Free Trade Zones....?

[leja]

Mondongo ? again, I definitely feel rather out of my depth when it comes to having a grasp on the complex dynamics of the Dominican economy ? and I also realize that many of my ideas are rather optimistic and don?t necessarily correspond too well with how the government works at the moment. As I said before, I definitely don?t pretend to have all the answers. But all that being said, here are some ideas that have been bouncing around in my head?and please don?t feel at all shy about tearing them apart or challenging me?I can think of few better ways to come up with stronger, better, and more complete ideas.

Okay, one of my thoughts is about creating more blue-collar government employment. For example, trash disposal has been a popular DR1 topic lately. If the Dominican government made the move to invest money in creating more public sanitation jobs (trash collectors, street cleaners, etc.) then (1) there would be the actual new jobs created (2) the streets would be cleaner & more appealing, and (3) more tourists would possibly be attracted to come and also return to the DR because of the cleaner cities/towns/tourist areas. So, the larger picture would ideally be that the government would invest money into creating jobs that would ultimately bring more money into the country, stimulating the economy.

Another way I think the government could make a huge impact would be by financially supporting social service organizations ? namely orphanages & street child programs. The benefits of doing this would be long-term, not immediate, so I know that I?m dreaming here (at least for now anyway?). But from my point of view, this would be a really, really important move for the country. First of all, there could be more orphanage/shelter employees, and they could be better paid & less overworked (happier, less focused on survival & so more so on the kids), the children could be better fed, educated, etc., and very importantly, psychologists & social workers could be hired to work with the children and their families. Long-term, the government would ideally be helping to raise much more emotionally stable and adjusted citizens. I can go on and on and on about this idea in all kinds of detail, so I?ll do everybody a favor and stop myself now while I still can? But if anybody wants to talk more about it, I?m game!

Now, both of those ideas are about how the government can help. On the one hand, government funded projects are the most realistic in that the government actually has access to funds that could theoretically be put to use in this way. On the other hand, however, I also realize that this actually happening is pretty unrealistic given the particular state of things at the moment. But I admit that I?m rather lacking in ideas for non-government funded ways to create more jobs. It?s hard to create money out of none?and I don?t have a good sense of what products/services would have a good enough market in the DR?but I?m still thinking?

Does anybody else have ideas? Whether they are completely unrealistic or not, hopefully we can find bits of potential in sifting through all of our different ideas together?

~Leja

 

[sjh]

The government exist with the sole purpose of continuing itself. As the governement is controlled by the wealthy and corrupt, you can expect that the interests of those will be reflected in the policies it creates. In the short term view,(as most Dominicans tend to hold) it is not in the best interest of those people to have a well educated, well paid lower class. Things will change when

A: the powers that be change hands
B: the powers that be see how these (or other actions) benefit them.

 

[Meredith]

Guys, I am just going to keep my mouth closed...

because nobody believes what I am saying anyways. I am not here to argue, I am just telling you what I know. Sorry, if you don't think it is right or up to your standards. Sorry.

 

[MommC]

No need to be sorry Mer!!! it's just obvious to some of us who have contact with "the powers that be" in the free zones that you've been given a "line". Don't be sorry......it's a "Dominican" thing!!

 

[mondongo]

leja, I commend your enthusiasm and willingness to help. I agree with what sjh wrote. Governments and big bureaucracies do not care about you or me or the little guy. They just want to get fatter and richer. The Mejia administration is a great example.

My natural disposition is to always make government smaller....not larger.

I shall not attempt to dissuade you from your goals. If antyhing can overcome the inertia of those who prey on the litlte guy....it is someone with vitality, energy and perseverence.

Take for example....your example of cleaning the streets. The IberoAmerican Summit costs upward of US$50million. For the money, the DR govt can buy 1 million trash cans...more than a dozen garbage trucks...develop a crude garbage dump...set the rest of the money asisde earning 25% interest in DR banks...and pay good wages to willing to work hard at picking up trash. Its a great idea. But it wont happen.

 

[Jim Hinsch]

Luckily, I know that nobody is going to be "fixing" the DR anytime soon, thus it will retain its charm for the short-term.

 

[leja]

originally posted by sjh
leja, remember that your worth as an employee has nothing to do with your cost of living. your worth is based on the job market, availiblity of qualified labor and employment

Sjh, first of all I certainly didn't mean to imply that a given employee?s salary (his/her ?worth? to the employer) is necessarily balanced with the employee?s cost of living. This is clearly not the reality for many people in lots of different countries, not just the DR. Whether or not I think this should be the reality, though, is a different matter.

