Foreign-owned companies in Mexico can leave the country overnight with few or no consequences.
Mexican federal labor laws are designed to ensure that employees are compensated for their work and receive their required severance pay, but in practice a lot is left to the companies’ good will.
The best chance workers have to recover severance pay after a company unexpectedly closes is to go immediately to the closest Junta de Conciliación y Arbitraje — the federal mediation council that helps workers and employers negotiate labor disputes — and request an asset seizure. That secures any equipment and materials left behind so workers can sell it.
Government officials tout this system as a way to guarantee that employees get paid, but it relies heavily on workers reacting quickly. And there’s no guarantee the seized assets will bring in the money workers are owed.
“A lot of times, this machinery is for a very specific task, and it’s very difficult to sell it in the market at real value,” says Rosario Robles, a professor at Universidad Estatal de Sonora who specializes in economic development.
Company owners often remove the most valuable machinery over the weekend and then lock the doors before workers show up on Monday.
“I see very little recourse for the workers,” Robles says.
That’s unlikely to change anytime soon.
“This is a very complex situation in Mexico. The same thing happens with financial institutions going broke and leaving their customers in the street,” says Cuauhtémoc Galindo, a federal representative on leave because he’s running for mayor of Nogales, Sonora.
“If such a delicate subject as the financial system hasn’t been properly regulated in Mexico, it’s a long shot for anything else.”
“THE ENGINE THAT DRIVES
THE CITY’S ECONOMY”
The Mexican economy depends on foreign investment and manufacturing.
Nationwide, more than 2.5 million people work in more than 6,000 factories, or maquiladoras, owned by companies attracted by Mexico’s low wages and transportation costs.
Sonora has about 140 “maquilas” with nearly 126,480 employees, data from INDEX, the national maquiladora association, show.
In Nogales, 40 percent to 60 percent of the economy depends on manufacturing, mayoral candidate Galindo says. The city has about 300,000 residents, nearly half of whom depend on manufacturing, estimates René Moreno of the Sonora maquiladora association and the Nogales Business Council.
“It is the engine that drives the city’s economy,” Moreno says. “A loss for the industry is a loss for Nogales.”
The association also helps displaced workers find jobs after a factory closes.
A combination of special interests, corruption and a lack of government involvement contributes to companies leaving overnight despite laws aimed to prevent it, labor advocates say. Some companies reopen under different names or in different locations, rehiring workers at lower wages or on a temporary basis. Workers who are rehired lose their seniority.
Effects of SHUTDOWNS are felt on BOTH SIDES OF BORDER
In a global economy, what happens on one side of the border has direct consequences on the other.
All the cases of American-owned maquilas closing involve binational businesses with manufacturing facilities in Mexico and warehouses and customers in the U.S.
Barton Nelson — a Kansas City, Missouri-based specialty advertising product manufacturer with operations in Nogales, Sonora — closed in 2014, leaving more than 100 workers without jobs or severance pay in Nogales and another 40 without paychecks in the United States, U.S. media reported.
Jim MacLaughlin, the court-appointed receiver overseeing the liquidation of Barton Nelson, would not discuss specifics of the case, but calls it unfortunate for everyone involved, including the owners.
“It’s an all-around loss,” he says, adding that the company had been affected by the recession.
No national, state or local office in Mexico tracks how many companies close without paying their workers. When a company closes, it must inform the authorities so it won’t be charged additional taxes or payments to services such as Social Security or a government housing-loan program. But that information is not shared, Robles says.
“This omission from the authorities, the laws and academics has allowed this to happen,” she says.
Nogales’ mayor, Ramón Guzmán, says there’s no need for tracking illegal closures because they are so rare.
“I don’t consider it a problem,” he says. “It’s a problem in the sense that as small as the company might be, it still closes and abandons the workers. But I insist that this is not a common issue.”
Closing up and leaving the country without paying workers is not part of the business culture of Nogales, says Jorge Vega, local union representative for the Confederation of Mexican Workers, or CTM in Spanish.
Those companies that do it “end up hurting all of us, but fortunately it is not the behavior of the majority.”
Actually, he says, most companies work hard not only to abide by the law, but also to provide for their workers. Many offer day-care services and transportation for certain shifts. Most recently, several have partnered to open a medical clinic.
Nogales’ mediation council has received few cases involving companies that leave illegally, says Jorge Arguelles, the council’s president.
“Given that Nogales is a maquiladora region, the lawsuit rate is low,” he says.
But even if it involves only 100 workers in a given year, that’s 100 families left without food, clothing and medical care, he says.
happening more frequently
Factory closures may be rare, but they’re becoming more common.
Since 2013, there have been four recorded cases of companies leaving overnight in Nogales alone. The most recent, in February, affected about 100 workers who said they weren’t paid for three weeks before the Atubic textile factory closed, local media reported.
One of the owners, Leonardo Dicochea, told the Arizona Daily Star they were in negotiations with most workers. About two dozen others filed a suit before the mediation council. That case is ongoing.
The pace has increased since the 2008 recession in the United States, says Martha Ojeda, executive director of the Texas-based Coalition for Justice in the Maquiladoras.
And while it is easier for a smaller company to leave the country suddenly, Ojeda says she’s had personal experience with companies of all sizes doing it.
More-active unions could monitor the companies and tell when a firm is about to bolt, professor Robles says. Active unions are practically nonexistent in Nogales, she says — something entrepreneurs tout as an advantage to relocating there.
Vega, who has worked for more than 20 years as a local union representative helping workers with labor disputes, says unions in Nogales have scant support in part because the labor force is so mobile.
For Galindo, the federal lawmaker running for mayor, the way unions operate in Nogales is what has allowed the industry to grow. In neighboring cities, he says, aggressive unions have pushed companies away, and they haven’t returned.
“We have to be very careful with that,” he says.
SOME OPTIONS FOR CHANGE
Increasing protection for maquila workers is possible, if not immediately likely.
For example, companies could be required to pay into a fund that would be used to guarantee workers’ pay in case of a shutdown. But recent fiscal reforms have hurt the industry, and more demands would be another blow, Galindo says.
First, he says, Mexico and its cities need to improve their economies. Only then should the government make such requests.
Guzmán, whose term as mayor ends in September, says the solution could be for local governments to offer certain tax- or land-cost deductions to companies in exchange for a guarantee to follow Mexican laws in case they shut down.
If workers want change, the only real solution is awareness, says Ojeda, the worker advocate.
The public needs to learn how companies are treating former workers and how customers contribute to it by patronizing companies with irresponsible labor practices, she says.
The answer, she says, comes down to “international solidarity and public condemnation.”