Central American Unions Demand Payment

Central America’s apparel unions are demanding $1.7 billion in back wages and additional financial support from U.S. fashion brands and retailers that have canceled hundreds of millions of dollars in orders, leaving around 80,000 workers without work or pay in one of the world’s poorest regions.

Top regional union Coordinadora Regional de Sindicatos de Maquila has teamed with U.S. and Canadian counterparts AFL-CIO and Maquila Solidarity Network, respectively, as well as with human rights groups, the Workers’ Rights Consortium and Belgium’s FOS, to launch a campaign to collect the funds.

The move, which is at an early phase, mirrors similar calls for global brands to compensate workers in Asia and other regions after the coronavirus forced fashion labels and retailers to cancel orders.

U.K.-based discounter Primark, responding to pressure from the WRC and The Clean Clothes Campaign, created such a fund in April to assist factory owners in Bangladesh and other Asian countries. But no such effort has been mounted in Central America, where Guatemala, Honduras, Nicaragua and El Salvador produce the bulk of roughly $6 billion in annual apparel exports for brands including Nike, Levi’s, Under Armour and Lululemon.

“We are working to launch this campaign next week and expect to meet with U.S. Department of Labor officials,” said the Coordinadora’s president Miguel Ruiz. “They should be acting as mediators so brands meet their labor and social responsibility obligations.”

Central American maquila (a term describing for-export manufacturing facilities) operators’ rights to obtain fair wages and social and health-care benefits are enshrined in Chapter 16 of the DR-CAFTA free-trade accord that links the U.S. and Central America under a duty-free corridor.

“It’s unacceptable that these brands have CAFTA duty-free benefits and don’t assume their labor responsibilities,” Ruiz noted, saying that the unions hope to meet with the U.S. Department of Labor’s Office of Trade and Labor Affairs (OTLA) to discuss the issue.

Ruiz said the Coordinadora is contacting several “problematic” companies that he claimed have not paid subcontractors or third-party suppliers in Nicaragua and other Central American nations for suspended orders, forcing them to fire thousands of workers.

Among the firms being contacted are Walmart, Target, and PriceSmart, as well as dozens of subcontractors, notably of Korean ownership, that have also let go of workers with no pay. Many of these subcontractors have also promoted slave-like working conditions in Central America for years, union officials allege.

Union officials alleged many U.S. brands have behaved similarly, owing suppliers which then claim they cannot pay employees. This in turn threatens the livelihood of 300,000 apparel workers in the Central American isthmus, many of them single women with families to support.

Walmart sources apparel in the region and has a growing number of local hypermarket and supermarket stores, and Ruiz claimed that garment suppliers it uses also dismissed workers with no compensation, recently furloughing 470 at least in Nicaragua. Factories supplying PriceSmart fired 200 workers recently, also with no compensation, he alleged.

Walmart, in a statement, said it has met all its obligations in Nicaragua and stressed its longstanding relationship with suppliers in the region.

“Walmart is committed to working with suppliers and other stakeholders to make the global value chain more responsible, and the foundation of our Responsible Sourcing program is our Standards for Suppliers. Suppliers, their facilities and agents are expected to comply with these standards throughout the product value chain,” the retailer said.

“During the COVID-19 pandemic, Walmart is supporting suppliers by prioritizing business continuity: The continuing operation of Walmart stores, Sam’s clubs and e-commerce channels provides many suppliers with the opportunity to continue to serve customers and help sustain their own businesses,” it added.

“Walmart has a strong relationship with its apparel supplier partners in Nicaragua, and has fulfilled all contractual obligations between the parties,” the company said. “We care deeply about the dignity of workers in the global supply chain, and we know this is also an important issue to our customers.”

 Target spokesman Shane Kitzman quickly refuted Ruiz’ allegations, saying it has ensured workers in its global supply chains are compensated for their work.

Target “is committed to our suppliers across the globe and will pay for orders already produced or in production, as we place great value on the relationships we have with our supplier partners and see them as part of our team,” Kitzman continued.

He did not comment on whether the company would support a fund to provide workers with an additional living wage or stipend.

Target is part of WRC’s Tracker, which lists brands that have agreed to pay suppliers for stopped orders around the world, as one of the businesses making such pledges. Zara-owner Inditex, Adidas, H&M, PVH Corp. and VF Corp., among others, are also featured on the list.

Regarding Central America specifically, the Tracker cites Kohl’s, Urban Outfitters and Gap as U.S. brands that have failed to settle payments in Central America.

“These are substantial buyers in the region and they need to pay or they will make a bad situation considerably worse,” said WRC executive director Scott Nova. He is supporting Coordinadora in Central America, as well as other efforts to get apparel brands to pay workers in textile hubs across Latin America, Asia and Africa.

Ruiz said unions have already approached Gildan, VF Corp., Tegra, Fruit of the Loom and Delta Group, which make T-shirts, underwear and sportswear in the region, to join the campaign’s initial phase as brands that could provide additional financial means for workers. He was optimistic they will participate as they have mostly paid workers after shuttering their local plants for 90 to 120 days.

He was less sanguine about the Korean subcontractors that produce for the likes of Kohl’s, J.C. Penney and Levi’s as they have so far refused to pay operators in the crisis.

“We have sent all of them a letter,” he said. “We are waiting for answers.”

PriceSmart did not return messages seeking comment.

Ruiz estimated that roughly 40 percent of U.S. brands sourcing fashion in Central America have pulled orders from their manufacturing partners, notably in March, April and May. About half of those workers – 80,000 by some estimates – have not received $150 million in monthly compensation, meaning they are owed about $450 million, he said.

Many of them are in El Salvador, which unions claim has received the least aid.

“We have the worst situation in Central America,” charged Marta Saldana, secretary general of Salvadoran independent union federation (FEASIES). “We are getting calls for help every day, from people who don’t have food; these are families, single mothers with two to three children to feed so it’s very difficult.”

As part of their campaign, which has yet to be named, the unions and advocacy groups are also asking brands to provide at least three months of additional wages to help sustain idled workers and their families until at least late summer. That could cost $1.2 billion, based on monthly wages of around $400 million earned by the region’s 300,000 textile workers, Ruiz said, though he noted the figures are still preliminary.

While brands could argue Central American governments should be responsible for their workers, activists counter that the brands, having long profited from low-cost labor in these countries, should provide support. And while Guatemala, Nicaragua, Honduras and El Salvador have announced some financial aid, it’s only temporary.

“They don’t have a social protection system like unemployment insurance in the U.S.,” said Stephen Wishart, who leads the AFL-CIO’s Central American mission, backing WRC views that brands should divert investor dividends toward the fund and pay a future ‘wage premium’ that would help insure workers who get laid off. “This is one of the things that I would love to see with Central American countries, the establishment of an unemployment insurance system that brands could support.”

Brands could also borrow funds to pay workers, Nova added, noting that the WRC has been involved in this effort.

“These brands must pay more money. Whether they use their leverage to get financial institutions to provide income support for workers or their own resources doesn’t matter. The important thing is that workers’ wages continue to be paid or they won’t be able to survive this crisis,” he said.

Editor’s Note: This article has been updated to reflect that Target did not use some of the factories that have allegedly gone unpaid for orders, as well as a statement from Walmart that it has met all its contractual obligations to its suppliers in Nicaragua.

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