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Central American University - UCA  
  Number 194 | Septiembre 1997
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Honduras

Maquila*: The Swallow That Lays Golden Eggs

Reflection, Research and Communication Team (ERIC) of Honduras

Maquila*: refers to the type of foreign-owned assembly plants set up in low-wage third world countries that put together products, mostly clothing, from imported materials then re-export them for sale to other countries like the United States. The individual assembly plants are called maquiladoras.

During June and July the powerful maquila industry was front-page news in Honduras. The breaking story was about a series of consecutive fainting incidents among 80 workers over an 8-day period in the Korean-owned PINDU plant in La Ceiba at the end of May. Judging by the reports, these fainting spells, unprecedented in the plant's short history in Honduras, were provoked by poor working conditions in the factory (overcrowding, high temperatures, lack of ventilation) and also by a contagious hysteria.

The Labor Ministry gave the factory one month to resolve the environmental conditions. According to the Ministry's inspector, the factory has a capacity for 150-200 people, but 420 work there.

The Fainting Continues

What appeared to be an isolated incident in a relatively marginal area caused serious concern among national owners of the industrial parks—tax-free export zones—where the assembly plants operate, when the collective fainting spells were repeated in Choloma, next to San Pedro Sula, in the heart of the manufacturing industry. On June 10, more than 30 young workers from the Won Chang assembly plant—where 600 young people work—fainted at their work posts.

The Korean supervisors of the assembly lines attributed the fainting to psychological reasons and mocked the Hondurans. "They trembled, they suffered from thoracic pressure and couldn't cry until they finally fainted," they said, describing a typical hysterical episode. Juan Bendeck, president of the Honduran Private Enterprise Council (COHEP), claimed that the collective fainting spells "are possibly being promoted by groups interested in affecting this sector." The "groups" he was referring to are US textile unions that are trying to undermine the Central American maquilas.
However, the Labor Ministry inspectors found that the Won Chang assembly plant does not meet environmental hygiene requirements and reached an agreement with the factory and the United Federation of Workers of Honduras (CUTH) to close the factory until it meets certain minimal conditions: dividing the workers into two shifts, improving ventilation, establishing 15 minute breaks, etc.

Business Nationalism, Worker Internationalism

Why the suspicious reaction by the highest representative of Honduran private enterprise? Between the two collective fainting incidents in La Ceiba and Choloma, an Independent Monitoring Team (EMI) was formed in Honduras to supervise compliance with human and labor rights in KIMI, another Korean factory located in an industrial park in La Lima, a city in Sula Valley, near San Pedro.

The monitoring agreement was signed on June 2 between the foreign factory and four national institutions: CODEH (Committee for the Defense of Human Rights), the women's organization CODEMUH, Caritas from San Pedro Sula and the Jesuits of Honduras.

The signing of this accord awoke open opposition among businesspeople and the media that back them, and they in turn infected unions with their rejection. The EMI was promoted by the National Labor Council (CNT) from the United States, and in part by the KIMI enterprise itself, which was affected by contract cuts from its US buyer firms—Gap and Macy's—and interested in improving its human rights image. The CNT proposed the independent monitoring formula to KIMI and the agreement materialized, to the dismay of Honduran assembly plants that denounced the "foreign intervention."

"Business nationalism" was more exacerbated by the media focus on the CNT activists from the United States. Among them is Charles Kernaghan, an extraordinarily talented activist who has demonstrated his solidarity with Central American grassroots struggles in other fields. Kernaghan had been in Honduras on other occasions promoting visits by Honduran workers to the US to testify to Congress about mistreatment suffered in the tropical sweatshops.

It took little time or effort for Honduran unions to see the space that an EMI-type monitoring system can offer them, because the central objective of the agreement is to supervise workers' right to organize. If the monitoring helps the factory clean up its image and recover its contracts, it also favors respect for workers' rights. This respect will translate into greater productivity in the long run.

Bit by bit, the accusation of foreign intervention faded out, among other reasons because of the prestige of the national organizations that make up the monitoring team.

