Labour Conflict Highlights EPZ Firms' Importance

By Roberto Fonseca, IPS, 24 July 1998

MANAGUA, Jul 23 (IPS) - The decision by a Taiwanese garment company to remain in Nicaragua, after threatening to pull out over a dispute with its employees, has drawn sighs of relief from officials worried about the effect such a withdrawal could have.

In early 1998, Chentex - the largest clothing manufacturer in Nicaragua's export-processing zones (EPZs) - had announced that it would withdraw from Nicaragua this month after being hit by a wave of protests by its workers.

However, following an agreement between its management and union representatives, the Taiwanese-owned company has now decided to renew its contracts in the country, Gilberto Wong, executive secretary of the state-owned Corporation of Free Trade Zones (CZF), told IPS.

"This is wonderful news for everyone, because I think it would be very damaging to the country if a company of this size abandoned its operations here due to labour conflicts," Wong said.

According to Wong, Chentex's departure would have caused the other the other Taiwanese factories here to pull out. This would have delivered a telling blow to the economy since Taiwanese concerns account for about two-thirds of the exports from the EPZs and employ just over half of the people who work there.

The importance of the EPZ sector has risen rapidly in Nicaragua in recent years. In 1992, it exported 2.8 million dollars worth of goods, but by 1997, that figure had increased to 164 million, of which 110 million came from the five Taiwanese companies. Exports from the EPZ sector dwarf those of each of the three commodities that Nicaragua has traditionally sold abroad - coffee, sugar and seafood.

The EPZs are also a major employer. Between 1992 and 1997, the number of jobs they provided grew from 1,149 to 12,810, according to official figures. One measure of their importance is the number of people who go there looking for work each day: around 150 in the case of the Las Mercedes Free Trade Zone, according to CZF officials.

The number of jobs in the sector, 72.1 percent of whose workers are women, is expected to hit the 20,000-mark by yearend. This is not negligeable since the total workforce in manufacturing is between 31,000 and 38,000, according to the Nicaraguan Social Security Institute (INSS).

The largest number of jobs in the EPZs are generated by the Taiwanese companies, which together employed 6,712 people (52.4 percent of the total) as of December 1997. Companies from the United States are next on the list with 23.3 percent, followed by enterprises from Korea (12.9 percent), Nicaragua (5.2), Hong Kong (4.4) and finally Italy (1.8).

Chentex, one of the largest companies in Nicaragua's EPZs, employs more than 1,700 workers and exports upward of 42 million dollars each year, according to official statistics. Early this year, its factory in Nicaragua was violently occupied twice by members of the Sandinista Workers Central (CST) demanding better and safer working conditions.

The protests prompted Chentex officials to announce that they were planning to shut down their Nicaragua operations in July of this year. The announcement divided Chentex employees. While some refused to compromise on their demands, other marched to the Ministry of Labour to ask the government authorities to prevent the closure of the factory.

After several months of talks, union leaders and Chentex officials finally agreed to iron out their differences through peaceful negotiations rather than violent occupations.

"I hope that company officials and labour leaders will keep channels of communication open at all times, since history has shown us that dialogue resolves problems without the need for violent actions which can harm our country both socially and economically," said Wong.

"We hope that the renovation of the contract will be for a four-year period, although they favour a renewal for a shorter amount of time which would serve as a probationary period for the company to see if things improve and to decide whether or not they can continue with their long-term plans in Nicaragua," he added. y It's not only Nicaragua that has been relying heavily on EPZs. 'Maquiladoras', as the EPZ factories are called, account for 25 to 30 percent of the people working in Central America's industrial sector, according to Eduardo Gitli, author of a study on the issue.

"Nicaragua could benefit from a second wave of free trade zones, which is awaiting more competitive conditions in the country in order to move definitively to start operation there," Gitli, also a consultant with the International Labour Organization (ILO), told IPS.

He said Nicaragua could attract more maquiladora factories in the clothing industry because there are no quotas restricting its exports to the United States, and it also has a surplus of qualified workers.

However, it needs to reduce the cost of services, improve its infrastructure -- its transport infrastructure is the worst in Central America -- and shed its image of a country wracked by political instability. (END/IPS/rf/mj/if/lb/mg/kb/98)