Free Trade Zones and Women in Nicaragua: Exploitation or Empowerment?

From the Spring 2002 issue of WCCN's Sister State Update

by Rose-Marie Avin

What does globalization imply for women in the world economy, especially for women in Nicaragua? Globalization, defined as an "increased economic interdependence and integration in the world economy" through the expansion of trade, technology, investment, and finance, affects the lives of men and women everywhere. It is argued, however, that trade has a different impact on women than on men, given the patriarchal structures of societies, discrimination, and the marginalization of women in the Third World. The question is: Does globalization reinforce women’s inferior status, or does it contribute to their empowerment? Studies have shown that the impact is varied, complex, and multidimensional. In this article, I will discuss one important aspect of globalization: the rapid expansion of trade through the creation and proliferation of Free Trade Zones (FTZs), also known as "maquilas," and their impact on the socioeconomic conditions of women in Nicaragua.

Globalization is not a new phenomenon. It is a process that started after World War II as competition intensified between producers of labor-intensive manufactured goods in industrialized nations. Producers then shifted production to Third World nations to take advantage of their cheap labor force. These producers received considerable help from their respective governments, which changed their tariff policies to allow the goods assembled abroad to reenter their economies duty-free. At the same time, governments from a large number of Third World nations made it attractive for foreign capital to relocate in their countries by giving them tax incentives and by building the infrastructure needed for manufacturing. South Korea, Taiwan, Hong Kong and Singapore were among the first to set up FTZs. A large number of poorer Third World countries in Southeast Asia took up the strategy a decade later. Today, FTZs exist throughout Asia, Africa and Latin America. All FTZs seem to have two things in common: They are enclaves with no linkages to the rest of the economy and the vast majority of the workers are poor young women working for low wages under deplorable conditions. Moreover, many of these women have no labor rights since labor unions are suppressed by the governments of these countries.

In Nicaragua, factories operating under the FTZs model have increased considerably during the period 1991-2001. In 1976, Nicaragua had one industrial park, "Las Mercedes," with 11 factories producing mostly clothes for the United States market. With the arrival of the Sandinistas in 1979, however, the factories closed their doors and moved their operations someplace else in Central America. The electoral defeat of the Sandinistas in 1990 brought to power a conservative government more sympathetic to the free-market and free trade policies advocated by the World Bank, the International Monetary Fund and the United States Agency for International Development (USAID). With funds received from the World Bank and the Inter-American Development Bank, new industrial parks were created and the foreign investors came back to Nicaragua. The sector has exploded during the 1990s.

Today, the FTZ system consists of 12 industrial parks and the number of firms has increased from 8 in 1992 to 45 in 2001. Of the 45 firms operating in the FTZs, 14 are from Taiwan and 13 from the United States with the vast majority (73 percent) engaged in the production of clothes mostly for the United States market. The sector has also been the most dynamic in terms of job creation: The number of jobs increased from 1003 in 1992 to 38,792 in 2001. At the same time, the value of exports grew from US $ 2.9 million to US $ 230 million during the same period. While the sector contributed 7.5 percent of the value of total exports in 1994, its contribution reached 32 percent in 2000.

What has been the impact of such rapid growth on the socioeconomic status of women in Nicaragua? There is no doubt that the FTZs sector is an important source of employment for Nicaragua and for poor Nicaraguan women. It is estimated that 70 percent of the workers are young women with a low educational level, with about 50 percent being heads of households. For Nicaraguan women, having a job in the FTZs means not having to sell food and trinkets in the streets and also not having to leave the country to become maids in Costa Rica. The reality is that there are no jobs in other sectors in Nicaragua. In 2001, 58.8 percent of working age women were unemployed and underemployed, and of those who were employed 75.5 percent worked in the informal sector- the employer of last resort.

While the FTZs have been a major source of employment for women, they have not created jobs that can bring women out of poverty and contribute to their empowerment. On the contrary, management in these factories pays low wages, provides difficult working conditions, and tries to suppress the women’s labor rights. According to Sonia Agurto of FIDEG, a well-known research institute in Nicaragua, the average monthly salary in the FTZs is 850 cordobas (about 62 US dollars) higher than the minimum wage of 400 (29 US dollars) cordobas. However, the basic market basket for a family of five cost 2550 (185 US dollars) cordobas. It takes three persons working in a FTZ to buy the basic market basket. To make ends meet, many women work extremely long hours.

Working conditions are also difficult. There have been reported cases of physical mistreatment, as was illustrated by the revolt at Chentex during the mid-1990s. At Chentex, workers rose up because of poor working conditions and the fact they were not been treated with respect by management. They were treated like "cattle" as one former worker said. According to Gladis Manzanares, former general secretary of one of the labor unions in the FTZs, one of the major problems is the difficulty of forming labor unions. Workers suspected of forming labor unions get fired and that can be a devastating blow for a female head of household. Furthermore, many women do not know the law and their rights.

It is obvious that the FTZs development model has not led to the transformation of women’s lives through economic empowerment, but rather reinforces the conditions of marginalization of women in Nicaraguan society. Job segregation from the outset gives women unskilled production jobs that are the poorest paid. Lacking access to on-the-job training, women are not moving up the job ladder and are not acquiring social and political power. One organization working to empower women is the "Maria Elena Cuadra," (MEC) a women’s organization working to improve the human rights of women, especially of women in the FTZs. This organization provides scholarships for nontraditonal jobs, has a small credit program for unemployed women, teaches women about their labor rights, and provides training for negotiation techniques. According to Sandra Ramos, the head of MEC, women need to have a consciousness raising that will empower them to take action but it takes time. The goal of MEC, then, is to create a space for reflection for the women of the FTZs so that they can achieve personal empowerment. Will that be the first step toward economic empowerment? Only time will tell.

Rose-Marie, a long-time WCCN supporter, participated in WCCN's January 2002 study tour to Nicaragua. The study tour focused on grassroots responses to the global economy, and looked at the free trade zones in Nicaragua as one aspect of globalization. Many of the people and organizations that she mentioned, such as Sonia Argueto and FIDEG, and Sandra Ramos and Maria Elena Cuadra, were visited during the study tour.