Code of Conduct

National business interests generally invest only in the infrastructure and administration of the maquila industrial parks, while Korean or US businesspeople invest in clothing manufacturing or in factory administration within the parks. With time, the nationals have realized that globalization is a double-edged knife: one side favors them and the other limits them. As part of the maquiladoras of Central America and the Caribbean, those in Honduras celebrated the first regional maquila industry congress, held in San Pedro Sula on July 28 and 29. At that congress they signed on to a code of conduct for all assembly plant industries, although without the participation of human rights organizations or unions.

Interest in this code of conduct was born a few years ago as the fruit of publicity carried out among US consumers about the inhuman conditions in Central American factories that made clothing for WalMart. Because of consumer pressure, President Clinton named a commission that included industry giants like Nike and Liz Claiborne, as well as human rights and union representatives. The objective was to formulate a code of conduct that businesses buying clothing assembled in the Third World should sign voluntarily. After eight months of internal tensions and negotiations, the commission proposed a code of conduct valid for US and foreign assembly plants. On April 14, 1997, Clinton gave his support to the commission accord.

This code of conduct includes, for example, a prohibition on hiring people under 15, limiting weekly work hours to 60 and protecting workers' right to organize. To see that the code is honored, the factories are urged to employ independent monitors who work together with human rights groups.

In this context, the KIMI factory's EMI is an historic step in the development of labor relations in Honduras. Although Honduran business attacked it viscerally as a betrayal of the country, they will have to examine it carefully if they want to maintain their contracts.

The Maquila Boom

The Honduran maquila industry was the first in Central America and the second in the Greater Caribbean after the Dominican Republic. It is Honduras' third largest source of income after coffee and bananas. In 1996 it generated $250 million in net added value and gave jobs to some 75,000 workers, 75% of them women. There are projections that these assembly plants will soon provide 100,000 jobs, not only in clothing manufacture, but also in the automotive sector, and that the number of assembly plant jobs could double in only three years.

The increased employment can be noted in the data on Honduras' economically active population. In one year, from October 1995 to September 1996, the economically active population rose from 49.5% to 51.6%, with the greatest increase among women, which went from 28.7% to 32.2%.

If this tendency continues for 10 years, the economically active female population will double and approach male levels, accelerating cultural changes that are already being felt, especially among the youth: young women's independence from the home, an increase in teen pregnancies, growth of youth machismo, an increase in gangs, etc.

The assembly plant industry has grown rapidly. Honduras currently has 11 industrial parks with almost 200 factories and 15 more in construction. Although data come and go like the swallow, according to the source, they invariably demonstrate an ascending curve. From 1990 to 1996, the number of factories rose from 26 to nearly 200, the number of workers from 9,000 to 75-80,000, the value of clothing exported to the United States from $112 million to $1.2 billion.

These dollar figures do not indicate income that enters the country. They only refer to the value of the exported articles, which is generally clothing made with untaxed imported cloth. The benefits that accrue to Honduras are only the wages, factory rent, payment for electrical services and a little more.

Competition with Mexico

One limitation on assembly plant industry development is the deficiency in national services, including electricity, telephones and transport. In 1993-94, when the emptying of the Cajón dam resulted in an electricity crisis and continuous power outages, the assembly plant industry dropped compared with previous and following years.

Another limitation is competition from Mexico. The Free Trade Agreement (NAFTA) gives a 28% advantage to production from Mexican textiles, imported into the United States tax free.

Honduras benefits from two preferential trade accords with the United States: the Caribbean Basin Initiative (CBI) and the general preference system. Both give unilateral and temporary preferences to Honduras and other countries. In 1996, the US government proposed expanding the CBI to make the treatment of clothing the same between the CBI countries and Mexico under NAFTA.

The US Congress looks favorably on that proposal, but is making demands: respect for intellectual property, environmental protection and compliance with labor laws. Being difficult goals to fulfill, the Central Americans have opted to initiate negotiations for their own free trade agreement with the United States.

Better Exploited Than Unemployed

The growth of assembly plants goes hand in hand with the exploitation of women's labor. Low wages predominate, though they are higher than the minimum in Honduras, which is 600 lempiras a month. According to a Price Waterhouse study in 1994, the wage for sewing machine operators, material cutters and packers was 41% higher than the minimum wage.

There is a huge gulf between the wages paid to Honduran operators and the prices charged for the clothing they make once it gets to the United States. A pair of Kathie Lee pants that an operator earns 25 cents to sew costs $19.96 in the US store.

