Labour Reforms in Brazil and Chile (a Comparative Study)

UNIVERSITY OF IBADAN DEPARTMENT OF SOCIOLOGY COURSE COMPARATIVE INDUSTRIAL RELATIONS (MIR 709) issue LABOUR clean upS IN BRAZIL AND CHILE (A COMPARATIVE STUDY) A topic SUBMITTED TO THE DEPT OF SOCIOLOGY BY GROUP 4 Adepoju Janet Oluwatosin167455 Ayangbemi Olusola Temitope166905 Dagunduro Adebukola Olufunke167457 Ogunsemoyin Olubusayo B. 81014 LECTURER IN CHARGE PROF. ONYEONORU P. I. OCTOBER, 2012 entrance fight raw(a) integritys is de all rightd as the balance of world-beater among organisation, employers, internalateers, and unions.The redrafting of a re mankinds savvy laws typic tout ensembley reflects a shift in the berth relations and may carry unfavourable consequences for a former beneficiaries. As the Colliers put it, cut into law is a highly visible and cover form _or_ system of government statement around which semi semi policy-making battles are fought, won, and lost, and around which political throw is attracted, granted, and withheld confinement law t hus provides a valuable invest of reference for analyzing the larger political context (Collier and Collier 1979, 971). The crystallize of find out undertaking laws is unrivallight-emitting diode of the n earlyish widely put throughed recent policy changes in the world.Since the earlier 1990s, brazil as well as yen pepper confuse changed their labor laws. grind reforms chip in alike provoked monumental protests, including general strikes. It sack up be to a lower places in like mannerd that the changes in do work law occurring on a global scale are themselves a reply to the drag of globalization. In to the highest degree nations of the world, grate legislation was originally do to reflect organization-employer-actor relationships embedded in protected national economies. But in recent categorys, muckle liberalization and greater global competitiveness film created new challenges for employers and workers.Pressures for legal and cornerst wizal change open naturally followed. This study is all more(prenominal) than(prenominal) or less comparative insights into promote reform processes at the terminus of the twentieth century of two Latin the Statesn countries, brazil and chilli pepper. scorn similar initial prescriptions for change in the admition of greater flexibility, the outcomes of labour reforms differed in the two countries. In the 1990s, mode target flexibility reforms were implemented in brazil-nut tree bandage in chilli, changes in labour law was extensive.THE Latin AMERICAN CONTEXT The neighbourhood followed a common import modify industrialization (ISI) copy in the post-war period. This development schema reshaped the Latin American economies, societies and institutions. While traditional pursual group groups linked to the primary sectors reduced their political influence, new affectionate groups with interests in the local industries gained social and political strength. aft(prenominal)ward r oughly duration, this in- orientated development strategy began to show clear signs of exhaustion.The performance of Latin American countries was non skinny enough compared with the South-East Asian countries that claimed to watch an al approximately opposite frugal model. The political support of the ISI model was little by little eroding in Latin America when the debt crisis unleashed in 1982 and the failure of early policies implemented by most countries to deal with it played an important manipulation in reshaping policy views in the locality. Latin America of course is not homogeneous, completedly at that place are some morphologic characteristics common to virtually countries in the region that had a bearing on the reform process.The regions competitive advantages are biased in favour of natural resources, and primary commodities explain a large share of exports minerals and oil in chilli, Venezuela and Peru, agriculture in Argentina, Paraguay, and Uruguay un til now in more than industrialized brazil and Mexico primary products are motionlessness relevant. This feature impinges on the regions political parsimoniousness via the so-cal direct natural resource curse. The statistical distri bution of income and assets in Latin America is highly unequal compared to some other regions in the world.As the 2006 homo Development Report of the World hope suggests, income ine t single of voice of this order is quite likely a signal of unequal opportunities (rather than of antithetical choices) World Bank (2005). Be get pig of the structural lack of equity, more Latin Americans did not shake off the chance to busy advantage of the opportunities open by reform therefore some(prenominal) opportunities at the item-by-item level were lost. Besides, groups that were marginalized and segregated did not support reform and oft opposed it actively, fearing that a more competitive environment would do them more harm than high-priced.In s everal of the countries, the so-called structural reforms came cash in ones chips in hand with efforts at macro economical stabilization. There had been a long list of stabilization attempts before this period, but the macroeconomic stabilization coursemes that att terminate the structural reforms were usually deeper and lasted more than foregoing ones. The perception of greater reconditeness of these stabilization efforts was related to the simultaneous writ of execution of other components of the reform package.Also, there have been important contagion effects across countries, that is, learning from the