Worker-run companies show how to profit without a boss

By various sources

There are now 205 “recovered” companies in Argentina, with nearly 10,000 workers — up from 161 companies with 6,900 workers in 2004, according to a study published in October. Though the economy has improved since the 2001 crash, the current economic downturn has caused a recent increase in factory take overs. There are now some 10,000 cooperatives in Argentina, where workers control profits and make management decisions — while saving their jobs.

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Marcela Valente
IPS Nov 8, 2010

After the late 2001 financial and political meltdown in Argentina, thousands of companies were abandoned by their owners in a sea of debt. But some of them were taken over and reopened by their employees. Today, as the economy continues to grow, these worker-run factories are still going strong.

There are now 205 “recovered” companies, with a total of 9,362 workers — up from 161 companies with 6,900 workers in 2004, according to a study published in October.

“How has a phenomenon that emerged as a kind of life raft after the 2001 economic collapse grown rather than faded away during a period of economic boom?” asks the lead author of the study, Andrés Ruggeri.

“The workers learned that running a company by themselves is a viable alternative, to keep a company operating,” he tells IPS. “That was unthinkable before.”

The study, “Las Empresas Recuperadas en la Argentina. 2010” (“Recovered Companies in Argentina 2010”), was carried out by a large team of student volunteers with the Open Faculty Programme at the University of Buenos Aires.

The aim was to provide data to help design policies to strengthen and improve the self-management of companies, says the study, which is based on an in-depth survey of the companies. Although there are some earlier precedents in Argentine history of bankrupt businesses that were reopened by their workers, they were isolated cases.

But as a result of the severe 2002-2003 economic crisis, worker-run companies began to mushroom in a broad range of areas, including the food industry, steel, textile, footwear and plastic factories, meat-packing plants, ceramic, glass and rubber manufacturers, graphic design companies, transport firms, restaurants, health businesses and even a five-star hotel.

The companies were reclaimed by their workers after the owners disappeared overnight, leaving behind jobless employees, piles of debt, factories stripped of everything not bolted down — and, often, charges of tax evasion or fraud.

Many of the companies are producing and even exporting again, after they were taken over by the workers, who were owed months and sometimes years of back wages.

Most of the workers formed cooperatives, and decisions are reached in assemblies, while they receive advice and support from other worker-owned companies and from government institutions as well.

A similar phenomenon has occurred in other countries of Latin America. According to the Open Faculty Programme report, there are 69 “recovered” companies in Brazil, around 30 in Uruguay, 20 in Paraguay and a growing number in Venezuela. Cases are also starting to be seen in Spain, says Ruggeri.

Many believed that as the economy boomed — it grew an average of 8.5 percent a year from 2003 to 2008 — the companies had gradually shrunk in number, and only a few survived as testimony to an era, the study says. But “nothing could be further from the truth,” Ruggeri says.

Even during times of economic growth, numerous companies fall into bankruptcy, sometimes as part of a strategy aimed at enabling the owner to start over again elsewhere. But the employees are left high and dry, and many of them are no longer young enough to be reabsorbed by the labour market, he points out.

“Recovered companies are a labour, economic and social reality that has taken root; they are here to stay and they will continue growing,” the study says. Although they face their own difficulties, they have enormous potential, it adds.

One illustrative case not related to the 2002-2003 crisis is that of Global, a firm that produced latex products — mainly balloons — that declared bankruptcy in 2004.

One Monday morning the workers showed up and found the sign “closed until further notice.” Neighbours told them that trucks had been hauling things away over the weekend — the owners had taken all the machinery.

The company’s dozens of employees were left without a job. But they managed to overcome many difficulties and reopen the business, and by 2005, Global had been transformed into “La Nueva Esperanza” (The New Hope), a cooperative with 32 members.

One of them is Domingo Palomeque, who has worked for 26 of his 50 years of life in the balloon factory on the outskirts of the Argentine capital. But now he does so as an equal partner in the cooperative.

“First we set up the cooperative, and then we recovered the machines they had stolen,” Palomeque explains to IPS.

In the survey by the team of university researchers, the problem mentioned most frequently by the companies is the lack of financing to purchase raw materials and machinery or to hire specialised workers. They also cited problems making headway in the market.

La Nueva Esperanza is no exception. “Credit,” Palomeque says without hesitation when asked what the company needs most. “We have to buy automated machines, not to replace people but to be more competitive.”

