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The Politics of Labor Reform in Latin America

Between Flexibility and Rights

Maria Lorena Cook

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2007

The Politics of Labor Reform in Latin America

Between Flexibility and Rights

Maria Lorena Cook

“This book offers the best study of the evolution of labor laws in Latin America in the current era of democratic politics and neoliberal economics. Its insightful framework and voluminous information for six important countries will appeal to political scientists, sociologists, and historians.”

 

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During the 1990s, governments, employers, and international agencies pressed for greater flexibility in labor regulations throughout much of Latin America. In this comparative study of six Latin American countries, Maria Lorena Cook shows why these common pressures for flexibility led to varied labor reform outcomes. Her examination of the role of organized labor in shaping reform highlights the conditions under which labor can still wield power despite a decline in overall strength.

Cook employs historical case studies and paired comparisons to analyze the political dynamics that led to moderate levels of labor reform in Argentina and Brazil, extensive change in Chile and Peru, and no reform in Mexico and Bolivia. Her book identifies the array of factors—labor movement strategies, democratization and economic opening, international pressures, legal frameworks, and political legacies—that determine whether labor reforms are more likely to stress flexibility or rights.

“This book offers the best study of the evolution of labor laws in Latin America in the current era of democratic politics and neoliberal economics. Its insightful framework and voluminous information for six important countries will appeal to political scientists, sociologists, and historians.”
“This book is one of the few good, comparative studies of the politics of labor law reform. Besides providing a rich and historically informed description of how labor laws have evolved in six Latin American countries, it links this evolution to broader changes such as economic opening and democratization. Because it is so accessibly written, it will be a valuable resource not only for scholars and students but also for practitioners working in labor law reform and international labor standards.”
“This volume ably examines the evolution (and absence) of labor protections in Latin America in clear language accessible to anyone interested in the politics of globalization.”
“Cook . . . has produced a valuable, comprehensive compendium of contemporary reforms of labor codes—as they amend the powers of unions and alter the bargaining clout of employers versus individual workers—in six Latin American nations. Her basic thesis is unassailable.”
“Maria Lorena Cook’s new monograph not only provides an essential corrective to the more exaggerated claims of analysts on both sides of the proverbial divide but also simultaneously makes an invaluable contribution to the literature on labor politics more generally.”
“Maria Lorena Cook offers the first comprehensive and comparative discussion of the politics of labor reform in a thorough and well-documented, if at times overly detailed, account of attempts at reform in six countries organized into pairs—Argentina and Brazil, Chile and Peru, and Mexico and Bolivia.”

Maria Lorena Cook is Associate Professor in the Department of Collective Bargaining, Labor Law, and Labor History and the Department of International and Comparative Labor in the School of Industrial and Labor Relations at Cornell University. She is the author of Organizing Dissent: Unions, the State, and the Democratic Teachers‚ Movement in Mexico (Penn State, 1996).

Contents

List of Tables

Acknowledgments

List of Acronyms

1. The Politics of Labor Reform in Latin America

2. Directions in Labor Reform: A Regional Overview

3. Legacies of State Corporatism: Argentina and Brazil

4. Legacies of Radical Regimes: Chile and Peru

5. Legacies of Revolution: Mexico and Bolivia

6. The Future of Labor Reform: Between Flexibility

and Rights

References

Index

Chapter 1:

The Politics of Labor Reform in Latin America

The reform of national labor laws is one of the most widely implemented recent policy changes in the world. Since the early 1990s, countries as¬ varied as South Korea, Chile, Russia, and South Africa have changed their labor laws. Labor reforms have also provoked massive protests, including general strikes in Argentina, Italy, and Portugal. Labor law reform is both widespread and contentious, yet as a political process it remains understudied.

These changes in labor laws occurring on a global scale are themselves a response to the pressures of globalization. In most nations, labor legislation was originally crafted to reflect government-employer-worker relationships embedded in more protected national economies. In recent years, trade liberalization and greater global competitiveness have created new challenges for employers and workers. Pressures for legal and institutional change have naturally followed. Yet labor reform remains among the most difficult changes to implement. Reform advocates have puzzled over why governments delay in passing labor reforms, and they have lamented the reforms’ partial nature and limited outcomes.

Why study labor law reform? First, labor laws structure the inevitable and recurring conflicts of employment relations. They define the balance of power among government, employers, workers, and unions. The redrafting of a country’s labor laws typically reflects a shift in these power relations and may carry unfavorable consequences for the laws’ former beneficiaries. Even if workers have suffered from lax enforcement or inefficient labor markets, labor laws often hold symbolic value, serving as a reminder of a time when workers’ organizations were more powerful. For unions, relinquishing laws that protect rights may mean accepting an indefinite institutional disadvantage and forfeiting future power. In many countries, labor law reform has become a focal point in the debate over organized labor’s future under globalization. Labor reform, therefore, provides a good lens through which to view conflicts over political and institutional change. As the Colliers put it, “Labor law is a highly visible and concrete policy statement around which political battles are fought, won, and lost, and around which political support is attracted, granted, and withheld . . . labor law thus provides a valuable point of reference for analyzing the larger political context” (Collier and Collier 1979, 971).

Second, labor laws are not only about a country’s ability to operate in a global market—a common justification for labor reform. Labor law also spans the arenas of rights and citizenship. Laws establish protection for workers’ voice in the workplace and in society. National labor laws are the vehicle for safeguarding internationally recognized human rights of association, organization, and collective bargaining, which have received heightened attention in global trade debates of recent years. Finally, because labor laws affect representative organizations of workers—i.e., unions—they help determine the extent to which fuller versions of democracy and deeper expressions of citizenship are present and possible. Labor law is also, therefore, a good gauge of a country’s prospective ability to meet social justice claims.

