SOUTH AMERICA: A DISTINCTIVE MODEL OF EMPLOYMENT RELATIONS OR AN
EXTENSION OF THE MEDITERRANEAN MODEL
Student: Lina Gattás Bultaif
ID: 201112211
Supervisor: Stephen Dunn
August 2012
SOUTH AMERICA: A DISTINCTIVE MODEL OF EMPLOYMENT RELATIONS OR AN
EXTENSION OF THE MEDITERRANEAN MODEL
ABSTRACT
This paper explores if there is an independent South American employment relations’
model or it can be classified as an extension of the Mediterranean one, framed in last
decades. It analyses the main features of the South American Model of employment
relations and its resemblance with the Mediterranean one. It focuses on the analysis of
the role of the state as a promoter of legislation, the unions’ identity and their bargaining
structure, and the employers’ organisations’ role and corporate governance structure in
South America. Additionally, it compares these patterns with the main features of the
Mediterranean Model of employment, to conclude that both models have a close
correlation regarding the employment relations systems, despite the cross national
differences of size, economic performance and social-politic context. Through the
classification of the South American model of employment as an extension of the
Mediterranean one, this paper provides a theoretical and practical insight in the research
of the employment relations.
2
CONTENT
ABSTRACT ……………………………………………………………………….
2
INTRODUCTION …………………………………………………………………
4
SOUTH AMERICA EMPLOYMENT RELATION MODEL …………………… 7
The State ………………………………………………………………………….
8
Unions …………………………………………………………………………….
14
Employers and Corporate Governance ………………………………………..
19
THE MEDITERRANEAN EMPLOYMENT RELATION MODEL: A MULTISYSTEMIC COMPARISON …………………………………………………….
22
CONCLUSION ……………………………………………………………………
28
BIBLIOGRAPHY …………………………………………………………………. 30
3
SOUTH AMERICA: A DISTINCTIVE MODEL OF EMPLOYMENT RELATIONS OR AN
EXTENSION OF THE MEDITERRANEAN MODEL
"You must have been dreaming,” the officers insisted. “Nothing
has happened in Macondo, nothing has ever happened, and
nothing will ever happen. This is a happy town.” In that way
they were finally able to wipe out the union leaders”.
Gabriel García Márquez, One Hundred Years of Solitude.
INTRODUCTION
Academics have developed several models of employment relations to ease comparison
among different states. A model is an approach to characterize certain national
employment relations systems that share several features, or in Ebbinghaus’ terms is
the way in which “specific combinations of institutions and social practices govern
market-society relations in a particular nation-specific combination” (Ebbinghaus, 1999.
P3). Dunlop captured this in his published work Industrial Relations Systems (1958),
stating that industrial relations systems have three central actors: the employees (and
trade unions), the employers (and their managers) and the state (and the government
agencies); and they interact in an institutional framework shaped by the market, the
technology and the political context. The relationship within these actors produces a set
of procedural and substantive rules, which is the focus of the employment relation
system (Dunlop 1993, P53). Thus, the rules and principles are the factors that unify and
characterise the system.
Scholars have intended to classify several industrial relation systems as models, and the
most acknowledged are: (i) the Anglo Saxon model, which refers to less regulated, firm
centred, flexible labour marked with weak unions, exemplified primarily by USA and
United Kingdom; (ii) the European Social Model, characterised by strong unions, non
market coordination process and a strong welfare system, represented usually by
Germany and Sweden (Hamann and Kelly 2008, P135); and (iii) the state-influenced
market economies or the Mediterranean Model, identified by Schmidt with a high state
intervention, ‘enhancing’ or ‘hindering’ business and labour, according to the needs of a
4
particular moment (Schmidt 2007, P5). This third model is associated with France, Italy
and Spain.
Nevertheless, scholars usually focus on advanced industrialised countries, leaving
behind the study of developing countries. In this regard, seeking to contribute in the
analysis and development of the employment relations’ models, this paper approaches
South America by analysing its main patterns of employment relations of the last
decades. With the implementation of liberal reforms in 1990s, the employment relations
systems in South American countries have changed significantly. However, the
Continent still shares a great deal of similarities with the Mediterranean countries due to
remnants of colonisation from Spain and Portugal, which shaped since the early
developments of the Latin American states, the institutional frameworks of industrial
relations. Thus, even today South America and the Mediterranean countries resemble in
their configuration of employment relations, in their weak institutions, in the late
industrialisation patterns, in the phases of authoritarian governments of the last century
and in the challenges that both models are facing in the twenty-first century.
In this regard, this paper explores if there is an independent South American
employment relations’ model or it can be classified as an extension of the Mediterranean
one, framed in last decades. South America has to be analysed due to the growing
significance of its countries over the last years. Defining its main institutions and actors
and establishing the patterns across their most important nations will contribute to put
these countries ‘in perspective’ and will enhance the literature on South America, that
traditionally is left behind by scholars. In addition, comparing South America with the
Mediterranean model will also contribute by placing South America in an existing model,
or even through contextualised comparison, establish if it has an employment relations’
model of its own. The above will have an impact in the rule-making context.
Furthermore, it will help to provide alternatives insights to describe new models of
capitalisms.
To address this purpose, first the core features of the employment relations systems in
South America and its changes in the last decades will be analysed. In this sense, the
role of the state, the unions and the employers will be examined, taking into
consideration the institutional changes of the last thirty years. The state will be studied
5
as the organizer of the legal framework, as an employer and as a provider and designer
of the welfare, which constitutes fundamental roles in which it shapes the employment
relation system. Further analysis includes the exploration of unions’ identity and power in
influencing industrial relations, the collective bargaining structure and the new
challenges and responses unions in the Continent are adopting. Finally, in this chapter,
a study of the employers’ organisations and its corporate governance structure will be
included to determine the degree of influence in the system. After identifying the main
features of South American employment relations’ model, a comparison will be address
with the Mediterranean model, aiming to establish their resemblance and differences in
their employment relations, and to determine whether there is a distinctive South
America employment relations’ model, or if it is an extension of the Mediterranean one.
To concentrate on South American model of employment relations, Brazil, Colombia and
Chile will be analysed. Brazil is the biggest economy of the continent and an example of
state corporatism; Chile, is one of the most important economies in the continent and
has had a tradition of strong regimes with antiunion disposition; and Colombia, is one of
the most relevant transformed economies in the last decades, and in terms of legislation,
it can be described as being in the middle of these two extremes of the scope. In
addition, these countries share common patterns of reforms, as well as a common
historic background. On the other hand, to discuss the Mediterranean model Spain,
France and Italy will be used as reference points, as they are the typical ideal of state
capitalism.
