The Politics of the Cooperative Sector in Developing Countries: Insights from Argentina, Brazil and Colombia
This is part of a series of think pieces by
scholars and practitioners working on a broad range of issues within the
field of Social and Solidarity Economy. The series is being published
in tconjunction with the UNRISD conference
“Potential and Limits of Social and Solidarity Economy”. The conference
took place on 6-8 May 2013 in collaboration with the International
Labour Organization and the UN Non-Governmental Liaison Service.
Although cooperatives are widely recognized as key drivers of
economic and social development, the type and scope of the policies
aimed at promoting the formation, expansion and consolidation of this
form of social business vary considerably across the developing world.
Even in countries with a long tradition of cooperative entrepreneurship,
government policies toward the cooperative sector differ considerably.
The question that naturally arises is: What accounts for such divergences? The
broad political economy literature on policy decision making and policy
processes suggests at least two possible explanations. On the one hand,
advocates of the so-called “politics matters” school of thought contend
that policy outputs are influenced by partisan variables. According to
the traditional Left-Right characterization of the political spectrum,
Leftist incumbents are driven by ideals and concerned with equality and
progress, whereas Right-wing governments are mainly motivated by
interests and tend toward inequality and conservatism (Bobbio 1997). On
the other hand, promoters of the economic theory of regulation argue
that political and regulatory outcomes are the result of complex
interactions between the supply of government-bestowed benefits and the
demand for those benefits by consumers and firms (Stigler 1971). From
this perspective, the degree of concentration of a given industry is one
of the major determinants of its ability to influence political and
decision-making processes.
Andrés Spognardi is an Argentine-born Italian political economist
previously working at the Italian Institute of Human Sciences in
Florence. His research work, which focuses almost exclusively on Latin
American countries, covers two main topics: the political economy of the
cooperative sector, and the institutional and socioeconomic aspects of
natural resource management.
Testing the theories: The cases of Argentina, Brazil and Colombia
This think piece examines whether it is possible to use the above
mentioned theories to explain differences in the policy framework for
cooperatives among developing countries. Are Left-wing governments more
prone to support and promote the cooperative model of business than
Right-wing governments? Do tightly-integrated cooperative movements
exert more influence on public policy making than loosely connected or
fragmented cooperative movements?
The experiences of Argentina, Brazil and Colombia over the last 20 years
provide the ideal comparative setting to address these questions.
Although the three economies share a long tradition of cooperative
ownership and have relatively similar size cooperative sectors, the
organizational configuration of their cooperative movements differs
significantly, ranging from a tightly-knit vertical structure in Brazil
to a highly fragmented one in Argentina. At the same time, the recent
history of the three developing democracies offers an interesting mix of
political ideologies. While Colombia has seen an uninterrupted
succession of Right-wing administrations, Brazil and Argentina shifted
from the Right to the Left in the early 2000s.
Cooperative movements in a hostile political environment
In the 1990s the Right-wing administrations of Argentina, Brazil and
Colombia implemented a series of neoliberal reforms which, among other
measures, included public programme cutbacks, liberalization of the
domestic economy, and reduction of protectionist barriers to trade and
investment. From the government’s perspective, cooperatives were not an
important part of the development strategy. Their desirability was
almost entirely based on their ability to operate efficiently in a
free-market economy.
Although these conditions created some business opportunities for large
companies, many small and poorly capitalized cooperatives suffered from
the increased competition, as well as from market deregulation that did
not adequately take into account their social, not-for-profit nature. In
all three countries, the organizational structure of the cooperative
movement was a key determinant of the sector’s ability to react to the
challenges posed by the Right-wing agenda.
In Argentina and Colombia, a divided cooperative leadership was unable
to cope with the complexities of the hostile political and economic
environment. In some cases, the divisions undermined the political
strength of cooperatives and their ability to challenge restrictive
policies and regulations. When in the mid-1990s the Argentine Central
Bank raised the capitalization requirements for both commercial and
cooperative financial institutions, the fragmented cooperative
leadership was politically too weak to challenge the decision. Since
most cooperatives were unable to meet the stricter regulatory standards,
the measure spurred a series of mergers, transformations and
liquidations that ended with the collapse of the entire credit
cooperative system.
In other cases, the divisions within the cooperative movement hampered
the development of a concerted political and economic strategy. While
the openness of the economy provided opportunities for the politically
influential and economically powerful Argentine agricultural exporting
cooperatives, the increased competition in the domestic market and the
concentration of credit supply toward less risky customer segments led
to the disappearance of hundreds of smaller, less efficient and
politically defenseless cooperative organizations.
The lack of cohesion within the cooperative movement also helped
exacerbate the crisis of the credit cooperative sector in Colombia.
Initially, when a liquidity crunch started to affect a relatively small
number of credit unions in the late 1990s, the solid and
well-established cooperative banks remained indifferent. In the absence
of a strong response from the cooperative sector, the authorities
intervened to protect the rights of depositors and forced the
liquidation of more than two-thirds of the struggling entities.
Ironically, the intervention of the government also undermined the
public’s confidence in cooperative banks, and eventually led to their
transformation into commercial or public institutions.
In contrast to what happened in Argentina and Colombia, the
tightly-integrated Brazilian cooperative movement exerted substantial
influence on the policy-making process. Its coordinated political
efforts led to the implementation of policies and programmes that helped
most cooperatives adapt effectively to the new conditions of the
economy.
