Sweatshops enter Southern Mexico

TRANS-TEXTIL INTERNATIONAL THE MAQUILADORA OF SAN CRISTOBAL DE LAS CASAS, CHIAPAS.

“These are the alternatives for Chiapas that we have dreamed of for so long”

--Pablo Salazar, governor of Chiapas, at the inauguration ceremonies of Trans- Textil International, April 11, 2002, in San Cristóbal.

A year ago, on April 11, 2002, President Vicente Fox flew in his presidential jet to San Cristóbal de Las Casas, Chiapas, in order to inaugurate the new and, to date, the only maquiladora (1) in the city, Trans-Textil International (TTI). Fox’s visit underscored the importance that his government is placing on initiatives such as TTI, spawned by a direct grant of US$1.65 million in public funds for the establishment of the factory, which is part of the federal government’s “March Towards Development” program. Its stated goal is, according to Fox, “to close the development gap between the southern and northern halves of our country”.

For the governor of Chiapas, Pablo Salazar, the inauguration of TTI was nothing short of “the launch of the state’s industrial development.” (2) In the face of the unemployment generated by 20 years of neoliberal policies, and in the wake of intense and growing campesino (small farmer) out-migration, governments at all levels are urgently seeking to create jobs, and have thus pinned high hopes on the maquiladoras. This explains Fox’s gesture to preside over TTI’s inaugural ceremony, since both he and Governor Salazar see it as an inroad, an example to follow, proof for entrepreneurs that Mexico’s southeast can be an alternative for their investments, spreading to the southeast the maquiladoras that up to now prevailed in the north. But is this merely a mirage?

Are maquiladoras the solution to the unemployment and resulting displacement provoked by two decades of neoliberal policies? A look at Trans-Textil in San Cristóbal, and the export-oriented maquiladora industry in general, will allow us to see if we are on the threshold of Chiapas’ industrial boom, as dreamed by Fox and Salazar. Incentives For a factory such as TTI to be installed, the federal, state and municipal governments must grant “incentives”, in other words, transfer taxpayers’ funds to companies, or grant exemptions for fees and taxes that otherwise would be collected.

In the case of TTI, the transfer was (at least) US$1.62 million, consisting of US$571,429 from the “March Towards Development” program, and another US$1.05 million from the state government. The grant of US$571,429 was made on the basis of a promise by TTI to create 1,500 jobs, with each job equal to a transfer of US$381. Yet these are only promised jobs, not jobs created. In April 2003, one year after the opening of the plant, 450 people are working at Trans-Textil, according to the manager José A. Chehuán Borge. Yet during visits to the plant, several researchers calculated that there are less people working there.

In any event, the federal government transferred US$571,429, with which TTI reconditioned the industrial warehouse that today houses the maquiladora. For its part, Salazar’s state government bought the immense 30,000 square-foot warehouse from its previous owners, Bodegas Gigante, and leases it to TTI for a token US$286 per month. The Chiapas government is also covering the salaries of TTI employees, during their first six months at the plant, supposedly as “scholarships” during the time it takes to be trained. Apart from the fact that the work done requires little training, the scholarships are in fact the minimum wage that employees earn over the six-month period, and which TTI saves, but at Chiapas taxpayer expense.

It is during the first six months that most people are either fired or quit voluntarily, and TTI also saves the cost of training new hires. The San Cristóbal municipal government topped off the incentive package by placing a sidewalk around the main entrances to the warehouse. Rather than appreciate these sizable transfers from public coffers, Trans- Textil International has been able to get away without fully paying bills due for the reconditioning of the warehouse.

Presently TTI has a pending debt of some US$190,476 owed to several contractors and workers, among them Prefabricados S.A. de C.V. (debt of US$54,731), Engineer Juan Gilberto Gómez Díaz (owed some US$44,381), SEPROFEL, S.A. de C.V. (debt of some US$19,048), as well as ironworks, carpentry, plumbing, and glass companies, and tradespeople, all of San Cristóbal (3). This debt was brought to the attention of Governor Salazar, as well as Vicente Fox’s office, over a year ago, yet to date nothing has been done . According to Amado Avendaño, well-known Chiapas journalist and politician, Pablo Salazar placed a call to the owner to comment on the debt and the damage being done to the maquiladora’s reputation, but the matter stands pending.