The traditional attempt in dealing with variety of nations is to categorise and analyse
each country as having its own system of employment relation, since it is more feasible
not to be trapped in the dangerous field of generalisation, as many of these models do.
In this regard, the particular analysis of nation states still have a major importance in the
analytical framework, as they are a source of statistics necessary for comparison and
they are still the main actors in terms of legislation and voluntary regulation among the
three main actors. However, it is still important to categorise countries as models to
provide a benchmark by describing them, systematically classified the different
institutions and establish patterns across, in this case, the South America continent.
6
In accordance to the abovementioned, comparing different actors and institution across
countries in South America will contribute to our knowledge of the employment relations
systems. In addition, due to globalisation, analysing different systems and its relevant
institutions may have an influence in the policy-making though the adaptation of best
practices. Comparing and abstracting similarities and differences between Latin America
and Europe will provide a benchmark to identify institutions and actors, and maybe,
alternative ways of succeeding (Turner, 2001). Comparative research “offers a
significant potential for theoretical development by establishing casual inferences”
(Bamber et al, 2004. P5). The comparison among different models will provide the
theoretical approach needed to understand the employment relations models within
each country and will serve as a framework for policy-making, as since Locke puts it
“…description without the support of an analytical model or theoretical argument has
little value for advancing understanding or providing the information and perspective for
action needed by the professionals who shape employment practices” (Locke et al,
1995. P158). Defining the main South American employment patterns will enhance
literature on the employment relations system, and will contribute to bring up to date the
main trends in employment relations in South America.
SOUTH AMERICA EMPLOYMENT RELATION MODEL
Core features of the employment relations systems in South America and its changes in
the last three decades
Most South American countries have been transforming their employment relations over
the past decades due to economic pressures and the liberalisation of the markets. Even
though each country has reformed its employment institutions in a particular way, there
are general trends in the configuration of employment relations systems. To explore if
there is a current South American model of employment relations, or if it can be
categorised in an existing one, such as the Mediterranean model, it is important to
analyse the three social actors in South America. For purpose of this research, the study
will be only limit to Brazil, Colombia and Chile. In this regard, this chapter will emphasis
in the role of the State in each country, the organised labour and its main
transformations, and finally the role of the employers, their strategies and the changes of
the corporate governance structure. In addition, an institutional framework will be
7
addressed to characterise the main trends of the employment relations’ model in South
America.
The State
The state is one of the main actors in employment relation system. It defines the set of
institutions and rules in which the social partners (i.e. employers and employees) may
act, and it enforces such set of substantive and procedural rules. In this regard, the state
can be defined as a group of institutions that controls, regulates and enforces that
regulation in a territory, with the monopoly of the force (Weber, 1947. P156). Its actions
are accomplished, according to Schmidt through policy, politics and polity. Policy refers
to the substantial policies that affect employment (and the market). On the other hand,
polity stands for how the institutions are shaped by those policies; and finally, politics
refers to the interaction between the social partners (Schmidt, 2007. P9). Moreover, all
“industrial relations models (…) are shaped more or less directly by state intervention
when are created and as they expand or decline” (Bordogna and Cella, 1999. P18).
Thus, from an employment relation’s point of view, the state performs several tasks
regarding employment.
Accordingly, the role of the state in shaping the industrial relations is crucial, but
complex. There is a constant tension between regulation and liberalisation of market,
which is an essential characteristic of labour relations. Particularly, in South America and
in the countries encompassed as the Mediterranean Model, where the industrial
relations are still highly politicised. In this regard, in South America and in the
Mediterranean countries, the state influences industrial relation through direct or indirect
intervention, by setting substantive and procedural rules, specifying the framework of
rights and obligations derived from an employment relationship, and by setting the
conflict resolution mechanisms. Due to the continental judicial tradition, South America
has adopted European models of codification and litigation. Within this framework,
labour regulation was developed in 1930s in most of South America, under the
understanding that the intervention of the state is crucial to protect the individual
employee from the employer, since there is an uneven bargaining power. Additionally,
the early developments of employment law in the Continent suggests a mistrust of the
trade unions as strong forces to counterbalance said bargaining power, granting the
8
state and its authorities great deal of power to regulate and control union activities, such
as bargaining procedure, registration and recognition of legitimacy as independents
bodies (Bronstein, 1997).
This paternalistic approach explains why South American employment law is dully
codified, heavily regulated and involves all aspects of employment relations. It differs
form the common law principle of freedom of contract, where the system allows great
deal of liberty to the parties. In the South American model of regulation, as well as the
Mediterranean model, the law intendeds to replace the will of the parties by setting
minimum standards that establish the conditions of the employment relations. In this
sense, employment law is of public concern, and it regulates aspects of individual
employment law, as well as collective labour issues. Aspects such as working hours,
minimum payments, types of agreements allowed and its requirements, special
obligations from the employer and the employee, health and safety standards, taxes and
social security duties of the parties, dismissal conditions and other forms of termination,
as well as alternative mechanisms for conflict resolution, mandatory leaves, salary,
holidays and so forth. Furthermore, labour law regulates the formal aspects of trade
unions, the nature and different types of unions, the conditions for their constitutions and
recognition as legal institutions with representation, and the procedure to a legitimate
collective bargaining, as well as the scope of the collective bargaining agreement and
the limits of strike during the bargaining process. Thus, it can be stated that employment
agreements are formalities to surpass the legal limits, and to establish evidence of the
ends of the employment. Employment contracts fill the gap of the law, but do not replace
it, unlike the principle of freedom of contract of common law.
Additionally, the state has an impact in the employment relations as an employer. Until
early 1990s South America was characterised by a high size of public sector, and
therefore a considerable amount of public employment. A large public sector is essential
to the transformation of the employment relation systems, since its impact directly the
terms and conditions of employment. Taking into account that profit maximization is not
the target of public sector, unlikely private corporations, which are subject to the
discipline of the market, public sector decisions are highly politicised and taken to
respond to macroeconomic measures. In this regard, according to Martin and Thelen,
the public sector impacts “the strategic interests of government bureaucrats, by
9
expanding their interests in improving the skills of the long-term unemployed, (...), and
alters the strategic interests of private actors.” (2007. P4). Accordingly, public
employment in Latin America during the first decade of the twenty-first century was of
approximately 13%. However, there are national differences across countries. For
example, according to ILO’s 2002 Labour report, Brazil’s rate of public employment is of
approximately 14%, while in Chile is of 11%, but Colombia presents the lowest rate of
public employment in South America by having only 7% approximately.
