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Big Cooperative Push in Venezuela

Incentives are helping to spur the wealth-sharing business model. Some question its viability.

August 21, 2006|Chris Kraul | Times Staff Writer

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 malfeasance.

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 loan.

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."

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