The assembly work is monotonous, based on pressure and repetition. A young woman spends all day sewing collars to shirts while more pile up behind her. Extra hours are obligatory (up to the 60 hours weekly), the factories are unhealthy and hot, unionization is impeded, there are unjustified suspensions and firings, the Labor Ministry is partial to the factory and sometimes there is direct repression against the workers by their immediate superiors.

This exploitation is possible because of the high national unemployment level together with the competition among businesses and countries to produce more at a lower cost. This combines with the state's compliance toward foreign maquila investment as an immediate solution to social problems, ideological defense of the maquilas by the national owners of the industrial parks and the constant threat by the foreign investors that they will fly with their business to more favorable countries—which is why they are called "swallows."

The threat to "fly" is not formulated directly by the foreigners. The national businesspeople talk of this, especially in the north, among the Maquiladoras Association, the Chamber of Commerce, the Cortés Industry and COHEP. They always say that treating the maquila badly will make it fly off. But reality shows the opposite. Every day new assembly plants fly into Honduras.

Despite the obvious exploitation, the people who benefit from the workers' wages, and the workers themselves, are satisfied with this source of work. In Christian reflection groups it is not rare to hear prayers thanking God for the arrival of a new factory, and even the greatest critics recognize that it is better to be exploited than unemployed.

More Experience

After years, it is now noticeable that the young operators are entering with greater experience. Many of them have been working at the same routine, tiring job for five years. They are no longer girls. Many have acquired family responsibilities, and though they might want to leave their work, they have no partner to help them maintain their children. The mothers, though young, fight with conviction. They seek help in unions or other organizations, even though they have not yet taken the step of believing in unions or similar associations as an instrument of collective struggle. In part that is because the unions have not yet touched the organizing fiber of these women, and in part because they are frequently hoping for a more definitive status for their lives.

Stagnation in Sight?

The women who have been working some years in the maquila use the union being formed to get the factory to fire them so they will receive severance benefits, which according to law can be more than 10,000 lempiras. To keep from paying these benefits, the factory makes life impossible for them, thus generating a climate of mutual incomprehension, labor indiscipline (absences, lateness, staying in the bathroom) and growing repression (verbal humiliation, suspensions, even being hit). This necessarily lowers production, damaging both the factory and the workers, as was the case in KIMI.

After the initial boom, the assembly plant industry may enter stagnation due to the lack of a long-term vision or because of short-term business thinking that wants only to get the most out of the capital invested in the least time.

Super-refinery in Trujillo

The Great National Transformation Project (GPTN), announced in 1996 and designed for an $18 billion investment, does not consider the maquila as the takeoff point for Honduras. It focuses on other areas: energy production for export (refinery, dam), mining, lumber, tourism and agroindustry, sectors requiring high levels of infrastructure investment: roads, ports and airports. The GPTN proposes the construction of a superhighway uniting the Atlantic with the Pacific and the creation of a triangular superzone (Puerto Cortés-Trujillo-Gulf of Fonseca) where development would be promoted.

Although the maquila, especially clothing manufacturing, does not appear in the front pages of the GPTN, the investment in infrastructure will benefit it, facilitating movement beyond Sula Valley towards the Aguán to the east, and Comayagua in the center of the country, and perhaps to the south.

Although the GPTN is betting on agroindustry, it does not totally reject the maquila concept, which has transformed Honduras from a Banana Republic to a Sweatshop Paradise. One of the million dollar GPTN projects is the construction of a continental supermaquila of petroleum: Latin America's largest refinery in the beautiful Trujillo bay.

Although the government has still not given environmental approval and there is resistance by ecological groups and the Colón Catholic Church, Miguel Facussé, president of the GPTN Executive Commission, continues to mention the refinery. According to the project, presented in 1994, before the GPTN, the refinery will store up to 20 million gallons of imported crude brought to Trujillo from producer countries, and will process 150,000 barrels daily to be exported to the United States, Colombia and other countries.

