[Marxism] "Before we had a boss. Now we are the bosses" - Venezuelan co-ops expand

M. Junaid Alam junaidalam1 at gmail.com
Tue Aug 22 22:00:18 MDT 2006

Big Cooperative Push in Venezuela Incentives are helping to spur the
wealth-sharing business model. Some question its viability.
By Chris Kraul
Times Staff Writer

August 21, 2006

MARGARITA ISLAND, Venezuela — For 20 years, Eustacio Aguilera's family owned
the Hotel Residencia Guaiqueri in this tourist destination and free-trade

He hired the cooks, the maintenance men and the cleaning women. But now when
he asks them to prepare a meal or tidy a room, he is careful to treat them
collegially. The staff may do menial work, but they are also co-owners.

"Before we had a boss. Now we are the bosses," said Hermogenes Garcia, a
longtime maintenance man at the Guaiqueri.

The hotel is among 100,000 cooperatives formed in Venezuela in the last two
years that are the centerpiece of President Hugo Chavez's new socialist
model to create jobs and redistribute this oil-rich country's wealth. They
now employ 7% of the country's workforce, a number that could grow to 30% in
a few years, government officials say.

Chavez is spending hundreds of millions of dollars in oil and tax revenue on
the cooperatives. Although there have been allegations of gross inefficiency
and graft, cooperatives have become a powerful part of the economy and

More than 700,000 impoverished workers across the nation have suddenly
become stakeholders, such as the 200 families in Bolivar state that were
recently given the right to operate a toll road connecting state capital
Ciudad Bolivar and Puerto Ordaz. Poor workers are now operating steel and
textile factories, fisheries and dairy farms across Venezuela with the
prospect of sharing in whatever profits the enterprises turn.

"Before this was just a job. Now you feel the hotel is yours," said Robert
Carreno, head of housecleaning at the 40-room Hotel Kamarata, another hotel
on Margarita Island that recently converted to a cooperative. "I have to
give much more of myself now."

At Mango de Ocoita, some 80 miles east of Caracas on Venezuela's steamy
Caribbean coast, Pedro Venegas gets emotional at the mention of Hugo Chavez.
The cocoa farmer credits him for membership in a worker-owned farm
cooperative and the use of a $7-million cocoa processing plant going up

Venegas hopes the cooperative and factory will revive his industry after
years of stunted prices for cocoa beans. The plant will enable him and 3,000
other farmers in the cooperative to produce cocoa butter, powder and liquor
that they can export directly to foreign customers, instead of selling raw
beans into what for years has been a buyer's market.

"We owe it all to the commandant," said Venegas, who works several acres of
cocoa trees in an orchard hacked out of a snake-infested jungle. "Up to now
we've had to sell to whichever buyer came along, but now we will have the
upper hand."

It's little wonder that a wide variety of groups including existing
companies are rushing to form cooperatives. The government offers
cooperatives exemption from all taxes as well as interest-free loans. The
movement is changing the nature of Venezuelan society, putting quality of
life and "solidarity" above the profit motive, said Oly Millan, Chavez's
minister of popular economy.

But critics say the cooperatives are a replay of policies that already have
failed across Latin America. For several decades after World War II, many
Latin American nations engaged in state-sponsored economic programs designed
to boost local industries and keep out imports.

"The underlying assumption of the program was that the state could do a
better job than the private sector, which is inherently self-aggrandizing
and doesn't look after the interests of the workers or the broader public,"
Boston University Professor David Scott Palmer said.

Several nations ended up defaulting on huge loans that they had taken out to
finance state-owned industries, generating a hemispheric economic crisis in
the early 1980s. The crisis pushed most of Latin America into embracing
free-market policies that broke down barriers to imports, foreign investment
and privatization of state-run monopolies.

Now, the pendulum is swinging back to the left in countries such as
Venezuela whose leaders say free trade hasn't done enough to reduce poverty
and inequality.

Chavez and his officials say that cooperatives are the fastest way to make
good on a social debt to hundreds of thousands of poor workers — or the
"excluded ones," as Millan describes them.

Skeptics inside and outside Venezuela question whether the cooperatives,
heavily dependent as they are on government subsidies, can survive the first
serious drop in oil prices, whose increases have been buoying the nation's
economy and increasing consumer spending.

