A recent strike by contract workers at
state-owned Corporación Nacional del Cobre de Chile
(Codelco) has thrust the country's labor laws into the
spotlight as discontent with the use of subcontract labor
bubbled over into outright conflict.
High metal prices have agitated workers in
Chile, and elsewhere, to demand a larger slice of the pie as
companies rake in bigger profits. Strikes are relatively rare
in Chile, but a 25-day strike at Minera Escondida Ltda. in
August 2006 was followed by a four-day strike at the Dona Ines
de Collahuasi copper mine, majority owned by Xstrata Plc and
Anglo American Plc, in July this year, just days after Codelco
contractors began their 37-day industrial action.
Times appear to be changing. "The current
awakening of Chilean workers dates from (the Escondida strike
in) August 2006 that showed that organized workers can leave
behind decades spent waiting for change and win their justified
demands," Pedro Marin, director of the Miners' Federation of
Chile, wrote in the Socialist Worker newspaper.
Emboldened by the success of mineworkers'
unions, the Confederation of Copper Workers was formed in June
to represent up to 80,000 contract workers providing services
at Chile's mines who receive only about one-third of the pay
and fewer social benefits than directly employed workers, even
when they do the same work, Marin said. Contract workers "have
been forgotten for decades."
Following its Codelco success, the
Confederation of Copper Workers is focusing on consolidating
itself as a representative body for contract workers and
assessing how to take on private-sector mines, Cristian Cuevas,
union president, said. "We are studying the reality (of
contract labor) in the private mines as we cannot mobilize
without knowing what that reality is. But we will continue to
build our influence in private mines."
Having won concessions from Codelco and the
Chile government, union organizers are turning their sights
onto private-sector mines, such as Collahuasi, Escondida and
Los Pelambres, that together represent about 3.68 million
tonnes of annual copper production.
Chile's copper miners use contractors for a
range of activities, including overburden stripping, drilling,
haulage and non-core services. The ratio of direct employees to
contractors ranges between 12 and 19 at individual mines, and
the unions claim that outsourcing is used as a threat to
encourage compliance and greater productivity among the
permanent work force.
Outsourcing is used by companies in many
sectors to help improve efficiency by contracting specialist
services for non-core areas, which allows a firm to focus on
the bread and butter of its business. But outsourcing becomes
divisive when it is viewed as simply a means of cutting payroll
costs, particularly when a company has contractors doing the
same jobs as its own work force, arguably the mistake Codelco
Politically hamstrung, Codelco was unable to
play hard ball because of the socialist slant of President
Michelle Bachelet's government or respond to worker demands as
its profits go to the state treasury. But the concessions it
agreed with contract labor after a dispute that lasted longer
than it should have ruffled the feathers among Chile's business
elite that use contract labor in everything from banking to
retail who fear they might face similar demands.
"For Codelco to sit down with the workers of
its contractors validated something that is not contemplated in
Chile's legal framework, giving a dangerous precedent for other
negotiations," Bruno Philippi, president of Chile's
manufacturers' association, was reported as saying by Chilean
newspaper Que Pasa.
For Juan Carlos Guajardo, executive director
of Santiago-based copper studies organization Centro de
Estudios del Cobre y la Mineria (Cesco), the root of the
problem lies in poor state regulation. "If there was good
regulation to ensure compliance with labor laws, this would not
have happened," he said.
Diego Hernandez, president of BHP Billiton's
base metals division, sees the labor issues as part of Chile's
growing pains. "Chile is living its adolescent crisis, a
society that is no longer undeveloped but has yet to be a
developed country, and we all know how complicated adolescents
are," he said in an interview with newspaper La
Hernandez said flexibility in labor law
promotes investment and growth, while rigid government control
leads to inappropriate results. "Labor flexibility is healthy
and positive when it is well utilized because it helps to
create more jobs, but it must not be used to pay lower wages.
If (subcontract labor law) is poorly applied, the authorities
will intervene and apply their criteria about how to organize
and direct the business of a private company, and that is not
healthy," he said.
Although the two companies are very
different, outsourcing helped Escondida post earnings of $3.5
billion in 2006 with 6,100 workers of all types, while Codelco
earned $3.8 billion with 42,000 workers.
Hernandez argues that large miners are always
singled out because they are easy targets. "(The government)
created a law whose first victims are precisely those that do
not need it because they already comply with it," he said.
"They always prosecute the big companies, those that comply and
that can be fined, because it has a media effect, while they do
not control those that do not comply."
