Maquilas in Central America

Maquila refers to a system of production, or a factory, in which imported materials undergo a process of assembly or manufacturing, before being re-exported and sold abroad. In Central America maquilas are predominantly for the clothing industry, and are owned by companies from the US, Asia and Europe. They enjoy special tax and tariff regimes and provide cheap goods for markets in the north.

The maquila industry in Central America has been referred to as neoslavery,[1] and these ‘sweatshops’ are notorious for their poor working conditions. Organisations such as No Sweat, and War on Want have campaigned to bring awareness to this issue and forge a mental connection between the cheap garments available in high street stores and the abuse and violation of labour rights which goes on in the factories in which they were made.[2]

Maquila employees endure hazardous working conditions; lack of ventilation, excessive heat, dust, noise and lack of adequate safety equipment are frequent complaints. Bathroom breaks are monitored and timed. Shifts can range between ten and sixteen hours, and forced overtime, often unpaid, is also commonplace. 75% to 85% of maquila workers are women. They may be forced to take birth-control pills, take pregnancy tests, and pregnant women are routinely dismissed without notice or benefits. Workers may face verbal or sexual harassment. The staff turnover in maquilas is high; unemployment perpetuates the situation, as there are always more people desperate for work.[3]

Attempts to organise unions are often crushed, despite national and international labour rights legislation. Unionisation is difficult and minimal due a variety of factors including mass firing, intimidation, fear, death threats, unemployment and capital mobility.[4] When a worker is illegally fired for participating in union activities, they are commonly blacklisted, making it impossible to find similar job elsewhere.[5]

A report by the Maquila Solidarity Network suggests that that shrinking consumer markets due the global financial crisis will impede efforts to improve workplace conditions. They predict an increase in short-term and temporary contracting, less job security, factory closures, and greater anti-union pressure.[6]


[1] MacEoin. G., 13 August 1999 ‘Maquila neoslavery, under conditions from bad to inhuman – maquiladora industry in Central America’ National Catholic Reporter http://findarticles.com/p/articles/mi_m1141/is_36_35/ai_55553270/ (accessed 13 August 2009)
[2] See http://www.nosweat.org.uk; http://www.waronwant.org/
[3] See Armbruster-Sandoval, R. (2005) Globalization and cross-border labor solidarity in the Americas: The anti-sweatshop movement and the struggle for social justice, Routledge, New York; also Washington Office on Latin America (2009) ‘DR-CAFTA and worker’s rights: Moving from paper to practice’ (May) http://www.wola.org/images/stories/Rights%20and%20Development/wola_dr_cafta_rpt%20final.pdf (accessed 17 August 2009)
[4] Op.cit. (Armbruster-Sandoval)
[5] Op.cit. (Washington Office on Latin America)
[6] Maquila Solidarity Network (2009) ‘How will the global financial crisis affect the garment industry and garment workers?’ (February) http://en.maquilasolidarity.org/sites/maquilasolidarity.org/files/2009-02-25%20MSN-FinancialCrisis-Feb09-ENG.pdf (accessed 14 August 2009)

NicaNotes: What is Significant About the Minimum Wage?

I am grateful for the following piece to Chuck Kaufmann who writes the NicaNotes blog for the Alliance for Global Justice (AFGJ).

 NicaNotes is a blog for Nicaraguan activists and those interested in Nicaragua, published by the Nicaragua Network, a project of the AFGJ. It provides news and analysis from the context of Nicaragua Network’s long history of struggle in solidarity with the Sandinista Revolution.

The Sandinista government’s unique Tripartite Alliance model achieves an agreement on the 2017 minimum wage that gives it a boost totalling 8.25%.

The Tripartite Alliance model functions as a direct negotiation between capital and labour in meetings moderated by the government. Since Daniel Ortega returned to the presidency in 2007 and implemented this system, Nicaragua has enjoyed an extended period of labour stability.

