Labor Protests Rock Mexico's Low-Cost Reputation

Labor Protests Rock Mexico's Low-Cost Reputation

Workers from Matomoros, Mexico, wave red flags as they demonstrate for labor rights at Zocalo Main Square in Mexico City.

SourcePedro Gonzalez Castillo / Getty

Why you should care

Mexican workers are demanding a bigger slice of profits. 

Since the start of the year, there have been dozens of factory stoppages and more than 1,000 calls for industrial action in Mexico. In a country that prides itself on three decades of labor peace, the strikes have affected employers from the export manufacturers, known as maquiladoras, as well as Coca-Cola soda bottler Arca Continental.

The wave of industrial action in pursuit of higher wages has put under the spotlight Mexico’s long-competitive advantage as a cheap location for U.S. and Canadian factories as the United States-Mexico-Canada Agreement, a revised version of NAFTA, is being finalized. Employers say Mexico’s relatively strike-free history has been key to attracting investment over the past quarter-century.

But in President Andrés Manuel López Obrador’s Mexico, labor relations are undergoing profound change, analysts say.

They’re very used to paying very low wages and exploiting workers in indecent conditions.

Napoleón Gómez Urrutia, mining union boss and Mexican senator

“Companies have to understand that the country is changing, and adapt,” says Napoleón Gómez Urrutia, a mining union boss and senator in López Obrador’s party, who has set up a new labor confederation to try to break the hold of an old union guard. “They’re very used to paying very low wages and exploiting workers in indecent conditions.… We have to reduce the disproportionate ambitions for profit at any cost and be more generous with workers.”

Unions have long wielded huge power in Mexico. but, amid allegations of cronyism, there have been questions about how much workers have actually benefited. Corruption-tainted old-style unions, long seen by workers as being in the pockets of management and politicians, have come under fire. As Labor Minister Luisa María Alcalde puts it: “Ninety percent of unions are chosen by management behind the backs of workers. There’s no representation.”

At a recent event to celebrate the 1938 oil expropriation — seen by the government as a defining moment in national history — Mexico’s oil workers’ union was glaringly absent. Instead, there were banners blasting oil union leader Carlos Deschamps. “Accountability for the STRPM, jail for Deschamps,” read one, referring to allegations of corruption, which Deschamps denies.

New laws under discussion in Mexico’s Congress should allow workers’ choice of representation. At the same time, during the USMCA talks, U.S. President Donald Trump has made clear he wants wages to rise. He has regularly blamed cheap Mexican wages for luring away U.S. jobs; hence the USMCA included a requirement for 40 to 45 percent of cars to be produced in areas paying $16 an hour.

The immediate trigger for recent strikes was López Obrador’s decision to double the minimum wage along the frontier to 176.72 pesos ($9.28) a day from the start of 2019. Although maquiladoras, which assemble manufactured goods ranging from TVs to electronics to industrial goods for export, pay more than the minimum wage, some companies’ salaries were indexed to it.

Factory workers, many in the north-eastern border town of Matamoros, swiftly demanded copycat wage rises and the situation snowballed. Susana Prieto, a labor lawyer spearheading a campaign for higher wages, believes that 90 companies have boosted 70,000 workers’ pay since January because of strikes.

Labor relations are now the worst they have been for 30 years, says Luis Aguirre, head of the maquiladoras association Index. Illegal strikes threaten “the legal stability [needed] to attract investment,” he says, adding that he would have preferred a series of gradual increases. He estimates the financial impact of the strikes in Matamoros, including canceled investments, at about $500 million.

Still. some experts say an overhaul is long overdue. Workers’ rights have been crimped by “a business class stuck in the 19th century,” says Graciela Bensusán, an expert on labor relations at Mexico’s state-run UAM university, which has itself been on strike for more than a month.

U.S. investors are spooked. The wage demands come as Mexico’s economy is already quickly slowing, private investment is on hold and job creation has been falling sharply since December.

Steven Lockard, CEO of TPI Composites, which makes blades for wind turbines, told a recent investor call that labor unrest in Matamoros had not only hurt production but could spiral further. “There is a risk that similar wage demands could be made by employees at most, if not all, businesses along the U.S. and Mexican border,” he said.

Additional reporting by Alistair Gray in New York.

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By Jude Webber

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