Dan Hellinger, a political scientist at Webster University in St. Louis,
said the cooperatives would take "one or two generations" to prove
themselves. Although he lauds Chavez's bid to make cooperatives the "main
strategy for economic development," he wonders whether oil prices and the
president's socialist ideology will endure that long.

Venezuela's embattled business groups say the cooperatives, in addition to
other Chavez measures such as price and currency controls, are killing
private investment and the growth of skilled jobs. The strategy, they say,
will leave the country's economy vulnerable to the vagaries of oil prices.

"The fear that their companies may be turned into cooperatives either by
force or by necessity to compete is causing business owners not to invest
and not to hire more people," said Ismael Perez Vigil, executive director of
business group Conindustria.

Government officials say the new movement in Venezuela is less top-down
central planning than bottom-up participatory democracy.

The state provides the money, lots of it, for the cooperatives to buy
assets, which are often government assets such as toll roads or bridges or
abandoned factories and other businesses. But once the cooperatives are on
their feet, the government lets the managers make major business decisions,
said Millan, the economy minister.

"The state is a non-invasive facilitator," Millan said, adding that the
primary purpose of cooperatives is not to turn a profit but to "realize the
potential of the country, create networks of productivity and improve the
quality of life."

Cooperatives are obligated to buy and sell among themselves whenever
possible, a policy that leaves private companies at a disadvantage.
Cooperatives have an edge in bidding for government contracts including
those awarded by state-run oil company Petroleos de Venezuela.

The transformation is hardly occurring without a hitch. There have been
several high-profile scandals involving Venezuelan paper and textile mills
that have been run by worker cooperatives that have either failed to get the
factories running after massive infusions of cash or have been accused of

Carlos Molina, the national superintendent of cooperatives, said in an
interview that substandard bookkeeping and infrequent auditing are too often
the norm. He acknowledged that the government was not even sure how many of
the 138,000 licensed cooperatives were actually operating as businesses. The
first thorough census of cooperatives will begin this month, he said.

"The weaknesses definitely include the management of the books at many of
the cooperatives which don't give a good picture of whether the cooperatives
are successful or failing," said Molina, who issued similar warnings in
testimony this month before Venezuela's national assembly.

Nevertheless, Guaiqueri Hotel owner Aguilera sees mostly the benefits of
Chavez's policy. Located near the beach, his hotel was going broke last year
and he was faced with the option of either selling or forming a cooperative.
He settled on a hybrid form called a co-managed cooperative in which he
turned over a 45% interest to workers in exchange for a $500,000 loan to
refurbish and remarket the property.

The 28-member cooperative includes 12 existing hotel workers, plus 16 poor
and unskilled employees who had no previous hotel experience. They were
added as part of the Chavez social initiative called Mission About-Face. The
program seeks to incorporate hundreds of thousands of poor into the
workforce via the cooperatives.

Aguilera, maintenance man Garcia and all other Guaiqueri hotel cooperative
members have an equal say in how it is run and share in the profit if the
hotel starts to produce one. The hotel cooperative has formed a dozen
committees to make decisions on everything, including bookkeeping and the
daily menu. For professional advice, the cooperative can turn to an
11-member advisory board that the government has formed.

Aguilera says business has improved 40% since the cooperative invested in a
website as part of a new marketing plan. Because the hotel now qualifies as
a member of the "network of productivity," it is eligible to receive
hundreds of government employees traveling on package deals. The hotel's
niche is middle-class government workers who pay as little as $10 a night.

"It hasn't been easy," Aguilera said. "But now we are a stable business
instead of just barely scraping by."

Down the street, Carreno and 52 other employees of the Hotel Kamarata say
occupancy is up since its cooperative was formed last year with a $500,000

David Pinto, a government official who oversees the finances of some 25
cooperatives on Margarita Island including fisheries and construction
companies, says the cooperatives must run a viable business or face
replacement by another cooperative.

"This is not some pinata given by President Chavez. If they don't make a go
of it, the government will step in," Pinto said.

Carreno says cooperative members realize that "this is a great opportunity,
one that may not come again."

M. Junaid Alam

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