In 1995, five years after the closure of the state-controlled National
Bank of Cooperative Credit, the sector successfully lobbied the
government to allow credit unions to create and run their own
cooperative banks. At around the same time, the influential Organization
of Brazilian Cooperatives (OCB)—designated by law as the exclusive
representative body of the national cooperative movement—strengthened
its ties to political power by officially relaunching a multi-partisan
coalition of legislators committed to advancing the cause of
cooperatives in the national Parliament. Acting as a unified voice for
the sector, the OCB’s strong influence on the Brazilian Congress led to
the development of a refinancing plan for critically indebted
agricultural cooperatives, and to the creation of a fund for training
and technology transfer that has helped Brazilian cooperatives improve
their efficiency and increase their presence in the market.
Leftist governments, cooperatives and the perils of fragmentation
Since the election of more progressive governments in 2003, both Brazil
and Argentina have abandoned the discredited neoliberal paradigm and
adopted a more proactive approach toward the cooperative sector. In
contrast to what happened in the 1990s, the Argentian and Brazilian
Left-leaning administrations started to acknowledge the potential
socioeconomic benefits of cooperatives and explicitly included them in
the national development agenda. But contrary to what one might have
expected, the authorities’ new attitude has not necessarily translated
into better policies.
Although both countries have channeled significant resources into the
cooperative sector, the differences in the organizational structures of
the two cooperative movements have been reflected in their ability to
exploit the opportunities provided by the favourable political
environment.
While maintaining its influential, multi-partisan ties to the Congress,
the strong and cohesive Brazilian cooperative leadership has been able
to establish a largely constructive relationship with the national
Leftist administration. Taking advantage of the friendly political
context, Brazilian cooperatives have become major actors in the
policy-making process. They have used their leverage to exert
considerable influence on the policy agenda, and have fruitfully
collaborated with the authorities in the development and implementation
of important policy initiatives, such as the Brazilian Cooperative
Plan—a national strategy aimed at providing support to cooperative
businesses.
In Argentina, things have been different. The existence of several
representative organizations that often overlap or even compete with one
another has added complexity to the policy debate and hampered the
effectiveness of some well-intentioned reforms. Almost 10 years after
the government passed a Credit Union Act aimed at revitalizing the
sector, not a single credit cooperative has opened its doors in
Argentina. The inability of the movement to articulate a proposal and
actively participate in the drafting of the law was one of the main
reasons for this failure.
At the same time, the fragmentation within the cooperative movement has
given the authorities the chance to take different approaches to
different cooperative segments. In some cases, this multipronged
strategy has helped accelerate an ongoing process of division and
identity dissolution. The government’s decision to increase the tax
burden of highly productive agricultural companies without
distinguishing between their capitalistic or cooperative nature has
prompted the leaders of the politically isolated agricultural
cooperative movement to distance themselves from the sector and forge a
political alliance with some of the main representative organizations of
the old agrarian capitalist oligarchy.
Perhaps worse, the inability of the divided cooperative movement to
adequately represent and protect the best interests of the sector has
created room for opportunistic behaviour on the part of the government.
In a context where democratic institutions are weak, and thus incapable
of preventing certain abuses of power, the self-interested actions of
politicians who seek to portray themselves as keen champions of social
causes have resulted in the harmful politicization of many cooperative
entities. Using state resources, the authorities have been able to
co-opt some representative bodies of the urban cooperative movement and
enlist their services in the top-down construction of a vast network of
publicly-funded “worker cooperatives”. Deprived of the basic
characteristics of a social enterprise, and unable to become
self-sustainable entrepreneurial projects, most of these
government-sponsored “cooperatives” have been acting in practice as
clientelistic vehicles of the ruling party.
The trap of ideology and the challenge of integration
Two interesting points related to the politics of the cooperative
economy and with important implications for the prospects of the sector
in developing countries emerge from this comparative overview. Firstly,
the ideology of the government appears to have a mixed impact on the
policy framework for cooperatives. Although Right-wing administrations
seem to be less responsive to the demands of the cooperative sector, the
presence of a Left-leaning government, as indicated in the case of
Argentina, does not necessarily imply a virtuous policy environment.
Secondly, the degree of integration among cooperatives appears to be a
key determinant of their political leverage. As the Brazilian case
shows, regardless of the political ideology of the government, a
tightly-integrated cooperative movement can exert considerable influence
on the policy-making process. Integration can help cooperatives both to
adapt to a hostile political context, and to exploit the opportunities
provided by a more progressive environment. Moreover, in developing
countries like Argentina, where democratic institutions are weak and
opportunistic politicians are not uncommon, integration might also act
as a barrier against political manipulation by opportunistic
authorities.
The considerations above suggest that the creation of strong and
cohesive representative bodies is a critical step in the development of a
vibrant, autonomous and sustainable cooperative sector. This, however,
can be a long and challenging task. The decade-long efforts of the
Colombian cooperative leadership to create a solid and unified system of
representation have produced only partial results. Although in recent
years the movement’s developing representative organizations have been
largely successful in fighting against restrictive legislation, the
persistence of internal divisions and organizational problems has
limited their ability to articulate and push forward the sector’s own
development agenda.
Even the successful Brazilian model of cooperative representation is
currently facing some critical challenges. The recent proliferation of
small grassroots cooperatives has given rise to a number of
representative bodies that question the philosophy of the traditional
cooperative movement and the legitimacy of OCB’s representational
monopoly. The sector has gained in diversity, but the loss in cohesion
has complicated the policy debate and hindered the implementation of
important reforms.
Paradoxically, the success of the Brazilian cooperative economy seems to
have undermined the integrity of its representative structures, and
thus the sector’s ability to shape the policy environment. It is still
unclear how a rapidly expanding and increasingly diverse cooperative
movement will manage to defuse conflict and constructively channel the
expression of multiple viewpoints. But what is certain is that the
coming years will provide us with valuable lessons about the operating
principles that must underpin efforts to build a cohesive and
influential cooperative leadership.