Those affected are considering suing TTI, in spite of the nightmare awaiting them in the maze of the Mexican justice system, knowing that their opponent is powerful, rich and influential. “He is an individual who has made non-payment a way of life”, according to journalist David Páramo. (4) Working Conditions (5) The workers at this textile plant are 60% women, 40% indigenous, and the average age is 22. Most women have children under their responsibility. Employees receive the minimum wage, presently US$3.84 per day, as established for “Zone C” in Mexico, where the lowest wages are paid. Officially the work week is 45 hours over five days, plus two Sundays a month, called packing days.

According to plant manager Chehuán, there are productivity bonuses for workers who have finished their six-month “training”, based on production above a minimum amount of finished pieces. These bonuses can be as much as 50% above the minimum wage. Employees also receive the legally stipulated benefits having to do with vacations, social security, etc. Work teams are “modules” of 16 people—including sewers, inspectors and packers. When modules fail to meet the minimum quota of garments, employees must remain working until they finish, with no additional pay. Asked if workers could establish a union, plant manager Chehuán stated there was no hindrance at all, but added with a coy smile, “well, officially there isn’t”.

In fact the manager commented to Dutch journalist Bertram Zagema last November that he had all required documents ready to establish a “ghost union” (existing solely on paper), should he ever find out that workers are organizing. Ghost unions make it impossible, with the due protection that the law gives company owners, for workers to create a real and independent labor union. At least part of the reasons for locating in San Cristóbal is that its people are not yet “ruined”, Chehuán confessed in another interview. Not like the undisciplined workers in Acapulco, he might have added. In 2002 there was serious labor strife in a TTI plant in the port of Acapulco, when workers struck for better working conditions, and the maquiladora responded by shutting its doors. In order to obtain compensatory payment to which they were legally entitled, workers took over raw materials, machinery and even the maquiladora building.

But to their misfortune, everything was in the name of third parties, nothing legally belonging to the company that owed them money. Again, with the brazenness that the law allows, the company left workers on the street and moved its machinery to San Cristóbal, precisely to the warehouse that at the time was being reconditioned for Trans-Textil, at taxpayers’ expense. Products and destination When TTI opened its doors in April 2002, it made sweaters for export. Now, due to the restructuring of the industrial complex of which it is part, in San Cristóbal TTI takes in t-shirt pieces from affiliated plants in Puebla and Tlaxcala.

Workers then sew the parts to make a full t-shirt, at a rate of 200,000 pieces a month, a production quota that supposedly will grow to 500,000 a month after three years. Some 95% of the t-shirts head for the US market, where they are sold by the large retail department stores such as Sears, Target, Wal Mart, J.C. Penny. The t-shirts carry “prestigious” brand names that are in style in the US market, such as Tommy Hilfiger, with which TTI has sizable contracts. If we consider that every module of 16 people must turn out a quota of 1,500 t- shirts per day, i.e., 94 per person per day, then a worker on a minimum wage earns 4 cents of a US dollar for each t-shirt she produces at Trans-Textil.

A “Tommy Hilfiger” t-shirt might easily fetch US$20 in the United States, some 500 times what the worker was paid for each one. In an article written on the textile industry that makes t-shirts, Alisa Solomon found that “the factory owner and the distributor got the biggest chunks of the [...] retail price. When merchandise moves through the more legitimate economy into the department stores, discount chains, and upscale boutiques, the high costs of branding and advertising jack the prices—and, again, the profits—way up. Thus, execs and shareholders in the apparel industry, with a little help from a panoply of corporate-friendly free-trade agreements, get steadily richer, and the rest of us enjoy “our way of life” on the sweat of workers in and from developing countries”. (6) The owner Who is benefiting from all this? His initials, KN, 3-feet high in bas-relief, are etched on the front wall of the Trans-Textil plant in San Cristóbal. He is Kamel Nacif, Mexican of Lebanese origin, the powerful and wealthy “king of denim” (full name: José Kamel Nacif Borge).

Nacif owns a textile empire in Mexico, United States and Hong Kong, and the maquiladora in San Cristóbal is a relatively small piece in his industrial complex, known as the Tarrant Apparel Group (TAG). Just in the city of Tehuacán, in the state of Puebla, TAG has seven maquiladoras, plus a plant that produces almost 20 million yards of denim per year, another enormous (1,500,000 sq. foot) textile processing facility, both in Puebla, in addition to offices in China, Thailand, Korea, New York and Los Angeles. (7) Aggressive and overbearing, despotic in interpersonal relations, according to newspaper accounts and people who have engaged with him, he walks with several cellular telephones in toe, giving orders to his entourage as he chomps on his cigar. Formally Nacif is just another employee of Tarrant Mexico, where a few years ago he earned an annual salary of a million dollars.