The cooperative’s products compete at a disadvantage in the local market today with cheap imports from Malaysia or Singapore. “Our products used to be cheaper, but that’s not true any more,” he says.

Despite the difficulties, they have managed to continue selling on the domestic market, and they even export their products. According to the report, 15 percent of the recovered firms export part of their output, and another 60 percent have the potential to do so.

The La Nueva Esperanza cooperative found its own way around certain hurdles. “It’s something we invented ourselves — we sell to Brazil, Paraguay, Chile and Uruguay, but we don’t export the products ourselves: our customers register at an address in Argentine provinces bordering their countries,” Palomeque explains.

He says there is no turning back. On the contrary, he has ambitions for the cooperative. “Our goal is to get new machines, hire new workers, and continue growing.”

Recovered companies vary in size. Seventy-five percent employ less than 50 workers, only a few have more than 100 employees, and just 2.3 percent have more than 200 workers.

The study calls for coherent public policies to support the firms. “The state should take a more active role, but it acts in an erratic manner because it has an erroneous conception that this is a transitory phenomenon,” Ruggeri says.

“It should strengthen these businesses because they are productive units that are growing sources of genuine jobs, which are neither precarious nor informal,” he adds. “These are workers who have got back on their feet on their own.”

In the last few years, the government has taken some steps that have given the businesses a boost. Through the Labour Ministry, it distributed more than one million dollars in subsidies. But it was a one-off arrangement. Without steady access to financing, the recovered companies “are condemned to teeter on the threshold of survival,” the report concludes.

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Worker-Run Businesses Flourish in Argentina
By Jaisal Noor
The Indypendent, August 14, 2009

Maria Alejendra, a factory worker in the suburbs of Buenos Aires, Argentina, spends her days cutting pieces of rawhide at the Huesitos de Wilde Cooperative. Along with the 33 other original workers at the dog treat factory, Alejandra now makes twice as much money — 2,000 pesos a month — as she did under her former boss. Alejandra, 41, who has worked at the factory for 14 years, is now able to listen to music and drink maté, a South American herbal tea, while she works.

The Huesitos de Wilde Cooperative is just one of more than 250 worker-recovered businesses in Argentina, which employ a total of 13,000 workers. Part of a broader effort to recover factories, which started after the country’s economic collapse in 2001, the workers at Huesitos de Wilde first occupied the factory and took over production in January 2007.

Though Argentina’s economy has improved since the crash, the current economic downturn has caused a recent increase in factory take overs, with a significant uptick since February.

Nearly 20 factories have been occupied since 2008, and 33 new cooperatives have been officially registered with the government in the past few months. While the government readily grants businesses cooperative status — there are currently some 10,000 cooperatives in Argentina — gaining this recognition is the first step for the few hundred recovered enterprises that wish to be worker-run. However, the government has yet to recognize the legal right of any of these recently recovered businesses to exist.

While cooperative enterprises do allow workers a greater role in company decisions, workerrecovered businesses allow employees to reclaim lost jobs, as well as receive the same wages and equally participate in management decisions, as is the case with Huesitos de Wilde.

Workers who seek to recover a business from their owners are faced with numerous challenges. In addition to often lacking management experience, the struggle to find start-up money and maintain a profitable business can often sideline reclaimed enterprises.

The workers at Huesitos de Wilde were offered guidance by an array of groups, including the Argentine Workers Center, a trade-union federation.

“Once we were taught, we came back to take over the factory,” Alejandra said.

Reclaiming factories that have been abandoned by owners provides workers with a way to counter the self-interest of some employers, according to Marie Trigona, a journalist and filmmaker who has worked with Free Speech Radio News and Z Magazine.

Businessmen often exploit crises by declaring bankruptcy so they can set up shop elsewhere and hire cheaper labor or invest their money in more lucrative projects, Trigona said.

AUTONOMOUS FACTORY: Los Huesitos de Wilde cooperative members in Buenos Aires, Argentina, chop large sheets of raw leather to be cured. These workers do not need a boss to make dog treats.

While Argentina has provided business owners with the option to run cooperatives since the late 19th century, the country’s road to an option such as worker-run enterprises has not been an easy one. Argentina’s history has been plagued by neoliberal policies, such as widespread privatization, deregulation and cutbacks in social services.

Prior to the military coup of 1976, Argentina was one of the wealthiest nations in Latin America. It was the envy of the developing world, with strong labor laws and an unemployment rate of 4.2 percent. But after seven years of brutal military dictatorship — which were marked by widespread torture and the “disappearance” of 30,000 political opponents — followed by a string of pro-free market governments, these progressive policies were eroded.