Looking at things in a purely economic sense, I don?t see how a country?s economy can truly flourish when a large percentage of its people struggle to simply be able to feed themselves. If a society has a large lower class that does not make money beyond that necessary for subsistence, then wouldn?t it logically follow that this large lower class would also be unable to put much money back into the country?s economy (by buying goods)? So doesn?t the existence of a large, uneducated lower class end up being damaging for everyone? And doesn?t it also undermine the actual ideals of capitalism?

I agree with your comment:

originally posted by sjh
As the government is controlled by the wealthy and corrupt, you can expect that the interests of those will be reflected in the policies it creates. In the short term view,(as most Dominicans tend to hold) it is not in the best interest of those people to have a well educated, well paid lower class.

And I also agree that things aren?t likely to change significantly until, as you said, ?the powers that be see how these (or other actions) benefit them.?

So, where does this leave us? In very simple terms, it seems to me (and please correct me if I?m wrong), that since colonial times the DR?s main income has come first from slavery (production for the external Spanish) then from sugar production (for external export) then to FTZs (again dependent on external countries) along with tourism (also dependent on foreigners). Under the capitalistic system, is this the only and best way a small Caribbean country can expect to survive, or is a more balanced relationship between self-sufficiency and external dependence a realistic possibility?

~Leja

P.S. Meredith ? please don?t keep your mouth closed?I?m sure there are angles of truth to what everyone here is saying, including you?and you bring a different perspective, which is always a good thing in conversations like these. Out of curiosity, is the guy you?ve mentioned the only person you know who works for an FTZ? Has he only worked at the particular FTZ he is at now? Are his plans to stay there long-term, or is he trying to find another, better paying job (FTZ or otherwise)?

 

[sjh]

come on Meredith, jump right in, the waters fine!!

Leja, a broader middle class redistributes power and wealth across a greater number of people. This dilutes the power of the upper most classes.

your comments about building a stronger economy being good for everyone is true, but only in the long term. In the short term it is a dilution of wealth and power for those who have it.

That being said, I have seen many dominicans who were born and raised poor, went to public schools etc, who now have more money and leasure time than i have. They accomplished that through an ability to spot an opportunity, hard work and dedication. For this reason i have to disagree with other posters who seem to feel that the lower classes are being actively kept down by the upper classes.

 

[leja]

this is a long one...

Thanks, sjh, I definitely see your point about the dilution of wealth.

And it?s encouraging that you?ve seen many cases of children being born poor and working their way up through hard work. What types of jobs are they currently working in? I agree that given the right circumstances and personality, a child can work his/her way out of poverty. I?ve also definitely seen this happen, and although I?m incredibly encouraged by the reality that some children can and actually have done this, I also know many Dominicans who have not been able to. Of course one important factor, aside from those of circumstances and personality, could be that there are many different levels and types of poverty. At any rate, it definitely is amazing and encouraging when this does happen.

I also agree with you that the DR?s current class structure is not a simple case of the elite trying to keep the poor down. However, I do feel that this is definitely an important part of the picture ? and is occurring both on the conscious and subconscious levels. Would you agree with that?

Mondongo, thanks for your kind words. Although at the moment I?m not able to do nearly as much as I would like, I am hopefully working in that direction. But first things first, right now I?m focused on education.

Sjh, in an earlier post you wrote:

originally posted by sjh
sounds to me like you friend either doenst know how to manage his career or is looking for a handout

I?m not sure if you meant to direct that comment towards me or towards Meredith, but since it seems like it was addressed to me, I?ll respond. Although I don?t know them well, I do not get the feeling that the people I spoke to about FTZs are looking for handouts exactly. It very well could be that, like HB suggested, they are not ?cut out? for the strict schedules, etc. of FTZ work. I guess you could interpret this to mean that they?re looking for ?easy? work (aka handouts), but I think it?s a bit more complicated than that. Again, the guys I spoke to are ?unskilled? workers. I would guess that they have middle school educations at most. I think it?s sometimes hard to see the complexity of these issues in the abstract, so just for argument?s sake, I?m going to create a fictional scenario based on what I believe I?ve seen as well as the information you guys have given me. I?m interested to hear what you think?

