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December 23, 2014

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I live in Nicaragua (León) and was very impressed with your analysis of the canal as a kind of Trojan horse for the Chinese to gain acceptance in Nicaragua with the promise of jobs and resurrecting the economy. But as you astutely point out the real focus is the zona francas which will be exempt from Nicaraguan law, although I would be curious to know if this includes labor law.

Thank you! I think they exempt the concessionaires from Nicaraguan labor law, but I'll have to re-read the concession agreements to be sure. I'll report back on that when I've got access to my main files again. (I should figure out a way to post them publicly.)

That would be great. I know the workers in the Taiwanese zona franjas receive Christmas bonuses (aguinaldos)equivalent to one month's salary and I'm sure the Nicaraguan government would insist the Chinese do the same. Still, I'm very curious about the extent of compliance with local labor laws.

As far as I can tell, the only explicit references to Nicaraguan labor laws in the MOU or the two enabling laws (800 and 840) only cover four issues:

(a) HKND can bring in as many expats as they see fit;

(b) Expats are not governed by Nicaraguan labor laws;

(c) HKND employees (whether foreign or Nicaraguan) are exempt from all payroll taxes and other labor charges;

(d) Strikes are considered force majeure events that could either exempt the Canal concessionaire from needing to pay Nicaragua or give it reason to sue the government under the arbitration clauses.

That last would be pretty strong; the company would need to terminate the concession.

The contracts do, however, protect the concessionaire against any and all future changes in labor law.

Short version: Nicaraguan labor law as it currently stands is not effected by the Canal agreements ... but the concessionaire is protected against any future tightening of those laws. It could in theory work around them by bringing in workers from elsewhere, although in practice I have trouble seeing that happening after the construction of the subprojects is finished.

Fantastic research. Thank you so much.

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