Labor codes in Latin America entrust the state with the role of ultimate arbiter, with the power to intervene at any stage in labor negotiations. In view of these statist arrangements, workers have limited incentive to organize into trade unions and pursue collective action. Perhaps as a consequence, trade union membership in Latin America is low and declining. The coverage of collective hiring arrangements is also limited, and far lower than in European countries. If worker protection arrangements were to depend less on government legal mandates and more on contractual agreements among the parties involved, then trade unions and collective bargaining could become the dominant factors in the process.
Governments face two fundamental challenges in ensuring adequate protection of workers' rights.
First, governments must ensure basic rights of trade union organization and collective bargaining, so that broader groups of workers may take refuge beneath the union umbrella. Second, governments must also scale back their involvement in the bargaining process and in resolving disputes between businesses and workers. A promise of government intervention is all too often an invitation to strike, as it leaves the door open to political considerations that obscure and complicate the bargaining process.