To make this easier to follow, I?m going to name my fictional, ?unskilled? FTZ employee Miguel. Miguel is twenty years old, has a 6th grade education, and comes from a family with 3 children ?de madre y padre.? Miguel?s father also acknowledges 2 children by another woman. And although Miguel?s father has always tried to financially support both families, the sporadic and meager pay he earns in construction is spread very thin. So, Miguel?s mother began working at a nearby FTZ to help feed and clothe her family. They get by. Neither Miguel?s mother nor father have higher than middle school educations.

When Miguel turned the legal working age, he dropped out of school and went to his mother?s FTZ to look for a job. Neither of his parents objected to his decision. Education hadn?t gotten either of them anywhere, and work is what fills their bellies. Miguel was given a job sewing labels onto sneakers. He works 8 hours/day. He earns $5,000RD a month, which roughly comes down to $60US a week and $12US per workday. At twenty, he has a two-year-old son and a baby on the way. He and his girlfriend each live at home with their respective parents. He helps her out with money and food sometimes, and he also gives some money to his mother. He spends the rest of his salary on Presidentes the day he gets paid. Saving money doesn?t occur to Miguel; he has no frame of reference for that concept.

At least 500 new, attractive sneakers pass through Miguel?s hands a day. He handles them enviously. Although he helps make 500 shoes a day, he knows that he will never be able to own one pair. If he were to step back to look at the bigger picture, Miguel might be able to see that his salary is not a direct result of how much a pair of shoes is sold for ? that there is overhead ? advertising, rent, storage, shipment, etc. But these are foreign concepts to Miguel. His life is organized around working, eating, and maybe having a little fun while drinking, dancing, and romancing girls in his free time. Although he sees no better alternatives, Miguel still feels that his job is unfair and too demanding. He envies his father?s long, flexible hours of freedom as an often-unemployed construction worker. Given the choice though, Miguel would definitely not trade his better paying and more reliable FTZ job for the low paying & sporadic yet less restrictive one of his father.

It does not even occur to Miguel that education could be a way to make himself more marketable and better paid. Nobody in his family has ever gone to college, and his older cousin Tito is the only one who has finished high school. And Tito has the exact same job and salary as he does. Miguel feels stuck, exploited, and powerless. Is his work pseudo slave labor? No?definitely not ? not if you look at what real slave labor is. Does Miguel interpret the world and his life through the crippling, hopeless mentality of powerlessness (similar to that associated with pseudo slavery)? Maybe so.

Now, I?m not sure if Miguel and his story are realistic or not, but my point is that I think this issue is very complicated and that there are probably pieces of truth to what everyone is saying ? even the guys who told me that their work is pseudo slave labor. Their words may not have been an accurate reflection of reality as we would see it, but it was probably at least partially indicative of their particular interpretation of reality.

These guys and their opinions may make up only a very small minority of FTZ workers (they in fact may be the only ones)...and although their assessment of FTZ labor may be substantially inaccurate, I would definitely guess that their feelings and comments are coming from somewhere.

Do you guys see the scenario I presented as accurate? If not, where would you say I am misinterpreting or missing pieces?

~Leja

 

[JOHNNY HONDA]

Meredith
Dont feel that way as mom said sounds like dominican disclosure thats all,its only that we have a hard time believing what is not the norm,have a great day

 

[GringoCArlos]

(long as usual)

If it's ok, I will jump in, having just read this thread. I can't speak for all free zones, or the "typical" free zone company, but I will for the one which I work in.

By law, actually, the legal minimum wage rate is a bit lower inside a Free Zone than outside in the DR in a regular company. I think that the current mandated minimum wage for FTZ's is now about RD$2650 a month.

If you want to do something to generate jobs and more wealth, etc = use your money to do something to get the government, their bloated payroll, and all of their stupid regulations out of the way of companies trying to make a profit. Without making any profits, how are companies supposed to expand and creat emore jobs, or pay better wages, or educate their employees. Employees already have LOTS of laws protecting their rights in the DR workplace.

The government doesn't GENERATE money, they only take it away from someone else to squander the majority of the loot on something that won't matter in a year or two.

 

[Robert]

Great post! I especially like the last two paragraphs, so true.

 

[MommC]

Great post!
Now take that "base" pay, add in the holiday pay, 13th month, vacation pay, production pay, medical benefit, etc. and it comes out to more than minimum wage earners make in the "private" sector.

As Rob says the last two paragraphs are regretably TOO TRUE!

 

[Pib]

From the other side of the fence...

Fantastic post! Having sat down with more FZ managers that I can remember I have to say that your last two paragraphs are vox populi. I have a question, do you agree, however that during Balaguer's government it was much worse? That's my recollection.

