05082023 USCC Congressional Testimony on Labor Reform
May 08, 2023
Today, Cesar Vence, Executive Director of the U.S.-Chamber’s U.S.-Colombia Business Council (USCBC), delivered remarks on behalf of the USCBC and its members during a public hearing on Colombia’s Labor Reform held by the Chamber of Representatives of the Congress of the Republic of Colombia.
Why it matters: Colombia’s Labor Reform could undermine its principal objective of creating labor security by generating costs that cannot be readily absorbed by businesses. This, coupled by the highest corporate tax rate in the region, are unsustainable and would decidedly undermine the private sector’s ability to invest, generate employment, and help advance the government’s important priorities tied to innovation, industrialization, rural development, and energy transition.
Details: The current text of the Labor Reform presents four main challenges for the business community in the areas of outsourcing, protection of workers in automation processes, union activity and labor relations, and labor costs. The reform, as currently written, will generate significant additional costs that threaten to disincentivize growth and investment, discourage hiring, and slow productivity. These costs will have a direct and disproportionate impact on Colombian micro, small and medium enterprises and consumers, and may lead to an increase in informality.
Be smart: Colombia’s Congress can foster the growth of Colombia’s formal economy, while also ensuring that Colombia remains an attractive destination for foreign direct investment, by:
- Continuing to create opportunities for public-private dialogue to ensure that the reform increases productivity, addresses informality, and incentivizes job creation, while also addressing labor standards and regulations.
- Taking into consideration Colombia’s current macroeconomic situation and the implications of the proposed reform, as Colombia is currently facing an inflation of around 12.8% and an unemployment rate of 11.4%, and it has an effective tax rate for companies of around 52%.
- Strengthening the rule of law through enhanced regulatory transparency, predictability, stability, accountability, and due process.
Bottom line: The USCBC looks forward to working with Colombia’s Congress to advance a trade and investment agenda in Colombia that supports inclusive economic growth and ensures a level playing field for businesses capable of delivering meaningful opportunities for Colombian workers.
To read the full testimony, click here.