This book is about the role of Latin American labor organizations in shaping the design and implementation of labor law reforms at the end of the twentieth century. Despite similar initial prescriptions for change in the direction of greater flexibility, the outcomes of labor law reforms differed throughout Latin America. This study examines why that is by analyzing labor reform processes of the 1990s in six countries: Argentina and Brazil, where moderate flexibility reforms were implemented; Chile and Peru, where changes in labor law were extensive; and Mexico and Bolivia, where labor law reform did not occur despite extensive economic liberalization.

I argue that labor’s efforts to influence reform account in large part for this diversity in outcomes in the region. To make this case, I look at labor’s strategic interests in labor law and at its ability to pursue those interests during specific rounds of reform. Labor’s strategic interests in labor law are derived, in turn, from the legal and institutional framework of labor relations, which is often inherited from an earlier period of legal and political incorporation of labor. I refer to this inherited complex of labor laws, institutions, and political alliances as the “political legacy.” This legacy may confer legal, institutional, and political resources to labor organizations, or it may constrain labor’s access to resources. In this way, the political legacy helps to define the relative strength of labor organizations to defend or promote specific labor law initiatives. Clearly, those labor movements that benefit from more legal and institutional resources are in a better position to resist adverse reforms and to shape the outcome, even when their political alliances weaken or other unfavorable conditions dominate.

Yet the relative strength of labor does not dictate a specific outcome. Instead, it is labor’s use of resources in interaction with other factors that explains outcomes. One of these factors is the degree of government resolve or political will to see reform through. Government resolve is shaped by the pressure for reform that it faces from international actors or domestic constituencies. International pressure can be oriented toward expanding labor rights or labor market flexibility.

A second important factor for both government and labor is the “transition context.” Most countries in the region have undergone dual transitions: a transition toward democracy and another toward economic opening. The nature of the transitions as well as their timing affects the political environment for labor reform. Democratic transitions tend to favor rights-based reforms and strengthen unions, while market-oriented economic transitions tend to favor labor flexibility and weaken unions. Moreover, the sequence of these transitions—whether democratization comes before economic liberalization, for example—can affect the relative power of labor to shape reform.

The next section looks more closely at the political dynamics of labor reform in the region, examining the role of labor, government, and transition contexts in turn. This is followed by a discussion of the political legacies that give rise to distinct contemporary legal frameworks, which in turn shape labor’s ability to influence reforms. The final section presents the country cases and the method of paired comparisons by which I analyze labor reform processes in the region.

<1> Political Dynamics of Labor Reform

The political dynamics of labor reform differ from those of economic or other institutional reforms. These differences have been insufficiently studied in the political economy of reform literature, yet they help to explain the contentiousness of labor reform and the relative influence that labor unions wield in this policy arena, despite an overall decline in bargaining power.

During the 1990s, studies of Latin American political economy focused on the implementation of market-oriented economic reforms and on accompanying institutional or “second-stage” reforms of health, education, justice, and pension systems. Although most of these studies were concerned with policymakers’ ability to implement reforms, they also addressed the role of nonelite social actors, insofar as these obstructed or facilitated elites’ reform goals.

The portrayal of these actors in each of these literatures differed. The economic reform literature tended to see both labor and business groups as relatively weak. Business groups were regarded as weak for failing to provide the strong base of support governments wanted in order to implement economic reform, and for being uncooperative or indifferent toward reforming governments (Haggard and Kaufman 1995; Nelson 1994). Labor unions were portrayed as weak because they failed to prevent economic reforms that harmed their interests, such as privatization and market opening, and because they failed to propose alternative policies (Geddes 1995). The institutional reform literature, by contrast, tended to portray unions as effective and powerful challengers to reform. Analysts emphasized unions’ confrontational responses to reforms and their frequent ability to stall changes (Haggard and Kaufman 1995).

This perception of unions as potentially powerful opponents was further evident in the attention paid in the institutional reform literature to how elites managed opposition by affected groups, posing what Mark Williams has called the “reformer’s dilemma.” Most approaches discussed in the literature aimed either to gain support for reform or to diminish opposition to it. One approach was to build a positive consensus for reform by constructing pro-reform coalitions (Nelson 1994). A second approach was consultation, whether through legislative channels or directly with affected groups via bipartite or tripartite pacts (Nelson 1994, 190–91; Haggard and Kaufman 1995). A third approach was compensation, or giving actors a stake in the reform (Graham 1998, 336; M. Williams 2001, 27).

Yet these approaches downplayed the degree of coercion often required to overcome opposition to reforms. While each of these approaches implied some degree of negotiation and compromise, policymakers who saw standardized solutions (privatization, flexibilization, decentralization) to institutional problems were unlikely to find compromise satisfying. Not only did compromise go against the grain of technocratic problem solving, but it risked distortion of the original reform design or, worse, led to the scuttling of reform. Some pro-reform elites tried to circumvent this problem by avoiding any forum requiring compromise with affected actors. Actions ranged from repression and coercion to division and political isolation. Consensus, consultation, and compensation were rare (Teichman 2001, 191; M. Williams 2001, 27).

Indeed, market reform advocates often constructed their perceptions of trade unions in ways that justified strategies that marginalized (and repressed) labor. One common characterization of unions was that they were powerful “insiders” who resisted efforts to implement reforms that would benefit weaker “outsiders” (informal-sector workers, the unemployed, women, and youth) (Cortázar et al. 1998; Lora and Pagés 1997). Labor reforms were seen as a zero-sum game in which unions’ gains cost unorganized workers and business. The implication was that trade unions’ resistance to reform must be overcome. At a minimum, these portrayals complicated any consultative process. They also provided justification for avoiding negotiations with trade unions, and even for promoting reforms that weakened trade union power. These dynamics account in part for the especially contentious character of most labor reform in the region.

