Bobbin / January 1996
By Larry Luxner
Honduras -- one of the poorest nations in the Western Hemisphere -- has in recent years become a mecca for U.S. and Asian garment manufacturers.
In San Pedro Sula, the nation's second-largest city and the fastest-growing metropolis between Mexico and Colombia, signs of the newfound prosperity are everywhere. Shiny new BMWs and Toyota jeeps crowd the dust-filled roads, while expensive villas rise on the outskirts of town.
At the same time, for those who don't have jobs at the air-conditioned, landscaped EPZs (export-processing zones), poverty rules the day. San Pedro Sula has one of Central America's highest AIDS rates, and malnourishment is common.
In a study by the United Nations Development Program released in August, Honduras scored 0.578 on the so-called "human development index" -- lower than any other country in Central America. The only other Western Hemisphere nation which finished lower was Haiti, with a score of 0.362.
In the past four years, the Honduran government has attracted dozens of garment makers with the passage of new laws facilitating investment and offering tax breaks. More than a dozen EPZs have been established -- mostly around San Pedro Sula -- where vast factories produce garments and other exports for the lucrative U.S. market.
Some 29,000 people are now working in the garment industry, 80% of them women. About one-third of the factories in export processing zones are U.S.-owned, one-third Korean-owned, and one-third owned by Honduran and other nationals. Investors are attracted by wages as low as 70 cents an hour, including fringes, and by the fact that Honduran apparel isn't yet subject to U.S. quotas.
In addition, none of these companies pay taxes, as long as everything proced in EPZs is shipped out. Explains Marco Vinicio Matute, vice-president for promotion at the country's Fundación para la Inversión y Desarrollo de Exportaciones (FIDE): "The difference between Honduras and other CBI countries is that here, the tax exemption lasts as long as the companies are there. Elsewhere, they end as soon as the exemption runs out." Adds José A. Molina, general manager of ZIP Choloma, the country's first EPZ: "These zones alone have created over 30,000 jobs in the last three years. That's much more than the banana companies have created in the last 40."
During the first five months of 1995, according to U.S. Commerce Department statistics, Honduras exported $244.6 million worth of apparel to the United States,up 69% from the $144.7 million worth of apparel exported during the same period last year. That made Honduras the second-most important source of apparel in Central America after Costa Rica.
In June, New Jersey-based Biscayne Apparel Inc. announced the opening of a subsidiary, Amy Industries de Honduras S.A., at a 32,000-square-foot plant in the Buena Vista EPZ. President and CEO John E. Pollack says "our decision to locate in Honduras relates to several factors, including political stability, plentiful and qualified labor, and a favorable tariff policy." Adds Juan Canahuati, chairman of both ZIP Choloma and the Lovable Group, a lingerie maker: "Honduras has the best facilities and labor in the Western Hemisphere. If you treat Hondurans right, they can be much more efficient than Americans or anyone else."
Canahuati, a Palestinian who emigrated to Honduras 39 years ago, opened ZIP Choloma in 1990; today, it has 11 factories employing 8,300 workers. He also owns the Buena Vista EPZ, which was inaugurated in April 1993 and has 18,000 employees.
Yet Honduras' popularity with Asian investors has caused the industry major problems. More than once, Washington has threatened to remove Honduras from the Generalized System of Preferences (GSP) -- and, by extension, the CBI program -- unless free-zone workers were given greater protection and the right to form unions. This followed a petition by the AFL-CIO stating that Honduran women, employed mainly by dictatorial Korean bosses, were subject to sexual harassment, overtime without pay, arbitrary firing and physical abuse.
The honorary Korean consul in Tegucigalpa, José Maria Ajurcia, declined comment, but Canahuati makes no secret of his dislike for Korean investors: "I wouldn't let them in for any price in the world. They don't know how to treat their employees."
Garcia says he doesn't like the Koreans either, but denies that unions are kept out of the EPZs. "The labor code here protects all workers. There is no way the domestic laws cannot apply in free zones," he says.
Still, says Canahuati, "we have to cooperate with U.S. companies so that we bring mostly U.S. textiles. If we continue letting the Asians bring all their materials from there, I think we'll have quota problems."