By Matheus Pimentel

On August 14th, two Uruguayan ministers said they were against the Brazilian Labour Reform, passed in July 2017.

Rodolfo Nin Novoa, minister of Foreign Relations of Uruguay, requested a meeting of the Mercosur, regional economic bloc, in order to discuss the changes made to the Brazilian labour legislation. Nin Novoa believes that the Uruguayan economy may be damaged by the new Brazilian legislation.

The arguments of the Uruguayan government

“Without intruding into the internal matters of Brazil, we understand that this is a project that reduces workers’ rights (…) Uruguay is concerned that it is a way to compete based on the elimination of labour rights, which we have always tried to avoid” said Nin Novoa.

Ernesto Murro, Minister of Labour of Uruguay, backed up Nin Novoa’s declarations: “if an individual agreement between an employer and an employee is worth more than a law, we go back two or three centuries”. According to Nin Novoa “it is going to be very hard to compete” and “the wages of workers cannot be a variable to be adjusted for our markets to compete”.

In other words, Uruguay fears that the new labour legislation of Brazil (the largest economy in South America and a major trading partner of Uruguay), shall damage the Uruguayan economy by having lower production costs.

According to the Uruguayan ministers, by producing cheaper, Brazilian companies will be able to sell their products at a lower price, affecting the competitiveness of Uruguayan products. Nin Novoa does not get into details regarding the areas of the economy that could be damaged the most.

Regardless the economic aspect, there is an ideological disagreement between the administrations of both countries. Tabará Vazquez centre-left government has the support of social movements and trade unions, while it fosters the State’s participation in the economy, an opposite perspective to the one held by Temer’s administration.

Vázquez’s party has been ruling Uruguay since 2005, winning three consecutive presidential elections, and having parliamentary majority.

What may actually happen?

There are no certainties whether there will be a Mercosur meeting to address this topic. But the Uruguayan government says it will insist and is based on an agreement of the bloc that has in view meetings like this.

The Mercosur is an economic bloc founded by Argentina, Brazil, Paraguay and Uruguay – Venezuela has been suspended on the grounds of breaking democratic order.

It was founded in 1991, after the regional integration model of the European Union, with the free passage of people and products among these countries, and a common economic policy. However, it still is far away from those goals. It currently works as a customs union, as it uses the same taxes for products that come from outside the bloc.

Uruguay’s proposal is to gather a commission to debate the new Brazilian legislation, guided by the “Sociolabour Declaration”, an agreement signed in 2015.

It is rather unlikely that the Mercosur takes any reprisal against Brazil for these motives. Nevertheless, there might be a negative symbolic effect against Temer’s government, should the bloc decide to address the issue.

The Brazilian government’s answer  

The Brazilian Ministry of Foreign Relations (known as Itamaraty) summoned the Uruguayan ambassador, Carlos Daniel Amorín-Tenconi, asking for an explanation regarding the Uruguayan government’s positions regarding the labour reform.

In practice, this gesture shows disapproval regarding the behaviour and declarations of the Uruguayan ministers. In diplomacy, when a country refers to the internal affairs of another country (such as the case of the labour reform), there frequently is some sort of retaliation.

In this case, Uruguay claims that the Brazilian labour legislation will affect it directly and, therefore, it is not an intromission, but a “defence on the Uruguayan national interests”.

The Itamaraty declared that it has not been officially notified on the Uruguayan government’s pretence to call for a Mercosur meeting yet. However, the issue will be discussed once again on the next few days.

Since point zero, Temer’s government has denied that the new legislation will reduce workers’ rights, but it has stated that old fashioned legislation will be adjusted to the current labour market’s situation (benefiting workers). The result will be economic growth. The government has been using the concept of “labour modernization” to refer to the reform.

What are the changes of the labour reform?

The labour reform was passed on July 2017. It will become effective in 120 days, but the government will have to introduce a temporary measure soon to modify other points of the legislation and specify the changes of the law enacted by the Congress.

Temer’s main opposition comes from trade unions that were against the reform, claiming that it eliminates workers’ rights and increases the asymmetry between employers and workers.

Key points

Agreement on the legislation – what was agreed between unions and employers on 13 topics (including vacations, workday, leisure time, and wages) will prevail over what has been determined by the new legislation.

Intermittent labour – a new labour contract, a type of temporary labour in which payment is made at the end of every period of services’ delivery.

Union tax – the contribution to unions will no longer be mandatory, becoming optional. It currently is the main source of income of the entities that represent workers. Meanwhile, unions are negotiating to replace this tax for another, as a form of transition.