Thank you for sharing first hand info with us, as I said somewhere I've been servicing free zones for a long time, but that's nothing like sitting down on your side of the desk.

First of all, Pib is wrong about FTZ ownership. The majority of Free Zones in the DR are privately held, and only about 1/3 are government= owned

I stand corrected. Thanks for that. I didn't know that that many were privately owned. I always thought ugly = government owns it. You have to admit they don't all look like Itabo I What FZ are you in?

By law, actually, the legal minimum wage rate is a bit lower inside a Free Zone than outside in the DR in a regular company.

I remember that this government promoted a law to make the minimum wage less than RD$2000 in FZs located in "depressed areas". I disagree with that idea.

They provide medical coverage (now through an ARS)to the employees and dependents \ Christmas Bonus of one month's pay\ mandated severance pay if they quit or get fired for any reason (if they have been there less than a year this amounts to about 18 days minimum to pay, but is on a sliding scale)\ Preaviso pay, which is 21 days pay for every year worked\ 14 days vacation pay per year\ 12 or 13 days of holiday pay (or MORE if the Big H feels like declaring ANOTHER holiday, for example this year extra days for Balaguer's mourning period, the Census, the Elections, whatever)\ soon-to-come Pension deposits which will end up at a rate of about 15% \ sick days \ 3 days off for a death in the family or a wedding \ and 3 months off for pregnancy.

To be fair, that is all law mandated (except for private medical care for employees making low wages) or common to all employers.

All and all I do trust that you treat your employees fairly. That's been my experience in all FZs I've been at. Except for the loud music (that apparently workers actually like) I've seen nothing in a free zone that ammounts to anything like "semi-slavery".

The government doesn't GENERATE money, they only take it away from someone else to squander the majority of the loot on something that won't matter in a year or two.

Ditto!

 

[sjh]

leja, i got mixed up, the friend i was refering to was in a post by Meredith

Pib, GringoCarlos: great posts, very interesting info

When you look at people protesting FTZ, labor laws, etc, always look for their motivation. When the protests are coming from or sponsered by 1st world Labor unions where members are making 25+$/hour you have to realize that the motivation is NOT the best interest of some poor dominican, but the fear of losing jobs (and $$$$) in their home country....

 

[JOHN J.]

My thanks to all of the people who have contributed to this discussion about the FTZ . It is fantastic and very helpful to me.

I rarely read forums, and have never contributed to one until now. For reasons, which are not important here, I have been trying to learn about the culture and business environment of the Dominican Republic.

I discovered DR1 several months ago and find it very informative and helpful. My business activities may bring me to the Dominican Republic to visit a free trade zone. If and when this happens I assume some of you are open to letting me buy you a beer.

 

[Jersey Devil]

Re: (long as usual)

If it's ok, I will jump in, having just read this thread. I can't speak for all free zones, or the "typical" free zone company, but I will for the one which I work in.


he government doesn't GENERATE money, they only take it away from someone else to squander the majority of the loot on something that won't matter in a year or two. It ain't going into infrastructure no matter what that baboso says.

Great post.

Thank you for this information.


Moca

 

[GringoCArlos]

some FTZ statistics

Some statistics from the Free Zone Council (they based this on 2001 numbers, but just released it):

51 Free Zones with 512 companies in the DR.
175,000 directly employed workers in FTZ's in 2001.

26 FTZ's are Privately owned with 226 companies;
22 FTZ's are Publicly owned with 164 companies;
3 FTZ's are Mixed ownership with 91 companies;
there are 31 Free Zone Especiales (basically an area surrounding a company that is then called an FTZ I think.

16 FTZ's have 10 or more companies, and of these, 10 FTZ's are Privately owned and 2 are of Mixed ownership.

16 FTZ's have only 1 company in them.

Average salaries:
Technicos: RD$1833 per week
Obreros: RD$778 per week

51% of companies are textiles
17% are Services
and then in descending order are:
electronics
tobacco
jewelry
shoes

50% are US owned companies
32% are Dominican owned companies
5% are Korean companies
2% are Puerto Rican companies (they broke this out, not me).

PS- Playing music boosts productivity in assembly type work by 10% - it PAYS to play it!

 

[MommC]

Great post GA! Very informative!

 

[leja]

Thanks so much for all of the info and opinions.

This has been incredibly informative and helpful. Hopefully I?ll get to actually visit some FTZs the next time I?m in the DR to see all of this first hand. You guys are certainly a wealth of information and experience. Thanks again. And I wish everyone a wonderful Thanksgiving!

~Leja