By the 1990s, Argentina was viewed by the West as a poster-child for embracing neoliberal policies championed by the World Bank and International Monetary Fund. But when the speculation- driven economic bubble of the 1990s burst in December 2001, the country’s banking system collapsed. Business owners declared bankruptcy, fired scores of workers and moved their money offshore, resulting in a capital flight of $18.7 billion in 2001.

Argentine civil society responded through popular revolt against the government and economic elite. Tens of thousands of protesters took to the streets and toppled four governments in a matter of weeks. Factory takeovers were commonplace, and violent clashes with police led to dozens of civilian deaths over the next several years.

In 2002, the unemployment rate was 25 percent, with another 20 percent of workers underemployed and 60 percent of the country living in poverty. Workers began taking over factories in an attempt to reclaim their livelihoods.

Argentina’s economy began recovering from the collapse in 2003. From 2003 to 2008, for “most recovered factories, the priority was growing economically, finding capital, or raising capital through work. Most of them have done pretty well, while others have just survived,” said Esteban Magnani, who has worked extensively with the recovered-business movement in Argentina and is the author of The Silent Change: Recovered Businesses in Argentina.

By early 2007, more than 170 businesses were worker-run, though the vast majority were not recognized by the government as legal businesses.

Members of the Huesitos de Wilde Cooperative credit La Base, the Argentine-based counterpart of the U.S. micro-finance organization The Working World, as well as the broader community of groups that support worker-run cooperatives, with the factory’s continued success.

This support network proved to be invaluable when the workers returned to the factory to reclaim it and discovered that most of the plant’s machinery had been removed.

With help from the Employees and Supervisors Union and a $15,000 loan from La Base, the workers were able to buy back the equipment before it was sold at the auction block as well as purchase raw materials. But the process was far from easy. For many months, workers went without paychecks, and only 33 of the original 200 workers chose to remain in the cooperative. Of the workers that left, some have found work while many are still unemployed.

The Working World, founded by Brendan Martin in 2004, offers collateral-free loans with no enforcement mechanism for repayment. While the interest rates on the loans given to Huesitos de Wilde range from 10 to 18 percent, the repayment rate for all Working World loans is 98 percent.

SCOOBY SNACKS: Workers at Huesitos de Wilde do the final task of packaging finished dog treats into plastic bags. The factory is one of hundreds of worker-recovered businesses in Argentina.

Though the Huesitos de Wilde Cooperative has managed to keep its factory doors open, the workers still do not own the property. They could be evicted at anytime. While Huesitos de Wilde only received preliminary approval last February under the law of expropriations, they must continue producing so they can pay off the debt owed by the former owner, thus keeping them in a state of legal limbo until they receive final approval and can be granted ownership of the factory.

According to Magnani, while the state has indicated that expropriation laws, which would provide cooperatives with legal permission to use owner assets, might be enacted, the legal support provided by this legislation would be weak.

“The future of the recovered factories, both the new and the old, is still uncertain,” Magnani said. “Of the older ones, just a few have managed to get the property of assets.”

US Labor Far Behind the Times

Despite the challenges facing the workers at Huesitos de Wilde, the state of worker-run cooperatives in the United States is still far behind Argentina.

Late last year, more than 250 fired workers at the Republic Windows and Doors factory in Chicago held a successful six-day sit-in demanding vacation and severance pay.

While the factory remains open after recently being purchased by California-based Serious Materials, a company that manufactures green building supplies, only 15 of the workers have been able to return to work since May, as production has been slow. Serious Materials hopes that an infusion of federal stimulus funds for weatherization will increase demand for the company’s products and allow them to re-hire all 250 workers.

Though the workers did consider the possibility of taking over the factory themselves, Mark Meinster, a representative of United Electrical Workers, the union to which the Republic workers belong, told The Indypendent earlier this year that the lack of a recovered-factory movement in the United States made this an unlikely possibility.

“The fact that no real movement of worker-run enterprises exists in the U.S. makes this option much more difficult at this point,” Meinster said.

Despite the current global recession, the Huesitos de Wilde Cooperative is thriving, and has recently hired eight more employees. The workers remain optimistic, regardless of their lack of legal ownership of the factory.

“The truth is that you can work without a boss. We have learned that you can continue … and you can succeed,” Alejandra said.

Translation provided by Judith Lantigua, Vivian Onyekachukwu Ekey and Max Garcia.