Labour stability in and of itself is not necessarily a positive thing if that stability is due to an uneven playing field such as exists currently in the US where corporations hold most of the cards, or if it is due to ‘company’ unions, such as are dominant in Mexico, which do not defend the interests of the workers. But labour stability in Nicaragua says more about the nature of the State than it does about the relative power dynamics between capital and labour. In the two times I can think of in the past ten years that labour and capital have not been able to come to a consensus about the percentage increase in the minimum wage, the government has sided with labour and imposed an increase equal to or close to the rate supported by the unions.

In February, Paulo Speller, secretary general of the Organisation of Ibero-American States (OEI), said during a visit to Nicaragua, “Nicaragua is a country that has inspired us because it has a different situation compared to the rest of the region. The economy is growing, the people live in peace, and the government is implementing carefully developed policies. The Nicaragua Tripartite Alliance model between government, employers, and labour is a unique and successful model in the region.”

Luis Barbosa, secretary general of the Sandinista Workers Central – José Benito Escobar, said, “We have achieved something great” and Labour Minister Alba Luz Torres called it “a major victory for Nicaragua’s workers.” Employers, represented by the Superior Council for Private Enterprise (COSEP) are also happy with the deal and have repeatedly credited the model for calming foreign investor fears and promoting investment and job growth.

Nicaragua has several minimum wages for various sectors of the economy. The one covered by this agreement is the one covering Nicaragua’s lowest paid workers in agriculture and garment factories. The agreement covers workers in the rapidly growing tobacco industry, as well as coffee workers, Nicaragua’s largest single employment sector. For the first time unskilled workers will earn US$195.60 per month. That doesn’t sound like much, admittedly. Honduras and Costa Rica have minimum wages of US$353 and US$516 respectively, but a one-to-one dollar comparison leaves out the fact that Nicaraguan workers have free health care, free education, subsidized food and housing for low wage workers, all of which increases the buying power of the Nicaraguan córdoba.

Nicaragua is nowhere near full employment; barely a third of workers are considered formally employed and paying into social security. But that is a significant increase over historical norms and few would argue that workers are not better off than they were under the neoliberal governments of 1990-2006.

The fundamentals of the world economy have not changed. Neoliberal capitalism is still making the rules. But in Nicaragua the nature of the State and what economic actors are defended by the State has changed, and that has made all the difference.

 NicaNotes website: http://afgj.org/nicanotes

AFGJ website: http://afgj.org/

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Defenders of Export Processing Zones

In 2000, Daniel W. Drezner of the University of Chicago published an article entitled ‘Bottom Feeders’[1] in which he accused the critics of EPZs of a “lack of supporting evidence” for their arguments, of peddling myths and of simply being wrong. The grounds for his arguments are summarised below.

There is a lack of supporting evidence that the reduction of controls on trade and capital flows has forced a generalised downgrading of labour or environmental conditions;

“Multinationals often pay higher-than-average wages in developing countries in order to recruit better workers” (p.65);

“Several nations, including the Dominican Republic and the Philippines, actually … established labour standards in their EPZs when none previously existed” (p.66);

“Even developing countries … have liberalised their foreign investment laws while simultaneously tightening environmental regulations” (p.66);

“And even in the absence of uniform national enforcement, many multinational corporations have embraced self-monitoring programmes for the environment – an effective complement to government regulations” (p.66)

“Nongovernmental organisations, corporations, politicians and academics use the race to the bottom as an excuse to peddle their policy wares” (p.68).


[1] Daniel W. Drezner (2000) ‘Bottom Feeders’, at http://drezner.foreignpolicy.com/

Criticisms of Export Processing Zones

A report by the International Confederation of Free Trade Unions (ICFTU)[1] states that the supposed benefits of EPZs are limited for a number of reasons:

  • work tasks involve simple processing operations, requiring limited and non-transferable skills;
  • most jobs are poorly paid and of low quality;
  • only a small percentage of foreign currency earnings remain in the country;
  • investments are insecure and can easily re-locate to another country offering a more attractive
  • investment climate, and;
  • materials are often imported rather than sourced from the local market.