<2> Labor’s Role: A Strategic Approach

Studies of reform have paid relatively little attention to what factors make labor a more or less formidable opponent. Characterizations of labor as weak vis-à-vis economic reform and strong with regard to institutional changes do not get at the underlying strategic interests and motivations or at the larger contextual issues likely to shape labor’s effective resistance. Some scholars have argued that the nature of the reforms themselves determines a greater propensity for resistance. For instance, Madrid (2003a) argues that unions’ opposition to labor reform is more intense, and so more able to delay or stall changes, because labor reform affects union organization, leadership, and membership all at once. Compared with other reforms, labor reforms have the effect of unifying diverse factions of workers and therefore of strengthening an organization’s ability to act in defense of its interests. Battles that form around labor reform initiatives may also reinforce a class cleavage, thus placing the issue into more traditional and familiar territory for trade unions (Etchemendy 1995; Etchemendy and Palermo 1997).

Yet the impact of labor reform is not felt equally across all groups of workers, and the unity of worker organizations should not be overstated. The effects of reforms aimed at individual workers and at collective interests are different, and unions forced to choose which to defend are more likely to safeguard collective provisions over changes in individual or employment legislation. Moreover, the divisive tactics governments employ in other arenas to pressure groups to make concessions are also found here. Labor unity can dissolve when some unions are allowed to retain restrictions on freedom of association, such as monopoly rules that put competing unions at a disadvantage.

While labor unions may respond more forcefully to labor reforms than to other kinds of reform, this still does not explain why unions in some countries are more successful than others in shaping reform outcomes. Nor does it help in understanding labor’s varied responses to different reform initiatives or to the timing of those initiatives. Rather, how labor responds—what and when it resists—depends not only on labor’s capacity for mobilization or negotiation, but also on labor leaders’ strategic assessments of what matters most. Which provisions in labor law are labor leaders most likely to defend? Which are they willing to concede? How do unions choose to make trade-offs or to expend resources during rounds of reform? Answers to these questions call for greater attention to labor’s strategic interests in labor reform.

One fruitful approach is to focus on trade unions’ identification and defense of their core interests. Core interests are linked to the group’s organizational survival. They are the issues that an organization will defend most forcefully, being willing to bargain or trade on other matters outside the core. Labor’s identification of core interests and its perception of threat to this core shape where and when it assigns limited resources and when it assumes risks and costs. This focus on core interests makes it is easier to understand why unions may cooperate on some reforms and resist others. For example, unions tend to defend established policies, laws, or provisions that grant them power and resources, such as representational mechanisms that establish union monopolies in given sectors. We gain a better understanding of a group’s behavior by viewing how it behaves—what it trades off—in order to defend these interests.

This strategic approach also calls for a more disaggregated view of labor policy than has appeared in much of the literature. By looking at both individual and collective labor laws and at how they are packaged in reform rounds, we can better evaluate labor’s strategic interests and choices. Studying these rounds of reform enables us to understand the trade-offs that take place among pieces of legislation in a reform package, as well as the political and economic influences that shape bargaining over reforms. These trade-offs may in turn explain the contradictory outcomes of many labor reforms. They also provide a good indication of what matters most to labor leaders.

<2> Government Resolve

Labor movements that seek to influence the reform process must contend with the intensity of government commitment to reform, or government “resolve.” This resolve entails government’s willingness to confront resistance to reform, which may involve political costs. One of the most important factors shaping a government’s commitment to labor reforms is the degree of international pressure brought to bear on it. In many instances, international pressure may be more effective than domestic pressure because of the high costs of noncompliance. For instance, international financial institutions like the International Monetary Fund and the World Bank have conditioned loans on flexible reforms of the labor market. International pressure can also function in support of labor rights. To secure a country’s enjoyment of preferential trade status under the U.S. Generalized System of Preferences (GSP), Central American governments were pressured to push for improved legal protections for labor rights (Frundt 1998; Compa and Vogt 2001). The International Labor Organization has also acted as a source of pressure for labor rights.

Domestic pressure also shapes a government’s commitment to labor reform. In recent years employers have been the key domestic group pushing for flexibility of employment regulations. The strength of employers will depend on the unity of employer organizations, their political alliances, the degree of consistency in their demands, the business orientation of the government or party in power, and the ability of employers to pose a credible threat to economic or political stability if reform is not achieved. Like trade unions, employer organizations may also identify and defend core interests in labor law.

The strength of employer pressure may also depend on structural factors that force employers to reduce labor costs and to respond more rapidly to market demands. These factors include the overall degree of trade liberalization and the percentage of the economy affected by trade. Related to how employers respond to these pressures is the degree of protection (often labeled “rigidity” by pro-reform forces) of existing legislation, and the ease with which these laws are evaded (Bensusán 2006). Clearly, where protective laws are easily evaded, employers are less driven to demand reform, although the call for reform may still be there.

Finally, structural economic conditions can influence both international and domestic demands for reform. In the classical literature on labor markets, a high unemployment rate is usually evidence of excessively rigid rules and high labor costs. The neoliberal policy response is to ease protective legislation governing the hiring and dismissal of workers, especially requirements that employers make long-term commitments to employees. These ideas can shape perceptions of the need for labor reform to address unemployment.

