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Latest News - December 2014

December 22, 2014
Chilean mining firms nervous about impending labor reforms
Source: REUTERS
By: FABIAN CAMBERO

Mining firms in Chile, the world's top copper producer, say the government has left them in the dark over a new labor bill to be delivered to Congress this month, undermining the confidence of investors grappling with low metal prices.

President Michelle Bachelet's socialist government says it wants to modernize collective contract negotiations and strengthen unions, though it has been vague on details. Senators close to the government have said it could seek to limit mining companies' ability to replace workers during strikes.

The labor reform is part of a battery of measures aimed at reducing Chile's gaping wealth gap, and Bachelet faces a tricky balancing act as mining accounts for half of Chile's exports.

Mining companies fret the reforms will jack up labor costs and increase the power of unions in a country where strikes are relatively uncommon.

"It's not the moment to implement a radical labor reform because we have had too many changes and each change creates uncertainty," said Diego Hernandez, president of Antofagasta Minerals.

State-run Codelco and private firms like BHP Billiton, Anglo American, Glencore, and Antofagasta are all juggling weak copper prices, due to slacker demand from China, and surging costs.

The government has said reforms will be implemented gradually and industry's concerns will be fairly evaluated. Still, executives and industry groups are concerned.

Alberto Salas, head of the influential SONAMI mining association, said it wants to know details of the proposals "so we can contribute to the debate and have a decent law."

Investment in Chile's mining industry is declining, dragging down economic growth to a projected five-year low of 1.7 percent in 2014.

Last week, the central bank trimmed its forecast for next year's recovery, underscoring economic weakness at home, where consumption is falling, and abroad.

UNCERTAINTY

Industry leaders and opposition lawmakers say Bachelet's social reforms have damaged consumer and business confidence.

In September, she scored the first big legislative victory of her presidency, pushing through tax reforms that included a higher corporate tax rate and shut down loopholes to add $8.3 billion to the government's annual tax take.

Education and labor reforms are next in Bachelet's sights, with the labor bill expected to go to Congress on Dec. 29.

Chile's Mining Federation, which groups unions from privately-run mines like Escondida and Collahuasi, is seeking improved benefits for union members under the new labor law.

It wants to boost the bargaining power of striking workers by limiting the use of replacement workers, and seeks shorter collective contracts with guarantees that benefits and salaries are not scaled back with new contracts.

BHP Billiton owns a 57.5 percent stake in Escondida while Rio Tinto holds a 30 percent share.

Collective contracts currently run for between 34 to 48 months. The government wants to shorten them so they can be more frequently negotiated to protect workers from shifting economic conditions, in particular inflation.

Some mining executives say the uncertainty stirred up by looming labor proposals could jeopardize investment commitments, estimated at $104 billion over the next decade.

Juan Pablo Letelier, a senator with the ruling coalition, said industry leaders were overly concerned. "It's not going to be something that adds an extra burden to mining projects, not at all."

 

 


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