6 am, July 13, Las Mercedes Free Trade Zone, Managua, Nicaragua

One of the activists brings to us another woman, who is pretty but sad-looking. "I lost my baby because los Chinos abused me," she says. She is finishing the night shift. These days they are working six days a week, 7 pm to 7 am, with a break at midnight. This woman was pregnant in the spring. Her supervisor yelled at her when she lagged, calling her names like "dog face" and saying she was as dumb as a horse. She says, "I lost my baby in May, because they harassed me so much."

Yet another woman comes forward. She works in the embroidery area. They have been on twelve-hour shifts for weeks, including many Sundays. She was told not to join the union or she would be fired. Now even more women come up. They are not on the night shift; they were sent back from the gate because they were late. We asked if they could get into trouble for talking to us. "Claro"--of course--they could be fired for talking to union people.

The Nicaraguan apparel industry has grown rapidly in just a few years, and the vast majority of its production is bound for US markets--$73 million in 1995, $232 million in 1998 and an estimated $314 million this year. The factories in Las Mercedes are contractors who work for known brands and retail stores.

Global contract-production is a cutthroat business. About 30 percent of the apparel sold in the big stores is store-brand merchandise in which the chain acts as the initiator of the production process--the "manufacturer." The actual production enterprises, like the Nien Hsing Textile Company--however tyrannical they are to their workers--dwell in the middle of a steep pyramid of power rising above them. At Chentex they make store-brand jeans for Kohl's retail stores (Sonoma), J.C. Penney (Arizona), Kmart (Route 66) and Wal-Mart (Faded Glory), as well as Gloria Vanderbilt, Bugle Boy and Cherokee jeans. The smallest of the four retail chains, Kohl's, has a revenue stream of $4.6 billion--more than double Nicaragua's GDP. Kohl's profits of $258 million are much greater than Nien Hsing's 1999 sales of $158 million. So here, as in the rest of the apparel business, the retailers are the 800-pound gorillas. The top eight retail chains controlled 62 percent of US clothing sales in 1996--and concentration has steadily increased since then.

Retailers, an executive told Bonacich and Appelbaum, "know how many minutes it takes to sew a particular garment and can calculate, on the basis of the minimum wage, how much they need to pay per garment in order to cover it. For large orders, however, retailers can simply cut back the price they are willing to pay, forcing the contractor to pay less than the legal minimum." Explains one former Nieman Marcus official: "The pressure goes right down the line. Pricing starts from the retailer and moves down. It doesn't start from the bottom, from the real costs of making the garment. The retailer can always go down the street and find someone who can make it for less."

Typically, labor costs are 10 percent of the retail price of clothing under standard conditions in the United States. Under the sweatshop conditions faced by more than half of US apparel workers, who earn less than the minimum wage and get no overtime pay--as many as 400,000 workers--earnings of the sewers are about 5 percent of the retail price of women's clothing. Chentex workers earn no more than 1 percent of the retail price of the jeans they stitch--between 30 and 40 cents an hour.

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