Moreover, the State plays a role in shaping employment relations through the welfare
system. Mediterranean countries share the same welfare structure of most Latin
American countries, since the state plays a crucial role in controlling, managing and
regulating welfare, health, pension and occupational risks. The Latin American welfare
regime was based on the early models of Europe in the beginning of the 20th Century,
with the influence of Bismarck, as well as in the case of the Latin Rin, or the
Mediterranean welfare regime (Gal, 2009. P7). Through governmental intervention, the
Welfare regime is of public concern and is imposed as an obligation and a right to all
citizens. Employers and employees participate through contributions and other fulfilment
of legal requirements concerning occupational risks, industrial security, taxes and other
duties; and via alternative collective bargaining agreements. Besides, trade unions and
employers negotiate additional benefits or alternative forms of managing risks, health
and pensions plans. Recently, these alternative schemes have been transformed and
challenged due to financial crises in all countries. There has been a pattern of privatising
pensions, and increasing requirements to access the benefits of said welfare across
these countries. Thus, the state has been and still is a key actor to understand such
changes and the way these reforms impacted the relationship between the social
partners, and in that regard, the industrial relation systems.
Given the relevance of the state in shaping employment relations, it is important to
analyse the institutions and changes in labour law to understand the scope of the South
American model, and its resemblances with the Mediterranean one, object of this paper.
The changes in employment regulation in South America provide a good framework of
analysis to understand the industrial relation system, since the state is “the chief
architect of economic reform as well as of legal and institutional changes in industrial
relations” (Cook, 1998. P313). In the last twenty years, employment law changed due to
10
pressures of the neoliberal system in South America. The international pressure oriented
the changes towards a more flexible labour market, decentralisation of collective
bargaining, privatisation of pensions and other measures that aimed to increase the role
of the market in the economy (Fraile, 2009. P215). However, re-democratisation
processes have shifted towards a more protective employment system, generating
contradictions in employment systems (Collier and Collier 1991, and Cook, 1998. P4). In
this sense, the labour law reforms in the last twenty years of Colombia, Brazil and Chile,
provides “a valuable point of reference for analysing the larger political context” (Collier
and Collier, 1991). Thus, Brazil and Colombia although have shifted to a more flexible
labour regime regarding individual rights, they have assumed a protectionist approach
regarding collective rights (this is the right to unionise, to bargaining and to strike). On
the other hand, Chile has been characterised by many authors (see Cook 2007, Murillo
2001) as having the “greatest degree of flexibility” (Cook, 1998. P37).
The Latin American experiment regarding neo liberalism was promoted in the 1980s and
1990s by the Washington Consensus. Even though in the late 1980s the reforms varied
across countries, in the mid 1990s there was a high level of convergence in all Latin
America in relation with liberalisation of the market, some extent of privatisation, the free
movement of capital and trade, a high degree of flexible labour policies (‘flexibilisation’)
and changes regarding social protection coverage. The labour reform agenda included
wage flexibility, the introduction of forms of atypical employment agreements such as
temporary contracts, less costly forms of dismissals, reduction of the public sector (this
means a withdraw from the state as an employer and from wage bargaining), working
time flexibility, and reduction of welfare benefits. Additionally, there has been a concern
regarding collective rights and several reforms have intended to restore union power.
Cook classifies the changes in the employment systems in South America as being
flexible, liberal or protective. The flexible changes or ‘flexibilisation’ in this context refers
to the reforms intended to improve efficiency, competitiveness and respond to market
needs of neoliberalism. Through these types of changes new forms of employment were
allowed. This is the case of fixed term agreements, part time work, extension of
probationary period, and the establishment of employment agencies and outsourcing
regulation, with different and lower benefits to these categories of employees (1998.
P319). Other attempts to generate flexibility and achieve lower costs have been the
11
redefinition of wages and the possibility of reducing its scope by excluding wages from
incentives, profit sharing and bonuses; allowing a decrease in payroll taxes for pensions
and other mandatory benefits. Moreover, ‘flexibilisation’ reforms have impacted working
time and work shifting, by allowing extended working hours and a decrease in overtime
remuneration (Fraile, 2009. P215 and Cook, 1998. P320).
On the other hand, the liberal o pluralistic changes refer to the amendments aimed to
promote autonomy among the social partners in the employment relations systems. In
the last two decades, there has been a trend to reduce the state intervention in collective
employment laws, by decreasing the degree of control of the administrative authorities
regarding bargaining procedures, union registration and strike legitimation. Furthermore,
regulation have been designed to strength collective bargaining and increase its scope
to the public sector, since it was banned in several countries as is the case of Chile,
Brazil and Colombia (Cook, 1998. P322). Nonetheless, this has not been completely
achieved in reality, and the general trend in the Continent is the weakening of trade
unions and an increase in decentralised bargaining, as it will be analysed further.
Finally, the protective changes exemplified the tradition of state paternalism embodied in
South America. Employment law has extended some level of protection to individual
employees that historically have been excluded from the labour market, such as women
and disables. Most of labour reforms in all South America include reinforced stability for
pregnant women and disable employees. Other changes of this nature include extended
maternity leave, inclusion of paternity leave and feeding time for new mothers. In
addition, some amendments were incorporated regarding indexation of final salary,
strengthening of industrial safety measures mandatory in the work place, incorporation
of obligatory contributions to pension and health and extended notification before
dismissal (Amadeo et al 1995; Cook, 1998. P322).
In this regard, Brazil, Chile and Colombia have shaped their industrial relations system
within this framework of reforms. Brazil’s employment law changes have encompassed
flexible, liberal and protective amendments in their employment relations system,
transforming the relation among the actors, this is between unions, state and employers.
In the same line, Colombia has introduce flexible and protective measures in the last
fifteen years that has changed the employment relations in the country, creating a
12
tension between ‘flexibilisation’ of individual agreements and an attempt to strength
collective rights for unions (Gonzales, 1999). In Chile the reforms were intended to easy
‘flexibilisation’ of Pinochet’s regime (1970 to 1990), nonetheless, Chile is still the most
flexible system in the Continent. (Cook, 2004. P14).
However, the legal changes in South America still face many challenges regarding
employment levels, informality and above all, compliance. The promise of neoliberalism
has not accomplished its premises and the Continent is still struggling with low formal
employment levels and weak social protection. According to 2002 ILO’s report, the
region is characterised by high levels of insecurity and “up to a certain level,
precariousness” which “are perceived as a driving force of the market in the broader
sense of the point and linked to its inefficiency” (ILO’s 2002. P23). The Washington
Consensus approach of one size fit all did not answered South America’s needs. In this
regard, Governments have been taking actions to combat precariousness and reduce
the social gap (Fraile, 2009. P229); and these actions are reflected in the liberal and
protective changes described above. This reinforces the literature on “varieties of
Capitalism” which states that the institutional differences may act as competitive
advantage (Hall and Soskice, 2001) and that there are several paths for social and
economic success (Turner, 2001).
