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  Number 150 | Enero 1994
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Nicaragua

Welcome to the Free Trade Zone

The maquila is not a way towards development; it is just a salve to relieve the crisis. It is a desperate, and hopefully transitory, way of concealing unemployment and misery.

Donna Vukelich

Leaving the Managua airport, visitors are immediately greeted by a huge sign in English declaring "Las Mercedes Industrial Free Zone Welcomes You to Nicaragua." Heading north just a bit, one finds this free zone, which proudly proclaims itself to be "the new face of Nicaragua."
Life in Nicaragua today is marked by a push towards the private, the individual and thus an attack on most things collective including in organizational terms. When the Chamorro government took office in 1990, its officials began to talk about the "new era" and the "new economy," preaching the advantages of a free market and the future awaiting Nicaragua as it opened itself up to international trade. It is common to hear the government and politicians of all stripes talking about the need to adapt their strategies economic or political to this new era. Many of the "new" models have as their key foundation something as old as a nearly total faith in the efficiency and moral correctness of the free market. What is new today is how the world has changed, and with it, nearly all the rules of the game.

The free trade zones, known in Nicaragua and the rest of the Central American countries as zonas francas, and more recently as maquila zones, were reactivated as part of this inexorable transition towards a full fledged market economy.
The zones are made up of largely foreign financed maquila plants, which simply assemble imported inputs with cheap local labor and re export the finished product the two key areas historically being textiles and electronics primarily to the developed world. They function in enclaves set apart from the rest of the national economy and are referred to as "free" because they benefit from a range of tax exemptions and other incentives offered by the host governments.

Central America: the 1970s

In the mid 1960s, most of the poor countries of the South still did not have assembly (maquila) plants or free zones producing for the world market. A decade later, the technological innovations taking place in the North led to a new international division of labor and an industrialization of the poorer countries oriented toward new kinds of exports for example, radios, tape recorders, computer chips, blue jeans and sportswear instead of coffee, bananas or sugar. With this new division, the free trade zones emerged.

The free trade zones came to the region during the 1970s, within the context of the new Central American Common Market. They were conceived of by the governments as mechanisms to promote development, and the state was seen as playing a key role.

Nicaragua was one of the Central American countries where the installation of a free trade zone was first planned (in 1973), but the zone did not open its doors until 1996, with eight factories and 3,000 workers. There was even a complementary plan to construct a deep water port on the southern Atlantic Coast near Monkey Point, to facilitate exportation of the zone's products to the eastern seaboard of the US by bringing transportation costs down. But the port was never built.

The free trade zones throughout Central America were taking on more importance by 1980 and were integrated first as part of the Caribbean Basin Initiative and later in the Initiative for the Americas, the economic strategies for Latin America promoted by the Reagan Bush administrations. They fit well with the neoliberal model and the structural adjustment programs the international financial institutions were introducing at the regional level. The emphasis was on assembly process of nontraditional exports. According to the study, "Maquilas and Union Organization in Central America," by Roland Membreño and Elsa Guerrero, "our countries are being converted into huge industrial parks, abandoning any pretension of serving to satisfy internal demand."
There are currently some 1,000 maquiladora enterprises in Central America, most of them textile plants, with 178,000 employees. From 1980 to 1991, maquila exports in Central America and the Caribbean increased by more than 600%. In 1991, Central America's maquilas provided 15% of all US imports in clothing and textiles.

Nicaragua: the 1980s

During the revolutionary decade, Nicaragua was isolated from the large scale economic changes that were taking place internationally, including throughout the Central American region. Although the zona franca was essentially irrelevant to the economy of revolutionary Nicaragua, a small zone did continue to function, producing primarily shoes and clothing.

A worker from the ENAVES textile factory confiscated by the revolution and part of the zona franca during the 1980s remembers those years: "There were problems, but there was protection. They gave us meals, including breakfast and dinner, when we had to work extra hours. They also gave us the basic market basket of goods and transportation." The factories in the zone during the 1980s were unionized and state run. Thus their workers benefited both directly, in terms of their actual salaries, and indirectly, through the many subsidies the state guaranteed to the entire population. That is the key difference with the zona franca as currently constituted.

On the other hand, a study by the Legal Office on Women, done in 1985, showed that women workers in the textiles plants in general had less skilled job classifications and lower salaries than men. That began to change in ENAVES, however, when a woman was appointed as director.

