Social Observatory Institute (Brazil)

May 2006

By Marques Casara, with the contribution of João Paulo Veiga

SÃO PAULO - BRAZIL
MAY/2006

SOCIAL OBSERVATORY INSTITUTE R. São Bento, 365, 18º andar Centro - Cep: 01011-100 São Paulo, SP, Brasil Phone/Fax: 55 11 3105-0884 e-mail: observatorio@os.org.br
site: www.os.org.br
ORIGINAL TITLE Que moda é essa?
Published in May 2006 at "Observatório Social Em Revista".

In a cramped apartment in downtown São Paulo, Ramón pushes his box of toys amid industrial machines, workbenches, tools and piles of clothes waiting to be sewn. Twelve other people occupy the space. The electric wiring is exposed and the risk of fire is permanent.

The windows are sealed shut. The noise of the machines could reveal the clandestine workshop and attract the police. It is stifling hot, the air is heavy in the space without ventilation. Sitting for more than 16 hours behind a sewing machine, Ramón's mother is in a rush. Maria Diaz intensely sews one piece of clothing after another. She has a schedule to keep. She only stops to eat or go to the bathroom. Ramón's mother is an exhausted woman.

Since she arrived in Brazil in 2003, Maria Diaz works from sunrise until late at night. She has no signed working papers, protective equipment or medical assistance. She is not in the immigration records. Officially, the Brazilian government does not know of her presence. Nor was her departure from Bolivia in 2003 registered by the government of that country. Maria was brought to São Paulo by an intermediary, known as a "coyote", who earns money smuggling people from one country to another. In São Paulo, at least 100,000 Bolivians are in this situation. They left the Andean region to try their luck in clandestine workshops in various parts of Brazil.

Maria Diaz is one of tens of thousands of people who live in São Paulo anonymously, under the risk of extradition, victims of prejudice who have no social or labor rights. She cannot risk revealing her face in this magazine. She would be fired for talking about her problem, perhaps expelled from the country.

The immigrants are exploited by a multinational that earns billions in sales. At one end of this precarious and clandestine chain is one of the world's oldest and best known department stores.

C&A sells clothes sewn by people at the other end of the chain forced to act on the margin of the Law, people whose basic rights as human beings are not respected.

C&A has known of the problem for at least a year. Nevertheless, through dozens of these sweatshops, it continues to benefit from extremely precarious labor sources. What's important is that the clothes reach the consumer quickly and cheaply. Immigrants? They don't even exist formally. They can't complain, if they do they'll be arrested and deported.

Modern times

With 2005 sales of 5.2 billion Euros in Europe, C&A had, according to the Bloomberg agency, profits of more than 500 million euros. An article in the Valor Econômico newspaper of São Paulo reported that the company's stores in Brazil are among C&A's most profitable operations in the world "if not the largest".

Founded in Holland in 1841, the network reached Brazil in 1976 and has 113 units in the country. According to a study by the Credit Suisse bank conducted in March, C&A's prices are normally 10% - 15% lower than those of Renner, one of its principal competitors in Brazil. Its prices are 50% - 60% cheaper than those of Zara, a Spanish retailer that also operates in Brazil.

What is C&A's secret? One of its principal weapons is price, the company adopts a strategy that combines low prices with high-impact marketing. It makes major investments in promoting its brand name. Its advertisting campaign features one of the world's most expensive models, the Brazilian Gisele Bündchen.

Little Ramón, who pushes his box of toys in the chaotic and stuffy workshop, has no idea what his mother does for more than 16 hours a day before that noisy monster. His own life has been a bit confused. At five years of age, he came to Brazil in a bus packed with illegal immigrants who left behind in the interior of Bolivia, hunger, poverty and unemployment. They arrived in São Paulo burdened by debt to their contractors, in search of work and a better life. For this reason, to escape hunger, his mother spends nearly all her time at a machine where she sews all kinds of clothes for C&A; shirts, coats, pants. She earns 20 cents for each piece sewn. That's why she's in a rush. She needs to work a lot to earn money and pay the heavy bills of her contractors. After all, C&A is one of the stores that sells the most clothes in Brazil.

The process functions in the following manner: To sew its clothes, C&A contracts clothing manufacturers legally located in São Paulo. These companies, in turn, pass the work on to clandestine shops. In this way, the clothes sold by C&A enter a vicious circle of precarious and illegal work.

Zero monitoring

The Public Labor Ministry has a list with all of C&A's suppliers in São Paulo. Prosecutor Vera Lúcia Carlos told the Social Observatory that as many as 80 suppliers are suspected of using clandestine workshops to sew clothes: "The investigation is just beginning. We found hundreds of C&A labels in clandestine shops". The prosecutor said the goal is to identify all of the links of the clothing production chain. "What is happening here is a prohibited labor. Like all illegal work, it has legal consequences. Our job is to know who is the final beneficiary of this irregularity", said the prosecutor.