A similar link is drawn between protective labor legislation and high levels of informality, yet informal-sector employment does not seem to elicit strong domestic demand for flexibility the way that high unemployment does. Informality indicates a good deal of flexibility in the labor market. It is often a condition that employers can exploit because of the lower costs involved and the flexibility of employment relationships. Informality does, however, present high costs to governments in the form of lost revenues due to the failure to pay taxes and other social charges. It remains a concern of international financial institutions and other international agencies, and is often cited as a reason to adopt reforms aimed at introducing more labor market flexibility.

Government resolve is typically most intense when strong international pressure is involved, or where strong domestic and international pressures converge in favor of flexibility reform. This may be counterbalanced, however, by domestic resistance that is politically timed, as in the period leading up to important elections.

<2> Implementation Mechanisms

Governments typically pursue one of three mechanisms for implementation of labor reforms: executive decrees, legislative action, or concertation (social dialogue). These mechanisms can be combined, as when concertation over reform proposals becomes the basis for legislation. The government’s choice of mechanism may offer a good indication of its commitment to reform. Decrees may be the most direct route to reform but are often limited. By sending proposals to its legislative branch, the executive may indicate a serious commitment to reform, or it may signal others, especially multilateral lending institutions, that the government has made an effort to change labor regulations in good faith. Concertation mechanisms may, but often do not, indicate that priority is being granted to serious reform, although they may serve other important political purposes. I examine each of these mechanisms in turn below.

In political systems that make such action feasible, executive decrees have been used to set specific legislation. The advantage of decrees—from the perspective of the executive—is that the issue is not first submitted to the Congress for discussion and a vote; hence it can be implemented relatively quickly and with minimal disruption. Although in most systems such decrees are supposed to be reserved for matters of “urgency and necessity” and therefore limited to crisis measures, they have often been used for labor reform. Governments may consult beforehand with business or labor groups about such decrees, but in most instances they act quickly to thwart opposition prior to implementation.

In democracies, however, the reform of labor markets and industrial relations cannot be wholly executed by decree. Legislative initiatives sent by the executive branch to Congress typically involve the most comprehensive pieces of labor legislation, and therefore also those that are the most contentious and risk being significantly reformulated. The prevalence of presidentialist systems and divided legislatures in Latin America means that passing reform legislation can be a complex process, since opposition parties can dominate one or both houses of Congress. Legislative proposals are also vulnerable to opposition by affected groups, especially if labor or business has strong ties to legislators. Even if political alignments are in the executive’s favor, labor reform bills can run into opposition in legislative labor committees, which tend to be dominated by labor deputies or their allies. The politics of the legislature, executive-legislative relations, and national party politics all play a role in determining the fate of labor reform legislation. Labor reform that travels this path typically takes a long time. A period of several years is not uncommon, and the end product may look very different from the initial proposal.

Governments may also place a reform proposal before the affected parties, or even request that they arrive at a compromise. Bipartite or tripartite “concertation” arrangements have been used quite often in Latin America as a means to shape labor reform. Typically the stated goal is for business and labor groups to reach a consensus on reform terms. The belief is that, once sent to Congress, an initiative shaped by consensus will weaken any objections of legislators and limit the conflict that could result from interest group pressure. This process has rarely resulted in significant labor reform, however, since agreement among the parties is difficult to achieve. Indeed, sometimes the best way for a government to look like it is trying to move on labor reform while ensuring that no real reform occurs is to toss the task into a bipartite or tripartite negotiation. Successful dialogue very much depends on political context and political will.

Given the relative difficulty of passing labor reform legislation, it is remarkable that governments repeatedly expend enormous effort to push reform. One way to understand what may seem like a futile exercise is to note the powerful “signaling” effect of labor reform efforts. Considering the tremendous pressure from international and domestic actors that some governments face, these governments may attempt to pass reforms even when their expectation of success is low. Even a failed effort to reform can signal to investors, international institutions, or domestic constituencies that the government is at least taking steps toward a shared goal. Whether a given executive adopts decrees, goes through the legislature, or seeks consensus, therefore, provides some indication of its commitment.

The mechanisms that the government uses will also shape labor’s response. Decrees, where trade unions are not consulted beforehand, leave them little option but to mobilize in protest or refuse cooperation if it is needed for effective implementation. Even when labor leaders are consulted, workers or unions that are left out may still resort to protest. Since the ability to mobilize effectively is costly and limited to relatively few labor organizations, decreed laws are an efficient way of implementing reform, although one that often lacks the legitimacy of legislation passed by Congress.

Reform initiatives sent to Congress provide another range of possible action by labor unions. Depending on their party ties and the presence of legislative allies, unions can lobby representatives and flex their electoral muscle to press their interests and either defeat or modify the legislation. Finally, concertation or social-dialogue mechanisms enable those unions that are invited to sit at the table to present their positions on reform. But, as noted, this more “participatory” method may be the one least likely to yield significant changes.

<2> Sequencing of Dual Transitions

Labor’s strategic calculations on how to respond to reforms, as well as government resolve to reform, will also be shaped by political and economic transition contexts. The countries studied here underwent two distinct transitions: democratic transitions from periods of authoritarian rule, and market-oriented economic transitions under pressures of globalization (see Table 1.1). Both democratic and economic transitions often give rise to reform efforts and present distinct constraints and opportunities for unions. Moreover, these contexts shape the substance and direction of labor reforms. For example, labor reforms that coincide with democratization tend to enhance rights and protections, whereas reforms that respond to market policies tend to increase flexibility. This helps us to understand contradictory reform sequences in many countries: periods of protective or rights-based reforms followed by a move toward flexibility a few years later.