Facussé: Supermillionaire

The GPTN project is already beginning to move, given that the Cressida Corporation, whose president is also Miguel Facussé, just received a $55 million loan from the World Bank for manufacture and industry. The manufacturing part is for cleaning products—produced in Honduras and El Salvador—and the agroindustry part includes cultivation of African palm, mango and grapefruit, the production of foods, drinks and snacks, oil refining and the production of tomato-based products in Mexico and Nicaragua.

Facussé's millionaire investments—he is also a large investor in Cuba—are part of a species of multilateral corporation that transcends Central America and hopes to compete in other countries' markets. So, while the clothing assembly plants in Honduras have remained quiet about approval of the new Consumer Protection Law in the Honduran Congress, Facussé has raised his voice in protest. The first group doesn't care about national consumption, but the "patriotic businessperson" does.

On the contrary, when the assembly plant owners protest the supervision of their factories as "foreign intervention," Facussé, the greatest Honduran supporter of globalization, keeps quiet.

In defense of globalization, Facussé also raised the morale of the timid Tegucigalpa businesspeople who belong to the National Industry Association (ANDI) when the Ministry of Commerce, Industry and Tourism announced in June that the group of CA-3 countries (Guatemala, El Salvador and Honduras) would join Mexico in NAFTA. Facussé, with his main office in Tegucigalpa but investments throughout the country, urged them not to fear the necessary globalization, because Honduras is becoming one of the most competitive countries thanks to the Reina government, which lowered both tariffs and the fiscal deficit.

His Nephew's Candidacy

The GPTN is a political alliance between the government and businesspeople, or more concretely between the Liberal Reina administration and the group of businesspeople headed by Miguel Facussé. President Reina and the Cressida Corporation have mutually defended and praised each other. For Reina, Facussé is an example of business nationalism and of a positive vision of the country. For Facussé, Reina is the state leader with a great perspective.

If the opposition National Party wins in the November elections, the GPTN will probably not disappear, but enthusiasm will be dampened. This explains the business group's interest in the Liberal Party's presidential candidate: Miguel's Facussé's nephew, Carlos Flores Facussé, currently president of the Congress.

The Liberal candidate was smiling beside his uncle when Facussé and the World Bank representative signed the $55 million investment agreement for Cressida, satisfied to add this to the list of achievements of his legislative term.

The Apple of Discord

Some strong internal contradictions have arisen within the alliance between Miguel Facussé and the Liberal Reina government, however. The apple of discord is privatization of the Honduran Telecommunications Institute (HONDUTEL), which is to be acquired by a mercantile company promoted by the GPTN Board of Directors. According to a violent editorial in the daily Tiempo, "Everything indicates that this privatization will become a fabulous business for a certain business group, which from its heights of power has apparently planned the operation to retain not only the institute but also the power that its possession would give it in the future."

Although Tiempo does not mention the private shareholder by name, it is clearly referring to Miguel Facussé, thereby identifying the current struggle over the state's primary resource— telecommunications— between Facussé and the newspaper owner Jaime Rosenthal, who also owns the Continental industrial park and various agricultural, industrial and financial businesses.

Central Americanizing

In July President Reina signed an accord—in the GPTN line—with the President of Nicaragua to create an inter-oceanic corridor between Puerto Cortés and Nicaragua's Port of Corinto. According to the GPTN, this superhighway should join the Atlantic with the Gulf of Fonseca. The accord with Nicaragua contemplates extending the superhighway to Nicaragua's interior and 24-hour customs service between the two countries, which now closes when the sun goes down.

Although this accord does not mention the assembly plants, connecting the superhighway to the port of Corinto could possibly favor the establishment of assembly plants in Sula Valley and Choluteca. Just as trucks now take clothing assembled in El Salvador to Guatemalan ports for shipping, trucks of clothing assembled in Honduras could leave from the Nicaraguan port.

In the GPTN concept, Honduras appears as the center of Central American trade integration thanks to the highway triangle, which will also connect the Honduran Atlantic with the Salvadoran Pacific. The relationship with El Salvador will be closer, because the GPTN's regional and private promoting organization—the Interoceanic Corporation of Central America— already has accords between Salvadoran and Honduran businesspeople.

The GPTN will not begin anything until three basic laws are approved: the Concessions Law, the reform to the Framework Law of the Electricity Subsector and the Mining Code. They are the prerequisites for attracting the necessary foreign investment.
The role of Liberal candidate Carlos Flores Facussé as President of Congress is crucial to pushing these three laws through before the November 30 elections.