What is C&A's responsibility in all of this? "If C&A contracts or subcontracts companies that do not respect the legislation, they are subject to what is called subsidiary responsibility, that is, C&A, as the principal beneficiary, can be held responsible. The courts have issued this type of ruling," responds researcher from the Center for Union Studies and the Economy of Labor of Campinas University, José Dari Krein.

C&A's involvement with clandestine sweatshops was debated by an investigative commission of the São Paulo City Council, which was established to examine the exploitation of slave labor. Although not named in the final report drafted by city councilwoman Sonia Francine Gaspar Marmo, Soninha (PT), the company was called on to explain its production processes. C&A representative Vlamir Almeida Ramos explained that the company visits its suppliers to identify the conditions of the machinery and to see if they have the technical conditions to sustain production. "If at this time there is something that calls our attention in relation to irregular labor, anything, it is identified and naturally this can become an impediment to the development of the business," Ramos explained. The existance of clandestine labor "could" become an impediment, he said.

Asked by city councilwoman Soninha if they visit all of the suppliers, the C&A spokesperson responded that not all suppliers are visited. "We do not accompany the sub-contracting, we don't have, lets say, any influence in relation to any subcontracting, that he (the supplier) conducts. We do not know about contracts that are made with other parties, by the contractor, or about the prices that are paid to other parties. Our business is with the supplier who was choosen." In sum, C&A itself admits that it has no control over the production chain of the clothes that it sells.

Assistant federal Attorney General Sérgio Suiama participated in the inspections of clandestine factories in the neighborhoods of Pari, Vila Maria and Bom Retiro. He found that the irregularity of the Bolivians is the principal reason that they are found in conditions of degrading labor. "In the last inspection that we made, we found a C&A label in an illegal shop. Then what happens. As with Nike, which was charged with using child labor and superexploitation of workers in Asian countries, the same takes place here in the shops in São Paulo. They often sub-contract to third or fourth parties and the third or fourth parties turn precisely to illegal labor.

Contradictions

As he drags his toy box through the cubicle where his mother submits herself to sewing clothes, little Ramon has become a victim of globalization. He is a typical child of a productive structure that invests billions in new technologies, but that employs labor relations comparable to the first industrial revolution of the 18th century, when workers were exploited to the limit at manual looms.

In 21st century São Paulo, when the machines are turned off in the shop, after midnight, Ramón finally goes to his mother's lap. It's so late, Maria Diaz is beyond exhausted, she has no physical or emotional energy to do anything except throw herself on the mattress that she uses to sleep, a dirty piece of foam that is placed alongside the machine where she was sewing. Here, people live and work in the same space. They eat, they sleep and dream of the future in overcrowded cubicles, small cells where they can't even see the light of day through a window. They sew clothes that they could not afford to wear.

The C&A labels, collected by the federal police in various workshops, are the principal proofs of the company's relationship with these sweatshops. The statements collected by the Public Ministry, which promises to release them soon, should unveil new details about how the process works.

C&A did not accept an invitation from the Social Observatory to present its version of the facts. The company is not accustomed to receiving journalists.
"It's a decision from headquarters for the entire chain, we never attend journalists personally", according to public relations consultant, Guilherme Gaspar, of the company Gaspar e Associados Comunicação Empresarial. C&A was only willing to respond to a few written questions, in which it maintained that the company strives to confirm that its chain of suppliers work with strict respect for the law. The complete response is at the end of this article.

The company said, in summary: "C&A acts in complete compliance with the current law and enters contracts that have clauses for protection and adhesion to social obligations. In these clauses, the supplier and its sub-suppliers, agree not to use slave labor or that analogous to slavery, child labor or that of vulnerable groups or in degrading conditions".

This response is not compatible with what was said at the city council's investigative hearings, by company spokesperson Vlamir Almeida Ramos. It is worth repeating his words: "We do not conduct any accompaniment of the subcontracting, we do not have, let us say, any influence on the subcontracted relation that it (the supplier) realizes. We do not have information about the contracts that are entered with third parties, by the supplier, or the prices that are paid to third parties. Our business is with the supplier that was selected".
In its written response, the company also affirmed: "We emphasize that all of the suppliers, by the requirements of C&A, make a formal commitment to not use illegal labor, and affirm that they do not have knowledge that their subcontractees operate illegally". The response was also not convincing. This is because the company was formally notified of the problems along its production chain by the City Council in October 2005, or that is seven months earlier. It was even informed of the seizure of labels by federal police agents.
In its written response, given to the Social Observatory more than 180 days after the statement to the City Council, the company did not mention even one measure taken against suppliers that did not comply with contracts. In the text, however, C&A said that it "strives for the total respect for its stakeholders and values human capital".