exposition of the (successful and unsuccessful) experiences of other countries in the region. Having referred to m any common factors, it is also important to tense that Latin American countries are quite different in many a(prenominal) dimensions. Country size is clearly one of the dimensions in which the region is not homogeneous a dimension that became particularly re levant for the dowry of the inward oriented ISI model (think about the size of the domestic mart in brazil as compared for instance with chilly).stinting and social development show epoch-making variation across countries as well. The historical jump points in name of social and economic organise, as well as in the expound of past policies, were also different in different countries when pro- merchandise reforms began. Social indicators as literacy ratios, life expectancy and the like also show much variation. tear down when most countries espouse a version of the ISI model in the post-war period, the elevate they make in that direction varied considerably in terms, for instance, of the leg of industrialization they reached.This was partly dictated by the size of the domestic commercialize and partly by policy chooseions and political conditions. In spite of some common institutional heritage from the colonial era, political and institutional register also shows signi ficant variation across countries in Latin America. nigh countries in the region experienced periods of dictatorship in the twentieth century, but while some spent most of the century under those conditions, others did it for comparatively short periods. The quality of institutions and the incidence of corruption also varies, Kaufmann, D. , A. Kraay and M. Mastruzzi (2003).The different starting points and idiosyncratic characteristics influenced the fate of the pro- securities industry place reform. BRIEF HISTORICAL BACKGROUND Brazil The tale of Brazil starts with Indigenous Peoples of the Americas, who arrived thousands of years ago by crossing the Bering charge bridge into Alaska and then moving south. The offset printing European to explore Brazil was Pedro Alvares Cabral on April 22, 1 cholecalciferol under the sponsorship of Portugal. From the 16th to the 19th centuries, Brazil was a addiction of Portugal. On kinsfolk 7, 1822, the country state its independency from Po rtugal and became a constituent(a) monarchy, the Empire of Brazil.A armed services coup in 1889 launch a re unexclusivean administration. The country has seen a dictatorship (19301934 and 19371945) and a period of soldiers machine obtain (19641985). Brazil returned to country in 1985, after(prenominal) more than two decades of continuous military governments. The first pop government unsuccessfully tried to becalm the economy and made little progress with reform, but since 1990, when Collor de Mello arrived to the presidency, the successive democratic governments carried on a series of market-oriented reforms. It was argued that democratization facilitated the door bureau of market oriented reforms in Brazil.While the military stayed in government, the protective mantle of national bail and find out-sectors protection became a standard speech, always blocking a deeper integrating into the world economy. This ideological view was present not besides at the top of the m ilitary regime but also inside the mid-level military officers who were comm altogether appointed to prominent positions in economic ministries and state trys. In the nineties, under democratic rule, a new breed of internationally-minded top civic servants replaced these officers.Reform in Brazil followed a pragmatic way, meaning that it was gradual, piecemeal, and loosely coordinated. atomisation of the political system prevented any group from gaining dominance and forced a negotiated style, leading to gradualism. So, most policies took conviction, were negotiated, and had to go through multiple veto points. The daily institution of rather fluid ties among state elites and in the midst of them and business facilitated consensus build around reform policies, but they had to be negotiated. In this manner, the policy outcomes were supposed(prenominal) to be extreme.The actual social and economic outcomes have not been too spectacular, and some discontent against the reforms ha s breaded. Yet, the arrival to office in 2003 of a left wing party, the PT, has not generated any reversal, suggesting that pragmatism is not likely to be displaced before long in Brazilian economic policy making. chilly The territory of Chile has been populated since at least 12,000 ago. By the 16th century, Spanish conquistadors began to try and colonize the region of present-day Chile, and the territory became a colony from 1540 to 1818, when it gained independence from Spain.The countrys economic development was successively marked by the export of first agricultural produce, then saltpetre and later copper. The wealth of raw materials led to an economic upturn, but also led to dependency, and even wars with neighbouring states. The country was governed during most of its first 150 years of unaffiliated life by different forms of restricted government, where the electorate was carefully vetted and controlled by an elite.Failure to address the economic and social disparities and increase political awareness of the less-affluent population, as well as indirect hindrance and economic caudexing to the main political groups by two the KGB and the CIA, as part of the Cold War, led to a political polarization