March 11, 2016 / 2:54 PM / a year ago

Chilean labor bill clears Senate, but rebels knock down key part

SANTIAGO (Reuters) - Chile's Senate passed most parts of a controversial labor reform bill on Thursday night, but struck down one key provision in a sign of hardening divisions within the ruling coalition.

President Michelle Bachelet has pledged to reform labor relations and give unions more of a say as part of her agenda to tackle deep inequality in Chile, the top copper exporter.

But the reform has put considerable strain on her governing Nueva Mayoria bloc, which takes in communists to centrist Christian Democrats. Many senators in the latter have joined business leaders and the right-wing opposition in fighting against some aspects of the bill.

Of the three most disputed parts of the reforms, two provisions were passed by the Senate after being watered down by Christian Democrats and other centrists. One will allow unions rather than companies to distribute benefits resulting from collective bargaining agreements, and the other will restrict the replacement of striking workers.

A third provision, which would have required employers to negotiate with workers that unite across companies, was struck down as four Christian Democratic senators rebelled.

Though the bill was modified, its passage in the Senate, where it had been stuck since October amid fractious negotiations, is a significant step forward.

It is now expected to face a constitutional challenge by the opposition and will likely need to be reconciled with a version of the bill that passed the lower house. Both processes could be messy and will take weeks, if not months, analysts said.

Conservative members of the increasingly fractured Christian Democrats have said they want to use the opportunity to make provisions more employer-friendly, while left-wingers have pledged to try to reinstall more worker-friendly provisions that were scrapped in Senate negotiations.

"From what I've seen of the government's modifications, I don't think the lower house will accept the changes," said Josue Vega, a lawyer for Chile's largest labor union.

Excessive delays, analysts have warned, could cause the already-unpopular Bachelet to lose bargaining power at a time when she is trying to push through other reforms, including an overhaul of the constitution and a rewrite of its strict abortion laws.

"The worse thing that could happen for Bachelet is losing the support of the parties," said political analyst Kenneth Bunker.

"That brings about a scenario where she lacks the legitimacy to pass other programs."

Editing by Rosalba O'Brien and Jeffrey Benkoe

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