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Globalization with a human face:
In Nicaragua, Worker Co-ops Triumph

By Michael Woodard

For more than ten years the Jubilee House Community (JHC) has worked in Nicaragua, focusing in five general areas: sustainable agri- culture, appropriate technology, sustainable economic development, health and education.

As the Nicaraguan economy has continued to suffer from "free market" globalization through the 1990s and into the twenty-first century, JHC’s work has focused more and more on providing alternatives to Nicaragua’s current role in the neo-liberal global economy.

Today, JHC works with five worker-owned cooperatives to provide workers with jobs and control of the workplace. The five co-ops include one service co-op, three industrial co-ops, and an agricultural co-op that is actually eleven production cooperatives and a second-tier marketing cooperative.

The agricultural co-op includes approximately two thousand subsistence farmers who produce a variety of organically certified products, such as sesame, peanuts, coffee, cotton and honey. Unfortunately, due to Nicaragua’s dismal economic situation, there is no internal market for organic products, so ninety-nine percent of them are exported to the US and Europe.

The farmers are not allowed to take land out of production of local foodstuffs. Nor are they allowed to clear forested land for organic planting. Nicaraguan credit policy is to loan to large agricultural producers, not to small farmers. So, due to lack of credits for small farmers, there is plenty of abandoned, arable land in Nicaragua. Organic production creates the conditions for credits and reintroduces this abandoned land into a sustainable productive cycle. Because organic products bring a price premium, and because organic products are considered "non-traditional" here in Nicaragua, there are credits available for such production even on a small scale.

Finding domestic and export markets

The service co-op is a collective of security providers. Due to increasing poverty and the resulting disintegration of societal norms, a high rate of petty crime in Nicaragua has led to increased demand for security guards. Both JHC and the co-ops they work with were employing an outside security company to provide those services. When a theft occurred, the company paid off the claim by docking its workers’ pay three times the amount of the claim.

JHC helped the workers file a claim with the Ministry of Labor, which the Ministry ignored. Despite this, we then helped them form their own cooperative. Now they do the same job, but, working for themselves, are paid almost double the salary they had been making.

The three industrial cooperatives include a construction materials co-op that produces block, paving stones, and prefab posts and slabs; a ceramics co-op that makes cheap, effective ceramic water filters; and a women’s sewing cooperative that specializes in clothing made from certified organic cotton.

While the construction materials and ceramic co-ops sell their products locally, the sewing co-op – again due to the lack of any market for organic goods in Nicaragua – is focused on exports.

In April, 2004, the co-op registered to become the world’s first worker-owned free trade zone, allowing it to compete on an equal footing with sweatshop companies, while providing just pay, fair working conditions, and worker control of the workplace.

Making membership meaningful

Based on an analysis of cooperatives in Nicaragua during the 1980s and early ‘90s, membership has been made intentionally hard to obtain. In the 1980s the Sandinista government promoted cooperatives by giving easy credit, cheap equipment, and a guaranteed market. When the Sandinistas lost power in the 1990 elections and the government turned against cooperatives, many co-ops collapsed with the notion of "easy come, easy go". To offset this attitude:

A prospective member must work for a year in the co-op first, and complete forty hours of training in cooperativism and another forty hours in business management;

At the end of the trial year, the pre-member is evaluated by fellow workers, who either issue an immediate or a conditional invitation to join (the latter highlighting areas that need improvement and a stated period of time to demonstrate that), or deny membership.

Members pay a buy-in fee in cash or sweat equity depending on the circumstances of the co-op at the moment. A member’s buy-in fund draws interest, and profits – when not distributed in cash – are added to the fund. This creates a financial package that is available when a member leaves the co-op. Meanwhile, the co-op can borrow from the fund at below market interest rates when in need of capital.

Access to credit completes the loop

To assure adequate financing for the cooperatives, JHC operates a revolving loan fund that makes capital available to the co-ops at interest rates one-sixth the market rate of thirty-six percent.

In the case of the agricultural co-op, access to affordable credit has many advantages. It puts production costs within the means of the farmer. Also, farmers can receive payment for crops at harvest rather than waiting until the goods are delivered, which can sometimes be two months or more after harvest. Finally, it makes funds available to process commodity crops, bringing a higher "value-added" price to the farmer.

In the case of the construction materials and ceramic co-ops, the revolving fund assures credit for raw materials and capital improvements. Providing funding for timely capital improvements is essential in a country where equipment is normally allowed to completely deteriorate before being replaced, with the resulting lost productivity and decline in product quality.

Access to credit has allowed the women’s sewing cooperative to change from a cut-and-sew operation, which furnishes almost no profit margin, to a full-package provider that offers a finished product for a premium price. Full package service also attracts many more clients: in the first three months of 2004, production soared to 116 percent – and gross income to 140 percent – of the previous year’s totals.

Supporting the creation and development of worker-owned cooperatives is not easy work. There are many obstacles, both internal and external, to the co-ops’ success. However, as these Nicaraguan enterprises reveal, the model does provide a truly viable alternative to the neo-liberal model of treating workers as just another commodity.

Michael Woodard is a founding member of Jubilee House Community (JHC) and its Center for Development in Central America. JHC is a non-sectarian, faith-based community that has focused on service ministry since 1979. FMI:

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