under Socialist President Salvador Allende which in turn resulted in the 11 September 1973 coup and the military dictatorship of General Augusto Pinochet, whose 17- year regime was creditworthy for numerous human rights violations and deep market-oriented economic reforms.In 1990, Chile made a peaceful changeover to democracy. With ups and downs, Chile followed a sanctionedally inward-looking-state-centred development strategy from 1930 to 1973. It was not very(prenominal) different from the experience of other Latin American countries, save probably for the socialist period amidst 1971 and 1973. This period ended up with a severe socio-economic and political crisis that paved the road for a military coup that inaugurated a dictatorship that woul d last until the late eighties. The military government pushed a cold reaching pro-market reform docket.This experience is usually regarded as a leading reason of market-friendly reforms, not only for the borrowing of a shock therapy, but also for doing it well before most other countries in the region. Beginning in late 1973, several structural reforms were implemented, including the liberalization of most prices, interest rates and profits drastic reductions in tariffs and the elimination of non-tariff barriers to trade the establishing of fiscal and monetary policies the privatization of more than 500 buckrams the reform of the pension program and the ad pickaxe of new policies of competition and regulation.In the early eighties, Chile, like other developing countries, underwent a deep economic and pecuniary crisis. There was some reversal of reforms during this period, but the military government resumed the liberalizing reforms shortly after it. Chile returned to democr acy in 1990. One of the most notable aspects of the Chilean process is that after the return to democracy in 1990, the centre-left compaction that has governed the country since, did not revert the market reform process.There were several left(p) factors leading the military dictatorship to follow the suggestions of a group of foreign-trained economists towards market liberalization (against the nationalistic tendencies of part of the military). Some possible sources of opposition ( such as unions or left leaning parties) were silenced by the dictatorship.Business sectors were relatively delightful since firms were devolved to cloak-and-dagger owners after nationalization by the previous socialist government of Allende, so that they did not oppose trade liberalization. The way the mutation to democracy was instrumented in the late eighties was key for the consolidation of pro-market reforms in Chile. integrating was by no means granted by that time, for the parties that crea te the pleasing coalition (named the Concertacion) in the 1989 elections had opposed many of the reforms.Also, formerly repressed interest groups could take advantage of the new political environment to voice their demands, button the new government towards a less neutral and more balmy fiscal policy. According to Foguel, Miguel, Indermit Gill, Rosane Mendonca and Ricardo Paes de Barros, (1998), several factors alterd to the consolidation of the pro-market reform in the conversion period * the good performance of the economy in 1985-1989 * the concurrent diminish of socialist regimes in Europe the economic failure of democratic transition in Argentina (that contributed to convince several left15 wing politicians of the risks of heterodox policies) * the bright renovation and internationalization of the circles around the Concertacion, which lead to a revaluation of persistence and * several institutional enclaves in the new constitution, increasing the veto power and politica l relevance of the right, which forced democratic presidents to follow accordant strategies on economic matters. Chile seems to be in a racecourse of institutional and policy consolidation.The democratic governments have maintained the core of the economic reforms undertaken during the dictatorship, while steadily (albeit slowly, consort to some views) advancing on the social and democratic front. These steps have taken place according to a style of policymaking that is much more consensual and transfer than that of other Latin American countries. (IADB, 2005). EVOLUTION OF LABOUR REFORM IN BRAZIL The merge Labour Code The main body of the Brazilian labour legislation was introduced in the 1940s, and consolidated into the Consolidacao das Leis do Trabalho (CLT) in 1943.The CLT is a large, often overlapping, set of rules which determines individual and collective rights and duties of the workers, unions and firms. The law determines that all workers moldiness have a booklet whe re all individual labour campaigns and its changes over time are registered by the employer. By definition, a semiformal worker has a booklet signed by his employer (carteira assinada) Besides the obligation to sign the booklet, the law stipulates a set of nominal conditions any employment relationship must follow.The most important rules are supreme hours of work per week supreme extra-time working hours minimum comportment for extra-time work minimum lease pre- gainful yearbook holidays special protection clauses for women and children the degenerateal of pregnant women is interdict the right of compensable vacation before and after childbirth, for the mother special work conditions for nighttime shifts one month pre-notification of firing and protection against un warrant dismissals. There have been changes