Envío Digital
Central American University - UCA  
  Number 116 | Marzo 1991



Privatization to the Workers— Issues and Actions

Envío team

Privatization of state enterprises has been a cornerstone of UNO's economic program dating back to the pre-election period. It is also a key element of International Monetary Fund-style austerity programs and a condition of economic aid from the US government. UNO opened the process shortly after the elections with the signing of decree 11-90, which established the procedure for returning confiscated enterprises to their former owners. The workers immediately began to organize to claim the enterprises as their own—based on 10 years of labor, including thousands of volunteer hours, put into rebuilding and maintaining the factories under difficult conditions, and in order to preserve the benefits acquired under the revolutionary government.

The struggles over privatization vary from factory to factory but together raise important questions concerning worker ownership. The Sandinista Workers' Union (CST) recently announced its decision to fight for full privatization to the workers of 82 urban enterprises; in others, workers have chosen only to fight for a share of the stock; and in still others, rightwing unions have led the battle to return the factory to its former owner.

The issue of privatization to the workers in other countries usually sparks a heated ideological debate about the implications and contradictions of workers becoming owners. But in Nicaragua, the theoretical debate has been cut short by the concrete demands of a historical moment that has left workers only one alternative—to struggle for the preservation of their hard-earned rights in any way possible.

Factory takeovers

Early last August, the unions of seven factories rumored to be slated for privatization jointly presented a position paper to the government on decree 11-90 and privatization. After receiving no response, they presented another document, detailing their analysis of the condition in which the previous owners left the factories at the time of their confiscation, the workers' contribution over the past 10 years and the current state of those industries. This time the government's only response was to announce, on September 16, the return of 16 state-owned enterprises to their former owners, including 4 of those specifically addressed in the CST report. Since then, the government has returned—or tried to return—other factories more quietly and has put off announcing the names of an additional 300 urban and rural enterprises to be returned, originally expected to be released in January. The delay is clearly a response to the workers' struggle.

According to Leonidas Pulido, secretary general of the CST's Food Federation in Managua, the 82 out of more than 400 urban state enterprises that the CST is currently demanding for the workers were chosen based on their "real political, organizational and economic conditions for assuming the struggle." Of 11 state, private and mixed enterprises in the federation Pulido oversees, for example, the fight for full privatization has the overwhelming support of 95% of the workers in 3 state factories, all of which are economically viable; in one mixed enterprise the workers chose to fight for 30% of the stock.

Workers are actively resisting in several of the 16 enterprises the government announced would be returned to the former owners and in others threatened by decree 11-90. They have actually taken over 5, of which El Caracol, a cereal and coffee factory in the Food Federation, has become the test case, "the laboratory," says Pulido, that everyone is watching.

All eyes on El Caracol

Once inside the gates of El Caracol, only opened with special permission, one cannot help noticing the animated and friendly spirit that pervades the factory grounds despite the crushing economic hardship all Nicaraguan industry is suffering. Business continues as usual, and workers greet each other and visitors with a sense of camaraderie and confidence reminiscent of the early years of the revolution. Workers at El Caracol have been at open war with the former owner, Magelda Campos, since September 25, when she arrived at the factory to reclaim it. The workers, according to Pulido, let her in and heard her speak. After a vote rejecting her position, they told her to leave, saying they would demand a response to the documents they had presented to the government. The state-appointed director and eight workers left with Campos.

Since September 26, El Caracol has been under worker control and round-the-clock vigilance, and continues to operate. The workers created a governing committee to address problems and formulate strategy and tactics; it is made up of union representatives, economic and legal advisors and the remaining administrators who all took the workers' side. In October, El Caracol's committee, together with those of five other factories, solicited and won a restraining order from the courts, while awaiting a Supreme Court ruling on the issue of the return to their former owners. Legally, then, Campos has no right to the factory unless the Court rules in her favor.

But Magelda Campos has launched a concerted campaign against the workers. With a copy of the government's September 16 resolution in hand, she cut El Caracol's phone line, froze its bank accounts containing almost $85,000, cut its electricity—reinstated 24 hours later with the restraining order—and tried to prevent supplies ordered in May, before she had any legal claim to the factory, from being delivered in October. When workers from El Caracol arrived at customs to pick up the delivery from Costa Rica, the five trucks had already been released to Campos, and were just leaving the storage yard. The workers jumped on the trucks and instructed the drivers, some of whom had made deliveries to El Caracol in the past, to head to the factory. When Campos realized what was happening, she actually drove her car in front of the two last trucks to try and block their way. After all five trucks were safely inside the factory gates, the workers returned to customs with their court order to legalize the shipment. Campos had alerted the police—grossly exaggerating events—and the workers were surrounded, accused of killing the drivers and arrested. They were released at midnight after a direct appeal to Minister of Government Carlos Hurtado.