<Comp: TABLE 1.1 ABOUT HERE>

Reforms undertaken during democratic transition periods have tended to reinforce or extend protections to individual workers and to restore or bolster collective rights, such as the right to strike, organize, and bargain collectively (Bronstein 1995; Cook 1998). These reforms typically took place during “first-round” democratic governments, those that followed authoritarian regimes. Scholars have argued that first-round democratic governments enjoyed multiple advantages in implementing a wide range of policies—including tough stabilization measures—because of the value society places on peaceful democratic transition (Haggard and Kaufman 1995; Nelson 1994; Geddes 1995).

Yet while transition governments attempted stabilization measures, the experience of Brazil, Argentina, and Spain shows that these were more successful during “second-round” governments that followed the transition regime. In the Spanish case, Nancy Bermeo argues that this was because the core task of the first-round government was the establishment and consolidation of democracy, which took precedence over orchestrating economic recovery (Bermeo 1994, 606). Since it was unable to resolve economic crisis, the transition administration became “sacrificial,” leading to the election of a new government headed by the opposition. This government, in turn, was better situated to address economic recovery through stabilization and economic liberalization because it was no longer burdened by the task of democratic consolidation. The result was an “unintentional sequencing of tasks” between the first two ruling parties after the end of authoritarian rule (Bermeo 1994, 602).

Bermeo’s analysis of the sequencing of core tasks during democratic and economic transitions is useful for understanding the similar sequencing of labor reform. Democratic consolidation involved rebuilding democratic institutions, securing political stability, and restoring civil and political rights to citizens. First-round democratic governments found themselves under pressure to restore collective labor rights and protective employment laws that were removed during antilabor military regimes, or else to extend new rights and protections. Even where democratic governments might have resisted implementing labor-friendly reforms, they were often confronted by the relative social and political strength of organized labor. In general, trade unions enjoyed greater legitimacy in this period due to their persecution under the military and their role in the transition to democracy (Valenzuela 1989). Governments faced a social consensus that saw favorable policy reforms as labor’s due. This combination of factors often had a stronger bearing on labor reform outcomes than did strictly partisan concerns, in which labor-based ruling parties would play to their labor constituencies. During democratic transitions, nonlabor governments also implemented labor-friendly policies.

The premium governments placed on political stability and accommodation during democratic transition produced a generally favorable political context for labor, even when the economy was unfavorable. Governments were less likely to use repression in response to worker mobilizations, and interest in stability meant a higher likelihood that labor would receive concessions. Indeed, strike activity increased throughout the region during democratic transitions, and labor protest against structural adjustment policies was common (Cox Edwards 1997, 135). Labor was able to engage in a traditional sectoral strategy—strike activity—but it was also able to operate in a number of arenas made available by the return of democracy: political party activity; working through congressional allies to defend labor interests; participating in demonstrations with other sectors of civil society; engaging in tripartite accords or direct negotiations with the state; and even collective bargaining. In this context, organized labor was not only better able to advocate for labor rights, it was also free to protest economic policies, such as austerity measures, that it would later find more difficult to resist.

Economic transitions presented a different set of challenges to labor and imparted a different tenor to labor reform. Although market-oriented economic reforms may have been initiated or attempted by first-round governments, they were usually deepened and consolidated in second- and third-round democratic governments (Nelson et al. 1994; Haggard and Kaufman 1995). By this time the core task of democratic consolidation had been achieved or was well under way, ceding to a more pressing concern for the implementation and consolidation of economic reforms, which in Latin America typically occurred during the late 1980s and 1990s.

With the more systematic implementation of market-oriented economic reforms, the favorable political and economic environment disappeared for unions. Most economic reforms generated higher levels of unemployment and income inequality. Even if not accompanied by legal reform, employment generally became more precarious. For instance, the number of people working in the informal sector increased throughout the region in the 1990s (International Labor Office 1999). These structural economic changes and their effects on the labor market weakened labor organizations by reducing union membership, increasing workforce segmentation, and creating an adverse environment for strikes. The strengthening of business actors, who were often favored by trade liberalization, privatization, and flexible labor market policies, also diminished unions’ relative power in society.

The political environment during economic transitions was also unfavorable for workers and unions. Market rationality and efficiency rather than rights and democracy became the watchwords of government. Unions were often portrayed as privileged special interests that sought to protect union leaders’ access to sources of wealth and corruption, or as market-distorting institutions that pushed up wages at the expense of the vast majority excluded from the formal labor market. This portrayal of unions in turn legitimated policies and legal reforms that aimed to remove or reduce unions’ sources of power.

Where economic transition preceded democratic transition, labor was often placed at a special disadvantage. In these instances, unions generally moved into the democratic transition weakened by structural economic reforms as well as by legal-institutional changes imposed during dictatorship, as in the Chilean case. In addition, a core task of first-round democratic governments was complicated by a commitment to preserve economic reforms implemented earlier, which often conflicted with the expansion of labor rights. While democratization may have generated a public debate about labor rights, as in Mexico, and even led to movement in this direction, as in Chile, the constraints on expansion of labor rights tended to be greater.

In sum, during democratic transitions that preceded market reforms, labor could both resist economic policies and attain and defend organizational gains. During economic transitions that followed democratization, labor was more likely to be forced onto the defensive and to concentrate its resources on organizational survival. The nature of the transition context and its sequencing are important for understanding the strategic options of both government and labor in labor law reform.

