In the 1980s, encouraged by the International Monetary Fund and the World Bank, Guatemala began to offer enticing tax incentives to international businesses to relocate, in an effort to attract profitable business that would help their country grow and expand. With promises of low overhead costs, close proximity to the United States and the implied but never overtly mentioned lax labor laws, businesses took the bait and moved to Guatemala. The victories now seem all but one-sided. The maquilas, as they are known, created numerous jobs, but these jobs were not what the economy of Guatemala needed. They did not provide even a basic wage to cover the cost of living, and they were anything but safe or secure for their employees. This export-heavy business is now worth close to 3% of GDP and brings in well over a billion dollars a year to the economy. Employees, mostly women, and now the government, seem to be handcuffed to the maquila industry.
The maquila businesses once hoped to be a savior to the struggling Guatemalan economy, have learned how to expertly skirt laws. The tax law that attracted businesses in the first place allowed up to ten years of tax-free operation, including being exempt from import/export taxes for either their goods or the supplies they bring into the country. However, well after the ten year period, the companies have yet to start paying taxes, opting instead to shut down old factories and replace them with identical ones under a new name, or a new address.
Exploitation of workers runs rampant as well. Factory workers at the maquilas are paid below the minimum wage for other “unskilled workers” – making an average of just under $300USD/month. Accordingly, to the Guatemalan government’s National Statistics Institute the average family needs approximately $375USD/month to cover basic needs such as food and shelter. Furthermore unrealistic standards are placed on workers – giving them far more than a day’s worth of work to accomplish, and then either punishing workers or forcing them to work unpaid overtime when they do not finish their list of demands. It is estimated a standard worker is paid for 8 hour days, but in all really ends up working a minimum of 10 to comply with minimum production standards. The Institute for Global Labour and Human Rights claims that maquila companies owe over $6 million in back wages and unpaid overtime to Guatemalan factory workers. The realities of this life are not without consequences: the UN reports that 83% of Guatemalans live in poverty, with 46.5% of children under the age of 5 years suffering from chronic malnutrition.
With substandard and exploitive wages it comes as no shock that human rights violations follow suit – in order to be hired women must produce a medical certificate assuring they are not pregnant and are routinely fired if they become pregnant. Factory floors are improperly ventilated and lit, safety is often substandard, and violence in the workplace is a constant threat. Unsanitary conditions are the norm and bathroom breaks are strictly controlled for workers.
Making matters even grimmer, drug and gang violence in recent years has spun out of control. Faced with a lack of employment prospects the drug trade has picked up steam in Guatemala, and innocent people are being pulled into the violence one way or another: join or face constant threats to physical safety.
While the realities of life in Guatemala might seem dire, there are glimmers of hope for the future. As ethical fashion and ethical consumption, in general, pick up popularity more Guatemalans will be able to find work that solidly supports their families, and leaves families in better shape all around. What can you do? Seek out the companies doing it right. Demand transparency from where you shop, making sure living wages, as well as safe and fair conditions, are being met for all workers.
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