According to the aforesaid, the role of the state in South America has been fundamental
in shaping employment relations and their social welfare system. The legal reforms have
shifted in the last twenty years adopting influences from the neoliberalism and endorsing
‘flexibilisation’ in individual employment relations. Nevertheless, in the last recent years
Chile, Brazil and Colombia have promoted changes in the legal system aiming higher
levels of employment and a decrease in informality. These changes have been due to
international pressures such as the ILO and the ratification of the Declaration on
Fundamental Principles and Rights at Work in 1998 (Cook, 2004), and the negotiations
of free trade agreements with E.U. and U.S.A. Additionally, there has been a change in
the political arena with the rise of left wings governments, as in the case of Brazil that
aims to correct Washington Consensus policies.
The role of the state in the South American model is active as it intervenes through legal
changes, designing the institutional arrangement and the terms and conditions of the
13
employment relations by introducing ‘flexibility’, protective changes or liberal reforms.
Additionally, it affects the configuration of welfare system and the employment trends as
the main employer. However, in the last years there has been a subtle withdrawn and
the intervention has been indirect, providing more autonomy to the social actors
regarding collective employment relations.
Unions
Trade unions are fundamental organisations in today’s economic system, and still are
the main institution of employees in employment relations (Freeman and Medoff, 1984).
Trade unions have been characterised as having multiple identities. They can be
classified as business labour institutions that help to shape the employment conditions in
the workplace by bargaining wages, benefits, work time (typically from Anglo-Saxon
model); as a form of anti-capitals opposition, aiming to advance class interests through
militancy and social mobilization; and as vehicles for political organisation, acting as
“vehicles of social integration”, concerned with the social welfare (Hyman, R. 2001 P25). Trade unions are usually facing these three dimensions.
Moreover, scholars have characterised unions as having two faces of the same coin, this
is as having a dual role in employment relations. One is the monopoly face, which
creates distortion and thus inefficiency in the economy, and is associated with their
power to raise payment conditions above market levels. The other is the collective voice
‘face’, associated with the representation of organised employees at the firm level,
providing voice rather than exit by establishing a communication channel between the
management and the employees (Freeman and Medoff, 1984).
Trade unions in Latin America have faced multiple dimensions throughout their
development during the twentieth century. Even though the first organised movements
can be traced down from the mid-nineteenth century, the consolidation of unionism in
Latin America started in the first half of the twentieth century, with the early
industrialisation process and the political liberation of the continent (Murillo, 2001. P317).
Before the late 1960s, unions in South America were of two kinds mostly: class unions
or corporatism unionism. The first were characterised as being heavily influenced
ideologically by Marxism and Leninism. This is the anti capitalism face identity identified
14
by Hyman, where unions fought against social exclusion and acted as partners (or
enemies according to the circumstances) of the state to influence policies regarding
labour standards and social protection. On the other hand, corporatism unionism refers
to the unions subordinated by the state enterprises in the Keynesian stage, where the
state had an active participation in the market and acted as an active actor in the
promotion and protection of the industries. This kind of unionism is associated with
populist regimes and they are the antithesis of the business unions’ identity. They where
heavily politicised and the relationship with the state was closer, since their tactics were
more effective through the political activity than through private employers (Murillo, 2001.
P321).
Nevertheless, with the establishment of authoritarian governments in the 1970s in South
America, the end of Keynesianism and the breakdown of welfare states, the corporatism
unionism collapsed due to their antidemocratic and bureaucratic structure, which did not
responded any more to the needs of the employees (Wachendorfer, 2007. P7). The
unions that started an early renovation process were the ones that resisted the
institutional changes that followed afterwards. One of the most evident cases is the
nouvo sindicalismo from Brazil, which evolved in the Central Única de los Trabajadores
(CUT) that currently is the most important federation in Latin America (Wachendorfer,
2007. P7). The renewed unions were able in some events, even to block reforms and
lobby to achieve protective changes in the legal framework (Fraile, 2009. P219).
The restoration of collective rights regarding freedom of association, collective
bargaining and strike, which had been suppressed under authoritarian regimes during
1960s and 1970s, started in most of Latin America around 1980s. The simultaneity of
neoliberalism and re-democratisation placed trade unions back in the centre of the
political scenario, through coalitions with popular parties and mobilisations aiming
institutional changes (Murrillo, 2001 P336). Nevertheless, with the new political and
economical context of liberalisation, the traditional strategies used by unions were not
effective and they started focusing their actions on private employers (Cook, 1998.
P315). This tension had an effect on the rhythm of transformation in the employment
relations systems in South America.
These legal changes of the last decade have shaped the industrial relation model in all
15
countries. There is a tendency to increase the autonomy of the social partners and the
withdrawal of the state in collective right issues. The major changes are the
‘flexibilisation’ of collective relations (as well as individual ones like it was mentioned
above) through the decentralisation of collective bargaining agreements and a greater
degree of pluralism and autonomy of the trade unions. These institutional reforms were
achieved across constitutional alterations and labour codes amendments, mostly
through individual pieces of legislation to counterbalance economic transformation in the
area (Cook, 1998 P38). However, employment rights have been weakly enforced.
In this regard, Brazil has a trade union based on occupational category and they are
settled as a territorial unit, with voluntary membership. Once the bargaining agreement is
enforced, the terms are extended to all workers regardless of their affiliation, if certain
conditions apply. The changes have promoted a major degree of decentralisation and
more autonomy among social partners (unions and employers) (Cook, 1998. P319). On
the other hand, Chile has an enterprise-level union organisation with voluntary
membership. It has decentralised bargaining only at firm level, even though
multiemployer bargaining is only allowed in paper. Additionally, the collective agreement
is not extended to non-unionised employees. Being the most flexible country in the
continent, Chile still restricts strikes and replacement, and lockouts are allowed during
the collective bargaining procedures (Cook, 1998. P319). Finally, Colombia can be
classified as a middle point between these two countries, although has faced several
legal reforms that aim to extend collective rights in the last decade. There is enterprise
level and industry level organisation with plural unionism, and there is decentralise
bargaining structure (Gonzales, 1999). Nevertheless, the aspects subject to negotiation
are only economical. The collective bargaining agreement is extended to all employees if
certain conditions applied, but if not, a collective agreement with non-unionised
employees can be entered and enforced. Under this scenario, legal changes have aimed
the withdrawal from the state’s role in the supervision and management of the formalities
of union constitutions and in the determination of the legality of the strike (Torres and
Segrera, 2005. P185).