La Maquila: the 1990s

Looking to reinsert the country into the international market, the "1970s style" maquila reappeared in Nicaragua at the end of 1991. New legislation facilitated investment in this kind of enterprise and the zona franca began to function, as it does in all countries, as a productive enclave, isolated and disconnected from the national economy. Nicaragua's free trade zone is still small and relatively unimportant for the country economically, but the prospects are for significant growth. And that's what the government is aiming for. Government statements about the zone circulating among the foreign business community declare that "the government of Nicaragua offers an attractive package of incentives, to all enterprises that qualify, to establish operations in the free zones of the country."
Nine maquila enterprises are currently functioning in Managua, with several more currently under construction. Almost all of them are textile plants. A factory to assemble electronic articles, common in the Mexican and Asian maquiladoras, is scheduled to open in 1994. According to Carlos Zúniga, assistant promotion manager in the government run Zona Franca Corporation, electronics needs more skilled workers and is better paid. "We want to diversify," he says, "because the textile industry is volatile. When labor costs go up, the companies leave."
Three of the nine factories are financed with US capital, one is Taiwanese financed as the factories under construction will be and two are run with South Korean capital. The zone primarily produces clothing for export to the US market, and the products are bought by huge companies like K Mart, Sears and JC Penney.

Investment Incentives and Obstacles

In order to attract this kind of investment, all the Central American governments have offered a wide range of incentives publicized in slick and expensive advertising in the United States. This promotion also broadcasts the pitiful salaries a businessman can pay his workers in Central America, and stresses the legal measures that leave investors in these enclaves virtually free of any economic obligations to the country.
In its documents, the Nicaraguan government announces that Decree 46 91 facilitates the exoneration of 100% of all taxes (import, export, income, etc.) in the first 10 years of operation, with 60% exoneration in the eleventh year and thereafter. The governmental Zona Franca Corporation is the final authority in the zone, and it falls to the government to attract investment national or foreign and, later, assure that it stays in the country. Some observers state that, because of that role, the government completely sides with the factory management. Ligia Orozco, of the Women's Secretariat of the Sandinista Workers' Federation (CST), charges that "the zone functions as if it were another country, with completely distinct laws."
According to attorney Alicia Meneses, from the CST's legal service SALMO, although the factories that set up shop in the zone are exonerated from tax obligations, Nicaraguan law stipulates that the plants there are also obligated to obey all laws in effect in the country. But she says the way it works is quite different.
"Although the Ministry of Labor is supposed to look out for the interests of the workers, the truth is that it represents the interests of these foreign companies. It has rubber stamped firings and mistreatment of the workers," charges Meneses.

Although the government is doing everything it can to present Nicaragua as an attractive investment option, it cannot hide the obstacles that exist. Compared to the other Central American and Caribbean countries, there are serious infrastructural problems, including the lack of a deep water port on Nicaragua's Atlantic Coast, which forces the companies to use the installations at Puerto Cortés in Honduras or Puerto Limón in Costa Rica.

"A lot depends on the country's productivity image, and, in spite of everything that's happened here, we have a good reputation," Carlos Zúniga claims. Regarding public services (water, light, etc.), which so often fail to function in Managua, he adds, "We are always working for the institutions to offer better services in the zone. We want special treatment, because if we received the same treatment the rest of the world does, we wouldn't be able to produce."

Selling to the Highest Bidder

The extension of the maquilas is a symptom of an increasingly internationalized economy and of capital less and less interested in national flags or projects, much less in what happens to the workers of a given nation.

Piece work, repression and low salaries are as old as the industrial revolution that changed the world forever. But the maquilas represent a new dehumanization, since the massive unemployment that is a structural reality in the neoliberal model pushes many people into these difficult working conditions after having experienced other, more humane, ones.

Nicaragua, like the rest of Central America, occupies an unimportant place in the world economic scenario and the only option put forth by the current government is to sell the country to private capital, foreign or "national," which leaves the workers with no other choice than to sell their labor at any price in an increasingly tight market. Nevertheless, what has been seen in the Mexican maquilas could well be the future for Central America.
"Where before maquilas based on intensive use of labor in relatively simple assembly processes were dominant, the industry has evolved to the current situation, where more complex technologies are being incorporated that in turn demand more specialized, and higher paid, workers," says the Membreño Guerrero study.

Maquilas in Nicaragua

As part of its package to privatize state enterprises, the Chamorro government closed a number of state textile, clothing, shoe and other factories which set unemployment soaring among women workers, who had been the backbone of the work force in these industries. When the zona franca opened it doors again in 1991, almost all of the women from the closed textile factories sought and found jobs in the zone, working now for foreign employers.

