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A pleasant surprise
Sewing discontent in Nicaragua: the harsh regime of Asian garment companies in Nicaragua.
By Raphaelidis, Leia
Publication: Multinational Monitor
Date: Monday, September 1 1997
MANAGUA - Since the U.S.-backed UNO coalition defeated the Sandinista Party in 1990, Nicaragua has careened down the neoliberal economic path. Nicaragua has privatized state-owned industries, reduced protective tariffs, restricted credit availability and adopted a host of other measures designed to lure foreign investment to the country. The result has been skyrocketing under- and unemployment - 60 percent, according to the Nicaraguan research institute the International Foundation for the Global Challenge (FIDEG).
Despite the policy reforms, foreign investment has not flooded into the country.
A significant proportion of those foreign investors who have come to Nicaragua are Asian garment makers who sell their wares to U.S. apparel companies and retailers.
Asian companies make up half of the 18 companies housed in the Zona Franca Las Mercedes, Nicaragua's main free trade zone. Five of the companies are Taiwanese (Chentex, Chih Hsing Garments, China United Garment, Fortex Industrial, Nien Hsing International), three are Korean (Cupido Internacional, Istmo Textil and Nicseda) and one is from Hong Kong (Metro Garments). All but Cupido Internacional produce garments for export to the U.S. market. They work on contract for U.S. apparel companies and retail giants such as J.C. Penney, Sears & Roebuck, Walmart and Montgomery Ward. While some have had the same client for years, others change contractors more frequently.
Nicaragua offers tremendous incentives to foreign investors in Las Mercedes - though other poor countries in the Caribbean and Central America offer similar packages. Among the benefits Nicaragua provides are:
* a 100 percent exemption on income tax for the first 10 years of operation;
* exemptions on sales and capital gains tax;
* tax exemptions on the import of raw materials and machinery;
* no duties on exports, and a U.S. waiver of quotas on textile imports from Nicaragua;
* an industrial minimum wage of approximately $.41 an hour, the lowest in Central America; and
* low rental costs for industrial space in Las Mercedes.
Some company representatives say they are attracted by other perks. A representative of a Korean-owned maquila indicates that his company moved its operations to Nicaragua from Costa Rica because Nicaraguan workers had "nice working attitudes," while Costa Ricans had some "attitude problems." He illustrates his point with the following example: "If the work was supposed to end by 5 p.m., Costa Ricans would stop working right at five, even if they were in the middle of a particular job that needed to be finished right away. However, Nicaraguans tend to finish the work. ... They do not even mind working on Saturdays, when they are called in for extra work. They are hardworking people. ... Nicaraguans know what it is like to be hungry, Costa Ricans do not." When pressed, he admits that Nicaragua's lower wages was also a major factor in the company's decision to move.
The Asian-owned maquilas tend to be much larger than the rest of the plants in Las Mercedes. Among these, the Taiwanese-owned plants occupy the most industrial space, nearly 50,000 square meters. They employ the most people, currently about 5,500, 80 percent of them women.
Asian investment in the maquila sector is expected to keep growing. Chih Hsing Garments, the newest plant in Las Mercedes, was inaugurated with much fanfare this past May, and according to its owners, it will eventually employ 2,300 Nicaraguans. Another Taiwanese company, King Garments, is in the process of negotiating with the government and may open at the end of 1997.
Working conditions in the maquilas vary from plant to plant, though wages throughout Las Mercedes are comparable. Even under the best of conditions, garment assembly is tiring, repetitive work. In the Zona Franca, where no maquila even approaches ideal conditions, the work is backbreaking, and in some cases, dangerous. In general, the Asian-owned maquilas have the worst reputation among workers for the tremendous pressure put on the employees to keep up the pace of production.
"We're not allowed to stand up [from our machines] and we're not allowed to talk, even if we're seated next to each other," reports an employee of Chentex. "If [a supervisor] sees your lips moving, she immediately comes over and tells you to be quiet." She adds, "Since production goals are so high, you have to work and work and work and never take a break. ... If you want to take home a halfway decent wage, you have to work from seven in the morning till seven at night and on Saturdays too."
It is difficult to calculate an average wage for workers on the assembly lines, since they are paid according to a piece rate. Their earnings depend on their speed, the price the company pays for their particular operation and the number of hours of overtime they put in, whether voluntary or forced. Another factor is the availability of work, which varies according to season. A couple of months before major shopping seasons in the United States, such as back-to-school and Christmas, there is more than enough work to keep every assembly line moving at a near-frantic pace. During slow times, however, workers sometime are forced to sit at their machines with nothing to do for hours or days at a time. In this case, they are paid a flat rate that tends to be much less than their piece rate earnings.