Then in 2000 it was reduced to US$250,000 per annum, but with the right to purchase a million additional shares of company stock at a hefty discount. Researchers in Puebla of the Commission for Human and Labor Rights of the Tehuacán Valley have found that Nacif works closely with the Guez family—owner of Sassoon Jeans during the 80s. According to the Commission, TAG’s principal strategy is “the complete package”, i.e., vertical integration.

Not only does TAG make jeans and t-shirts, but they produce the cloth, cut and stitch it together, wash and finish it with the latest look (sand blasting, for example), and then package and ship directly to the large retail outlets in the US. In addition to the labor exploitation that is part and parcel of these operations, says the Commission, “they pose a great danger to the water resources at the plants’ location due to the finishing processes”. (8) Apart from his textile empire, the Mexican and US press has reported that Kamel Nacif is one of the world’s most prolific gamblers. In Las Vegas, gamblers who risk millions at a time are called “whales”, and Nacif is one of the biggest whales in the history of the city.

He has been a familiar face for over 30 years when, still an adolescent, he would come to Las Vegas with fake identification to bet before he was 21, the legal minimum. He’s also known as one of the bettors who built Caesar’s Palace Hotel, with the money lost on wagers. When arriving in Las Vegas, Nacif deposits between 4 to 5 million dollars. Baccarat is his favorite game, and he is not beyond betting the casino’s maximum wager of US$160,000 on a single hand.

In other words, what Nacif bets on one round of baccarat would cover all outstanding debts due to the companies in San Cristóbal that have been waiting a year for full payment of the goods and services lent to Trans-Textil. In the midst of his usual shouts, arrogance and blows delivered to other bettors at the casino tables, in 1993 Nacif was detained and jailed in Las Vegas -- but not for his bad manners, since casino whales are sacred. He was detained on an arrest warrant issued in Mexico accusing him of tax evasion. But Nacif wasn’t in jail for long. Jack Binion, owner of Horseshoe Casino pulled the two million dollars from his wallet to bail out this Mexican- Lebanese whale, and then lent him another four million dollars so that Nacif could keep betting.

According to the Chicago Tribune, Binion’s lawyers said in a deposition that the loan was “‘a calculated personal risk that he hoped would ingratiate him with Mr. Nacif’ The lawyers said that the strategy worked: Nacif later played at the Nevada Horseshoe and lost about US$13 million”.(9) Although Mexican authorities later dropped the charges against Nacif, it wasn’t enough to calm the suspicions of the Nevada Gaming Control Board that Nacif had participated in illegal activities such as drug and arms trafficking, and money laundering. Years later he was said to be one of the biggest debtors of Mexican banks, then in government escrow, following the 1995 economic bust that revealed the fraud committed by banks that lent out billions to clients of questionable repute.

Given the 50 million dollars that Nacif allegedly owes the banks, he “represents one of the biggest undermining factors of the bank rescue scheme” (10), and it could be that Nacif is one of the greatest beneficiaries of the FOBAPROA and IPAB (the billion-dollar taxpayer rescue packages). Press reports at the end of 2002 stated that Nacif had yet to pay the banks his million-dollar debt. In Mexico all this is well known, but authorities have chosen to turn a blind eye. In 1998 Nacif and other textile executives visited President Ernesto Zedillo in the official residence of Los Pinos in order to thank the federal government for support given to the textile sector.

In this administration Nacif has been very close to the Vamos México Foundation of Marta Sahagún, wife of Vicente Fox. In addition to companies located in Puebla and Tlaxcala, the textile center of Mexico, and the TTI satellite in San Cristóbal, Nacif has at least another maquiladora not far from Chetumal, capital of Quintana Roo state, also a t- shirt factory. On initial inspection, these maquiladoras would seem to be unsound economic investments, in locations that are hardly strategic, with little infrastructure and an untrained work force, and far from the main, perhaps only, export market, the United States.

Certainly there are the positive factors already mentioned: incentives, low salaries, a work force with no union experience, etc. Yet even so, the location of maquiladoras in the far southeast of the country would not seem to rest on sound economic grounds. In fact the response of corporations has been weak. Notwithstanding the occasional inauguration of a plant, there has been no strong response of the private sector. Kamel Nacif’s maquiladoras in San Cristóbal and Chetumal seem to be exceptions, rather than the rule. But a fuller picture has begun to emerge.

