economy

Since 1993, the way that Panama's minimum wage law works is that every two years, teams of negotiators from certain government-recognized business organizations on the one hand, and from some officially-approved labor unions on the other, bargain over minimum wage scales. If no agreement is reached --- and usually labor and management can not agree --- then the president sets the minimum wage rates by decree.

In 2007 there was a rare agreement, as the Torrijos administration excluded the largest and most militant private-sector unions --- the SUNTRACS construction workers' union and the CONUSI labor council of which it is the largest member --- from the negotiations, and in the labor rump that was left behind a company union faction led by Marcos Allen grabbed dictatorial power and made a deal with management that would never have been ratified by a vote of the members of the unions that Torrijos allowed to participate.

In 2009 the talks again featured Allen as the spokesman for the CONATO labor confederation, but CONUSI was also at the table, the official inflation rate over the the previous two years had been 14 percent and any attempt at a settlement like the one in 2007 would have spelled the end of Allen's role within a CONATO that would be sliding toward irrelevance. The management was offering a three percent raise, while the workers were demanding a 100 percent increase. The talks dragged on for months, there was no agreement and the matter went to the president.

On December 21 President Martinelli decreed a set of wage increases genearally ranging from 9 to 23 percent, but a bit more in highly profitable industries like the electric utilities and the casinos. The nation was divided into two zones, with workers in the districts of Panama, Colon, San Miguelito, Arraijan, La Chorrera, Penonome, Aguadulce, Chitre, Santiago, David and Bocas del Toro in the slightly higher paid Zone 1 and the rest of the country in Zone 2. For a number of occupations, minimum wages were made uniform throughout the country.

So your full-time maid? Monthly pay for domestic servants is $160 in Zone 1, $145 in Zone 2. Your gardener? You might play game and call him a domestic servant, but more properly he is an agricultural worker and you are a small employer, so his pay is $1.06 per hour throughout the country. To see the decree in its original Spanish, with all of the minimum wage scales, click here.

So is that a problem?

Well, just a few days before the sugar harvest was to begin, Martinelli was convinced that he had made a mistake by setting minimum wage for agricultural workers at large enterprises at $1.24 per hour; industrial workers at $1.81 per hour in Zone 1 and $1.50 per hour in Zone 2; and wholesale commercial workers at $1.81 in Zone 1 and $1.49 in Zone 2 because that would cause distortions at the sugar mills. A second decree was issued on January 14 to modify the previous decree by providing that the uniform national minimum wage at the sugar refineries would be $1.50 per hour whether on the industrial or commercial side of the business, with the cane cutters remaining at $1.24.

Distortions?

See, President Martinelli is owner of the Ingenio La Victoria sugar mill, which he acquired in a privatization sale during the Pérez Balladares administration, in which he served as Seguro Social director. That's in Santiago, as in Zone 1. He'd have to pay his workers there 31¢ per hour more than a competitor whose mill is in Zone 2. Oops --- the Ministry of Labor Development isn't supposed to do that to the boss!

Note as well that the family business of Vice President Varela, Panama's leading rum and seco distiller, also uses enormous amounts of sugar and would thus be affected by any minimum wage provision that drives up the cost of the basic ingredient of rum.

It took a few days for word of the January 14 decree to get out. The PRD opposition jeered, but FRENADESO, which wants to put a labor-oriented leftist political party on the ballot in time for the 2014 elections, called in its lawyers. Both the official opposition party and the movement that would posit itself as the alternative to both Martinelli and the PRD alleged conflicts of interest, but especially to the unions in FRENADESO what the president was trying to do would disrupt the two-year minimum wage cycle by allowing downward revisions at any time that a president wanted to make them. FRENADESO's legal position is that if Martinelli thinks he made a mistake, the law says that he has to live with it at least until the next regular minimum wage revision.

And it did seem that, as a matter of law, FRENADESO was standing on solid ground.

This would not be the first time that the Martinelli administration acted without having first done its legal research. It does seem to be the first time that this president has fired from the hip and shot himself in the pocketbook.

Thus on January 18, with FRENADESO's lawyers getting ready to go to court, Labor Minister Alma Cortés confessed that the January 14 decree was "an involuntary error." The government rescinded that decree and left the December 21 minimum wage decree the way it was.