<1> Legal Frameworks and Political Legacies

The creation of early labor legislation in these countries represented a critical watershed in the relationship between the state and labor. The drafting of an initial labor code often reflected labor’s level of mobilization and political alliances, and the state’s attempts to limit conflict, secure political support, and establish control over labor. In many cases, these early labor codes also reflected nationalist political and economic alliances that underlay the import-substitution industrialization model of economic development. The initial labor law frameworks, therefore, had a substantial bearing on labor’s capacity to organize, bargain, and mobilize. They also defined which organizational, financial, and even political resources accrued to labor.

Where labor was sufficiently strong to require inducements to cooperate with the state, these were reflected in labor law. Provisions in trade union legislation that stipulated monopoly representation, a role for labor in tripartite structures, automatic dues check-off, and direct subsidies reflected reasonably strong labor movements allied with parties in power. In contrast, weak collective protections signaled weak labor, authoritarian government, or a powerful industrial or landowning class.

These foundational labor codes, like most institutions, were difficult to change. This difficulty was even more salient in those cases in which labor provisions were incorporated into national constitutions (Bronstein 1995). The wholesale revision of labor laws was rare; generally this occurred only in cases of revolution or dictatorship, when a radical break with the previous regime made possible the creation of new institutions that would reflect a new balance of power. More commonly, however, legal frameworks produced enduring legacies.

Labor relations frameworks followed three distinct historical patterns or trajectories in each of the six countries I examine in this book. Each of these was initially defined by the combined legal/labor relations/political regime established during a critical juncture in each country. Each in turn generated its own legacy, which in some cases resulted in a very different legal and institutional labor relations framework in the contemporary period:

<NL>

1. State corporatist‡ State corporatist (Argentina, Brazil)

2. Radical (pro-worker)‡ Flexible (radical pro-employer) (Chile, Peru)

3. Revolutionary-state‡ Parallel (nonenforcement) regime (Mexico, Bolivia)

<end NL>

<2> State Corporatist

The first historical pattern is state corporatist. The initial legal framework originated during the key period of labor incorporation and at the height of import-substitution industrialization in the 1930s and 1940s. The characteristics of this pattern were an initial incorporation of labor by the state through labor and social legislation that combined protection and control. The early state corporatist pattern involved control of labor organizations through laws that set the terms of union organization and representation in ways that permitted a significant degree of state oversight and intervention. Competition among labor organizations was circumscribed by clearly defined jurisdictions, and entry by new groups was restricted. Along with these controls, laws provided for direct subsidies to labor organizations through a variety of mechanisms. This was another means of tying labor to the state and of enabling the state to channel resources to unions with official recognition. Political parties might or might not have been part of this arrangement; the key factor was the structuring of labor-state relations through legislation.

What were the implications of this initial pattern for labor strength and influence in later decades? What was its political legacy? We find relatively unified and large labor organizations that were protected from competition by newcomers, held a privileged seat in dealings with the state, and depended strongly on state subsidies. Because of regulations that called for compulsory membership or broad coverage through collective agreements, these unions represented large numbers of workers and therefore wielded some power. Corporatist provisions were difficult to get rid of because of their benefits to dominant labor groups and others with vested interests in the system. Labor was therefore most likely to defend those provisions that granted collective rights and powers (including those that ensured predominance of some groups over others), and those that provided financial resources to organizations and their leadership. Because of the difficulty in changing these laws, and because of the relative stability they engendered, this pattern exhibits a significant degree of continuity between early legislation and the contemporary period. Argentina and Brazil best represent this pattern.

<2> Radical (Pro-Worker)‡ Flexible (Radical Pro-Employer)

This pattern originated in a political regime that overhauled labor laws to install radical pro-worker legislation and policy. Such legislation included expanded employment protections, improved working conditions, and greater tolerance of union organizing and strikes. To qualify as radical, these regimes also enacted regulations that increased worker control at the workplace. The immediate result was greatly expanded mobilization among workers.

These changes were profoundly threatening to foreign and national business elites and usually generated a strong reaction. Radical pro-worker regimes were therefore short-lived. The reaction involved not only a change of regime but also a change of labor laws. Since these contexts were politically polarized, the result was not accommodation with the radical regime but rather its defeat. This was reflected, in turn, in the new laws and policies pursued by the victors. Implementation of new regulations had to overcome resistance by the workers who benefited from the previous regime, and the new laws institutionalized the relatively weak position of defeated workers’ organizations. Radical pro-worker legislation gave way, then, not only to flexible employment relations and reduced costs to employers, but also to strong restrictions on collective power and rights.

This pattern’s legacy was that labor had the most limited influence over labor reforms. Not only were unions too weak to stop flexibilization and curbs on their collective activities, they could not amass the political resources required to recover basic labor rights. It was more difficult to mobilize for new rights than to defend rights already enshrined in law, especially when the broader economic and political environment was not amenable. International pressure in support of labor rights may be most needed in these cases and could lead to a better equilibrium in industrial relations. Chile and Peru both represent instances of this trajectory, and exhibit the greatest discontinuities in our set of countries.

<2> Revolutionary-State‡ Parallel (Nonenforcement) Regime

In the revolutionary-state pattern the foundational labor legislation was associated with a regime that assumed the mantle of the “revolution.” This was not necessarily a revolution that came from below to overthrow an existing regime, but rather a regime that claimed to rule in the name of popular classes, even though its origins may have been part of a struggle among elite factions. Here labor was allied with the political party in power that claimed revolutionary origins.

Labor law contained many provisions favorable to unions. In contrast to the radical regime, however, these legal concessions to labor did not pose a threat in terms of creating an autonomous, mobilized labor movement. This was because labor in this revolutionary-state pattern was allied with the ruling party, such that those ties served to moderate and constrain labor action.

