Tuesday, October 13, 2009

Aziz Nassif on the LyFC

He says that the government should have paid closer attention to legality:
The conflict of LyCF has diverse causes; it wasn't merely a problem of the union, different governments also made the wrong decisions over the course of many years and didn't have the will to untangle the critical knots in the company. So, LyFC became a heavy burden for public finances; service got more expensive; the staff surpassed the needs of the operation and the retirement mechanisms became unsustainable.

The conflict had various exit points, but the government took the most radical: cancelling the company and liquidating all of its workers. Without a doubt there were [tough] positions [within the company] about what and how to transform the collective bargaining agreement and modernize the company. You can't ignore the conservative stances among the union ranks that wouldn't open any negotiation to modify the terms of their contract. But, at the same time, nor would the federal government follow the path of legality to make the necessary modifications.


We now know that the government decided to wipe from the map the company and its 66,000 employees. The generosity and the hurry with which the government wants to liquidate the workers of the SME is curious; it offered them up to 2.5 years of salary. The sum that the government is willing to lay out is up to 20 billion pesos. That's the size of the cost of not having chosen the restructuring of the business. In summary, this conflict is in its infancy. We still have to pass through the legal challenges and see where the union resistance goes.
A couple of points: From a strict bottom-line perspective, I'm not sure 20 billion pesos is really that much of a bite, if it means getting rid of a company that was costing public finances more than twice that per year (at least, according to the figure used yesterday by Jorge Chabat and by Calderón in his address to the nation).

Also, as to the legal maneuvering to come, should it eventually get there, it'll be interesting to see what the Supreme Court's take is, given the body's recent sympathy for the powerless. This is most certainly not the straight-up abuse of power that the Acteal case was, but the recent trend of Court decisions would seem to not favor Calderón.

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