENDATIONS 
 
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¶17.  (SBU) Chile's Ministry of Labor, employers, and unions are 
generally capable, credible organizations with well-developed 
understandings of labor rights, economics, and public policy 
tradeoffs.  Such organizations are eager for expert-level technical 
information exchanges and sharing of best practices. 
 
 
 
¶18.  (SBU) Post does not have this expert-level knowledge or 
experience in-house and, without funding to support such 
activities, has been severely constrained in our ability to bring 
U.S. and Chilean practitioners together to share expertise.  We 
have attempted to find no-cost/low-cost opportunities and to find 
other funding sources, and have been able to facilitate a handful 
of small-scale activities this way.  Post and DOL worked together 
with the Chileans to submit a proposal for OAS Inter-American 
Network for Labor Administration (RIAL, by its Spanish acronym) 
funding, which was accepted and led to a 2009 visit by Labor 
Directorate staff to DOL call centers.   In addition, post and DOL 
have begun coordinating a series of low-cost digital video 
conferences (DVCs) for Chilean labor inspectors held at Post. 
DOL's Wages and Hours Division presented in July 2009, DOL's 
Occupational Safety and Health Administration presented in December 
2009, and we hope to hold additional DVCs in 2010.  IDB funding 
allowed a Bureau of Labor Statistics expert to attend a Ministry of 
Finance conference in early 2009. 
 
 
 
¶19.  (SBU) Notwithstanding these examples of successful 
cooperation, informational exchanges so far have been short, 
isolated events.  A modest but consistent and dedicated funding 
stream would allow post and DOL to facilitate exchanges and 
relationships between US and Chilean labor officials, employers, 
 
SANTIAGO 00000166  005 OF 005 
 
 
and union leaders, helping to further improve Chile's reasonably 
successful current labor practices. 
 
 
 
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COOPERATION NEEDS AND AREAS FOR DIALOGUE 
 
--------------------------------------------- --------------------- 
 
 
 
¶20.  (SBU) Chile has few ongoing labor cooperation relationships 
with other countries.   Ministry of Labor International Relations 
Advisor Jose Maria Hurtado told Pol Specialist on January 7 that 
Chile's only ongoing cooperation relationships are with Argentina 
and the U.S.  Chile currently has several proposals pending for OAS 
RIAL funding, including with Peru and Bolivia. 
 
 
 
¶21.  (SBU) Post recommends the following labor cooperation 
assistance areas: 
 
 
 
Tier 1 
 
-- Technical assistance to strengthen labor law enforcement, in the 
form of travel funding for Chilean labor inspectors to travel to 
U.S. and apprentice with U.S. Department of Labor inspectors and to 
bring UDOL speakers/experts to Chile; 
 
-- Technical assistance to Chile on the formation and 
implementation of summer youth work programs; 
 
-- Technical assistance on work subsidy programs for women and 
youth; 
 
 
 
Tier 2 
 
--Travel funding for Chilean labor leaders and employers to travel 
to meet with peers in the U.S. and exchange best practices or 
participate in conferences or trainings.  Such travel could perhaps 
be facilitated by the AFL-CIO's Solidarity Center and the Center 
for International Private Enterprise.  One industry focus for such 
exchanges could be agriculture as the U.S. and Chile share a 
complementary trading relationship in this area and Chile and 
California have an ongoing cooperation agreement in place. 
 
 
 
¶22.  The U.S. and Chile recently signed a Memorandum of 
Understanding to coordinate development assistance activities in 
third countries within the Western Hemisphere, a concept termed 
"trilateral development cooperation."  The first projects will 
likely begin in El Salvador and Paraguay.  Given Chile's relatively 
high labor standards, labor could be a fruitful area for future 
trilateral development cooperation, particularly in the areas of 
labor law enforcement and pensions. 
URBAN