Communist Party (Marxist-Leninist) of the Dominican Republic

The movement of finance or parasitic capital, separated from productive capital and even from bank capital, in the dialectical sense which is a new dominant category, has unleashed a serious capitalist crisis of production in the drive for ever- increasing profits, and obliged productive capital to seek new forms of production in order to revalue capital.

With the development of science and technology and with the internationalization of finance capital

under the hegemony of North-American imperialism, new forms of exploitation of wage work have objectively developed (ranging from Fordism with its production lines, to "total quality" and finally to "Toyotism" with human groups as complements to cybernetics and robotics). Nevertheless, in many countries, and particularly in the so-called third world countries, the classic appropriation of surplus value in companies with a low level of organic capital continues, with low tech production where workers' daily wages do not exceed .60 $US. These are a big source of profit for productive capital and therefore for finance capital.

It is true that in the G-7 of the north, cybernetics and robotics are used in more sophisticated industrial production (production of means of production) and in the car industry; and also that the quest for efficiency in production under the pressure of finance capital hits the European, Japanese or American working classes, forcing them to become more productive or to lose their jobs in complex restructuring processes that have liquidated many industries and productive forces.

But at the same time, a strategy for the production of goods was launched in the free zones or maquiladoras, and extended to the entire world under the control of the same G7, with the US taking the lead. This country produces only 18% of the goods it consumes . The strategy was to set up and to extend means of production and of capital revalorization, based on the increase in the number of workers on one hand, and on the decrease of fixed capital on the other by paying very low wages and using unsophisticated machines.

In this situation, the growth of sales and management of currencies and profits of the maquiladoras is based on a massive appropriation of surplus value as never before seen, with a drop in real wages for the working class through intensification of the work day, job discipline and administrative management.

In the Dominican Republic for example, between August 1990 and December 1994 the Free Zones showed growth in added value of 2.5% to 3.8% of the GDP and 13.9% to 20.5% of the GDP in manufacturing. This has supposedly generated currencies ranging from 20.75% to 63% of the added value of exports, 15 to 20% of services income and 10% to 18% of the value of imports. A great commercial success . But the story of currency generation is more a fairy tale than anything else because the raw materials enter under the so called "internment regime" without paying import tax and leave the same way after being transformed by the added value of labor.

It is easy to show in the free zone operations that the only thing that falls significantly is the value of the workforce: the minimum legal monthly wage fell from (in 1987 prices) 68.20 pesos in 1989 to 58 pesos in 1994 with an absolute decrease of 10.20 pesos and a relative decrease of 15%. This wage represents 17% of the cost of the grocery cart of goods and services for a Santo Dominican family.

These capital revaluation operations which bring down wages to achieve a same level of profit, have been a decisive factor in attracting new companies, whose number rose from 220 to 476, and the number of workers from 122,946 to 163,974 between 1989 and 1994. In March 1999 the number of workers in the Free Zones is estimated at 190,000.

The competitive advantage gained by keeping a large profit margin from the surplus value that this cheap labor generates, from the abundant natural resources, from state tax exemptions, from adequate transportation, storage and communications facilities, make the Dominican Republic a center for capitalist companies seeking to relocate. The same thing occurs with the other third world countries, which all end up competing with each other, offering cheaper labor and tax benefits as well as devalued local currencies.

Contrary to the claims of its promoters, this type of work intensification has nothing to do with better production cycles or more flexible production; instead it is based on a system of production and sales with high profit coefficients where costs are kept low through state intervention, low wages, and markets guaranteed by international agreement. Fixed capital (machines, raw material and wages) is considerably reduced and each dollar that goes into production is multiplied by 17 through a high exchange rate.

The difference in the legal minimum wage paid by large domestic companies and those paid in the FZ represents a loss of of some 586 millions in purchasing power for our workers and a decrease in state income of 46 millions US$.

The competition between companies of FZ and domestic companies has intensified as a result of the President's permission to sell their production on the domestic market and also because they were allowed unrestricted participation in the Central American Free Trade Agreement.

Even though the press headlines in 1986 focused on statements made by US Ambassador Paul Taylor that the international agency for development -AID- would give 32.4 million $US for the FZ, the naked truth is that in a few days Dominicans will have paid more that that amount to foreign

monopoly capital as a consequence of the reestablishment of a parallel currency market and the devaluation of the currency by Balaguer.

The problem is that the big companies in the FZ have been able to blackmail the government by threatening to leave the country (the 10,000 dismissed workers of the FZ in Santiago are a striking example of this) if they did not get compensation for their extra expenditures in variable capital when the minimum wage rose to 700 pesos. Balaguer then ordered the Governor of the central bank, Willam Caram, to let the exchange rate float with the dollar, allowing the monopolies to sell off their dollars 8 to 1, which amounted to a veritable grant by the Dominicans to American monopoly capital.

