Co-ops and the Battle Against Poverty in Venezuela

This year’s conference of the Society for Co-op Studies took place at its spiritual home of Ruskin College. Its model of working class education and spirit of enquiry fit closely with the society’s ethos. The conference theme was ‘Building a Co-operative Economy – Opportunities and Challenges’ and there is certainly a feeling amongst co-operators that the global capitalist crisis could be a huge co-operative opportunity.

One of the liveliest sessions was, ‘Empowerment through Co-operation in Venezuela’. Lead by Sabine Kienzl, “I am an Austrian by passport but a Venezuelan in my heart”, she said. Now at the LSE she first went to study micro-finance in Columbia and Bolivia supported by the Austrian Government but whilst there had witnessed the astonishing changes of the Bolivarian Revolution leading to her working with the Venezuelans to build links between the Social Economy sector in the United States and Venezuela and undertaking research in the Co-operative sector.

She pointed out that when Hugo Chavez came to power there had been only 910 co-op’s in Venezuela. Whilst just over 50% of the population lived in poverty and over 20% in extreme poverty. By 2007 there where 228,004 co-operative enterprises comprising 14 % of Venezuela’s GDP and 18 % of employment and poverty levels had been reduced to 33.6 % and those living in extreme poverty reduced to 9.6 %.

In sharing this vast increase in the number of co-op’s with the audience there was a collective gasp. UK co-op development bodies would be delighted with registering a single new co-op in a month. All this reduction in poverty cannot be put down to the rise of the co-op sector however it has made a significant contribution. How had this vast increase in co-op activity come about?

When in 2001, the “Special Law of Co-operative Associations” gave the State the responsibility for the promotion of co-op’s through education, improved access to finance, tax exemptions and their prioritization in public contracting. President Chávez argued that the social economy “brings together economic and social interests and gains strength from the dynamism in local communities and the participation of citizens and workers.” The rise began in earnest with actions to implement this law in 2003.

The key education role was taken up by the social missions. Misión Vuelvan Caras, renamed Misión Che Guevara in 2007 took technical education, in agriculture, tourism or construction, and classes on what the Social Economy was all about out to the people. Over 670,000 have been through these programs with their alumni creating over 10,000 new co-op’s.

Simultaneously a new co-op model was developed, the Social Production Enterprise (EPS), which reinvests a proportion of its profits back into the community. Today EPS’s have won some 30% of the value of supply contracts with state owned enterprises. Meanwhile the state-owned oil company, PDVSA took a key role by ensuring that 10% of its investment went into a social fund that is used for projects in education, health, infrastructure and the social missions.

PDVSA also made it a priority to “democratize” its supplier base. By opening up to small co-op’s, at the end of 2007, its suppliers included more than 3,000 EPS’s. It also introduced a program to identify supplier opportunities, a standardized EPS registration system, and an “EPS School” educating them how to do business with PDVSA and other government bodies. Once an EPS wins a contract it commits itself to contributing 3% of its profits to the Social Fund, providing yet further investment.

Alvaro Sanchez from the Venezuela Embassy explained how the development of participatory forms of democracy through the community councils had been a key driver in the development of the co-op sector. The people themselves had identified the needs of their own communities and had then set about creating the co-operative tools to tackle those problems.

It seemed appropriate that this discussion of bottom up decision making and grassroots democracy should have been taking place in the Raphael Samuel Room. Here was something that I would have hoped Raphael would whole heartedly approve, history being made from below. Mind as you would expect from co-operators some where sceptical of the role of the state in this exponential growth whilst others had reservations about Hugo Chavez.

Veteran Co-operator, Edgar Parnell, who many feel wrote the bible when it comes to the building of co-operative enterprises in the developing world made a particularly pertinent and measured contribution to the debate. He described the challenges of sustaining this astonishing level of co-operative development from his experiences in Botswana and Bangladesh. But his most telling comment was about the time he worked on the development of co-operatives on the sugar plantations of Jamaica during the Premiership of the charismatic Michael Manley.

He told delegates not to underestimate the challenges that the Venezuelans faced in building this alternative social and economic model and reminded them of the dirty tricks and destabilisation attempts that the CIA and the United States in collaboration with the large land owners had played in Jamaica to try and thwart their efforts at land reform and the building of a viable co-operative sector. In congratulating the Venezuelans on what they had achieved he said the challenges of sustaining such fast growth in the sector should not be underestimated.

Whilst a vibrant co-operative sector is not the only thing necessary for a more just society as President Chávez has said: “We must transcend capitalism [since] it is impossible, within the framework of the capitalist system to solve the serious problems of poverty of the majority of the world’s population.”