When on the piece rate, workers report earning anywhere from about $3 to $5 per day, though during peak periods some can take home as much as $10 for a long day's work. The Chentex worker quoted above reported that she was paid $1.35 for every 100 pairs of jeans pockets she attached. If she worked nonstop, she could attach 500 in a day, taking home about $6, after deductions. Some co-workers, she said, only reached 300. New workers often earn a set wage during an initial training period, after which they graduate to the piece rate.
According to conservative government estimates, a Nicaraguan family needs about $150 a month just to cover its most basic needs. Though the wages paid to workers in the maquilas are equal to or above the minimum wage, they are usually fall well short of "a living wage."
When asked about wage rates, the assistant manager of a Korean-owned maquila responds that the complaints about low wages came mostly from "workers who do not work hard." He adds that his company pays the standard wage in the Zone and that his workers are paid well compared to people outside the maquilas.
This latter point is valid to a certain degree; in Nicaragua's cash-starved economy, maquila workers do earn more than maids, teachers or even doctors. However, wages for manufacturing jobs tend to be higher outside the Zone. Unfortunately, competition from abroad and lack of credit have wiped out many of the industries that existed in the 1980s, while the Nicaraguan private sector (read: the oligarchic class) has failed to fill the investment vacuum created by the government's downsizing of the state. To his credit, the assistant manager at the Korean maquila admits that he cannot understand how his workers manage to survive on the wages they earn.
Besides the wage levels, other common complaints from workers include: verbal abuse and occasional cases of physical abuse on the part of the Asian supervisors; timed bathroom breaks; forced overtime; firings for minor infractions (such as being caught eating or missing a day's work); unhealthy working conditions (including clouds of lint in the air and scats with no backs), limited access to the Zona Franca's health care facilities and widespread violations of the right to organize.
Workers consistently report that going to the Ministry of Labor to lodge a grievance is a waste of time because "the Ministry does nothing." Furthermore, if the company finds out about the visit to the Ministry, the individual runs the risk of being fired. Workers are well aware of how easily they can be replaced and that awareness helps keep them "in line."
Without a doubt, the proliferation of maquilas has been a mixed blessing for Nicaragua. On the one hand, given the country's shockingly high unemployment rates, Nicaraguans desperately need the work. For many people, a job at the Zona Franca is better than none at all. Maria, a worker at a Taiwanese-owned maquila, indicates the desperation of Nicaragua's workers. "The [Asian investors] are doing a great thing," she says, "They're exploiting us but they're giving us jobs. ... Who knows where Nicaragua would be without them."
On the other hand, the maquila model is of very limited long-term benefit to the country. The kind of foreign investment it attracts can leave as quickly as it appeared. The maquilas have almost no linkages to the local economy, since the garments are made exclusively of imported raw materials. There is virtually no technology transfer; the textile industry is not new to Nicaragua and most of the equipment used in the plants are simple sewing machines. Furthermore, other than for some administrative personnel and a few industrial mechanics, the maquilas generally do not require a highly skilled workforce, nor do they make any long-term investment in their employees.
Despite the many drawbacks of the maquila model, Nicaragua's government, led by President Arnoldo Aleman, is committed to expanding the maquila sector. This commitment is based on political interests: during last year's presidential campaign Aleman promised to create 100,000 new jobs, and promoting maquilas represents the fastest way to create at least some jobs without straying from the free-market policies required of the Nicaraguan government by its international creditors.
To further this aim, the Aleman administration is cultivating elaborate ties with Taiwanese investors and the Taiwanese government. In addition to the maquila operations, Taiwanese investors in Nicaragua have interests in shrimp production and tourism. Meanwhile, the government of Taiwan has promised Nicaragua $150 million in foreign aid, designated to help with balance of payments problems and to fund a number of development projects. Not surprisingly, one of those projects is to be a center for training people to work in Taiwanese-owned maquilas. The foreign aid also helps buy Taiwan political support from Nicaragua in the United Nations General Assembly.
It is easy to see that within this great, convoluted scheme, the foreign owners of the maquilas and the U.S. apparel companies and retailers that contract them emerge as the clear winners. With almost complete immunity, they are boosting corporate profits at the expense of workers' rights, while at the same time they are lauded by the government and the press for having created jobs. Nicaragua's workers are not demanding that the maquilas go away. But they are demanding dignity.
Leia Raphaelidis is a member of the Nicaragua Long Term Team of Witness for Peace. Most of the research for this article was conducted by the Long Term Team. All interviews with representatives of Korean companies were conducted by Bo-Kyung Rim Kirby.
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