in the legislation since the creation of the CLT. In particular In 1962, accounting entry of a one monthly occupy annual premium ( ordinal salary).In 1963, introduction of a family allowance. In 1965, introduction of a salary version law which determined the minimum rate of rent limitings of all workers in the economy. In 1966, creation of a prison-breaking fund (Fundo de Garantia por footstep de Servico FGTS) in place of a clause forbidding dismissal of workers with more than 10 years of tenure. In 1986, creation of an unemployment restitution program which today covers about 25% of the countrys labour force. In 1988, adulation of a new ecesis with the introduction of new labour clauses. shift Rules and Unemployment CompensationUntil 1965, to fire a worker without a proper justification the employer had to pay one months wage for each year of work in the firm. The compensation was calculated on the basis of the higher(prenominal) wage received during the work contract. It was a duty of the employer to prove the dismissal was justified, and the conditions for justified dismissals were clearly be in the law. After 10 years in the same enterprise, dismissals were forbidden by law, except if properly justified. In 1966, this entire system of protection against non-justified dismissals was changed.A happy chance fund was created, called the Fundo de Garantia por Tempo de Servico (FGTS). When hiring a worker, the firm had to open a banking account for the worker and deposit 8% of the cheer of the wage in the account. Today, Caixa Economica Federal, a government saving and loans institution, collects the FGTS levy and invests it primarily in urban housing projects giving workers a licitly guaranteed minimum deposit rate. When dismissed without a just contract (sem justa causa) the worker could draw this money and received a monetary compensation synonymous to a fine of 10% over the total amount of the fund.Like many other Latin American countries (see Loayza, 1998), dismissal for economic reasons is not considered a just cause. In 1988 the fine for unjust dismissal was increase to 40% of the workers F GTS account balance. Besides this fine, the employer has to notify the worker one month before he will be fired. This is the aviso previo law, or previous notification of firing. During the month the worker has received the previous notification of firing, he/she is allowed, according to the law, to take two hours a day to look for a new job.This implies a minimum cost of 25% of the workers monthly wage. In fact the cost is usually higher since firms end up give the notification fee to the worker and dismissing him immediately. Thus, the total cost of dismissal is 25% to 100% of the monthly wage plus 40% of the FGTS. The cost depends on the number of months the worker has worked for the firm. Since 1986, when fired, besides the advance notice, access to the FGTS (and the 40% fine for unfair dismissal), the worker also has the right to an unemployment compensation benefits.The unemployment compensation program offers partial coverage for up to four months of unemployment (extended to five months after 1996). To render eligible to receive the benefit, the worker must meet the following criteria * to have been dismissed without a just cause * to have had a formal labour contract during the last six months or to have been legally self-employed for at least 15 months * to be unemployed for at least seven days * must not receive any other pension * must not have any other type of income sufficient to guarantee his own subsistence and that of his family.The value of the benefit cannot be lower than the value of the minimum wage, is adjusted monthly for inflation, and is related to the mean(a) wage received by the worker in the last tercet months in the previous job. prosecute Laws An important change in the CLT was the introduction of the Wage adjustment Law in 1965. Before this date, wage adjustments were amend through collective bargain between workers and employers unions, at the settlement dates ( entropy base), and through individual negotiations betwe en one worker and his/her employer.Only the minimum wage was determined directly by the President of the Republic, although most of the time it incorporated automatically the prescriptions assumption by indexation clauses imbedded in the Law. The Wage Adjustment Law gave the government the right to determine the minimum rate of adjustment of all compensation in the formal sector of the economy. The first wage law stipulated that nominal wages should be adjusted once a year, at the settlement date of each occupation, following a grammatical construction which took the past and expected future rate of inflation and the growth rate in GDP per capita as the base for the adjustments.The peculiar(prenominal) formula and the adjustment period changed many times over the years, as the rate of inflation increased. In 1995, one year after the introduction of the Real Plan, the Wage Law was abolished. Today, upward adjustment of wages is negotiated between employers and employees. But dow nward(prenominal) adjustment of wages is for all practical purposes prohibited by the Constitution attempts to do so make employers open to lawsuits, which are generally intractable in favor of the worker.This was irrelevant during a time of high inflation, but now quite possibly adds to the rigidity of the labour market. The Reforms of 1988 The main changes of labour legislation introduced in the Constitution of 1988 can be