In February 2002 it was reported that Kamel Nacif paid US$12.1 million dollars for the Condohotel Dunas, in Cancún, adding hotel management to his activities. “La Revista” of Quintana Roo reported that “the location of the terrain couldn’t be better: next to the Marriot Casa Magna Hotel, in the second section of the hotel area. Reportedly the Double Tree Hotel chain, with 256 lodgings in the United States, is interested in operating the new Dunas”. (11) For some observers, the connection between maquiladoras, hotels, relations with Vamos México, Nacif’s past as a big-league bettor, the suspicions of his participation in drug trafficking and money laundering, all point to a possible conclusion: more than a sound bottom-line decision, the maquiladoras in Mexico’s southeast are an agreement between Mr. Nacif and President Fox, keen as the latter is to show results for his motley assembly of programs such as the Plan Puebla Panama or the March to Development.

Nacif is a bettor, a gambler by nature. To invest what is for him a token amount in a pet project of the President’s (the maquiladoras in San Cristóbal and Chetumal), and in exchange influence the inner circle of power, might be fairly insignificant in monetary terms, and yield enormous rewards. The coveted prize would be a concession to operate a casino in his recently-acquired hotel in the Cancún hotel strip. Certainly the most appealing, financially rewarding deal, with million-dollar profits waiting to be made, are not the maquiladoras, but gambling.

The Mexican Congress has been debating for years whether gambling should be legalized, or rather re-legalized, since highly-regarded President Lázaro Cárdenas banned it during the 30s. But now there are big interest groups behind its restoration in Mexico, including an “important group of Mexican entrepreneurs, headed by the National Confederation of Chambers of Commerce (Concanaco), and the National Association of Hotels and Motels which directly, or through lobbying firms like the Grupo Estrategia Política, are working to legalize gambling in Mexico. Also within this group are the governors of Quintana Roo, Joaquín Hendricks, and of Guerrero, René Juárez [...], who directly and with bureaucrats and federal legislators from their states, are lobbying in favor of legalizing casinos.” (12) In any event, Mr. Nacif’s bet is relatively risk-free. If it fails, the maquiladoras can be shut down and their machinery transferred to another locale without much problem, similar to the equipment that arrived in San Cristóbal from the maquiladora closed in Acapulco, and, once again, workers would be the principal losers.

International context of the maquiladoras and conclusion In a more global context, Mexico’s maquila export industry is facing changes at home and abroad that could mean imminent closure for plants such as Trans- Textil in Chiapas. Apart from the current recession in the United States, recent academic studies (13) indicate that Mexico has recently lost part of its competitive advantages in the maquiladoras due mostly to structural factors, related to greater government bureaucracy, deterioration in infrastructure, lack of public security and increases in violence, corruption, kidnappings, i.e., tendencies not easily reverted.

Now China has emerged as the main competition to Mexico’s maquiladoras: “while in China salaries are 4.5 times lower than in Mexico [...], the available labor force is 10 times greater than Mexico’s”, according to researchers Carrillo and Gomis. They add: “Given the loss of competitive advantages and the growing presence of countries such as China [...] in world manufacturing, it seems inevitable that certain industries will emigrate out of Mexico in the near future. Companies that base their competitiveness on unskilled labor-intensive processes, with low salaries, are quickly losing their market in these new circumstances.

Consumer products for the US market, such as clothes, toys, shoes and electronics, are increasingly being manufactured in countries such as China. (14) This is precisely the situation of maquiladoras such as Trans-Textil, and the clothing maquiladoras located in Huixtla, Comitán, Villa Flores and Ocozocuatla, Chiapas. In fact, the flight of maquiladoras has already begun—in December 2002, Kamel Nacif closed a Tarrant Apparel plant in Tlaxcala, laying off 1,600 people, just one more of the 424 plants that have closed since October 2000, and the 250,000 people that have lost jobs at the maquiladoras. Such is the folly of neoliberal economic policies implemented since the early 80s, insofar as they have destroyed domestic industry, based on the local market, with linkages to Mexican suppliers and the consequent healthy effect on job creation.

