BY KEVIN G. HALL
 Herald World Staff

 SANTIAGO, Chile -- The Chilean economy will grow by 6 percent this year, but
 the country must reform its labor laws to distribute the wealth more equitably,
 Chile's new president, Ricardo Lagos, said Monday in his first news conference.

 Lagos, who began a six-year term Saturday, said he will have a labor law reform
 package ready to send to Congress by next week. Neither he nor his aides
 provided details on how he would pay for reforms such as creating an
 unemployment insurance fund.

 ``We are certain that the state will have to participate, and so will the private
 sector,'' Lagos said.

 Labor reform is a significant issue in Chile. While most of South America is trying
 to reform the cumbersome labor laws of bygone eras, Lagos wants to create them
 in a country where military rule quashed labor unions. Gen. Augusto Pinochet
 yielded power to civilians in 1990, but many labor practices still date to his
 17-year rule.

 Unlike in much of the world, the Chilean government makes no contribution to
 unemployment pay for workers, and unions' ability to organize and seek collective
 bargaining was sharply curtailed. For much of the 20th Century, unions had been
 an important political force in Chile, which had Latin America's longest record for
 democratic transfer of power until a coup led by Pinochet deposed President
 Salvador Allende in 1973. Lagos is the first Socialist elected president since
 Allende.

 Lagos faces an uphill battle in trying to create new protections for workers, who
 now get a month's pay for every year of employment from employers when
 terminated. The response is likely to be chilly from business-friendly conservative
 parties in Congress.

 Past attempts at compromise on labor laws got hung up on provisions such as
 those that allow companies to replace striking workers.

 ``It will be a test case,'' said Manuel Riesco, a Santiago economist, adding that
 Lagos' efforts may set the tone for relations between the new president and the
 conservative opposition.

 In line with most predictions by economists, Lagos expects economic growth of
 at least 6 percent in real terms this year, and he pledged to keep Chile's budget
 balanced. ``We think the government of President Lagos has a readied playing
 field for a good economic year,'' Eduardo Aninat, deputy managing director of the
 International Monetary Fund, said of Chile's growth prospects.

 Lagos repeated that he wants to use revenue from new growth for needed
 spending on education and health care. In an address to the nation Sunday night,
 he pledged to create a program for a minimum level of universal health care, but
 did not say how it would be funded.

 In a nod to his onetime boss, Lagos told reporters Monday that, like Allende, he
 would give citizens access to the presidential palace during business hours.
 

                     Copyright 2000 Miami Herald