In its US publicity campaign, the Nicaraguan government emphasized how cheaply investors could acquire these factories. Although it spoke and continues to speak of "private" enterprises, the government plays a key role in consolidating the zone. The free trade zones, showcases for the free market, would not exist if not for other mechanisms that promote them, at the expense of other types of economic activity. In a commentary on the nightly "Sin Fronteras" radio program, CRIES economist Adolfo Acevedo destroyed the myth of the so called free market; his words are pertinent to an understanding of the zona franca. "The concept of the free market is ideological. A free market exists nowhere in the world; there is state intervention and regulation everywhere.... In the case of Nicaragua, the market simply does not function for 70 80% of all Nicaraguans. What the market does is deepen social and economic polarization, instead of attenuating it."

No Unions, Never Ever


One of the first shifts in the transition from state to private capital in Nicaragua's free trade zone was to characterize the unions as non grata, and to totally ban union organization in the zone. Though this move was unconstitutional, the government offered no resistance.

Ligia Orozco is clear about the fact that the CST is not opposed to foreign investment in Nicaragua, but does reject the exploitation prevailing in the zona franca. "We want to organize women within the framework provided by law," says Orozco.

"It's not that unions aren't allowed," says Carlos Zúniga, "it's that no place in the world is there a free trade zone that has unions. A union would mean shutting down the zona franca because, quite simply, investment doesn't come in where there are unions. We're working with the Ministry of Labor to resolve all this, so that unions aren't needed here."

Subcontracting the Work Out

In addition to the free trade zones invading Central America, each country has a series of mini workshops linked to the zones. Operating with private capital, these workshops are sometimes little more than a family based business, and other times employ as many as 25 people. The mini workshops are contracted to do part of a larger job being done in one of the factories. Signs around Managua announcing "maquilas and clothing" indicate the location of these workshops.

This form of work, known as subcontracting, creates a situation in which workers lose the social and organizational environment that one has in a larger workplace. With that, organizational space is lost as is the feeling of being someone within a larger community.
In the textile industry in the United States, this kind of work is gaining a lot of ground, precisely as a way to undermine the historically militant textile unions. Roland Membreño and Elsa Guerrero characterize subcontracting as the "most extensive, and for our analysis, the most important form of work, as we find today that the maquila transcends the limits of a specific territory to include any part of a nation's area."

Women in the Maquilas

According to a study by Ana Silvia Monzón, the characteristics traditionally assigned to women in the social and labor division of society point to "women as a labor reserve that is poorly skilled and therefore cheap, docile and disciplined." This makes women the "perfect" work force for maquila production.

Advertisements in the Nicaraguan newspapers appearing recently read as follows: "Private firm located in the zona franca needs female personnel from 16 to 22 years old." In Central America, women are 90% of the work force of the maquila, which now employs 8% of the economically active female population at the regional level. This is explained in part because the region's most important maquilas are textile plants, an industry that has long been a bastion of female labor. Another reason is of greater concern: businessmen tend to see women, and particularly young women, as ideal workers, more easily manipulated and thus less problematic.
Currently, women over age 20 make up 70% of the work force in the Nicaraguan maquilas, and 62.5% in Costa Rica. The majority of women working in the Central American free trade zones are single heads of household with children.

Ligia Orozco points out that the fact that almost all workers in the zona franca are women creates problems because of the negative concept the employers have of women. In almost all the zones in Central America both verbal and physical abuse is standard. It is common to demand that the women report their marital status and companies often try to find out if a woman is pregnant or not at the time she is hired. Afterwards, women are often submitted to periodic urine tests so the company is aware before a woman herself if she is pregnant and can then summarily dismiss her.

Dehumanized Work

Work in the textile plants in the zona franca is based on piece work. A worker has to be very quick to make any money. For example, six córdobas less than a dollar is the going rate for putting 100 collars on a shirt. Each collar implies three different tasks cutting, sewing, ironing. "I could make 300 collars a day, but only if I really killed myself doing it," says a very experienced worker.