summarized as follows * The supreme number of hours of work per week was reduced from 48 to 44 hours and the minimum payment for extra-time hours increased from 20% to 50% of the workers wages. * For continuous work shifts the maximum daily journey was reduced from eight to six hours. * A vacation bonus of one-third of the workers wages was created. The childbirth leave for mothers was increased to great hundred days and a five days childbirth leave for the return was introduced. * Firing costs for unjustified dismissals increased from 10% of the FGTS balanc e to 40%. This is the list of the minimum individual rights for private sector and state enterprise workers. Working conditions can be purifyd through negotiations between the individual worker and the firm, or through collective bargaining. The Constitution of 1988 clearly mandated higher nonwage benefits and made dismissals costlier for employers. Payroll Taxes and Mandatory Benefits after 1988The CLT and the 1988 Constitution stipulate a very comprehensive set of minimum standards any individual contract must follow. The rules do not provide much space for negotiations between employers and workers. The result is a rigid set of minimum rules, which reduces the flexibility of the labour contract in face of changes in the economic environment. In step-up to the costs imposed by this inflexibility, there are more direct and obvious non-wage costs due to payroll department taxes and mandatory benefits required by the law. The cost of labour can be decomposed into four parts The ba sic contractual wage. * Mandatory benefits which include the annual one month bonus (terceiro salario), the contribution to the FGTS, vacations and other benefits. * Contributions to the official training system (SENAI and SENAC), to pay an institution which assist small enterprises (SEBRAE) and a contribution paid by firms to finance an workers assistance service (SESI or SESC). * Contribution to the federal social security department system (INSS) and to fund educational services salario educacao) and an on-the-job accident insurance fee mandatory for all firms and proportional to the payroll.In addition to these contributions based on payroll costs, employers are also charged levies on revenues to pay for supernumerary INSS-related obligations (Cofins), to be raised in 1999 from 1 to 2 percent and PIS/PASEP, the contributions towards the Fundo de Aparelho de Trabalhadores (FAT) which fund unemployment compensation, job search assistance and active labour programs such as train ing and microenterprise support schemes. These labour related levies can add up to between 2 and 3 percent of employer revenues. EVOLUTION OF LABOUR REFORM IN CHILE Labour Code (1931-1965)Initially, Chiles labour market regulations is characterized with tripartite system of collective bargaining and conflict resolution. 1931 labour encrypt focuses on conflict resolution. While the legislation favoured collective bargaining at the firm level, and this form of negotiations was dominant, the mechanisms of conflict resolution projected negotiations beyond the enterprise. With time, sector-wide negotiations spread throughout the economy. Dismissal without nerve of cause with a months notice. Severance payment of a months wage per year of tenure for white collar workers.The main component of payroll taxes are social security contributions. Chile started a Social security measures System in 1924, building from a set of privately launch pensions systems that covered specific groups of w orkers or sectors of economic activity. These programs finance retirement, invalidity and family survivor benefits, a public wellness care system, the payment of family allowances, and an unemployment subsidy. In addition, there was a 1 % contribution to fund public training programs. The Chile labour market reform has come a long way and in each stage undergone few reforms to meet the demand of the ever-changing market conditions.After the deadly coup of 1973, several labour unions, labour institutions were dissolved. In October, 1973, the Chilean government introduced wage adjustments, which were linked to inflation rate. Chile labour market reform is significant because of the following reasons * The country underwent a hurl over from an economy, which was regulated to an economy, which is unregulated as well as open. This was brought about by the execution of instrument of economic reforms pertaining to labour markets and pension system in the country. * The labour market in C hile has been over the years very unpredictable.Labour market in Chile during the seventies During the middle seventies, the government in Chile launched the first structural reforms in Chile. Which in turn increased the unemployment rate. However, Chile experienced a healthy growth in the economy towards the end of seventies. Despite the speedy growth in economy, the labour market refused to recover from the high rate of unemployment. Reverse to what it was during the seventies, the labour market in the eighties recuperated very fast even though the crisis was much more severe than the previous one. steady rate of growth in wages recovered comparatively fast.During this period, rate of unemployment reached 25%. As part of Chile labour market reform, the proportional adjustments pertaining to lower wages was made more than the higher wages. The method of indexation that existed between 1973 to 1979 had many drawbacks. In order to outdo these drawbacks, Labour Plan of 1979, was imp