Neoliberal policies placed emphasis on supposed “competitive advantages” of low salaries in countries such as Mexico, to the detriment of a long-term industrialization policy, which might have transcended these advantages in order to create over time increasingly sophisticated domestic production processes, by means of technological transfer and through creation of local technological capacity. Now Mexico faces the worst scenario, with domestic industry largely in shambles, and with hopes pinned on maquiladoras, that are forever “on their marks” to leave for other countries that challenge the ephemeral “advantage” of poorly paid labor.

So, Governor Salazar, keep on dreaming. Export-led maquiladoras are not the alternatives that we in Chiapas want for our state. Miguel Pickard CIEPAC, A.C. Notes in the text: (1)“The word maquiladora is used to designate any factory in Mexico, owned domestically or from abroad, that has received authorization from the Mexican government to import and export goods covered by a special accord of tariffs and income taxes. The term also evokes typical images of the first generation of maquiladoras: very large plants along [Mexico’s] northern border, owned by multinational corporations.

There is, however, great diversity in the maquiladora sector: from immense branches of multinational corporations to small companies that export only a part of their output under the maquiladora accord in order to complement their sales on the domestic market”.

Taken from “Los conglomerados locales en las cadenas globales: la industria maquiladora de confección en Torreón, México”, by Jennifer Bair and Gary Gereffi, Comercio Exterior, April 2003, Vol. 53, No. 4, México, p.343. (2)The declarations by Fox and Salazar come from the web page of the presidential office, www.presidencia.gob.mx. (3)Data on debts owed provided by some of the creditors. Also see La Jornada, February 23, 2003, p.2. (4)“Nacif juega en casinos fondos de contribuyentes”, by David Páramo, August 28, 2002. Available at www.lavisiondelciudadano.tipo.com/2002_3/CI02SEP02.htm. Personal communication with Amado Avendaño. (5)Information on working conditions obtained through various interviews at TTI by journalists and academics, including Jessica Roach of American University, Washington, D.C.; Daniel Nemser, independent researcher affiliated presently with CIEPAC; the author; and through information provided by CAPISE, San Cristóbal. (6)“Shirts Off Their Backs”, by Alisa Solomon, Village Voice, December 5-11, 2001, available at www.villagevoice.com/issues/0149/solomon.php. (7)Information obtained from the web page of Tarrant Apparel Group, www.tags.com, as well as from documents submitted to the US Securities and Exchange Commission, also available on the page. (8)Personal communication with Martín Barrios, co-author of “Tehuacán: del calzón de manta a los blue jeans”, Human and Labor Rights Commission of Tehuacán, A.C. (9)“Minority Pacts Cloud Binion Casino Bid”, by Douglas Hold and Maurice Possley, Chicago Tribune, June 30, 2000. Background information on Nacif in Las Vegas is readily available on the internet. (10)“Nacif juega...”, Ibid. (11)“El magno fraude de Dunas”, by Elizabeth Martín López, La Revista, April 1997, available at www.larevista.com.mx/ed393/boton_home.gif. (12)“Inversionistas nacionales y extranjeros buscan el control de casinos en México”, by Armando Alcántara Esteves, no date, at www.tvmexiconoticias.com/Reportaje1.htm. (13)See the issue on “La nueva maquiladora” of Comercio Exterior, April 2003, vol. 53, no. 4, Mexico. (14)“Los retos de las maquiladoras ante la pérdida de competitividad”, by Jorge Carrillo and Redi Gomis, Comercio Exterior, April 2003, vol. 53, no.4, Mexico, p.327. Translated by Miguel Pickard for CIEPAC. Special thanks to Daniel Nemser for his editorial assistance and suggestions. Miguel Pickard Center for Economic and Political Investigations of Community Action, A.C. CIEPAC is a member of the, Mexican Network of Action Against Free Trade (RMALC) www.rmalc.org.mx, Convergence of Movements of the Peoples of the Americas (COMPA ) www.sitiocompa.org, Network for Peace in Chiapas, Week for Biological and Cultural Diversity www.laneta.apc.org/biodiversidad, the International Forum "The People Before Globalization", Alternatives to the PPP http://usuarios.tripod.es/xelaju/xela.htm, and of the Mexican Alliance for Self- Determination (AMAP) that is the Mexican network against the Puebla Panama Plan. CIEPAC is a member of the Board of Directors of the Center for Economic Justice http://www.econjustice.net and the Ecumenical Program on Central America and the Caribbean (EPICA) http://www.epica.org.