Spanish Company Calvo announced the reduction of its operations due to the “imminent loss†of the General System of Preference Plus (GSP Plus) for Salvadorian tuna in the European Union (EU) markets. Such a reduction means that Calvo will have to terminate one of the production shifts of its facilities located in La Union, with the consequent personnel layoffs.
The Salvadorian, President Mr. Elias A. Saca, informed the local press that “after Calvo’s layoffs of 600 working places, the Government will make the appropriate arrangements and take the necessary steps to provide the workers with jobs in other manufacturing companies and help absorb this labor situationâ€.
Since September 2003 the Spanish Group Calvo installed its tuna facilities in La Union providing work opportunities mainly to women from a Salvadorian area considered as one of the poorest in the country.
The employment reduction is the direct consequence of the “imminent loss†of the preferential duties granted by the EU to developing nations.
As of January 1st 2007, the EU will put into effect the new GSP Plus, which requests the beneficiary nations to ratify the agreements of the World Trade Organization (WTO).
Furthermore, the current GSP will expire next December 31st. Therefore, El Salvador will not be favored by a preferential tariff until it fulfils the new EU requirements for trading cooperation.
According to Calvo, 95% of its exports from El Salvador go to EU countries and, without the GSP Plus benefit, the applicable import tariff will be 20.5%.
El Salvador has not ratified two agreements regarding trade union association on the public sector and the collective job contracts. The Government insists on the fact that both ratifications need to go through constitutional reforms to be approved by the current Government and also to be confirmed by next term.
The Legislative Salvadorian Assembly composed by 84 members of Parliament finalized last April 30th. However, WTO agreements were not approved. Therefore if new the Government proceeds now a fresh ratification, it will be need according to forthcoming legislation which can only be by the beginning of May 1st of 2009.
President Saca remarked that his Government is exploring all possible diplomatic procedures with the EU to avoid loosing the duty benefits and insisting on the ratification of the WTO agreements “since it is a condition that arose after the arrival of the Calvo Group to El Salvador, so it should be solvedâ€.
There is a waiting period, since ratification first needs to be analyzed from a constitutional perspective.
Calvo has invested USD 118 million in El Salvador and during the year 2005 over 20,500 tons of tuna have been exported. This represents an exports value of USD 75 million, so far. Calvo announced “that although it is determination to maintain its factory in El Salvador, it is unsustainable without the GSP Plusâ€. Calvo will continue operating its tuna fleet in the Eastern Pacific Ocean under the Salvadorian Flag. Most likely raw materials from these vessels will now be shipped to production locations of the Calvo Group in other nations.