lemented, which stated that adjustment of wages would be made at or above inflation rate. At regular intervals, as part of Chile labour market reform, the government carried on with the do of increasing wages but not in accordance with the travel rate of inflation.However, during the 1990s, there was increase in wages higher than what was declared for the purpose of readjustments. The Employment Security Law, states that if there is no valid cause for dismissing an employee, the worker could be re engaged in the job as per orders from a labour court. However, in the year 1978, this law was substituted by a method of faulting payment. Chile labour market reform, edict Law 2,200 stated that employers had the right to make changes in the contract between the employers as well as the employees and that they could fire an employee without giving any account statement to the employees.A break of serve payment, which was minimum was also introduced. rescript Law 2,200 as well as Chi le labour market reform of 1979, led to the introduction of new techniques to supervise the activities of the labour unions. This was stated in canon Law, 2,756. Collective bargaining was stated in Decree Law 2,758. Decree Law 2,756 and Decree Law 2,758 are collectively referred to as Labour Plan. Decree Law 2,756 governs matters related to labour union. Whereas, Decree law, 2,758 governs the various norms adopted in the event of a strike.Labour reforms that took place in Chile is summarized at a lower place Phase I (1966-73) Increased polarization of the labour movement generalized use of wage indexation. Dismissals require expression of just cause, or severance payment of a months wage per year of tenure. In spite of very high nominal contribution rates, by 1970 the public sector spent 20. 5 percent of its budget to cover the deficits in the health and pensions systems on with its own contributions. Phase II (1974-79) Economic liberalization with a highly intervened labour ma rket.Decree Law 670 of October 1974 substituted the earlier legislation that defined the tripartite commissions, giving them a consultative character. They were understood to be a transition mechanism, while a new policy towards the labour market was developed, and while union activities were banned.. Economy-wide wage adjustments imposed by decree. Dismissal without expression of cause reinstated in 1978 for all new hires. Employers pay a severance of a months wage per year of tenure to all dismissed workers, unless there is just cause, which includes economic cause. A number of partial changes brought down contributions from a 60 percent at their peak in 1974, to the order of 33 percent in 1980. Rates varied according to the specific plan at which an employee was affiliated, but all the plans were guaranteed by the state. For example, in 1976, the 1% contribution earmarked to fund training program was eliminated. Phase ternary (1980-1990) Union affiliation becomes voluntary. Dece ntralized collective bargaining. Labour negotiations opened to market forces. Strikes without job guarantees after sixty days.No intervention of the government in the personal matters of unions or the collective bargaining process, except for a wage down guaranteed by law. The wage floor was eliminated in 1982, and as a by-product, the indispensable conditions to replace striking workers were eroded. It also marked the era of minimum wage setting. Starting in 1981, dismissals of any worker, new or previously hired, can take place without expression of cause, and as long as severance is paid. Severance payments are open to negotiations. In the absence of an explicit arranging the minimum severance would be a month wages per year of tenure with a 5 months cap.A 1984 reform established that the minimum severance agreed by the parties could not be less than the severance established by law. Furthermore, economic cause for dismissal is not just cause anymore. In 1980, a reform lowere d social security contributions to just above 20 percent (10 % towards retirement, 7% towards health and about 3% towards disability). New entrants to the labour force would contribute to a new old-age program based on a mandated individualized savings plan, to be managed by private administrators (AFPs).Old contributors could to opt out of the traditional pay-as-you-go system. In the case of health care contributions, both old contributors and new entrants were given the choice to opt out of the public system (FONASA) and use the 7 percent towards a health care insurance policy provided by an authorized private health insurer (ISAPRES). A basic pension, the unemployment insurance, and the family allowances programs would be fully financed by the central government budget. Phase IV (1991 till date) This is the Consolidation of Labour Reforms.The new law eliminated the sixty days period for the legal strike, which allowed employers to dismiss striking workers without severance. The n ew law also reinstated stricter conditions for workers replacements in case of strike. Labour negotiations can take place at the sector level if both workers and employers agree to it. Dismissals require an expression of cause. Severance of one month wages per year of tenure applies to dismissals with economic cause. Severance would be paid with a 20% surcharge if the employer cannot prove an alleged economic cause. No severance obligation in case of dismissals with just cause. Dismissal ceiling on severance payment raised to 11 month wages. THEMES ON LABOUR REFORM