The institutional changes have not stopped the decline of unionism in the Continent. The
crisis of unionisation is a global trend and South America is not the exception. Structural
changes in the region, which include privatisation, the incorporation of women in the
16
labour market, the increase in the informal sector, changes in the third sector and the
decrease of manufacturing, ‘flexibilisation’ and other transformations of today’s market,
have affected unions (Marshall, 2000. P12). The changes of the 1990s and onwards
have limited unions’ density and influence. Trade unions have become weaker and their
militancy has increased, since the traditional strategies have become ineffective.
According to the ILO in 2002, the union density of formal workers in Colombia was of
7%, in Chile of 12% and in Brazil of 18%. However, in 1995 the union density in Brazil
was of 66%, in Chile of 33% and in Colombia of 17%. This decline in density also
reflects a weakening of bargaining power, and an inability to organise due to the growth
of the informal sector and a decline in prestige and influence among the politic parties
(Köhler and Wannöffel, 1993 in Cook, 1999).
In accordance with the abovementioned, it can be stated that the transformation of
employment legislation in South America has been characterised by multiple tensions
between neoliberalism demands (promoted mostly by the Bretton Woods institutions) in
the early 1990s, and the assertion of the democratic welfare rights in the last part of the
twentieth Century and the beginning of the twenty-first Century that Schmidt describes
as a ‘moralisation’ process (Schmidt, 2003). During this period, collective labour laws in
South America have changed dramatically. The democratisation process reinforced
collective rights and intended to restore the legitimacy of trade unions in the employment
relation system. However, the reforms have been contradictory. In South America the
political and economical context hinders the implementation of labour reforms
concerning collective rights. Despite the advancements in the legislations, the
institutional framework is still very weak to generate a real transformation in the exercise
of unionism in the Continent.
Taking the aforementioned into account, in the last years there has been an international
pressure regarding the adoption of core labour standards promoted mainly by the ILO in
1998 with the Declaration on Fundamental Principles and Rights at Work and several
Conventions ratifying and widening the scope of collective rights; and the regional
agreements such as the CAN and Mercosur in South America that have included labour
chapters as part the international consensus regarding the relevance of labour rights.
Nevertheless, there is a need to incorporate these rights locally and national actors are
essential in said implementation (Cook, 2004. P6). Unfortunately, trade unions in South
17
America (although in some countries more than others) are still weak and they lack the
infrastructure to enforce and lobby against strong employers and right wings political
parties. Moreover, the international pressure is contradictory, since there is a constant
tension between ‘flexibilisation’ and competition, and protection and reinforcement of
core labour standards, which include collective rights.
Facing the challenges of neoliberalism described above, the responses of unions have
varied in the last years. Whether they come from a corporatist tradition or anti capitalist
identity in Hyman’s terms, unions have adopted neoliberal strategies. These strategies,
according to Cook, can be classified in three broad categories: (i) conservatism, which
refers to the support of unions to economic and social reforms in exchange of
guarantees from the government to maintain their structure and patrimony rights; (ii)
rejection, which describes the identity crisis of left wing unions that now support the
status quo of a regime that in the past they wanted to change; and some of the unions
have involved in (iii) negotiation, particularly the unions of modern sectors, which have
adopted the monopoly face in Freeman’s terms, claiming and defending the interests of
their members without dealing in further social demands (Cook, 1999. P249). In this
same vein, Murrillo identifies three different path that unions in the continent are taking
to face their crisis, which are (i) the interaction again with left wings parties and a regain
in the political arena internally and internationally through process of regionalisation such
as Mercosur, and the consolidation of the Organización Regional Interamericana de
Trabajadores (ORIT), the most important confederation of unions in South America; (ii)
more autonomy in their management, including more democratic internal process; and
finally (iii) more industrial participation, which refers to the new forms of productivity and
a new approach to bargaining with the private sector regarding the productive process.
Despite the above, Murillo concludes that the processes and transformation is still slow
and ineffective (2001).
All of these responses have been insufficient and it can be stated that trade unions have
been unable to keep pace with labour and political reforms in South America (Murillo,
2001). They have emerged form decades of authoritarian regimes, economic crisis and
the incorporation of neoliberalism, which have debilitated their legitimacy as institutions
and their ability to represent effectively the employees. To this scenario, the
decentralised and conflictive bargaining structure sharpens the lack of power and the
18
inability to promote institutional changes at a work level. Unions strategies have shifted
towards a monopolistic view, bargaining for exclusive rights and ignoring further social
demands form the working class (Cook, 1999. P251). There is a long way to go for
unions in South America, since they are still incipient institutions that lack voice, in
Freeman’s terminology.
Employers and Corporate Governance Structure
Unions and employers organisations have been fundamental for the configuration of the
employment relations system in South America. Either by supporting or by opposing the
reforms, these actors are essential in the implementation and enforcement of the
transformation of the institutional framework in the Continent. Particularly, employer’s
organisations have played a leading role in the transformation of legislation mainly
through political pressure and lobby. Due to the changes promoted through
‘flexibilisation’ with the introduction of new labour schemes, employers are changing the
way they manage their human resources. South America has been subject of a
significant growth of alternatives way of employment. In addition, new management
systems and reorganisation of production have been implemented (Cook, 1995)
affecting the relationship of the social partners. Furthermore, not only the employment
schemes have changed with the implementation of neoliberalism in South America, but
also the corporate governance structure. In recent years, there has been a new
paradigm regarding capital, labour and management (Aguilera and Jackson, 2003.
P448).
The institutional changes promoted in the early 1990s by the Washington Consensus
described above, altered the practices and strategies of the national and international
firms in South America, reshaping the internal employment systems, with a conversion
towards a common denominator strategies (Cook, 1999. P243). These pressures of
globalization and the internationalisation of multinational corporations (MNCS) have
transformed the human resources management across the world, since countries are
relocating their business and translating their practices to other places, in what have
been called country of origin effect (Edwards and Rees, 2011).
South America is not the exception. Employers started to implement new strategies to
19
reorganise productivity, with different models adopted mostly from the Japanese lean
production. There has been an increase in technology investment, and a change in
human resources management by the introduction of job classification, job mobility,
quality circles, work teams and alternative forms of employee participation; and all of
these reforms demanded ‘flexibilisation’, since firms have to face the competitive
pressures of neoliberalism, as it was analysed above (Cook, 1999. P245). The flexible
reforms in the workplace have affected the decentralisation of collective bargaining, the
wages structure with the introduction of pay for performance, mobility in jobs, the
incorporation of agency workers and outsourcing companies, and there has been major
elasticity in hiring and dismissing employees (Cook, 1999. P245).