Campos' most recent scheme has been to launch a boycott against El Caracol, trying to convince producers not to sell raw materials to El Caracol and buyers not to purchase its products. Two important foreign clients were approached; one blocked a $20,000 payment on products already bought and has refused to make new purchases until the problem is resolved.

One of El Caracol's most important strategies has been solidarity. The five factories taken by the workers stay in close contact, sharing experiences and providing each other with support wherever possible. On January 26, El Caracol workers went to Granada to support workers from Prego, a soap factory, after the police had been ordered to dislodge them. A few days later, Prego union leaders visited Cafe El Mejor, a coffee-processing plant potentially subject to decree 11-90, to describe what had happened and share information. In addition, all the factories have maintained close contact with supporters in nearby neighborhoods and farming cooperatives.

El Caracol workers have also approached some 228 families who live on a large plot of Managua land previously owned by and confiscated from the Campos family. Those families know that if El Caracol loses its battle, they will too.

Union leaders don’t expect this issue to be resolved in the courts, which had 17 days to make a ruling and had not yet done so more than three months later. Ramiro Álvarez, the new director of El Caracol voted in by the workers, says the court is stalling in hopes of a negotiated solution. "A decision in our favor would be a blow to 11-90, and one in hers would mean a serious confrontation [with the workers]."

El Caracol's governing committee is not convinced the workers will get 100% ownership and is willing to negotiate. They only demand that the government recognize the workers' acquired rights—the 72,000 volunteer hours and three months without pay put in by the workers in 1981; Campos' debts that the workers paid off; and the new machinery they purchased over the years, more than doubling the factory's production levels since its confiscation. They claim that Campos simply left the country with the hundreds of thousands of dollars she was given to reactivate the factory after the Sandinista revolution, taking vehicles, raw materials and other property from El Caracol at the same time.

The factory's governing committee has met with a government negotiating team three times. But the government insisted on playing a mediating role between the committee and Campos, while the committee demanded to negotiate directly with the government. At one point, the factory representatives walked out because the government tried to impose the participation of the Federation of Trade Union Unity (CUS). The CUS is a pro-government union sponsored by AIFLD, the international branch of the AFL-CIO. The CST rejected CUS participation, claiming it has the support of 116 workers and the CUS only the 8 that walked out with the former owner. The CUS, reports the committee, has tried to swell its ranks by recruiting the participation of about 10 former employees.

In a meeting between Sandinista National Workers' Federation (FNT) head Lucio Jimenez and Presidential Minister Antonio Lacayo on January 29, Lacayo finally accepted the CST's demand for direct negotiations between the factory representatives and the government for all six enterprises that were granted the restraining order. Some union leaders interpret the government's first implicit recognition of the workers' claims as valid as an important step. Dámaso Vargas, secretary general of the CST for the Managua region and National Assembly representative, however, sees it as merely another maneuver without real importance, a stall for time to take the impetus out of the workers' struggle. Direct meetings between the government and representatives of the occupied factories began two days later and continue as this issue of envío goes to press.

At El Caracol, far from being discouraged by Campos' attempts to destroy the company, the workers seem even more determined to win. But they are not misled about what winning means. It would be easy to rally around a false illusion—that ownership means better salaries, better benefits, profits and even getting rich like the old owners— but, while some workers do hope for better pay, most are clear that this battle is to prevent a change for the worse, not to get rich overnight. But El Caracol is a special case. Even with its bank account frozen, phone cut off and Campos actively organizing a boycott, Pulido reports that the factory is financially solvent, though just breaking even.

Factory worker Marina Largaespada says that if El Caracol is privatized to the workers, "Things will change because the factory will be ours, instead of them getting richer and us poorer." In general, workers' biggest fear about the old owners' returning is losing their social benefits and/or their jobs. To them, privatizing to the workers primarily means guaranteeing those benefits and jobs. To most, layoffs are almost unthinkable, but the FNT recognizes that many state industries are over-staffed and some layoffs will be necessary for economic survival. This issue may cause conflicts in the future. While the factories must now be financially solvent in a capitalist market, the workers may resist layoffs on principle, and will have the power to do so if they win 100% of the shares and the right to vote out the director.

