Labor, Sweatshops and CAFTA in Nicaragua

By Steve Watrous (Watrous is a professor and Chair of the Milwaukee Fair Trade Coalition.)

As I walked through the big room of a clothing factory in Managua’s free trade zone, where about 800 workers were busy sewing and ironing black Wrangler jeans, the heat was horrible for a visitor from the north. I saw the notices that the employees were supposed to wear dust masks, but they mostly weren’t, and neither was I until a kind woman offered me one.

The dilemma is that once you put on the mask, those ceiling fans no longer cool half your face, and that factory seems ten degrees hotter. Fortunately, the dust was light enough that I could clearly see the far corner of the room, maybe 300 feet away.

This building used to contain Chentex, a viciously anti-union company that made clothing for Kohl’s Department Stores and other U.S. vendors. About 11 years ago fair traders in Milwaukee and many other cities made a fuss about Kohl’s Nicaraguan sweatshops. When I last visited Nicaragua, 10 years ago, Chentex had defeated the unionizing effort.

But Chentex and some of the worst exploiters left the country when Daniel Ortega, the leftist leader of the 1979 Sandinista revolution, regained the presidency in 2007. Most of those abandoned factories have new businesses, wages have gone up 36 % since 2008, and workers get somewhat more respect now, said Pedro Ortega [not related to Daniel], head of the FESITEX textile workers union.

President Ortega, a socialist, didn’t confiscate any factories but his government stepped up enforcement of the labor laws. Despite rhetoric against the U.S., the Sandinistas have an uneasy peace with foreign investors, including from the U.S.

So now 60% of the workers in the largest free trade zone are unionized, according to Pedro Ortega. That means they have a contract, rights and representation, and that the union can arrange for a gringo visitor to tour a factory. The minimum wage law calls for a tri-partite commission [government, labor, owners] to adjust factory salaries every six months, and wages went up 15% last year. That’s the good news.

The bad news is that textile work in Nicaragua pays about $130 per month, according to Pedro Ortega.

That’s the lowest in Central America, where Nicaragua is the poorest country. Ortega noted that the canasta basica, or market basket of goods for a family of six, costs $450 per month.

I talked to one woman worker with 17 years seniority making about $200 per month. As one U.S. labor activist in Nicaragua noted, no employer there pays a living wage. And the harsh conditions in non-union plants make them sweatshops.

Yet foreign investment, exports and factory employment are up. Poverty is down. The Central American Free Trade Agreement [CAFTA] with the U.S., started in 2005, has worked well for Nicaragua’s garment industry, according to both Ortegas and several economic analysts.

What’s really new is “Better Work,” a program of the International Labor Organization, supported by the government, unions, the U.S. Dept. of Labor, the AFL-CIO Solidarity Center, and by some U.S. companies. It’s supposed to improve productivity and conditions of work.

Gap, Target, Levis, Wal-Mart and VF signed on, said Pedro Ortega, but Kohl’s refused. Some 60,000 textile workers could benefit from this program, which got rolling in 2010 and is the first such effort in Latin America.

On the other side of Managua, the capital, is the anti-sweatshop: Nueva Vida. Started in 1998 partly by women workers from the garment industry, this co-op factory is a more pleasant place to work and it tries to pay better. Wages are $290 per month when the work is good, according to Maria Elena Medina Vallejos, the marketing director. They got official “free trade zone” status to help with import and export rules.

Alas, their T-shirts, camisoles and baby clothes are only being produced at 30% of capacity, so the small plant was pretty quiet when I strolled though in June. They sell organic cotton shirts to the U.S. through the Presbyterian Church and would like to sell a lot more. The co-op members, mostly women, consider it the only free trade zone in the world owned by workers.