The revolutionary-state legacy produced a strong disjuncture between law and practice. Labor relations operated in a “parallel realm” of nonenforcement or selective enforcement of pro-worker legislation. In our cases this took two forms. In one, labor laws were favorable to labor organizations, but the actions of labor were comparatively moderate, since they were constrained by alliances and commitments to the ruling party. The result was a form of collaboration, even collusion, between labor organizations, the state, and employers to maintain stability and labor peace. This collaboration extended to the creation of a “parallel” labor regime that violated the favorable dispositions of labor laws. This was the case in Mexico. In the other form, seen in Bolivia, the constraining commitments to the “revolutionary” party were weaker since the party was not sustained in power, yet the original legislation stood. Protective labor legislation was tolerated by employers owing in large part to the fact that legal enforcement was weak.

Under this pattern, labor organizations were relatively strong in exerting their influence to halt reform of labor laws. This was because of their alliance with prominent political parties and/or their mobilization potential. There was also relatively less pressure to reform the laws because of the limited enforcement or parallel containment arrangements described above. The result was no reform (or greatly delayed reform) of labor legislation despite its strongly protective nature.

<2> Labor Strength

Political legacies and legal frameworks also shape the relative strength of labor movements. To the extent that these extend and protect trade unions’ organizational resources, those unions are more likely to defend their interests in potentially antagonistic rounds of labor reform. As noted earlier, however, “strength” and “weakness” do not by themselves explain specific labor reform outcomes. In order to understand how labor’s capacity is deployed—whether it is “strong enough” to shape the reform process—we have to look at other factors discussed here: labor’s strategic or core interests, government resolve, and transition contexts.

I draw on characterizations of labor strength here to assist in devising the pairings of cases. To do this I use several data indicators to assess labor strength in Argentina, Brazil, Mexico, Bolivia, Chile, and Peru during the 1990s (Table 1.2). The focus is on national confederations, since labor law reform negotiations typically involve national organizations rather than local unions.

<Comp: TABLE 1.2. ABOUT HERE>

The indicators include two measures of union density, union structure, degree of political unity among peak organizations, and political-strategic orientation of the largest peak organization. Although each one of these measures presents drawbacks, together they combine features of membership, structure, and politics suitable to assessing peak organization bargaining power on national policy issues. The final designations of labor strength also coincide with most assessments found in the secondary literature on labor in these countries.

Union density is a common measure of labor strength, but a problematic one. While reliable data on union density exist for advanced industrial countries, in developing countries data collection has often been difficult (McGuire 1997, 267). Moreover, high density in some countries, such as Mexico, may reflect involuntary or compulsory union membership and is therefore less meaningful as an indication of member commitment or mobilization capacity. Nonetheless, taken together with other measures, union density can signal the relative strength of organized labor.

Two other measures of labor strength relate to union structure and the degree of political unity where multiple central organizations exist. The assumption is that more centralized structures—a system based on national industrial unions rather than on provincial, municipal, craft, or enterprise-level unions—both reflect and confer a greater degree of labor power. Likewise, the number of peak confederations and competition among centrals or within these can indicate the degree of labor influence. Simply put, labor is stronger where there is a single peak labor confederation and where internal political or ideological divisions are limited, so that labor speaks with one voice. A single or a dominant peak organization usually indicates greater unity and hence greater negotiating power than multiple confederations, from which the government may pick its allies.

A final indicator is the political-strategic orientation of peak organizations. This measure refers to the largest peak organization’s primary policy orientation and response to government initiatives. This measure tries to capture both the extent to which peak organizations engage in general strikes and other forms of collective action and protest, and their political party alliances. In this formulation, “conciliatory” peak organizations had ties to ruling parties during most of the 1990s, whereas those with opposition party ties were “militant.” Militancy here is weighted more heavily as an indicator of labor strength: “Moderately strong” movements (as measured by density and union structure) may be able to compensate for a weaker structural position with militancy, whereas otherwise “strong” labor movements that are conciliatory toward government initiatives can be weaker actors when faced with unfavorable reforms, given a lesser propensity to confront their allies. Political-strategic orientation defines why, for example, Brazilian labor appears as “strong” in Table 1.2 despite “lower” measures in the areas of union structure and political unity among peak confederations, whereas Mexican labor is listed as moderate in strength, despite high scores on other indicators. The final determination of degree of labor strength (high, medium, or low) combines this political-strategic dimension with measures of structure and density.

Table 1.3 shows countries paired according to political legacy, labor strength, and reform outcomes. The last is presented in terms of degree of flexibility. One would expect stronger labor movements to exert the greatest influence over labor reform outcomes. Likewise, since unions resist flexible reforms that shift power to management, those cases with the greatest degree of flexibility (“extensive” reform outcome) should reflect the weakest labor influence. However, the puzzle evident in this table is that “strong” labor movements—those of Argentina and Brazil—present cases of moderate or mixed reform outcomes, while “moderately strong” labor in Mexico and Bolivia is linked to retention of protective legislation with no reform. Weak unions have the least influence over reform outcomes, which is consistent with expectations.

This puzzle suggests that there is not a simple linear relationship between labor strength and reform outcomes. While labor strength is certainly important insofar as it relates to labor’s capacity to influence outcomes, other variables also matter. For instance, legal frameworks establish the terrain on which battles over reform are played out, and they shape labor’s identification of its core interests. Government commitment to reform, as determined by international and domestic pressure, indicates the degree of intensity with which government actors will pursue reform against labor opposition. As noted, this can affect the mechanisms governments employ to design and implement reforms, another factor that can disadvantage labor unions. Finally, transition contexts and sequencing can create more or less favorable political environments for labor organizations in their efforts to influence labor law reform.