TEXNICSA— A different case

The textile factory TEXNICSA is not on the CST's list of 82 priority enterprises. The textile industry in general and TEXNICSA in particular have faced a serious financial crisis for a long time, reaching a critical state in July due to the UNO government's economic measures, according to Antonio Aguilar, secretary general of the Sandinista union. These measures included lowering import duties, which caused an influx of cheap foreign products. At the same time, increases in the price of gas, electricity and raw materials raised TEXNICSA's fabric production costs to $.75/yard, far above the average Central American market price of $.45/yard.

Since August, the CST and CAUS, another strong textile union (affiliated with the Communist Party which in turn is a member of the UNO coalition), have been working together on production proposals that would provide an alternative to the government's plan to close the factory. They rejected the option of striking or occupying the installations in order to keep the workers united and avoid the inevitable economic hardship that would ensue, given that fabric and thread sales are larger and less frequent than those of food products. The government rejected all their proposals. Toward the end of January, it announced TEXNICSA's indefinite closure, with workers' "severance" pay of 25% of their monthly salary for five months. With national unemployment at 40%, some 900 additional workers will be in the streets with virtually no job possibilities.

The case of TEXNICSA has an interesting twist for the Sandinista unions. Insiders reported that the plant closing was part of a larger plan to create a monolithic textile enterprise under the auspices of the former owners of FANATEX and other private investors, including at least one Sandinista party member, Federico Cerda. Cerda is currently director of the Peoples' Industry Corporation (COIP), the government entity that oversees state-owned industry, and has been directly involved in negotiations over TEXNICSA's future. When Cerda himself proposed that TEXNICSA's best machinery be transferred to FANATEX, the factory's union leaders considered their information confirmed.

Sandinista union leaders are convinced that Cerda's behavior is based entirely on personal interest—either trying to set up his own business or just trying to keep his government job—and does not represent the FSLN party position. But his behavior is representative of a certain faction within the FSLN that some say has abandoned the working class in favor of its own class interests and a "co-government" with UNO. Some union leaders look toward the party Congress in July for an official condemnation of party members "who've sold their revolutionary principles for a job."

In negotiations with the government, the CST and CAUS were able to increase the 25% severance pay to 100% for five months and to include four monthly food provisions. The gain is important, but the lowest paid workers will still only receive an outrageously low cash total of $120 for the five months. While the CAUS signed this accord with the support of some 180 workers, more than 700 CST supporters voted to keep fighting for additional concessions. After several days' refusal, the government agreed to continue negotiating. As this issue of envío goes to press, Aguilar reports that the government has informally agreed to shut down TEXNICSA for only five months—not indefinitely or to privatize it during that time; and to respect work contracts, so all workers may return upon TEXNICSA's potential reopening. But Aguilar is not convinced the government will actually sign an accord to this effect. The Sandinista union continues to demand the inclusion of the costs of lunch and transport—formerly provided by the factory—in the five months' pay.

Given the government's poor record of keeping its promises, says Aguilar, the union leadership will not simply wait for the factory to reopen. During the shutdown, the workers will maintain a presence in the factory, and the unions plan to appeal to the National Assembly to pressure the government to fulfill its moral obligation to reopen TEXNICSA. "Democracy is not concertation, talking and negotiating; democracy is fulfilling the accords that you sign," says Aguilar. While the FNT does not think privatization to the workers is economically viable in the textile industry, the CST, which claims to have the support of the CAUS on this issue, is considering assuming the struggle to privatize TEXNICSA to the workers if and when it is reopened.

Factories given back—Four months later

The majority of the workers in Camas Luna (mattresses) and Kikatex (textiles) supported their return to the former owners. The reasons vary. Many feared that their factories would close without the capital inputs that would presumably be guaranteed by a private owner. The owners’ politicking and offering of benefits and favors for workers who took their side influenced some. Some simply would have opposed any Sandinista alternative for political reasons. Still others equate change with the possibility that things will get better. Workers who support returning Cafe El Mejor to its former owner, which is being fought by the majority, say they are tired of politics, feel their jobs threatened by Sandinista supporters who want them out and simply "want to work." They have no illusions about what would happen to their benefits under the old owner but think he has a better chance of improving the factory's economic situation.

