Free Trade & the Economic Crisis in Nicaragua

THE GLOBAL ECONOMIC CRISIS that began at the end of 2008
has hit Nicaragua hard. Over a dozen maquilas, factories,
that import all the primary materials, export all the products,
and comprise the primary source of employment in
Nicaragua, have already left the country, and tens of thousands
have lost their jobs. The very real fear of the flight of
investment has caused the previously populist government
to turn to supporting labor-abusing companies, either outright
or tacitly, by choosing not to enforce the law while companies
are increasingly violating workers’ rights. This is a
shift back into the state’s former role under the 16 years of
neoliberalism that followed the electoral defeat of the Sandinistas
in 1990.
As a United Students Against Sweatshops International
intern, I spent the summer in Masaya, Nicaragua with a
union federation that organizes with workers of the maquilas
which primarily produce apparel for American consumers.
Yutex, a factory making shirts for Walmart, provides one
example of the growing trend among corporations to capitalize
on the financial crisis and the government’s weakened
position by disrespecting labor law in obvious and devastating
ways. Workers at Yutex finally formed a union last winter
to resist forced overtime, abuse by supervisors, and other
oppressive practices of the company. The new union members
were laid off by the hundreds and met with a vicious
propaganda campaign on the part of management, which
accused the union of driving the company out of Nicaragua.
“We [the unions] must be flexible with the companies.
Because if we continue struggling 100% they will leave and
the workers will be left without a job,” explains Wilfredo
Guerrero, a young union leader at Yutex who was fired and
threatened with death by the factory owner. Guerrero tells
me, one cannot allow the company to continue its current
practices: firing at will, underpaying workers, and refusing to
accept unions. He and the union organizers are some of the
most committed and fearless activists I have known. However,
there is a creeping feeling among labor in the Nicaraguan
apparel industry of being stuck with no way out.
The government, organized labor, and big business
formed a tripartite commission in response to the crisis. On
March 12, they signed an agreement in which the companies
promised to establish and maintain communication
with workers, including consulting them in responding to
financial difficulties caused by the crisis, and to follow
proper legal procedures in cases of company closures (as
opposed to fleeing the country without paying workers
their due benefits, a common practice in the Free Trade
Zones). Labor leaders agreed to have minimum wage negotiations
once a year rather than every six months. The labor
movement had fought hard for twice-a-year negotiations
and the tripartite agreement was a sacrifice decided upon in
a top-down manner within the labor organizations, one
that workers were extremely upset about. In one labor
organizer’s words, however, “this was the only thing to do:
sign this agreement or else here, there would have been a
massive closing of factories, like there was in Honduras. A
lot of companies left Honduras and came here. In El Salvador
and Guatemala the same thing happened.” Nevertheless,
the agreement did not stop many signatory companies
from leaving the country, often in outright noncompliance
with the conditions set by the commission. Nicaragua has
among the lowest wages in Central America. Since the crisis,
companies have been leaving nearby countries and
moving to Nicaragua where they can profit more because
the price of labor is lower. This cycle continues as companies
facing financial hardship in Nicaragua move to countries
in Asia and Africa, where labor is even cheaper.
The union members I got to know have a strong analysis
of the way their struggle fits into the global situation. What
is happening at Yutex and the many factories with similar
cases is only possible within the context of the global race to
the bottom, the process of companies constantly chasing the
economies with the lowest wages and most vulnerable labor
force. Critiquing, actively opposing, and finding alternatives
to the free trade policies embodied in agreements that facilitate
this disastrous race, such as CAFTA-DR (the Central
American Free Trade Agreement implemented in 2006), is
part of the Nicaraguan labor movement’s work. The free
trade system puts Nicaraguans in a vulnerable situation. If
companies operating in the country did not all depend
upon imports and markets abroad to make money, this crisis
would not be hurting them nearly as much. The few
companies that do obtain their primary materials from within
Nicaragua or from bordering El Salvador have been surviving
the crisis far better than the maquilas that are at the
mercy of fluctuating foreign markets.
A question many have been asking in the US, since the
economic crisis hit is, “why should Main Street pay for
Wall Street’s actions?” However, we usually aren’t thinking
about the price of this crisis on a global level. The people
of the poorest countries in the world are affected the most.
The free trade policies that the United States and international
institutions, such as the World Bank, have imposed
upon Nicaragua and other impoverished or indebted
countries have ensured that the lowest-paid and most
abused workers of the world take the greatest hits from a
crisis caused by a system these same workers have resisted
from the beginning.