Political instability brings uncertainty for employers, suggest speakers

Political instability brings uncertainty for employers, suggest speakers Credit: Daniel Quinones

Political instability and an overarching shift to the left in parts of Latin America are bringing uncertainty for employers in the region, but there are signs of economic strength in some areas, heard delegates at the sixth annual Latin Lawyer Labour & Employment conference held on Wednesday in Miami.

Governmental changes in Mexico, Venezuela, Brazil and Argentina were compared in the opening session of the conference, which was moderated by Carolyn Knox from Ogletree, Deakins, Nash, Smoak & Stewart. Each country is at a different point on the political spectrum, and each has its own set of issues surrounding labour and employment laws as a result.

Mexico’s leftist President Andrés Manuel López Obrador (AMLO) was elected last year. The sharp shift from the centre-right politics of the Institutional Revolutionary Party (PRI) party has been turbulent to say the least, said Jorge de Presno from Basham, Ringe y Correa. Following the “30 years of neo-liberal political stability and economic growth” brought by Enrique Peña Nieto and his predecessors, AMLO’s overarching focus on employee rights and unions has brought uncertainty to companies, he explained.

Indeed, speakers were cautious as to how much foreign investment Mexico would receive under AMLO’s presidency, and in turn, the amount of jobs that would be created. However, de Presno spoke positively about AMLO’s enactment of the labour reform bill on 1 May as part of the United States-Mexico-Canada Agreement (USMCA), which for the first time gives Mexican workers the legal right to bargain collectively with employers through independent labour unions, without fear of retaliation or harassment. If approved by all three signatories, USMCA, widely considered to be the “new NAFTA”, will improve working conditions in Mexico, and consequently increase the country’s worker retention rates. While the effectiveness of the agreement depends on its enforcement in Mexico, AMLO’s recent ratification of the International Labour Organisation’s (ILO) convention #98 on collective bargaining and the right to organise is a good sign.

Hyperinflation, poverty and two warring governments dominated the conversation on Venezuela, led by Juan Carlos Pró-Rísquez from Dentons in Caracas. Rampant inflation means 60,000 bolivars are currently worth one US dollar, making the minimum wage just US$2 a month.

According to Pró-Rísquez, the instability in the country raises questions as to what companies can do to train and retain talent; while educating employees is cheap, employers are worried that training will drive talented employees out of the country in search of better paid work. Paying employees in dollars was another option, but since the imposition of US sanctions on Venezuela, the circulation of dollars in the country has lessened significantly. There are positives, however. The Venezuelan constitution states that employees should only be taxed on their base monthly income – as a result, bonuses, which aren’t part of an individual’s taxable salary, have been extremely popular. “That’s the beauty of Venezuela,” says Pró-Rísquez.

Despite the controversy surrounding new far right President Jair Bolsonaro, Brazil has seen an economic uptick in the last year, as well as falling unemployment. “His election reflected a deep dissatisfaction by Brazilians on the economy and lack of employment, and the huge corruption scandals brought to life by Operation Car Wash,” says Andrea Giamondo Massei Rossi, from Machado Meyer Advogados. “But despite Bolsonaro’s divisiveness, Brazil is showing real signs of recovery.”

In particular, Rossi spoke positively about three reforms put forward by Bolsonaro’s administration. Firstly, the privatisation of certain state-owned industries such as airports, railways and ports to restore investor confidence; the Provisional Measure for Economic Freedom, which aims to reduce bureaucracy in certain industries; and thirdly, the pension reform, which is projected to save Brazil over 80 billion reais (US$19.5 billion) in the next decade and strengthen the country’s national budget as a result.

President Mauricio Macri’s loss to centre-left rival Alberto Fernández and former president and running mate Cristina Fernández de Kirchner in Argentina’s election primaries, has plunged the country into a new phase of uncertainty. “The market didn’t react positively to being led again to Fernández and Kirchner, because of their respective histories of closing off Argentina to investment – it’s a return to populism,” says Mercedes Balado Bevilacqua from MBB Abogados.

The Argentinian peso has plunged by 35% against the US dollar, while the International Monetary Fund (IMF) has pressed pause on emergency funding. Balado Bevilacqua says that the country needs legislative reform to mitigate the risk of massive unemployment. “Make everything more flexible and reduce the cost of labour for employees,” she says. “We also need to reconsider the historic strength of unions in Argentina – are they too strong?”

The conference is chaired by Anthony Oncidi of Proskauer Rose LLP and Enrique Stile of Marval, O'Farrell & Mairal. Coverage of the conference will continue in the following days. Other panels include topics such as health in the workplace, unions, alternative compensation structures, and combating discrimination in the workplace.