The ICFTU report also suggests that: “Serious questions remain as to the real benefits of EPZs to development. By its very nature, EPZ investment is precarious, and likely to leave the country at a moment’s notice if a cheaper, more compliant workforce is on offer somewhere else.”[2]

Similarly, John Madeley suggests that the main beneficiaries of EPZs are the transnational companies, rather than the host countries: “They have a record of facilitating exploitation and make a very limited contribution to the overall development of the countries in which they are located.”[3]

A further criticism of EPZs as a development mechanism, and one widely publicised by the NGO sector, relates to the poor working conditions and labour rights violations which occur in the factories situated in the zones, such as the maquilas in Central America. The ICFTU report states that governments offer a weak framework of social and employment rights as part of the incentive package to attract investors, either explicitly through exempting them from labour laws, or passively, through the lack of regulation or enforcement of these laws.[4]


[1] International Confederation of Free Trade Unions (2003) ‘Export processing zones – symbols of exploitation and a development dead-end’ (September p.5) http://www.icftu.org/www/pdf/wtoepzreport2003-en.pdf (accessed 24 August 2009)
[2] Ibid.
[3] Madeley, J. (2008, second edition) Big business, poor people: How transnational corporations damage the world’s poor, Zed Books, London (p.153)
[4] Op.cit (ICFTU)

Race to the bottom

Andria Myriamthopoulos and Martin Mowforth, 2009

Pollution control remains a dream in developing countries. Companies that produce goods will avoid production in countries with strict environmental regulations and will try to produce their goods in countries with less strict environmental regulations. Tietenberg (2007)[1] and Tietenburg and Lewis (2009)[2] explain that this is because they will face the problem of market share loss.

This is a good reason for countries to accept and follow lower environmental standards; which is known as the Race of the Bottom. Developed countries ‘force’ developing countries to keep environmental standards low for their economic benefit. This is not only happening in developing nations but also in weak developed countries whose economy depends mainly on the market flows of stronger countries such as the UK.


[1] Tom Tietenberg, Tradable Permits in Principle and Practice. Moving to Markets: Lessons from Twenty Years of Experience. J. Freeman and C. Kolstad. New York, Oxford University Press, 2007: 63-94.
[2] Tom Tietenberg and Lynne Lewis (2009) Environmental Economics and Policy, New Jersey: Prentice Hall.

The Better Work Programme in Nicaragua

The Better Work Programme of the International Labour Organisation (ILO) and the World Bank’s International Finance Corporation (IFC) was launched in 2007 following the success of the ILO’s Better Factories Cambodia Project. In July 2011 Nicaragua became the first Latin American country to join the programme which is supported financially by the US Department of Labour and is implemented locally with the support of the Nicaraguan government.

In essence, the programme focuses on improving labour standards and on promoting the business case for better working conditions. It has three major components:

  • Compliance with ILO Core Labour Standards and national labour laws. Auditors evaluate adherence to these standards.
  • Worker-Management Cooperation. In the case of Nicaragua, tripartite talks take place every six months between the government (Ministry of Labour), the factory owners and unions to negotiate the minimum wage, meal subsidies, health care and working conditions.
  • Social dialogue for all involved. This includes the international buyers as well as the government, employers, unions and workers and, amongst other things, leads to improvements in compliance with social standards which in turn lead to improved competitivity.

The weekly Nicaragua News sheet claimed that “before 2007 the word maquiladora was a synonym for labour abuse. It was difficult for workers to organise unions and those who tried were often fired. Today most factories are unionised and there are more government inspectors inspecting more frequently and issuing more fines.”[1] An earlier Nicaragua News sheet cited Luis Barboza, formerly of the Sandinista Workers Central (CST), who explained that “before [1990 – 2006], there was an alliance between the corporations and the government to destroy unions and investment came at the cost of a decline in labour conditions. Now the situation has changed.”[2]

Companies participating in the scheme include VF Corporation, Levis, Tommy Hilfiger, Wal-Mart, Gap, Gildan, Target Corporation, Sears, and J.C. Penney, amongst others.


[1] Nicaragua News (31 July 2012) ‘Labour conditions improve in Free Trade Zones’, Managua.
[2] Nicaragua News (2 August 2011) ‘Better Work Programme launched’, Managua.