From Washington Uribe looks good. The World Bank recently reported that "the policy orientation of the new Colombian government has been positive for investors." Uribe is seeking a $2 billion credit from the IMF, which will unlock a further $9 billion of loans. The conditions are that he reduces the fiscal deficit from 4.1% to 2.5% of Gross Domestic Product (GDP), and pushes through a new round of ‘structural reforms’. Their common theme is obvious. Uribe has launched an offensive to force down wages.
Wage levels have still not recovered from the crash of 1998/99, the worst in Colombia’s history. Since 1998 the average income per capita has fallen by 7% (30% in dollar terms). The absolute fall in the standard of living for Colombia’s poor is even more drastic. The minimum wage has fallen in real terms from 41,025 pesos in 1990 to 39,298 pesos in 2002. State sector workers have lost 30% of their income in peso terms over the last ten years.
Wage settlements for all state sector workers – apart from the military – are frozen until the referendum in May. Half of Colombia’s workers live on the minimum wage or less. The government has decided that for 2003 it will be 332 thousand pesos (£70.44) a month, an apparent 7.44% increase. However when it comes to real wages rather than money wages all is not what it seems. The government has also agreed 17% rise in electricity prices, to guarantee private companies profitable returns on their investment. It is estimated that prices of necessities will increase between 15% and 20%. There could be a 7-8% reduction in the real minimum wage next year.
And from 2005 sales tax will be applied to household purchases. This measure is intended to raise an extra million million pesos (£212 million) annually for the Armed Forces.
Uribe’s counter-reform package includes the most regressive labour legislation in 50 years. The new labour law extends the official working day by four hours, from 6am to 10pm. Overtime rates will not be paid during these 16 hours, and overtime on Sundays and public holidays has been cut from double time to 1.75 of normal day rates. The basic working week has been set at 48 hours.
Compensation for unjustly sacked workers with less than 10 years service has been halved. Unemployment benefit has been cut to six monthly payments of 76,000 pesos.
Cesantias is a system of annual increments, or bonuses, equivalent on one month’s salary that could be accumulated in a fund and then drawn on as required. Workers used this fund to save towards a home for their family, to achieve some dignity and stability in their lives. From 2004 public sector workers will lose the right to accumulate their cesantia. Uribe’s reform will take 30% of the fund for unemployment benefits. Not that these benefits are at all adequate, they have been cut to six monthly payments of 76,000 pesos.
Support to the SENA apprenticeship system has been cut. SENA represented a real gain for the workers. It meant that children who had no chance of paying for university could at least gain some post-school education, with technology and skills training. Apprentices will now receive only half the minimum wage while at college, and three quarters while working. Their contract has been changed to remove their employment rights.
Uribe has attacked pensions. By 2015 workers will have to have completed 1,300 weeks employment to qualify for a pension. The only significant element that Congress blocked was his proposed increase of the retirement age. As with wages, the armed forces will be exempt from the general rules – the President will set their pensions.
Uribe’s government claims that within 4 years these reforms will generate 600,000 new jobs. In fact in the last year alone there are 600,000 more unemployed. The whole point is to re-employ them, but on worse terms than before.
The attack on wages, cesantias and SENA is essential to the Uribe economic project to drive Colombian labour down market a la Mexico. A country of unorganised, casual labour destined for temporary jobs in maquiladoras run by foreign multinationals. The condition for this is the destruction of the social movements, the trade unions and any elements of political opposition offering serious resistance.
Andy Higginbottom