<Comp: TABLE 1.3. ABOUT HERE>

<1> Approach of the Book: Paired Comparisons

This book analyzes labor law reform in six countries: Argentina, Brazil, Chile, Peru, Mexico, and Bolivia. These countries were selected because of similarities on several key dimensions: Since the 1990s they have all been democracies; labor has been a historically important force in national politics in each case; and each has pursued extensive economic liberalization. Despite these similarities, the countries vary on labor reform outcomes, as defined by degree of flexible reform at the end of the 1990s (see Table 1.3).

By the end of the 1990s, Argentina’s and Brazil’s labor laws included flexible reforms, which mostly affected the individual employment relationship. Yet they also retained significant protections in collective legislation that benefited unions, despite government efforts to change those laws. These countries experienced a moderate flexibility of labor regulation overall. Chile and Peru had the greatest degree of flexibility, giving significant power to employers in their dealings with individual workers and unions. This was so even after the expansion of protections in Chile during the democratic governments of the 1990s. Mexico and Bolivia are the only cases in this set that did not significantly change labor laws despite strong economic liberalization.

How do we account for these varied outcomes in the face of similar pressures for flexible reforms? By pairing countries that are quite different on a range of variables yet similar on reform outcome, we can isolate common features that are important determinants of labor reform. For instance, Argentina and Brazil are very different in terms of political party system, party ties with labor, and historical incorporation of labor. Until the early 2000s they also had different socioeconomic characteristics, with higher inequality and lower per capita income in Brazil. Yet their labor laws exhibit similar features of state corporatism, and their labor movements rank the highest of the six cases in terms of strength.

Chile and Peru differ even more starkly in terms of the stability and size of their economies, histories of labor incorporation (state vs. party/movement), and orientation of their respective military regimes in the 1970s. Yet both countries share a more recent period of radical policy change under a pro-worker regime, which in turn produced a backlash reflected in subsequent governments’ antiworker policies. In both countries labor also appears in the weakest position.

Mexico and Bolivia differ in stability of political regime and size of the economy. While Mexico’s PRI ruled for seventy-one years, Bolivia suffered multiple military interventions in politics during the second half of the twentieth century. Mexico’s large and dynamic economy also contrasts with that of Bolivia, one of the poorest countries in the region. Yet in both cases labor ranks as moderate in strength and labor legislation derives from similar revolutionary-state origins. Mexico also shares features of state corporatism, but the mobilizational nature of labor incorporation due to the revolutionary experience in Mexico distinguishes it from Argentina and Brazil and places it alongside Bolivia. Despite similar revolutionary legacies, however, Mexico and Bolivia differ in closeness of labor’s alliance with the revolutionary party. This alliance was much stronger in Mexico than in Bolivia, where labor and the party split in the mid-1980s, and where the labor movement was an autonomous source of political power, often rivaling that of its party allies (Malloy 1970).

<1> Organization of the Book

Chapter 2 gives the context for labor reforms in Latin America, indicates the range and direction of reforms throughout the region, and outlines the theoretical and ideological bases for reform during the 1990s. It provides background on types of reforms proposed and implemented in the 1990s, on the influences and agencies pushing for reform, and on trends and patterns that have emerged in the region. It contains a detailed explanation of labor flexibility, discusses the role of international financial institutions in promoting flexibility policies, and looks at where labor rights fit into this policy debate.

Chapters 3 through 5 analyze and compare labor reform dynamics in each of the three country pairs. Chapter 3 examines Argentina and Brazil, similar cases with relatively strong labor movements and a state corporatist legacy that explains many of the features of their contemporary labor laws. Both countries also experienced democratic transitions from military rule in the 1980s, followed by a market reform period in the 1990s. In both cases labor flexibility was introduced in the 1990s, but the labor movement managed to stall or defend against changes in collective law even as flexibility reforms proceeded in employment law. The mixed outcome points to the negotiating capacity of strong labor organizations in a context of intense pressure for reform. Although the chapter focuses on the 1980s and 1990s, it also analyzes the labor reforms implemented in Argentina in the early 2000s and reform proposals in Brazil under President Luis Inácio Lula da Silva between 2003 and 2005.

Chapter 4 compares the labor reform experiences of Chile and Peru. Both countries have labor movements that were once strong and politicized but which have weakened considerably since the 1970s. In both countries a radical pro-worker regime (Allende in Chile and Velasco in Peru) instituted policies favorable to labor, and unionization flourished. In reaction, subsequent regimes (Pinochet in Chile and Fujimori in Peru) imposed extreme flexibility and antiworker policies together with market reforms. Worker protections in the 1990s were among the weakest in the region. Yet in both cases, partly as a result of international pressure, recent efforts have turned toward more equilibrium in labor law and industrial relations, including closer attention to labor rights.

Mexico and Bolivia are regional anomalies, given that they display some of the strongest features of economic liberalization but are among the few countries in the region (along with Honduras and Uruguay) that have not reformed their labor laws. Chapter 5 explores why. It examines the national revolutionary legacy of both countries and the subsequent development of a parallel labor-relations regime that permitted flexibility in spite of protective laws. In Mexico this occurred via collusion of labor with the state and employers. In Bolivia nonenforcement and labor’s veto power stalled reform. Although labor laws have not changed, domestic and international pressures to reform persist. The chapter analyzes several reform proposals, providing a unique view into policy debates prior to implementation and an indication of what type of labor reform is likely to emerge in the future.

The final chapter explores the lessons of this comparison of Latin American countries, assesses the reasons for the failure of reform efforts in the 1990s, and examines prospects for more balanced reform that incorporates labor rights, based on initial developments in the 2000s.

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