New Peruvian agrarian law approved after a month of tension

A few days before the end of the year, the Peruvian Congress approved the new agrarian law that will regulate the conditions of agricultural workers and the state taxation of companies, among other aspects. On 29 December, the green light was given to this project, which had been awaited since the beginning of the month.

Exactly one month before its approval, on November 29, workers in the Peruvian agricultural sector took to the streets to demand an improvement in wages and working conditions, especially those in the agro-industrial sector. They were calling for new legislation that would shield a minimum daily wage of 70 soles (15 euros) - currently 39 soles - along with social benefits and other benefits.

On the last day of the session, Congress managed to approve a series of measures that did not convince the workers, but neither did the employers. Some of them are too few and others too many. 

Thus, on the subject of wages, a 30% bonus on the minimum wage has been secured. This is 930 soles (209 euros) per month, which with the bonus would reach 1,209 soles (272 euros). However, the bonus is not remunerative and does not count towards employment benefits or contributions to pension systems, whether public or private. In short, the daily increase would reach 50 soles, far from the 70 soles claimed by workers.

Progress is also being made in the participation of workers in the company's profits. It will be a gradual process. Until the year 2023, 5% of this will go to the workers, to be increased to 7.5% in the following three years. From 2027 onwards, the goal of distributing 10% of the company's total profits among the workers will be reached. 

On the other hand, it is established that the law will be applicable to agricultural areas larger than 5 hectares, and the working day will not exceed 8 hours per day and 48 hours per week. 

With regard to taxation, both large companies and smaller ones are expected to end up paying a 29% income tax rate. Larger companies will be taxed at this rate from 2028 and smaller ones from 2031.

However, reaching the approval of the new law has not been an easy road. As explained above, at the end of November this year, the first protests began in pursuit of improved working conditions for agricultural workers and greater income sharing.

That is when Congress decided to repeal the agricultural law in force until then and give itself a period of 15 days to approve a new regulatory framework. This happened in the early hours of December 4. And it was not until the 29th of the same month that it went ahead. In between, hard clashes between workers and police caused the death of several demonstrators, as well as dozens of wounded. 

The previous law governing workers in the sector was the so-called Chlimper Law, enacted in 2000 by the agriculture minister, José Chlimper, of Alberto Fujimori's government. That same year, Chlimper, according to the newspaper La República, also began his career in agricultural exports as president of the agro-export company Sociedad Agrícola Drokasa S.A (Agrokasa).

Congress, for its part, rejected the first draft of the law that was presented to parliamentarians on 21 December. The Economic Commission of the Congress had to reformulate it. December 24 was the date chosen for this, but due to the lack of a quorum it was postponed to Saturday 26, thus increasing social unrest. On Monday 28th the bill generated by the Economic Commission on Saturday was again rejected and sent back to the Commission to be dealt with on Tuesday 29th December.

It should be noted that the 29th was the last day parliamentarians had to approve a regulatory framework for agricultural activities. Theoretically, the parliamentary recess began on 18 December but the agrarian law, among others, needed immediate approval and it was decided to extend the parliamentary year to 20 December, which in the circumstances had to be extended again to 29 December.

The provinces of Ica, La Libertad and Lambayeque have been the most active in the protests and demands of the agricultural workers. In fact, workers from the agro-export companies in these areas do not support the new regulations approved.

The fact is that the workers of the large agricultural companies have been the main driving force behind the protests. Agricultural exports have grown in importance in Peru in recent decades. In 2000, agricultural products worth 390 million dollars were exported. Twenty years later, agricultural exports amount to a total of $6.6 billion. It has also increased its share in total national exports, from 5% to 13%.

Agricultural production has increased annually by an average of 6.4 % between 2008 and 2018. This is much higher than the rest of the agricultural sector (2.2%) and the economy as a whole (4.9%), according to data from the Peruvian Central Reserve Bank. The same institution refers to a 160% increase between 2010 and 2018, from 147,000 to 382,000 workers.

In any case, this is a relevant sector for the current Peruvian economy, with high growth rates and greater labour participation. This has led to the demand for improvements demanded by workers and that Congress has taken a step in this direction. However, everything will depend on the actions that both employers and workers take in the coming weeks, given the discontent of both poles. The ball is now in the hands of the incumbent Executive, which has 15 days to approve it or return it to Congress.