The emphasis on productivity has changed the relationship between employers, the
state and the unions (Vargas, 2010. P193). Unions have shifted their strategy and
instead of aligning with the state (as it used to be in the corporatism unionism of the
1980s), new coalitions with employers have been consolidated. The new productivity
schemes are demanding more cooperative strategies, which imply a cultural change in
the union identity in South America that was characterised as being hostile and militant.
Employers, thorough new employment relations’ schemes are shifting the bargaining
towards an individual basis (Vargas, 2010. P193) and the terms of collective bargaining
have focused recently in productivity, including pay for performance schemes, just on
time adopted from the lean system, and new methods of production (Cook, 1999).
Consequently, these new productive systems have created the necessity to develop
alternatives forms of control over the staff, since employers may be defenceless in the
new productive system in several aspects. In this regard, the just in time schemes is
vulnerable to strikes and stoppages; with the introduction of new technology, new
retention schemes should be developed as high skilled employees become prised; and
with the mobilisation of labour, expatriates arrangements should be established (Cook,
1999. P250). Thus, the “features of the new production system provide opportunities for
workers and unions to exert new forms of leverage in bargaining for improvements and
gaining greater voice within the workplace. They also form the basis for heightened
levels of conflict” (Cook, 1999. P250).
Employers’ organisations have been fundamental in the transformation of the
employment relations systems in the Continent since they have been closely align with
the governments and have promoted flexible changes in the legal framework (Cook,
20
2004. P14). The employers’ organisations are understood as business associations,
formally organised that are specialised in the aggregation, selection, defence and
promotion in of the interests of firms of the private sector (Levaggi, 1999. P1). The
tradition in these types of organisations in South America is very similar to the AngloSaxon model. Accordingly, employers’ organisations are self-managed associations,
subject to private law, with voluntary affiliation, and their functions are not legally defined
(Levaggi, 1999. P3). Historically, in the development of the employment relations
systems, the involvement of the employees’ organisations in the collective bargaining
processes was moderated. Furthermore, due to the decentralisation of the recent years,
the participation has been reduced even more. Instead, they have been actively involved
in the promotion of liberalisation of the market in the neoliberalism rounds of reforms in
the earliest 1990s. Also, the have been the advocates of more flexible reforms through
political involvement and lobbying with right wings governments (Levaggi, 1999. P6), as
is the case of Colombia and Chile. In this regard it can be stated that the inter-firm
coordination emphases more in policies than in sectorial issues (Schneider, 2009.
P557).
On the other hand, the corporate governance in Latin America has also been
transformed with the liberalisation of the market of the last decades. Corporate
governance deals with “who controls the firm, in whose interest the firm is governed and
the various ways whereby control is exercised” (Gospel and Pendleton, 2003. P560).
Despite the lack of research of the forms of corporate governance in domestic
corporations, it can be stated that South American corporate governance structure is
very particular, since it has a clear hierarchical structure (Schneider, 2009. P555) and is
characterised as having diversified business groups. Most of the corporations are
controlled directly and managed by their owners, which are family business groups or
either MNCS.
Taking into account the aforesaid, corporate governance in Latin America is divided
between large local firms and MNCS. There are four particularities regarding large
domestic firms in South America, according to Schneider. Those are that (i) firms are
diversified widely into subsidiaries that do not have a relationship between themselves
regarding market and technology, (ii) the business group holds the direct hierarchical
control of these subsidiaries, (iii) a few quantity of large business groups are
21
accountable for the majority of participation in shares of the market, and (iv) “groups are
mostly owned and managed by families, and often have been for several generations”
(2009. P558).
Thus, the diversification and family control characterises the corporate governance as
hierarchical, according to Schneider. The concentrated ownership (or block holding)
implies a centralisation of control, which rarely requires the involvement in negotiation of
other stakeholders such as employees and suppliers, meaning that relations with the
stakeholders are usually imbalanced (Schneider, 2009. P559). On the other hand,
MNCS tend to import their business models as a form of internationalisation, directly or
indirectly through mergers and acquisitions in the last decades (Edwards and Rees,
2011). Firms therefore, are coordinated directly by the headquarters located abroad,
creating hierarchical dependency (Schneider, 2009).
Consequently, employers have played a major role in shaping the employment relations
systems in South America through the promotion of policies and politics that support the
‘flexibilisation’ of the labour markets. Due to the new strategies of human resources and
alternatives forms of employment, labour relations have shifted towards a more
individualised emphasis, and alternative forms of production have changed the terms
and conditions for the workforce, regarding payment, productivity methods, and terms
and conditions of the agreement. Additionally, the hierarchical corporate governance
structure has been enforced lately due to the internationalisation of MNCS and the
merge and acquisitions of diversified local business groups.
THE MEDITERRANEAN EMPLOYMENT RELATION MODEL: A MULTI-SYSTEMIC
COMPARISON
Main features of the Mediterranean Model and its resemblance with the South American
Model of employment relations
Challenging the classification of the Varieties of Capitalism approach by Hall and
Soskice (2001), scholars such as Schmidt (2003) and Crouch (1993) have argued that
there is a third variety of capitalism focusing on the role of the state, which enforces a
different form of coordination (Meardi, 2012. P3). In this same line of analysis, Amable
22
(2003) categorised five different models in Europe, and classifies France, Italy, Spain,
Greece and Portugal as part of the South European Model, or the Mediterranean Model.
The Mediterranean model is characterized by a very active State, which intervenes by
‘influencing’ this is by enhancing or by hindering business and labour activity (Schmidt,
2003. P5). These paternalistic states have a generous welfare system (specially
regarding pension schemes), are highly regulated, and traditionally have been
considered inflexible. Thus, the institutional framework tends to emphasis more in
employment protection than social protection, within lower levels of market competition
and a lack of “short-term profit constraints owing to the centralization of the financial
system” (Amable, 2009. P21). The Mediterranean countries share a common history and
context, and today are facing the same challenges regarding the problems to combat
poverty, informality, unemployment and pension scheme’s sustainability. These are
some of the same challenges that South America has been facing for more than a
century.
These countries are characterised by late democratisation processes, an inadequate
shift from an agricultural society to industrialisation and a significant sector of small and
medium firms. Additionally, there is an active involvement of the state through the
nationalisation of banks and other public services which compensate the lack of private
investment, a fragmented union movement and a powerful private sector (Ebbinghaus,
1999. P19-20). Spain, Italy and France exemplify the traditional Mediterranean Model,
and at risk of oversimplifying, even though these countries have many differences
between each other, particularly with the institutional transformations of the last decade,
they still share patterns in their employment relations systems.
