Wal-Mart prides itself on cutting costs at home and abroad, and its Mexican operations are no exception. That approach has helped the Arkansas-based retail giant set a track record of spectacular success in the 16 years since it entered Mexico as a partner of the country's then-leading retail-store chain. But some of the company's practices have aroused concern among some officials and nongovernmental organizations (NGOs) that Wal-Mart is taking advantage of local customs to pinch pennies at a time when its Mexican operations have never been more profitable.

Wal-Mart is Mexico's largest private-sector employer in the nation today, with nearly 150,000 local residents on its payroll. An additional 19,000 youngsters between the ages of 14 and 16 work after school in hundreds of Wal-Mart stores, mostly as grocery baggers, throughout Mexico-and none of them receives a red cent in wages or fringe benefits. The company doesn't try to conceal this practice: its 62 Superama supermarkets display blue signs with white letters that tell shoppers: OUR VOLUNTEER PACKERS COLLECT NO SALARY, ONLY THE GRATUITY THAT YOU GIVE THEM. SUPERAMA THANKS YOU FOR YOUR UNDERSTANDING. The use of unsalaried youths is legal in Mexico because the kids are said to be "volunteering" their services to Wal-Mart and are therefore not subject to the requirements and regulations that would otherwise apply under the country's labor laws. But some officials south of the U.S. border nonetheless view the practice as regrettable, if not downright exploitative. "These kids should receive a salary," says Labor Undersecretary Patricia Espinosa Torres. "If you ask me, I don't think these kids should be working, but there are cultural and social circumstances [in Mexico] rooted in poverty and scarcity."

In a country where nearly half of the population scrapes by on less than $4 a day, any income source is welcome in millions of households, even if it hinges on the goodwill of a tipping customer. And Wal-Mart did not invent the bagger program that, as a written statement from the company notes, pre-dates the firm's arrival in Mexico, nor is it alone within the country's retail sector in benefiting from the toil of unpaid adolescents. But in Mexico City, for example, the 4,300 teenagers who work in Wal-Mart's retail stores free of charge dwarf similar numbers laboring unpaid for Mexican competitors like Comercial Mexicana (715) and Gigante (427). Although Wal-Mart's worldwide code of ethics expressly forbids any "associate" from working without compensation, the company's Mexican subsidiary asserts that the grocery baggers "cannot be considered workers." The Mexico City government's top labor official dismisses that contention as so much corporate hogwash. "To my mind, that is not an accurate description because the bagger is providing a service on the store's premises that benefits the company by serving the customer better," argues Federal District Labor Secretary Benito Mirón Lince. "In economic terms, Wal-Mart does have the capability to pay the minimum wage [of less than $5 a day], and this represents an injustice."

Certainly, Wal-Mart's bottom line is healthy. Wal-Mart de Mexico reported net earnings of $1.148 billion in 2006 and $280 million in profits in the second quarter of this year, a 7 percent increase in real terms over the same period last year. Buoyed by the handsome bottom-line results of the preceding 12 months, Wal-Mart de Mexico Chief Executive Eduardo Solórzano announced plans in February to add 125 new stores and restaurants to its existing network of 893 retail establishments during the course of 2007. That ambitious expansion plan will represent new investment totaling nearly a billion dollars, according to company spokesmen.

And in its defense, Wal-Mart says it fully complies with a 1999 agreement covering the teenaged baggers that the Mexico City municipal government negotiated with the Supermarkets and Department Stores Association of Mexico. The company also says it goes beyond the obligations of that accord, awarding bonuses twice a year to baggers who maintain high grades in school and also providing accident insurance that covers the kids not only when they are on duty, but also when they are en route between home and workplace. The company's written statement cited a study conducted by the Mexican government and a U.N. agency that found that teenagers participating in the baggers' program were less likely to use illegal drugs than peers who panhandled or hawked merchandise on city streets.

Wal-Mart says the bagger program was designed "in accordance with the International Labor Organization's (ILO) guidelines." That's questionable: Article 2 of the ILO's Convention 138 specifically prohibits the employment of 14-year-old children. (When asked by NEWSWEEK specifically about this clause, a Wal-Mart spokesman said in a written response: "With respect to your questions about the ILO, I repeat that we subscribe to an agreement signed between the Supermarkets and Department Stores Association of Mexico and Mexican labor officials. I suggest you share your doubts with Mexican authorities as to whether the [1999] accord [with the Mexico City municipal government] is in line with ILO guidelines.") A study conducted by three student researchers at the Autonomous University of Mexico documented violations of the 1999 agreement at a Wal-Mart Supercenter store in southern Mexico City. These included inadequate training and forcing youngsters to work a double shift, thereby exceeding the six-hour limit per day established by the accord. Then again, things could be a lot worse. In February 2005, Wal-Mart agreed to pay the U.S. Labor Department $135,540 in civil money penalties to settle charges of 24 child-labor violations. Some of the accusations involved minors who operated forklifts, chain saws and other potentially dangerous equipment. Stuffing groceries into plastic bags would seem considerably less hazardous.

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