Auxiliadora Abarca, ex Fortex worker, comments: "You're sitting down all day on a wooden bench, with no back. The lighting isn't very good, and by the end of the day, you can't see anything, not even the hole in the needle. And they don't want you to lose even one minute."
When it's a question of work on line, everyone gets slowed down and all the workers pay each time a worker is missing, or there is a problem of some kind or other with one of the operations. The workers complain about all sorts of problems, starting with weak threads that break constantly and slow everything down. There is also serious overcrowding in the majority of the factories, with the workers and their machines very close to each other, which is not only a problem in the event of an emergency, but also contributes to an excessively dehumanized and mechanized environment.

In spite of all these problems, there are always workers who manage to earn fairly well. And what happens to them? They tend to be transferred to other areas inside the factory. "That happened in ENAVES," says Auxiliadora Abarca, "And what happens when they're moving you around every other day is that you never get really good at any one job."

A Typical Story

One Fortex worker, who asked not to be identified, recounts her experience. "When I was trying for the job, I had to fill out a form and say whether or not I belonged to a political party or a union. I also had to say when the last time was that I had a medical check up. I work cutting fabric. I start at 6 in the morning and finish at 5 in the afternoon. Sometimes I have to work on Saturdays and also, if there's a lot to do, I work at night. They pay overtime, but I'm not really sure how much.

"During the revolution I worked at Texnicsa. We had a cafeteria there and they also picked us up in the morning and dropped us off at night. Here you have to bring your own lunch and there's no break, not even a speck of time to eat your breakfast, and they don't let you eat inside the building. The Chinese have their dining hall, but there's nothing for us, so we eat outside, under the trees. The discipline here is strict. There are two supervisors always watching, and that creates a lot of pressure."
"It was better working for the state. It's too demanding here and they don't allow unions. It's almost impossible to get a day off. When my aunt died, I wanted to leave early to go to the funeral, but they wouldn't let me. When I cut my finger on the machine, they gave me 15 days off and only paid me 138 córdobas for that whole time. INSSBI [the Social Security Institute] is supposed to pay 60% of any accident and the factory pays the rest, but it seemed that when this happened to me, they hadn't paid anything in to INSSBI."
The growing complexity and constant intensification of work in the maquilas takes a serious toll on the women workers. According to Membreño and Guerrero, this method of work hides "a conception of the woman worker, and of human beings in general, which reduces her to a kind of cog on the machine. Thus it becomes so important to control the time, and even the bodies, of the workers."
This automatized and intensified model of work in the maquilas, in which every single minute counts, means that the workers aren't allowed to go to the restroom or to drink water except during their 25 minute lunch. This can lead to or exacerbate already existing urinary tract infections.

Speaking before the International Labor Organization (ILO), Alba Palacio, from the National Workers' Front, denounced the factories in the zone as "a permanent source of human rights violations." She charged that the women are locked into the factories, which she called "concentration camps," and said they are searched, all the way down to their underwear, before returning home.

Taking into account the specific problems facing the workers as women, Ligia Orozco underscored the importance of forging and maintaining solidarity relations among the workers, which is beginning to happen, as well as with the country's broader women's movement.

The Case of Fortex

The enterprise that has turned out to be most conflictive in the zone is Fortex, a textile plant operating with Taiwanese capital. When the ENAVES textile plant like many other factories run by the state during the 1980s closed its doors in 1991,the workers received compensation and were promised that they could begin working in the new factory once it began operations. Fortex began production in 1992, and many of these former ENAVES workers started new jobs there, making blouses and blue jeans for export.

The workers didn't receive lunch, the work day was longer and more difficult, the rates were worse and they were subjected to abuse. Little by little, due to these conditions the workers describe as inhuman, some of the women began to resign. Responding to the workers' complaints, the Ministry of Labor inspected some of the factories in the zone, including Fortex, and found a number of irregularities.
According to the ministry, Fortex is quite behind in its social security payments, routinely refuses to pay overtime and hires underage workers, who never appear in any personnel records even though Nicaraguan law clearly established that the names, ages, working hours and salaries of all workers must be duly registered. Anomalies in salary payments were also observed, with non fixed norms regulating base salaries as well as piecework rates. Fortex was given a deadline by which it was to rectify these and other violations.

After the inspection, however, things worsened at Fortex. On September 10, workers there held an 18 hour sit-down strike when the base salary (350 400 córdobas monthly, roughly 60 65 dollars) was eliminated because, workers allege, the owners were angry that some women were able to work quickly enough to make 800 córdobas a month. In addition, the price for some piece work was halved with no written notification or any sort of discussion. The workers demanded access to the piece work scale, payment every two weeks, the installation of a cafeteria on the premises and subsidized transportation to and from work.