DISCUSSION The thematic elements under which labour reforms that occurred in the two Latin American countries under study will be discussed will focus on the labours strategic interest in labour law and its ability to pursue those interest during specific rounds of reform. These interests are derived from the legal and institutional framework of labour relations, which are often inherited from earlier period of legal an d political incorporation of labour.Secondly is the willingness of government to see reform through. Government resolve is shaped by the pressure for the reform that it faces from international actors or domestic constituencies. Another thematic commence is the transition context for the reform. The nature of transitions as well as their measure affects the political environment for labour reform. Democratic transitions tend to favour rights-based reforms and strengthen unions, while market-oriented economic transitions tend to favour labour flexibility and fall apart unions.The Initiation of the Reforms The crisis of the ISI model in the sixties and seventies left Latin American leaders searching for new paradigms. In this context, the pro-market reform order of business began to gain strength, initially pushed by groups of professional economists trained in the US, and reinforce later in the eighties and nineties by the IFIs. The experience of Thatcher in the UK and the fall of communism also contributed to create an environment favourable to pro-market reform. In some countries, these new ideas got through to the ruling army forces.Chile was the leading case, after a short socialist experience that ended with a military coup. Other countries only began the reform process in the early nineties, after suffering severe macroeconomic instability in the eighties. By that time, Chile had already become an example of a successful reformer that many wanted to reproduce. The debt crisis that blew up in the early eighties gave place to a decade characterized by severe macroeconomic instability in most countries in the region. There were several attempts at eterodox macroeconomic stabilization that failed completely. Brazil is probably one of the most distinctive cases. The pro-market structural reforms were out of the agenda in those years in most Latin American countries. Even in Chile, the debt crisis caused a partial and temporary reversion of the pro-market labour reform. It was only after these policies ended up in hyperinflation that the idea of implementing more Jewish-Orthodox stabilization programs bundled with structural pro-market reforms made its way through in the region in the early nineties.In the 1980s and 1990s, several democratic political leaders who gained elections proposing leftwing platforms ended up adopting the market-friendly package. Some of these presidents were concerned by little more than their political survival in the midst of impending or on-going macroeconomic crises, and were pretty much open to anything that might deliver some short-term economic results that could lead to favourable political results for them. They ended up convinced that some variant of the market-friendly package was the most sensible option they had.Implementation Recent literature on reform emphasizes the key role of distinguish implementation and enforcement capacity to determine the outcome of reform (Stein and Tommasi 2005 Ri us and van de Walle, 2004 Fanelli and Popov, 2003). It is considered that while the best designed policy packages may generate bad outcomes if implementation fails, policies that are not first-best in terms of design may still render acceptable results if they are well implemented (IADB, 2005).The quality of public policies in terms of enforcement and implementation varies considerably across the Latin American countries. Stein and Tommasi (2005) classified the Latin American countries in several key dimensions of their economic policies, one of them cosmos the capacity to enforce and goodly implement the policies. Of the two Latin American countries considered in this paper, Chile appears as the one with quite high enforcement and implementation capacity Brazil has intermediate efficiency with implementation quality.The enforcement and implementation capacities are in turn related to the quality and independence of the bureaucracy, the quality and independence of the judiciary, and the capabilities of the Congress. Stein and Tommasi (2005) show that the index of enforcement and implementation capacity is positively correlated to indexes of congress capability, judicial independence and cultured service development across these two Latin American countries. An independent and highly qualified judicial system is probably the most obvious enforcer of the laws.Delegating the implementation of policies to a professional and independent bureaucracy is also a good enforcement device. Chumacero et al (2005) claim that the Chilean military government that initially pushed the pro-market reform replaced the existing bureaucracy with a strong technocracy that contributed to improve the implementation and enforcement capacities of the State. Brazil followed a different route in that reformers did not replace the existing bureaucracy, Castelar Pinheiro, A. , R. Bonelli and B. Ross Schneider (2004).Nevertheless, Brazil already had a relatively good bureaucracy before t he pro-market reform era. This allowed the government to delegate the implementation of trade liberalization and privatization to autonomous agencies, which