Accordingly, France employment relations has been described as densely bureaucratic
in the management of organisations, with an omnipresent state in the regulation of
economy and the market, with high level of hierarchy, and “low-trust union-management
relations liable to periodically explosive conflicts” (Jenkins, 2000. P3). On the other hand,
Italy is described as a country with a generous welfare regime, and a broad difference in
unemployment rates and labour regulation across the regions (Regini and Colombo
2009. P4). Spain is also characterised by a weak corporatist tradition, with lack of strong
democratic institutions and a decentralised bargaining structure, with low union density
and hostile relations at firm level (Royo, 2005. P19).
23
Therefore, it can be stated that throughout history, in the Mediterranean model the state
has influenced the industrial relations in the Mediterranean countries, either by
enhancing or by hindering business and labour relations. The state participates actively
through legal intervention since as in South America, there is a dense and large quantity
of labour regulation, which has been reformed lately. This is the case of Spain, France
and Italy, where the State moved from a state capitalism towards a state-enhanced
capitalism within the institutional transformation of the last three decades.
Since the mid 1980s, the state has withdrawn from his role of replacing the place of the
market in wage coordination, active participation in nationalised industries and through
the definition of the institutional framework (Schmidt 2007, P5). A gradual deregulation
and privatisation has been achieved through legal changes, which gives more autonomy
to the firms and the trade unions. These legal changes have driven the states towards a
more market oriented, with liberalisation of financial market, privatisation, ‘flexibilisation’
of labour laws and a tendency towards decentralisation of bargaining. The liberalisation
of the financial markets from the state, allowed the private sector to substitute the state
and bank funding with equity financing, generation a boom on the financial market
(Schmidt 2003, P531-534).
Hence, the ease of labour standards has been also introduced in the Mediterranean
employment relation’s model, due to the new pressures of world competition.
Nevertheless the changes are slightly different from South America, due to the
pressures from the E.U. regulations. In Spain, France and Italy, there has been an
introduction of flexibility under the requirement of fulfilling core labour standards from the
EU ‘social model’. In order to prevent social dumping and avoid competition through low
levels of employment standards across Europe, but still maintain the levels of
competiveness and flexibility necessarily to succeed in today’s market economy, a new
policy framework under the name of flexicurity was developed (Collins, P9). Flexicurity
tries to reconcile the paradox of efficiency use of labour with mandatory minimum
standards regarding employment conditions (Collins, P9). However, this has not stopped
the deregulation, labour market decentralisation and the privatisation of the main
industries. Laws have eased the dismissal procedures and working hours, among other
conditions, while governments aim to ‘moralise’ employment relations (Schmidt 2003,
P536). Despite the differences in the approaches towards legal changes and the
24
introduction of flexicurity, South America and Mediterranean countries still share patterns
of protectionism in the legislation, as it was analysed above.
In this regard, the role of the state as a regulator in the Mediterranean countries is still
significant. The same can be established about South American’ states. Yet, their roles
have changed after 1990s. In both, South America and the Mediterranean countries the
states have increased the levels of deregulation aiming for more flexibility and autonomy
of the parties, and are not longer the centre of employment relations. In the last
decades, the lack of trust in the union movement made it necessarily for the states to
intervene in the collective bargaining regulations and the management of unions’
formalities. Nonetheless, there has been a shift towards an increase of autonomy in
dealing with employers and unions’ relations and a subtle withdrawn from the state. The
social partners exercise autonomy in the development of business strategies, investment
decisions, production methods and wage bargaining.
Despite the above, the state still has a great deal of influence in the development of the
legal framework, and keep seeking to influence labour and business where it see it can
(Schmidt, 2003. P536). In the state enhanced market economy of the Mediterranean
countries, as well as the South American Model, the state intervenes whenever the
market or labour cannot. This is in labour regulation, in the general macroeconomic
policies to promote competitiveness, in the structure of the welfare system and pensions
regulation, and through social and educational policies (Schmidt, 2007. P7).
In the Mediterranean Model of employment relations, the state also has an active role as
an employer. According with ILO’s report, the average of public employment in Spain is
of 15%, in Italy of 16% and a high rate in France of 25% approximately (ILO, 2002).
These statistics have a correlation with South America as it was exposed above. Despite
privatisation, France for example still holds a large proportion of shares in several
infrastructure companies and in other large companies of public services. In this regard,
South America and Mediterranean countries still have an active participation as an
employer, setting a benchmarking in labour relations (Martin and Thelen, 2007).
Furthermore, the State in the Mediterranean countries still intervenes in great measure
in the welfare system. The Bismarck model of pensions, as most of Continental Europe,
influenced the Mediterranean welfare regime, created to protect employees from the
25
risks derived from the capitalism (Regini and Colombo, 2009. P2) and although they
have been modified in the last decade, welfare expenditure in Mediterranean countries is
still generous. It has been characterised as being dualistic, in the sense of being funded
by the state and by contributions rather than by taxes; as universal, aiming to cover all
the risks associated with elderly, death, disability and unemployment; and with a large
participation of family assistance (Gal, 2009. P6). Nevertheless, it faces the same
challenges of South America and several institutional reforms lead by the state have
taken place to reduce the social spending in welfare in most of Mediterranean countries.
As in South America, the welfare is not universal, is inefficient, fragmented and greatly
segregated on occupational basis (Regini and Colombo, 2009. P11).
After an analysis of the role of the state, in order to understand the Mediterranean model
of employment relations and its relationship with the South American one, it is important
to examine the role of the unions. Collective relations in the Mediterranean countries
share several patterns and a tradition of low density and a politically fragmented union
movement (Ebbinghaus, 1999. P20). Unionism in the Mediterranean countries is
characterised as being weak, ideologically divided and fragmented, as in South America.
Additionally, there is a tradition of hostility and a propensity towards strikes and
stoppages, as unions have been struggling against authoritarian governments and
intransigent employers (Ebbinghaus, 1999). The lack of cooperation and trust of unions
is another similarity with South America. In this regard, the state has assumed the role of
regulating bargaining and union structure until very recently. Still, in the Mediterranean
countries there is no pattern regarding union density and union political or bargaining
power. Hence, Italy in 2008 had a union density of approximately 35%, France of only
8% and Spain of approximately 15%. In contrast, their bargaining coverage has little to
do with their union density, and in that sense, France has a coverage of approximately
90%, Italy of 80% and Spain of 71% (Eurofound, 2008). This has to do with their
bargaining structure.
