MEXICO CITY (Reuters) - Mexico's Senate on Tuesday approved a wide-reaching but watered- down labour reform bill in the biggest shake-up of the country's job market in more than four decades.
The bill's approval came after a protracted tussle between outgoing President Felipe Calderon's National Action Party (PAN) and pro-union hardliners within the Institutional Revolutionary Party (PRI) of president-elect Enrique Pena Nieto. The PRI has traditionally relied on union support.
"We shouldn't underestimate what we have," said PAN senator Javier Lozano. "It is a very good labour reform economically speaking which will really stimulate competitiveness and productivity, and will modernize labour relations."
Nonetheless, the bill, approved by 99 votes to 28, has been criticized by some left-wing politicians who accused the government of trampling on the rights of Mexico's workers. Protesters gathered outside the Senate and local television reports showed small scuffles breaking out.
"What we're doing here is annulling worker's rights," said Alejandra Barrales, a senator from the leftist Party of the Democratic Revolution (PRD).
The bill, which the government said will create up to 400,000 jobs a year, contains a raft of measures, including changes that would make it easier for firms to hire and fire workers and shorten labour disputes. However, parts of the bill that sought to make unions more transparent were cut back.
Pena Nieto sent a tweet congratulating Congress on the passage of the bill, which he said would "improve the productivity and competitiveness" of Mexico.
Under the new measures, work contracts will be more flexible, enshrining trial periods and initial training contracts in labour laws. Regulations will also be tightened on outsourcing of personnel, while the minimum wage will rise from an hourly to a daily rate.
The reform also strengthens the rights of working women, including outlawing gender-based discrimination and helping mothers plan their work schedules.
Unions will have to publish their regulatory statutes on the Ministry of Labor's website, but many of the tougher measures - including rules to force them to show how they manage members' fees - were dropped.
Pena Nieto faces an uphill battle to create jobs once he takes office. Last week, Calderon said 2.1 million new jobs were created during his six-year term, but that figure is well short of his promise of 1 million a year.
Between 2006 and 2011, the number of Mexicans old enough to work grew by some 6.5 million, according to data from the national statistics office.
If the bill succeeds in creating new jobs, it will help stem the flow of workers heading into the informal economy, which some estimate employs more than 10 percent of the population and costs Mexico up to $15 billion in lost taxes each year.
"There is a possibility that more people will be hired, but not under the right labour conditions," said Javier Oliva, a political scientist at Mexico's UNAM university.
Labour reform, along with an effort to widen the tax base and allow more private investment in state oil giant Pemex have been the three main items on Pena Nieto's economic agenda.
His capture of the presidency returns the PRI to power after a 12-year hiatus. The centrist party governed Mexico from 1929 to 2000, a rule frequently dogged by allegations of vote-rigging, authoritarianism and corruption.
Reformers have been trying for years to bring Mexico's antiquated labour laws up to date and received a boost in September when Calderon tried to fast-track the legislation through Congress.
But before the bill left the lower house, where the PRI can muster a slim majority with the help of allies including the union-backed New Alliance Party, Pena Nieto's party stripped out some of the less union-friendly measures.
Nonetheless, the PRI lacks a majority in the Senate where the PAN, alongside allies from other parties, was able to push its reform through after it ping-ponged between the houses.
Analysts said the reform, which relied on cross-party support between the PAN and the PRI, could herald a new era of bilateral cooperation, but that politicians missed an opportunity to push through a more wide-ranging bill.
"It should have been stronger," said Oliva. "In Mexico we're prone to making half-hearted decisions."
Writing by Gabriel Stargardter; Editing by Simon Gardner and Eric Walsh