Cheap Labor Rolling Along in Central America
By Mike Danna
Louisiana Farm Bureau Federation Public Relations Director
No matter where AgLeadership graduates travel, be it China, Chile or Central America, they always pick up on the common tie that binds Third World nations: the cost of labor.
For Louisiana farmers labor is a constant challenge. Finding workers, keeping workers and all the while documenting those workers is always part of their business plan. As any Louisiana farmer or livestock producer will tell you, much of the state’s farm labor force comes from Mexico, Central and South America. So it’s always a surprise to many farmers traveling abroad to see how labor works in other parts of the world.
In Third World countries like Nicaragua labor is dirt-cheap. But there are some in the town of Esteli, population 120,000 near the Honduran border, who fare much better than others.
Part of Class 13 visited the A.J. Fernandez cigar factory on Tuesday, seeing first hand how even their Nicaraguan competitors can give them a run for their money. The plant takes the cigar making process from the raw tobacco in the fields right to your lips. It employs 1,000 workers, everyone from the guy who works in the curing house to the woman who places the finished cigars, (premiums cost about $25 U.S. each) into hand-carved teak cigar boxes.
If you’ve never seen a cigar being made, and few have, the process rivals a Henry Ford assembly line. But for all of its intricate steps, where the rubber really meets the road in the making of a premium cigar is in the rolling room.
There, hundreds of men and women take the processed tobacco leaf, cut it, bunch it and then roll it, layer after layer, until a perfect cigar is created. And A.J. Fernandez cigars are top of the line here in Nicaragua. According to cigar aficionados the town of Esteli is ground zero for premium cigars around the world.
A fresh cigar really is a thing of beauty; a perfectly round, smooth outside, a clean 90-degree end and a temptingly tapered tip. It’s deep, sweet aroma, rich dark color and balanced feel in your hand almost makes you want to sell the house, buy a Panama hat and look for the first vacant veranda in Central America.
But for all their questions about how the cigar-making process works, the question about, and answer to, the cost of labor shocked most class members.
The person rolling your $25 cigar, the one you’ll smoke while drinking your $80 bottle of Scotch, makes $9 a day. The rollers’ busy hands work in an almost automated fashion: spread leaf, trim leaf, remove excess, roll layer after layer of different tobacco blends, cut end, smooth the tip, place in box and repeat.
The A.J. Fernandez Cigar Co. produces 45,000 cigars a day and while it’s not the largest employer in Esteli, the plant and its 1,000 workers account for 40 percent of the local economic stimulus.
A quick check of the math means that less than 1 percent of the town’s population earn and spend 40 percent of the area’s money. Looking for a job at the Fernandez plant? Don’t even ask unless you’re related to someone who works there now. Hey, 9 bucks a day is 9 bucks a day, right?
But there’s an economy of scale at play here, particularly if you’re an A.J. Fernandez employee. You may only earn $45 a week, but in Esteli that salary has you solidly entrenched in the middle class, regardless of education. If you can roll, you can roll, so to speak.
Class member Brandon Gravois, who grows Perique tobacco in St. James Parish, is working hard to break into the global cigar industry and understands that labor, regardless of product, is the No. 1 factor in tobacco profitability.
“Their labor costs are just unbelievable,” Gravois said. “That’s why most of the world’s cigars are made in other countries.”
As a cigar manufacturer the U.S. isn’t even in the ballgame. We like our cigarettes too much. But here in Nicaragua there’s an entire production chain in the making of cigars that works its way down to the lowest of both Fernandez employees and consumers.
The person walking behind oxen pulling a wooden plow in the tobacco fields is just as important as the A.J. Fernandez marketing manager who promotes his premium smokes to buyers around the globe. And many an Esteli local can be seen sporting a $1 stogie in his mouth while talking on his smartphone as he walks to work each day. This symbiotic relationship between labor and management is driving the Central American economy, an economy still heavily dependent of the agrarian lifestyle and a labor force willing to work for pay that would embarrass a 10-year-old Kool-Aid stand operator.
Upon seeing similar labor issues at play at a rice farm outside Managua, Midland rice producer Ross Thibodeaux, who grows 4,500 acres of rice in Acadia Parish said, “If I had that kind of labor I could plant the whole parish.”
For all the technology at their disposal, U.S. farmers, foresters, livestock and poultry producers, like all American businesses, are at the mercy of Third World labor costs. Mercy is perhaps too strong a word for those who support increasing the minimum wage or unionizing $8 an hour U.S. workers. But any chance of that happening here in Central American went up in smoke a long time ago.