This explains why ADOZONA (Dominican Association of Free Zones) actually protested when the National Wage Commission set the minimum wage in these companies at 650 pesos rather than 700. This is a graphic illustration that rather than integrating the maquiladoras (export-import processing zones) into domestic industry as American Ambassador Taylor claimed would occur, thereby supposedly developing the country, they are in fact reinforcing the slave-like relationship between the Dominican Republic and the metropolis. In this sense the arguments used by Mr. Taylor not only contradict Dominican reality, but are also the same ones used in Puerto Rico to justify the "Work for All" operation in 1947 which was supposed to convert the colony into a showcase for the continent.

Thus it is false that foreign investments provide a "takeoff" for independent development and serve as a stimulus for local capital investments, and that they help in the formation and accumulation of capital.

It is also false that export-oriented production in new industries counters the deficit tendencies in the balance of payments and thus contributes to capital formation. It is even more false that this industrialization creates well-paid jobs in sufficient number to answer the needs of the country and to improve the standard of living. Experience has shown us quite the contrary.

By importing inputs and exporting their products, the maquiladoras, or free zone companies have a circular mode of operation, which makes it difficult to establish links or interconnections with local industry. In fact, there are few concrete examples of domestic industry providing inputs, raw materials or finished products, contrary to what entrepreneur George Arenzo Brugal claimed. He didn't foresee the consequences of taking to heart Ambassador Taylor's words, because domestic industries are not competitive with their North American parent companies, from the point of view of technology, capital accumulation, nor access to finance or bank capital. They may provide some services, but there is no proof that local industry is growing, nor that the domestic market is expanding as a result of the free zones.

The conflict that broke out between FRUDOCA, a North-American pineapple company and the Cartonera Hernandez, was triggered because the latter wanted to produce packing boxes for the fruit exports, while the former insisted on importing the boxes from one of its subsidiaries in Central America.

Conclusions in the Krepps report about Puerto Rico are condemning: " With the current economic structure, North American subsidiaries in Puerto Rico are reduced to mere "production units" whose function is to minimize unnecessary costs and expenses (wastages) in production for the consortium. These local industries (subsidiaries) do not stimulate the purchase of locally-produced inputs nor the sale and distribution of their products on the local market. They (the subsidiaries) remain dependent on the parent company which knows little about the local market, with the result that most of these companies import their raw materials and export almost their entire production. This limits the establishment of links (backward and forward linkages), and the industrial process in Puerto Rico has not integrated vertically, despite the considerable growth of industrial production in the past 30 years." ( Report from the US Federal Department of Commerce).

Another report on Puerto Rico shows that after a few years, local industry became dependent on North American capital, and what is worse, that there was a considerable rise in the public and private foreign debt as well as a growth in public expenditures. This has been due, among other things, to increased spending on the import of goods and capital for public spending on infrastructures which require payment in foreign currency and especially because foreign currency is required for patriated earnings, interest payments and royalties paid to foreign companies. For example, the public debt in Puerto Rico rose from 41.5 million in 1954 to 8 billion in 1982.

But the most significant aspect of the Puerto Rican experience is that the free zones or maquiladoras did not bring down unemployment, but brought it up instead. Despite the outflow of 50,000 people a year since 1954, the unemployment rate in 1970 was 20%. The reason is that the jobs created by the maquiladoras were insufficient to compensate for the jobs lost in agriculture. Since both industrial and agricultural production was destined for export to the international market, and since the rate of profit is higher in industry, there is a concentration of capital in industry and the reverse in agriculture, affecting production and productivity levels, and causing massive displacement from the countryside to the cities and eventually emigration to the US. This is already happening in the Dominican Republic. As far as improving the standard of living, nothing could be more false. While the minimum wage was raised to 700 pesos, inflation has been pushed up by close to 400% in four years.

The results on Puerto Ricans have been devastating. Two million live in miserable conditions in the United States, with an unemployment rate of 20%, and 50% of the families depend on food subsidies. All indicates that the Caribbean Basin Initiative -CCI, approved in 1983 and adopted as Public Act no. 98-76 in 1984, which gives a legal framework to the Caribbean Free Zones is doomed to failure, just as the "Work for All" operation failed in Puerto Rico. Instead of developing the country, it chained it more tightly to the metropolis.

As with contradictions, every action has a reaction. Workers in the free zones, young as they are as a class and with a low level of consciousness have been thrust into the first form of class struggle, that is economic or union struggle. Repression from management is severe. There are no union freedoms despite labor legislation which recognizes freedom of association, the right to collective bargaining and protection for at least five leaders in every union. But in the free zones, unions are simply not accepted and the local police sees to applying this violation of Dominican law. Union activists are immediately fired and blacklisted, which means they will never find work in any of the 486 companies scattered throughout the country.

Exceptionally the National Union of Dominican Workers affiliated with the AFL-CIO can set up unions in the Haina free zone, more specifically in a little Westinghouse plant. These are yellow unions and don't step beyond what the AFL-CIO and the Labor Attaché at the US Embassy tells them.

Conclusions: We live in the era of imperialism characterized by Lenin as: The hegemony of finance capital, and the export of capital as the main form of capitalist exploitation. New or old modes of production are used in the drive to revalue capital and keep rates of profit growing, regardless of the negative consequences of the crisis of production of productive capital. We are approaching a new revolutionary era, but it is nonetheless governed by the laws of uneven development.