Sunday, 14 December 2008

Agnelli's Labour Law Proposal May Sink, But The Crisis Has Made it Relevant

Cia. Vale do Rio Doce CEO Roger Agnelli told Estado de S. Paulo newspaper in an interview published today that he has discussed twice with President Lula the necessity of easing labour legislation in Brazil as a way to reduce the impact of a global recession on Brazilian exporters. He is right, in part. 

The labour legislation in Brazil dates from 1943 and it imposes an awful burden on the finances of companies, either oriented to exports or to the domestic market. An executive at a food processing company recently told me that his company's biggest liabilities come from lawsuits filed by his own employees and the detrimental role of unions on the company's day-to-day operations. Agnelli should urge Lula to change the legislation not only on a temporary basis -- as the article suggests he did, -- but on a permanent basis. Also, it should reach companies and employees for each and every sector in Brazil. 

I don't see room for a fast-track passage of such an initiative in Congress (despite 2009 not being an electoral year.) I don't see the opposition engaging in such a difficult issue, and business groups are concerned it may backfire on them. But the debate has been opened at a moment almost every economist and analyst had forgotten about its relevance. This is a subject that we will be following as the crisis and its impact on the Brazilian economy unfolds. 

1 comment:

  1. As much as I agree that Brazilian labor laws are a burden and outdated, it's funny that Vale, with a record 12.4 bln reais profit in Q3 would suggest such a thing. No, it's not funny, it's cara de pau, as it's said in portuguese.