Xstrata Copper, which has about 1,000 of its
own employees and 1,000 permanent and project contractors, uses
a carrot-and-stick approach with its subcontracting companies
to ensure that they comply with labor laws, and also to improve
safety. "In terms of injuries, subcontractors have twice as
many accidents as our own people. We work with the companies to
improve their performance, including them in our leadership
development process so they meet the standards that we require.
We audit the contractors to ensure they comply with the law and
their commitments towards their workers, and if they don't they
won't exist in our business," said Jon Evans, executive vice
president of the company's North Chile division.
Despite the concerns of its members, mining
association Consejo Minero does not want to get publicly
involved in the debate to avoid becoming a media target,
although it is lobbying hard behind the scenes. While
maintaining that its members respect contract workers, its
official position is that "any action destined to affect the
actions of the subcontracting companies would introduce a
serious labor distortion affecting free competition and
discriminate against other workers that provide services to
companies in other sectors."
Consejo Minero shuns the idea of
inter-company negotiations or collective initiatives on the
basis that each mine is different and operates under different
conditions. "If we are against inter-company unionism, we will
not take collective initiatives to face a situation of this
type. This is not in the DNA of Consejo Minero," an association
Consejo Minero members used 45,337 contract
workers in 2006, accounting for 58.2 percent of their permanent
work force, with an additional 16,246 contract workers involved
in capital investment projects. The use of contract workers has
grown more than 11 percent since 2004 from 1.25 contractors per
permanent worker to 1.39 in 2006. The big outsourcing jump
happened in the 1999-to-2004 period, "when metal prices were at
their low point of the cycle," Guajardo said, changing from 37
percent of workers to 65 percent.
Consejo Minero's members-Chile's large
miners-performed something of a putsch in June at national
mining association Sociedad Nacional de Mineria (Sonami), which
represents miners of all sizes. The large miners obtained a
change in Sonami statutes to achieve "better representation and
equilibrium among the different member groups." With 46 members
from large mining compared with 38 from medium-scale mining,
Sonami's focus has swung to large-miner interests and away from
its traditional turf of small- and large-scale mining
development. The reason is that Sonami has a seat on Chile's
main business forum, the production and business
While shunning media attention, Consejo
Minero pushed for a presidential audience, and so while the
Bachelet government refused to get involved in Codelco's
contractor dispute, José Antonio Viera-Gallo,
secretary-general of the presidency, met with executives from
BHP Billiton and Anglo American in August to discuss the
Private miners have greater room to act than
Codelco as they can use retained profits to find a financial
solution to industrial action or dismiss sub-contracting firms
for failure to meet contractual obligations. The potential
losers, according to one industry executive, will be the local
companies providing contract services that foreign miners were
encouraged to use when Chile opened up to foreign investment at
the end of the 1980s. "This will destroy the SMEs (small and
medium businesses) that provide services. When miners invested
under the DL600 foreign investment law, they were told to try
to hire SMEs, but if their workers strike the contractor
companies will be fired," the executive said on condition of
While some miners may pay production bonuses
to contract workers through the sub-contracting companies as
part of their efforts to prevent conflict, contractor problems
are starting to produce the first signs of insourcing, bringing
some services back inside the company. Brazilian steelmaker
Cia. Siderurgica Nacional (CSN) is taking on 140 new
maintenance employees to reduce its dependency on subcontracted
labor following a strike by subcontract workers at its Volta
Redonda Works in Rio de Janeiro state in May.
"We are evaluating insourcing anyway on a
case-by-case basis, and if we think we can do a task better, if
there is value in it, we bring it in-house, such as maintenance
at Alumbrera in Argentina," said Xstrata Copper's Evans.
Unions in Peru also are unhappy about
contract labor, and national mining and metalworkers union
Federación Nacional de Trabajadores Mineros,
Metalúrgicos y Siderúrgicos del Perú plans
to call a second national strike in October to protest the lack
of progress by the government on an agreed program of issues,
including sub-contract labor. "We signed an (agreement) with
the government in May about themes it committed to address, but
they have not completed any of the eight points," said Luis
Castillo, general secretary of the union.
One solution for workers is to form their own
cooperatives and bid for mining company contracts, which would
allow them to decide how the fees are divided.
Mining industry workers are the best paid in
Chile, but as the contractor debate rolls on one sector of
society is clearly being forgotten, said Roberto de Andraca,
president of steel producer Cía de Aceros del
Pacífico. "It seems we are all worried about improving
the conditions of the richest of the workers. None is thinking
about the unemployed," he said in La Tercera.