Maquila Humiliates Machismo

Is there a relationship between the maquila and crime? Although there are no figures, it is frequently heard that one of the effects of the maquila is the growth of delinquency in poor neighborhoods.

The neighborhoods of San Pedro and Choloma, neighbors of the assembly plants, have received many immigrants. There is a proliferation of youth bands among them linked to a wider organization existing in various cities and ultimately reinforced by Hondurans who are deported back to the country from the United States.

One cause of the increase in crime is the uncontrolled overcrowding in immigrant housing. In addition, since the assembly plants don't pay municipal taxes, basic services— water and sewage— are ever more deficient in these houses. Another cause is unemployment among young men who, frustrated seeing two or three sisters with steady work, try to vent their frustration in the streets. They demonstrate their humiliated machismo through this manifestation of rebellion against society.

Bank Assaults On the Rise

Delinquency also hits the assembly plant owners, who have installed banks alongside the industrial parks or in connection with them. Many assembly plants pay in cash, which the workers prefer because it avoids standing in lines. If there are 3,000 workers in a plant, the weekly wage totals over a million lempiras, which must be transferred from the bank to the factories. Payday is tense for the workers. Sometimes the factories pay on an unscheduled day, partly so that workers won't be assaulted on the buses, but, above all, to protect the bank vehicles or the banks themselves from assaults.

Ramón Custodio, a CODEH leader who participates in the Independent Monitoring Team, has asked the government to declare bank assaults a national problem and has offered data showing the increases in these assaults: there were 11 in 1993 and 53 in 1996.

Although his statement favors the businesspeople, especially along the northern coast, Custodio argues that the cost of the financial system will go up for the user with the increased spending on private security to prevent assaults.

In his statement, Custodio noted that most bank assaults take from 4 to 8 minutes, which reveals a high level of coordination, similar to military operations. This hypothesis implicates military officials and former agents of the defunct National Investigation Department (DNI), and is reinforced by the fact that the Armed Forces Bank has never been assaulted.

Economic War

The maquila boom is part of the current culture of quick profits. On the one hand, it alleviates the effects of unemployment and concentrates the cauldron of crime in the northern part of the country. On the other, it favors an "informal organized crime enterprise," implicating military officers, whose motive is also quick profit, to put them at the same level as formal private enterprise.

Alongside this struggle for economic space is another strong competition, also for economic space, between the business sector more oriented to the production of goods and services for domestic consumption and the maquiladora business sector such as the industrial park owners. Even though this sector does not depend exclusively on the maquila, it has a significant base there, making it independent of the ups and downs of national consumers.

The two economic groups are competing for the privatization of the state. Each one wants its slice and both aspire especially to the telecommunications institute. The group that is shielding its growth within the GPTN will benefit most directly and significantly from the implementation of the GPTN project. But the assembly plant owner will also benefit laterally and indirectly from the investments the state will make in energy, infrastructure and communications.

At the political level, these business interests appear to be represented by the Liberal currents, which feel confident of an electoral victory in November, so they can share out quotas of power after the elections. Although corruption infiltrates all, the business groups linked to organized crime are closer to the National Party.

Prepared for victory, Flores' Liberal current, at the head of Congress, will be charged with modernizing the state rapidly by approving various laws. The quick profits they are gambling on go hand in hand with the rapid approval of laws that the country has no time to assimilate, either institutionally or culturally.

Will the Swallows Leave?

Will the maquila boom survive? The growing awareness of exploitation of many maquiladora workers, due to years of work experience, personal growth and the repression they have suffered, may be leading the maquila boom to its peak and subsequent decline.

Despite the abundant prognoses of rapid growth, even more rapid if there is integration with Mexico—which appears impossible—the main limitation of this fragile industry may be the lack of productive motivation that already exists and is growing among young people. At first they saw the maquila as an image of the American dream. Now, they feel that this dream is paralyzing them, even physically.

How will business respond? Maybe with dangerous irresponsibility: getting rid of the experienced and aware workers and hiring new, younger operators. Trying to save at all cost the swallow that lays golden eggs.

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