Mexican president unleashes labour unrest at border plants

MEXICO CITY (AP) — A mass strike at 48 maquiladora, or manufacturer, plants in Mexico’s border city of Matamoros is heading for victory, bringing pay raises for labourers who make less than USD1 an hour, or about 100 pesos a day, assembling auto components and TV sets for export to the United States — and causing jitters for the business community.

The labour battle broke out in mid-January after President Andres Manuel Lopez Obrador decreed a doubling of the minimum wage in Mexico’s border zones, apparently unaware that some union contracts at the maquiladora plants are indexed to minimum wage increases. The decree sparked a wave of walkouts involving about 25,000 workers.

The maquiladoras claim the strikes threaten the very existence of their industry, which has attracted over 5,000 mostly foreign-owned plants and two million jobs by paying very low wages. Union leaders say those worries are overblown, noting that workers at the border plants still earn far less than their counterparts in the United States.

Less than a week after the strike broke out, a majority of the export plants in Matamoros – 29 companies with a total of about 34 factories — have agreed to the union demands, a rare victory that owes a lot to something the president probably didn’t intend to happen.

After taking office December 1, 2018, Lopez Obrador doubled the minimum wage in communities along the US border to 176.20 pesos a day, the equivalent of USD9.28 at current exchange rates. With maquiladora pay averaging about 146 pesos a day, the Matamoros workers went on strike to demand the 20 per cent raise be applied to everybody — even those making above the minimum – and a one-time bonus of about USD1,685.

Workers gather outside a maquiladora for car accessories in Matamoros, Mexico. – AP

“Perhaps he didn’t take into account what was in the labour contracts,” said Javier Zuniga, an activist with the Miners’ Union who has helped coordinate the strike. “The President acted in good faith, but he didn’t measure the impact that was going to have on union contracts, and the workers came out winners for once.”

Since the 1990s, many companies in Matamoros, which is across the border from Brownsville, Texas, signed contracts indexed to minimum wage hikes. It was a way to keep wages down, given that in most previous years, annual increases were about equal to the inflation rate.

One such contract signed in March 2018 at the Kongsberg Interior Systems plant, which makes automotive cables, stipulates that “the company will reach an agreement with the union to increase wages by the same per cent that minimum wages are increased”.

In addition, many companies’ annual bonuses are calculated by multiplying minimum wage increases by 365, a figure that in past years usually amounted to only about USD100.

“They (the government) never thought there was a real union, or that there were (contract) clauses like that,” said Sociology Professor at Colegio de la Frontera Norte Cirila Quintero, who has studied the Matamoros union that has represented maquiladora workers for more than a quarter century.

The Industrial Workers and Labourers’ Union of Matamoros, which was founded initially in 1932 to represent cotton workers, is unusual in Mexico because it has won gains for its members that don’t exist in contracts anywhere else in the country. Far more common are pro-company “ghost” unions that sign contracts without consulting the workers they purportedly represent.

Lopez Obrador has been wary of antagonising the business sector, and he appears to be an unwilling hero in opening the floodgates of labour discontent. Both Quintero and Luis Aguirre, the head of Mexico’s association of maquiladora companies, said federal officials actively discouraged the Matamoros union from seeking the pay increases. The Labour Department refused to confirm that, saying only that it sent mediators to Matamoros to try to defuse the dispute.

Aguirre also claims federal officials agree that the union’s interpretation of the contract clauses is erroneous, but he said the federal government has been unwilling to act.

“This will give rise to unemployment and cause at least 15 of these companies to flee,” Aguirre warned. His group, the Maquiladora and Export Manufacturers Industry, said in a statement that the wage demands may spread to other areas along the border “where the industry is present and will project a very bad image for foreign direct investment”.

Still, most of the Matamoros companies have quietly agreed to the workers’ demands, and they would be hard-pressed to find any place near the US market where they could pay less than USD1 an hour.

Other Mexican border cities with assembly plants, like Tijuana and Ciudad Juarez, “don’t have this point” in their contracts, Quintero noted. “But what is going to happen is that workers are going to demand their raises to 176 pesos,” the new minimum, and probably across the board, he said.

Lopez Obrador has come under pressure from the business sector to rein in wage demands, but he is unlikely to do so.