Accordingly,
collective
bargaining
in
Mediterranean countries
is
extended
to
nonunionised employees in several cases. However, there are cases such as in Spain in
which the parties can exclude the application of the collective bargaining agreements by
means of an individual contract. In the Mediterranean model, the institutional and legal
framework is dense and was projected to establish a centralised bargaining at national
26
or sector level. Nevertheless, unions are weaker at firm level, and there is a constant
tension among the biggest confederations, as is the case of France and Italy.
Furthermore, the national and sectorial bargaining deals with employment benefits,
social security issues and several policies regarding development and training.
Despite the institutional framework arrangement, the decentralisation is becoming a
general rule due to the recent changes in the employment structure, the severe
economic crisis, the political fragmentation of the trade unions as organisations, and the
withdrawn form the state towards a voluntarism approach (Schmidt, 2003). To reverse
this effect, Spain and Italy have introduced several efforts to institutionalise social pacts
and cooperative relations in the workplace, with a certain degree of success
(Ebbinghaus, 1999. P20). Nevertheless, the decentralisation is a noticeable tendency in
collective bargaining in current days. This is a divergent point with South America. In
Colombia and Chile there has been a decentralised bargaining structure since the
institutional framework arrangement. Still, Brazil with its novo sindicalismo is shifting
towards a more centralised (although voluntary) approach to bargaining through bilateral
bargaining with large firms and large federations, as in the Mediterranean.
On the other hand, employers in the Mediterranean countries have been characterised
as being authoritarian and hierarchical (Ebbinghaus, 1999. P15), and there is a large
number of small employers with an antiunion tradition (Schmidt, 2007. P8), which might
explain the confrontational relations with unions and the propensity for strikes and
stoppages, that characterises the Mediterranean unionism. However, in the last years
there has been a shift towards a more cooperative approach and alternative human
resources management methods, which focus more on the individual performance and
higher levels of autonomy. This has been accompanied with the reduction of labour
costs and the implementation of temporary agreements, as in South America.
Additionally, the reforms and legal changes of the last decades, and the incorporation of
MNCS in the area have also impacted the corporate governance structure in Spain,
France and Italy. There has been a shift from a long-term funding and bank debt towards
an equity financing (Schmidt, 2003. P534). This market dependence in industrial
relations has increased the autonomy of the firms in the private sector. Nonetheless, the
share ownership is still more compressed than in countries from the anglo-saxon model,
27
ensuring that the interests of key shareholders hold larger power (Schmidt, 2003. P539).
In line with the abovementioned, at an inter-firm level there has been a change in the
productivity due to a pattern of vertical integration of larger firms over smaller ones. This
hierarchical structure promotes integration in the productivity chain (Schmidt, 2003.
P546), through diversified local firms or throughout the incorporation of MNCS, affecting
once more the corporate governance structure of the Mediterranean model. The
hierarchical structure and the condense holding of shares is a pattern in the
Mediterranean countries as it is in the South American countries. Still, the concentrated
share ownership in South America is characterised as involving family ownership. In
both models, the state intervenes by influencing the legal framework and by participating
actively in the shares of the businesses. Moreover, in the last decades there has been
an increase of autonomy of the firms and the reliance in capital markets.
In sum, it can be stated that South America shares similar patterns of union identity and
tradition; collective bargaining structure; an enhanced state activity, which assumes the
role of legal designer, public employer and welfare pillar; and shares similarities
regarding employers’ organisations and corporate governance arrangements. Despite
the divergence among countries, it can be established that the South American model of
employment relations system resembles in its main patterns to the Mediterranean one,
with the institutional changes of the last decades. More than a convergence towards an
anglo-saxon model due to globalisation and internalisation of the markets, the
privatisation, flexibility and deregulation in the legal framework have shaped in a
particular way the institutions of employment relations in both models in a similar way, as
it was exposed.
CONCLUSION
This paper has explored the main features of the South American Model of employment
relations and its resemblance with the Mediterranean Model. The analysis of the role of
the state as a promoter of changes in legislation and as an advocate of the institutional
framework, the unions’ identity and bargaining structure, and the employers’ role and
corporate governance structure of Chile, Colombia and Brazil in employment matters,
have provided some patterns across the Continent. Additionally, comparing these
28
patterns with France, Spain and Italy employment’s institutions, it can be stated that both
models have a close correlation regarding the employment relations systems. Despite
the cross national differences regarding size, economic performance and social-politic
context, there are cross national patterns in terms of employment in South America and
the Mediterranean countries that indicate a strong resemblance of the institutional
framework of the employment relations model, and the role of the main social actors, i.e.
the state, the unions and the employers. Thus, South American model of employment is
an extension of the Mediterranean Model of employment relations.
South America and the Mediterranean countries share many similarities, which have
shaped their employment relations’ model. These two models have been typified as
having weak institutions with an omnipresent state, which intervenes through legal
regulation, shaping the institutional framework. Additionally, the state intervenes as the
main employer and as the designer of the welfare system, affecting the employment
conditions and setting a benchmark. The South American and the Mediterranean models
of employment are heavily regulated and until very recently, they contained protectionist
legislation regarding employment. However, they are also characterised as having low
levels of fulfilment. The state intervened in industrial relations since the unions were
weak and did not have the power to bargain and restore the balance of the labour
relations with a tradition of intransigent antiunion employers. In that sense, unions have
been confrontational and weak institutions that do not have the strength to transform
labour demands into rights in the workplace.
Moreover, Mediterranean countries and the analysed South American countries, are
characterised for having a very particular hierarchical structure regarding employment
relations and corporate governance structure. Nevertheless, after facing periods of redemocratisation processes in the twentieth century and the challenges of neoliberalism,
the institutional framework between social actors has changed. In the last three decades
there has been a transformation of the employment relations systems due to legal
changes regarding ‘flexibilisation’ of employment, decentralisation of bargaining, a
withdrawn of the state from certain activities, all which provide more autonomy to the
unions and employers and a greater reliance in the equity financing.
29
Through the classification of the South American model of employment as an extension
of the Mediterranean model, this paper has provided a theoretical and practical insight
into the research of the employment relations. Hopefully, it will contribute by influencing
the rule-making context, providing new insights to describe new models of employment,
putting in the spotlight South America, which is traditionally ignored. Further research is
needed in the analysis of other Latin American countries, such as Mexico, to determine if
the patterns found can be replicated in the entire continent. The comparison and
abstraction of similarities and differences between Latin America and Mediterranean
countries provide a benchmark to identify institutions and actors, and perhaps, add
alternative ways for social and economic success, since institutional differences may act
as competitive advantage.
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