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Mexico’s Lower Chamber Passes Labor Reform

November 26, 2012

by Juan Manuel Henao

After much public and legislative wrangling, Mexico’s lower chamber opted to bring the country’s labor code into the twenty-first century.  With 361 votes supporting the measure and 129 in opposition, the Partido Revolucionario Institucional (Institutional Revolutionary Party—PRI), Partido Acción Nacional (National Action Party—PAN), Partido Verde Ecologista de México (Green Party—PVEM) and Partido Nueva Alianza (New Alliance Party—PANAL) voted on November 13 to breathe life into the Mexican economy by overturning rules that have idled Mexico’s economic engine for four decades.  The bill was subsequently sent to the Senate for a second time, and passed.

Absent from the new law are much-needed transparency measures intended for unions, whose boards are controlled by powerful union bosses who skim profits and use slush funds to reward friends, prop up political campaigns and finance everything from protests to public campaigns against reformers.

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Union transparency and accountability were central to the labor bill submitted by President Felipe Calderón and his PAN party to the lower chamber in September, but the PRI and its allies would not have it. In the end, forgoing strong union transparency and accountability measures allowed the bill to pass.  PRI legislators promised to hold debate on union accountability legislation in a future session.

The Partido de la Revolución Democrática (Party of the Democratic Revolution—PRD), Partido del Trabajo (Labor Party—PT) and Movimiento Ciudadano (Citizens’ Movement—MC) voted against the bill.  In their view, the bill does little to help workers, a lot to support business owners and validates union corruption.  As the bill went up for a final vote, deputies from the three parties ran a banner across the chamber´s speaker´s rostrum stating, “Those who betray workers betray their country.”

The new reforms are a clear win for Mexico, for President Calderón, for President-elect Enrique Peña Nieto and the PRI.  The reform allows hourly wages for a maximum of eight hours per day, temporary hires, subcontracting, employment trial periods of up to six months, and 10 days paid paternity leave.  Labor Secretary Rosalinda Vélez calculates that the reforms will give Mexico an uptick of 1.5 percent in gross domestic product.

Mexico wins because business owners will have more flexibility in hiring for particular needs and projects.  The overall work force reserves its right to file a suit against employers for unfair dismissal, but under the new law, employers will not have to provide notice of dismissal to labor arbitration courts in advance.

Passage of the reforms will also allow history to remember Calderón for something other than the 50,000 deaths in the fight against narcotrafficking during his term.  There will be no statute to commemorate the president´s win on labor reform, but economists will certainly praise his part in moving Mexico up the latter on labor regulation.

President-elect Peña Nieto and PRI technocrats are also winners.  Both will have a better base from which to grow the economy.  International investment, logic follows, should rise as multi-nationals´ willingness to open shop or expand Mexican operations takes hold.  Should international markets (read: European and Asian) stabilize and hold, new labor measures will likely spell a bonanza for Mexico.

The PRI as a political entity also wins.  Passage of the measure signals to Mexicans and the international community the end of an old hegemonic PRI.  The party´s ability to pass labor reform implies a new way in public administration, a way which appreciates Mexico´s place in the global market place.

Good news also includes the fact that Mexico is no Greece. And the country has certain strengths lacked by other major world economies: its public debt is a manageable 30 percent of GDP (in comparison to 101 percent for the U.S., 182 percent for Greece, 102 percent for France, and a staggering 219 percent for Japan, according to the OECD Economic Outlook No. 90 database). And while it shares bureaucratic incompetence and corruption with its equals, it remains a country where people are willing to work long hours, and under sometimes difficult circumstances, to make a living.

As the dust settled, Jesús Zambrano, president of the PRD, said the PAN treads on thin ice after its refusal to push, at all costs, for union transparency and accountability.  According to the leader, his party´s campaign alliances with the PAN in the run-up to the 14 state elections in 2013 are in danger of fracturing.

For mature observers, the threat equals hot air after a disappointing defeat for the PRD.  By election time in 2013, Mexicans will have more formal jobs and both the PAN and the PRD will reunite for dialogue to unseat the PRI in as many state seats as possible.

Tags: labor reform, Mexico, PAN, PRI

To speak with an expert on this topic, please contact the communications office at: communications@as-coa.org or (212) 277-8384.
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