Weakened labor reform clears first hurdle in Mexican Congress

MEXICO CITY Wed Sep 26, 2012 9:48pm EDT

MEXICO CITY (Reuters) - A Mexican congressional committee on Wednesday gave provisional backing to a draft labor reform seen as a test of cooperation between the two parties expected to shape legislation for the incoming administration.

The proposal, crafted by outgoing President Felipe Calderon, was watered down to protect unions, but it aims to boost employment by making it easier for businesses to hire and fire workers.

The bill ran into resistance from President-elect Enrique Pena Nieto's Institutional Revolutionary Party, or PRI, and was gutted of provisions to make the country's trade unions more transparent.

Hours of debate in the lower chamber's labor committee highlighted opposition to the union-related provisions, a signal that the PRI's congressional bloc will not support measures to rein in its longtime union allies.

The full chamber is expected to vote on the labor proposal this week.

The union provisions supported by lawmakers from Calderon's conservative National Action Party, or PAN, sought to impose external audits on the unions, force them to divulge details of their balance sheets to members, and give workers a legal right to seek suspension of the fees they must pay to unions.

Millions of dollars are controlled by union leaders who are under no obligation to divulge spending decisions to their members.

Mexico's powerful union leaders, several of whom are newly elected PRI lawmakers, fought to weaken language that would undermine union power.

Luis Alberto Villarreal, leader of the PAN's lawmakers in the lower house, told Mexican newspaper Reforma, "the PRI protects ... the unions and the union leaders who refuse to make their activities transparent."

The bill approved by the committee would regulate outsourcing, make work contracts more flexible and allow hourly pay.

But lawmakers sidestepped proposals to require that the election of union leadership be free, direct and secret, and ensure that union members receive information on how funds are spent. The bill also excluded a provision that would have set a time limit on strikes.

MODIFIED PROPOSAL

The modified bill includes language that would oblige unions to consider the right of workers to know how union funds are managed.

"The right to strike, to associate, trade union freedom and the right of workers to control their own rules are, in our view, protected in this bill," PRI lawmaker Ricardo Pacheco said.

The majority of the country's unions emerged during the PRI's 71-year rule that came to an end in 2000. During that time, unions were pillars of support for the PRI, which is set to return to power when Pena Nieto takes office on December 1.

Mexico's next president has indicated his support for labor reform in Latin America's second-biggest economy, one of several structural reforms he's pushed to boost growth.

Political analysts point to the PRI's old guard as a major challenge facing Pena Nieto, who has promised far-reaching fiscal and energy reforms.

According to the PAN, labor reform could generate 400,000 new jobs per year.

Calderon's proposal put the PRI in a tough spot and since it was fast-tracked as a so-called preferred initiative, lawmakers must approve or reject it by October.

If the proposal is approved by the lower chamber, it goes to the Mexican Senate for consideration.

Mexico's federal labor law, with more than 1,000 articles, dates to the 1930s and hasn't been significantly modified in more than 40 years.

(Reporting by Miguel Gutierrez; Writing by David Alire Garcia; Editing by Stacey Joyce)

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