Although the factory takeover was peaceful, violence broke out when the owners and managers showed up. Four people workers and representatives from the CST were beaten in the ensuing altercation and the women charged that one of the owners fired his pistol into the air a number of times in an attempt to intimidate the workers.

A Question of Dignity

After the brief takeover, the workers formed a union, and also set up a technical commission to meet with plant owners and Ministry of Labor representatives to resolve the increasingly tense situation. The union charged that the police had been paid off by owner Steven Chang and that all the police documents regarding the night of September 10 have disappeared from police files. Auxiliadora Abarca, at that time a member of the technical commission, states, "While the files were in police hands, the way they treated us in the factory changed, it improved somewhat. But not too much later, they were as hard line as ever. We thought it was sort of strange. Then we found out the files had disappeared." The women charge that they have been told they're "burned" and will never work again in the zone.

Fortex refused to recognize the union, charging that its foreign suppliers of raw materials for production will stop supplies if a union is permitted to organize and function at the plant.

After talks between the union, management and the Ministry of Labor, Steven Chang signed an accord with workers in which the company promised to respect Nicaraguan labor legislation, pay a 400 córdoba minimum base salary and set up a technical team to hammer out production standards and communicate them to the workers. But only a month later, 10 workers were fired and piece rates were cut again.
Responding to what they call increased pressure and intransigence by management, more than 200 workers resigned from Fortex on October 14. Ministry of Labor officials recognized their complaints, but said it can do nothing on the workers' behalf since the resignations were voluntary.

"When we resigned," says Auxiliadora Abarca, "They were firing six people, and four lines of work different jobs on the assembly line had disappeared in less than a week. That meant that each woman had to work much more. For example, now a collar meant six or seven tasks. And if you have to iron the collar with a defective iron, you lose more time. These are little things, but they affect us very directly." Abarca called the resignation "a question of dignity," adding that "what we wanted was labor and psychological stability, but it couldn't be done."

Desperation and a Challenge

In many ways, the free trade zones are similar to the company towns that grew up around the coal and copper mines in the US earlier this century, based on authoritarian and paternalistic relations between management and the work force over whom the owners exercised considerable control. The owners even controlled the ability to close down factories overnight and convert whole populations into ghost towns.

Although the average salaries paid by the Nicaraguan maquila enterprises aren't enough to buy a market basket of basic goods, the current situation of unemployment is so critical that many workers can't even think about union activity, although they would like to, for fear of losing the little they have. The government takes advantage of this situation and adds to it the threat that, if the workers don't meekly accept this situation and maintain the country's "good reputation," the factories will pull up stakes and head to other countries.

"The maquilas emerge in the context of the regional economic crises, not for development, but to lay the foundations for a certain type of exploitation. In this sense, they constitute a desperate, and hopefully transitory, way to palliate in the worst way possible the region's high unemployment rates and critical levels of poverty," comment Roland Membreño and Elsa Guerrero.

Ligia Orozco declares that "the government wants to maquilize the country," and comments from the zone itself do not contradict that. Currently, some 3,000 people work in the zone and the governmental corporation hopes to have 6 7,000 employed by the end of 1994.

"We think there's going to be a huge growth in the zona franca in Nicaragua," Carlos Zúniga offers. He relates his expectations to the recently approved North American Free Trade Act. "All the analysts, both in Mexico and in the United States, think NAFTA will be very beneficial to Central America, because labor costs are going to shoot up and the employers will be looking to bring their costs down, so they'll come here. In addition, Mexico is not prepared to satisfy the new demand that will be coming."
So, to a certain extent, the "new times" are indeed here. It now falls to the workers, and to the popular sectors, to ensure that they are not excluded from the new world being constructed, but rather are included, based on just and respectful relations.
Ligia Orozco comments, "You have to understand that current economic policy creates a tough reality. People want to get together, to form unions, but you know that if you organize, you'll have problems." She adds that, in light of the new situation, both nationally and internationally, "the case of Fortex, and the reality of the zone in itself, really do oblige us to carefully reflect upon our vision."
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WHAT IS A FREE TRADE ZONE?

The conventional definition of the free trade zones, or zonas francas, is based on criteria of customs "status": "It is a manufacturing zone for export. An enclave within national customs territory, generally located near a port or international airport, in which foreign capital, goods, parts and materials are introduced without duties. The imported goods are transformed in the zone and later exported to other sites, once again without the intervention of the customs authorities of the host country." (UNCTAD, 1975).

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