Since the return of Camas Luna, CST union leaders report that all their former supporters have been fired. So was the woman who led the fight to return the factory to its former owner—El Caracol workers report that she appeared at their gate asking for work. On the other hand, Rigoberto Aguirre, secretary general of the CUS at Camas Luna, reports that the workers have a new and better collective bargaining agreement and that they threw out the CST people "who were apparently being manipulated" by the FSLN. His opinion of privatization to the workers was simply, 'That can't exist. That kind of benefit has never existed here. I'll never say this factory is mine."

Few CAUS leaders will talk honestly about the situation in Kikatex, probably out of shame for their own behavior. The CAUS actively promoted returning the factory to its former owner and was so servile that it rendered itself powerless. Now one union leader reports that the owner's family fires anyone who does not agree with the bosses and treats the union leadership with total disrespect, not even allowing them into its offices.

Why privatize to the workers?

Privatizing to the workers, given Nicaragua's current economic situation and that of urban industry in particular, is not an ideal solution. The combination of a contracted domestic market, obsolete machinery and lack of investment capital has driven most industries to bare survival conditions. COSEP leader Gilberto Cuadra, who opposes privatization to the workers, says, "If I were an evil Nicaraguan, I would say, 'Give them [the factories] today; give them loans even,' so that they go bankrupt the day after tomorrow and put an end to this situation.” The government is clearly trying to sabotage some industries in order to drive them into bankruptcy and sell them to private interests, but even some Sandinistas believe the enterprises would fail without such efforts. If a factory is privatized to the workers and then fails, it could have serious long-term repercussions for the workers' struggle.

The FNT has considered this. A draft of its position paper on privatization to the workers states, "We must fight for those [enterprises] that are truly economically viable," and its demand for 100% of 82 urban factories' stock is clearly a negotiating position, though it did not begin that way. Economic reality has forced the unions to take a more pragmatic stance. According to Dámaso Vargas, the federation has accepted the economic reality that privatizing to the workers brings short-term stability but in the long run requires investment that the workers cannot provide. It has been analyzing the economic reality of its list of both urban and rural enterprises to determine the most favorable resolution for both the workers' and the industries' future.

The FNT discussion paper states, "One political and overall solution is to demand of the government a tripartite (worker-government-private investor) or bipartite (worker-government) property scheme where the workers get a percentage. This would strengthen the mixed economy and, in addition..., could help secure capital and put an end to damaging official policies." One important aspect of a mixed enterprise is that government and business interests would stop trying to bankrupt the industry.

Privatizing to the workers also raises ideological issues about workers becoming owners and bosses. Edgardo García, secretary general of the Farm Workers' Association (ATC), told the Marxist-Leninist weekly El Pueblo that there is an ideological risk only "for all those who think there are only the bourgeoisie and the workers... We’re aware that society is bigger than just two social classes." He told envío that privatization is not a step toward socialism but toward survival. That’s how the unions see the issue, as Vargas agrees: "The idea for privatization to the workers... arose from the benefits—which range from political to economic and material rights— that the workers were able to obtain [in the state enterprises]. An enterprise where we had the most decision-making power was an enterprise where we could achieve the greatest benefits in every sense."

Vargas sees the step as only strengthening the workers' struggle. Even if they obtain 30% of the shares, he says, they are adding the weapons of property and participation to the existing strength of the unions. In addition to protecting the workers' rights at individual enterprises, the FNT sees worker-owned industries as providing a base from which to protect the revolution in general. Vargas says, "In Nicaragua, we have very hard-line private business groups who behave as real enemies of the democratic rights we’ve won." Together, a group of worker-owned enterprises can provide "a degree of mobilization and organization that makes it possible to confront them."

Some Sandinistas believe that it would be better to let the old owner back and fight with him or her in a more traditional union struggle to protect the workers' rights. But in an international context of heavily financed pro-government unions, such as the Solidarismo movement to break militant unions in Central America, enterprises fully or partially owned by the workers could provide an important base from which to organize and mobilize against these right-wing interests.

There are concrete issues yet to be resolved—how shares would be divided, whether and how individual workers would be prevented from selling their stock to private interests, how a worker-owned industry would generate capital. Union leaders say these decisions will be made once they have won the first battle. Whichever direction the unions take—toward defending workers’ rights with or without full or partial ownership of the factory—the reasons for maintaining militancy and organization are clear.

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