The president of the Sewers Unions of São Paulo and Osasco, Eunice Cabral, which represents 70 thousand workers, did not agree with the company affirmations: "Businesses in the formal sector complain considerably that C&A does everything but take their blood. At times, they can barely produce. If they don't, they [C&A] goes someplace else". According to Eunice, that is where the clandestine shops come in, with workers who have no signed working papers, health plan, or respect for legal rights.

The price charged for clandestine production is thus unbeatable. Eunice told the Social Observatory that C&A was informed of the problem in May 2005, or that is, more than one year ago. And now?


C&A's complete response

1) What is the definition of "corporate social responsibility" adopted by C&A concerning the relationship with suppliers and or subcontractors?

Corporate social responsibility is respected and practiced by the company at all levels of operation. Concerning more precisely the relations with its suppliers, C&A acts in complete compliance with the current law and enters contracts that have clauses for protection and adhesion to social obligations. In these clauses, the supplier and its sub-suppliers, agree not to use slave labor or that analogous to slavery, child labor or that of vulnerable groups or in degrading conditions.

In C&A's 30 years of operation in Brazil, it's relations with its internal and external public have always been in complete harmony with its Mission, Values and Corporate Strategy and based on its Code of Ethics.

2) What are the actions, programs, practices and or policies adopted by C&A concerning the control of Corporate Social Responsibility along its productive chain?

The principal instruments of control are its Ethical Code and the contractual clauses for protection and adhesion signed with its suppliers. In parallel, internally and externally, it promotes the unrestricted adhesion to its Mission, Values and Corporate Strategy. It strives for total respect for its stakeholders and respects human capital.

3) Does C&A know that companies it contracts use illegal immigrants who work clandestinely, in services of sewing clothes that are later sold in C&A stores?

C&A has contractual clauses with its suppliers prohibiting the use of slave or illegal labor, and expects its suppliers to meet their contractual obligations.
When the company learned of this situation, from the Investigative Committee of the São Paulo City Council, it immediately solicited explanations and clarifications from the supplier, stipulating a period to resolve the situation and making it aware of C&A's position. We emphasize that all of the suppliers, by C&A's requirement, make a formal commitment to not use illegal labor, and also affirm that they are not aware of any subcontractees operating in this manner.

4) What is the position of the company in relation to the use of these workers in the sewing of clothes sold by the company?

The values, principles and mission of C&A are incompatible with this type of situation. C&A cannot, however, take on the role of the government and thus exercise a police role, but can, should and is an assistant to them, so that its chain of suppliers work in the strictest legality in relation to the use of labor.

5. Has the company studied the adoption of actions, programs or specific policies, so that the suppliers/subcontractees improve their working conditions? What are these actions?

Yes. The company, without however, taking on the role of inspector, which is up to the State, understands that it should in meeting its own values and mission, work in support of social factors. It is thus involved in the development of a project that seeks the orientation, awareness and accompaniment of its suppliers. This project should be implemented briefly and will help guarantee that illegal situations of labor use be controlled.


SOCIAL OBSERVATORY INSTITUTE
BOARD OF DIRECTORS
President: Kjeld A. Jakobsen (CUT)
João Vaccari Neto (International Relations Secretary, CUT )
Rosane da Silva (Union Policy Secretary, CUT)
Artur Henrique dos Santos (Organization Secretary, CUT)
José Celestino Lourenço (National Training Secretary, CUT)
Maria Ednalva B. de Lima (Secretary of Women Workers, CUT)
Gilda Almeida de Souza (Social Policy Secretary, CUT)
Antonio Carlos Spis (Communication Secretary, CUT)
Wagner Firmino Santana (Dieese)
Mara Luzia Feltes (Dieese)
Francisco Mazzeu (Unitrabalho)
Silvia Araújo (Unitrabalho)
Tullo Vigevani (Cedec)
Maria Inês Barreto (Cedec)
EXECUTIVE BOARD
Kjeld A. Jakobsen - President Arthur Henrique dos Santos Ari Aloraldo do Nascimento - Treasurer Carlos Roberto Horta Clemente Ganz Lúcio Maria Ednalva B. de Lima Maria Inês Barreto
TECHNICAL SUPERVISION
Amarildo Dudu Bolito – Institutional Supervisor
João Paulo da Veiga – Technical Supervisor
Marques Casara – Supervisor of Communication
Mônica Corrêa Alves - Financial - Administrative Supervisor
Ronaldo Baltar - Information Systems Supervisor