according to Castelar Pinheiro et al (2004), was key for the advance of these reforms. Stakeholders The labour movement was more independent from the State and from the parties that ended up being reformist. In Brazil and Chile, trade unions would not favour pro-market reform, but they were forbidden in Chile when the reform began and relatively weak in Brazil (Castelar Pinheiro et al).Labour movements in Brazil retained some degree of organizational strength, mobilization capacity and political influence, and were therefore able to fight off some of the reforms that were aimed at expanding labour market flexibility. They fought hard against the loss of core organizational resources as well as legal provisions regarding union structure and collective bargaining. In Chile, economic labour reforms occurred mostly under the dicta torship, along with labour code changes, the prospect for expanding labour rights under the democratic transition were limited.The issue of labour reform lies at the core of this disjuncture as it straddles major fault lines innate to the Chilean neoliberal project. On the one hand, cheap and flexible labour with few rights to collective action has formed a central axis of Chiles economic model since Pinochets ruthless undermining of organised labour in the mid-1970s. This oppression was given a tangible legal form in the 1980 labour code that denied even the most basic of rights to the working population. Labour movements in Chile was pressured to moderate its demands during transition.Furthermore, labour ties to parties in power under the concertacion further strained the movements ability to assert demands for reforms in the first-round democratic government. In summary, in Brazil political stability is a contextual premium, a potential scourge to that stability came from the l abour movement. By contrast, in Chile, the prime concern was economic stability. Unfortunately, labour mobilization was constrained by political compromises and organizational factors. The economic elites were the ones to be appeased.Capitalist interests, institutionally represented by the Confederacion de Produccion y Commercio (CPC), have powerfully opposed any substantive changes to the labour code. They argue that, by middleman on labour market flexibility, reforms to the labour code would undermine the foundations of domestic accumulation to the detriment of all Chileans Inclusiveness of the policy-making Process behind the Reforms In Brazil, President Fernando Henrique Cardoso negotiated the pro-market reform along several years, and there was no reversal, even after the opposition took office.Reform was very gradual and partial, mostly due to the effective inclusion of opposition parties and social groups in the negotiation of reform. This participation slowed down reform, but it can be argued that it also contributed to render the economic policy more predictable. Political participation might not only contribute to reform because it reduces resistance, but also because it promotes a more open hunting lodge in which special interests find themselves more constrained. Chile is a case in which the bulk of the reform process took place under the Pinochet dictatorship.Yet, the conclusiveness of the successive incoming democratic governments of sustaining the main aspects of the market-oriented reforms, together with the consensual and institutionalized policymaking style with which modifications and adjustments have proceeded, has tended to generate an increasingly virtuous circle between reforms, democratic participation, and transparency. CONCLUDING REMARKS This paper attempted to leave off some lessons from the reform experiences of the selected Latin American countries, on the basis of underlying country studies.That good example led, in its cent ral section, to reflections on several key themes in the political economy of reform, reflections which themselves had some elements of concluding remarks. For that reason, this final section is relatively brief, and quite of recapitulating everything said before, it just draws from a few points in order to take a (succinct) prospective look. The early evaluations of the impact of market oriented reforms were far more optimistic than later ones.The present political dynamics of these countries suggests that the fate of reforms is correlated with the outcomes of reform, and that both in turn are correlated with more slow-moving (not to say, permanent) fundamental local conditions, in particular with local institutional conditions. The ranking of both countries in terms of reform outcomes, and reform tenacity and sustainability is almost identical to a ranking of State Capabilities developed by Stein and Tommasi at the Inter-American Development Bank, reflected in Stein and Tommasi (2005) and IADB (2005).Perhaps the main lesson we extract from the experience at this point, is that in democratic settings it is not a good strategy to impose reforms from above or by surprise. Consensus building operate through the social and political specificities of the country is not only a better way to achieve the desired reforms, but even a process for identifying and implementing policies and reforms more suitable for each country. The capacity of countries to achieve such processes seems conditioned by their political institutions and policymaking capabilities.REFERENCE Aguilera-Alfred, N. , D. Borda and D. Richards (2004) Understanding Reform. 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