The New Cooperative Movement in Venezuela’s Bolivarian Process

I arrived in Caracas in July 2005 with a few contacts at different cooperatives, anxious about how I would sort through the more than 70,000 cooperatives that the Superintendencia Nacional de Cooperativas (National Superintendence of Cooperatives — SUNACOOP) had referred to in its recent press statements. Indeed, I found cooperatives everywhere. Between one night and the next morning, I stumbled on cooperatives in some rather unexpected places: a group of artisans in the neighborhood near my hotel, a group of tour guides who entertained children in a nearby park, the cleaning crew of an office building where I went to conduct an interview. Even the taxi drivers in front of the hotel where I was staying had left their private employer to form a cooperative.

Spaces for small enterprises, especially cooperatives, have been opened by a great number of local governments, public institutions, and enterprises, including Venezuela’s oil company, PDVSA. These agencies have established contract-bidding procedures that, while demanding competitive quality and costs, don’t discriminate against small enterprises and cooperatives. They have also encouraged workers employed by private contractors to form cooperatives. For example, CADELA, one of the five regional branches of the state-owned national electric company, encouraged its maintenance and security subcontract workers to leave their private employers and form their own cooperatives. CADELA is an enterprise under co-management and has been very supportive of cooperatives.1 Similarly, most of the stations of Caracas’s state-owned rapid transportation system are maintained by cooperatives created by employees of former private businesses. The Public Works Division of Caracas’s main municipality has promoted Local Works Cabinets (Gabinetes de Obras Locales) through which neighbors organize themselves in working tables to decide which public works on infrastructure should be done and supervise them. The community also decides which cooperatives in the neighborhood carry out the work.2

La Matoma
Construction cooperative La Matoma, contracted by GOL to repair streets in barrio Nuevo Horizontes, Parroquia Sucre, Caracas

When President Hugo Chavez assumed power in 1998, there were only 762 cooperatives in Venezuela.3 These cooperatives, as the rest of Venezuelan society, had survived the structural adjustment measures started by the presidency of Carlos Andres Perez in 1989. In the two decades before the rise of Chavez, Venezuelan GDP fell almost continuously, and inequality became extreme. An estimated 80 percent of the population lived in poverty and more than half of the employment was in the informal sector.4 The Venezuelan economy is also heavily dependent on oil revenue, with most of its GDP coming from oil exports.5 Much of the food is imported, well under FAO’s minimum food production levels for food self-sufficiency.6

To deal with this social and economic situation, the Chavez administration has embraced a new development model, referred to as “endogenous development.” Its conceptualization draws heavily from Osvaldo Sunkel’s ideas in Development from Within: Toward a Neostructuralist Approach for Latin America (1993) which calls for an adaptation of import substitution policies which

prioritize equity, human development, and development adjusted to specific local conditions and employing local resources. The official interpretation of endogenous development also emphasizes the importance of local, diversified, and sustainable development, and the commitment to respect Venezuelans’ different cultures and identities.7 Most significantly, committed to including the historically-marginalized sectors of the Venezuelan society, the Chavez government also recognizes the need to democratize the economy, combat inequalities, and encourage solidarity in order to pay the accumulated “social debt” to the popular sectors.

The cooperative production model has increasingly come to define the development strategies of the “Bolivarian Revolution.” In its August 2005 report, SUNACOOP registered a total of 83,769 cooperatives, with more than 40,000 cooperatives created in 2004 and almost 30,000 more cooperatives formed in the first eight months of 2005. The total number of associates in October 2004 was 945,517, up from 215,000 in 1998.

This proliferation originates in the recognition of cooperatives throughout the 1999 Bolivarian Constitution as key economic actors within the nation’s social economy, portrayed as tools for economic inclusion, participation (article 70), and state decentralization (article 184). More significantly, the state is expected to “promote and protect” cooperatives (articles 118 and 308). It wasn’t until the Ley Especial de Asociaciones Cooperativas (Special Law of Cooperative Associations) was published in September 2001 that numbers started growing with almost 1,000 cooperatives in 2001, more than 2,000 in 2002, and more than 8,000 in 2003.8

In March 2004, the Misión Vuelvan Caras was created to “change the nation’s economic, social, political and cultural model in order to attain a State of Justice and Law sustained by an endogenous socio-economic development, as asserted in the Bolivarian Constitution.”9 Most students were recent graduates from other educational missions that allowed Venezuelans to finish primary and secondary education. The missions are social programs to promote education, health, and culture, funded by the surplus from oil revenues and managed directly by the executive. They were created by the Chavez administration as parallel structures to avoid the bureaucracy inherited by the existing ministries.

Through Vuelvan Caras, between December 2004 and May 2005, 264,720 students graduated from semester- to year-long classes on technical, managerial, and historical subjects, as well as on citizenship and cooperative values. During this period, students received scholarships and opportunities to improve their quality of life, especially health and housing conditions. Although graduates from Vuelvan Caras are free to seek individual employment or form micro-enterprises by themselves, it was made clear that cooperatives were a preferable form of organization which would be prioritized for state support. Students in the mission were encouraged to form cooperatives, and 195,095 graduates, or nearly 70 percent, did, resulting in 7,592 new cooperatives.10

In September 2004, the Venezuelan government created a Ministerio de Economía Popular (Ministry of Popular Economy — MINEP) to support and institutionalize the Vuelvan Caras program, and to coordinate the work of the existing and newly-created lending institutions.  Its role is to coordinate and draft policies to promote micro-enterprises, cooperatives, and other self-sustaining productive units that contribute to collective wellbeing and dignify productive labor.11 MINEP’s publications maintain that Vuelvan Caras is not an employment program and that cooperatives are not promoted in order to fulfill its commitment to provide employment for all Vuelvan Caras graduates — rather, cooperatives are seen as a central component of “an economic model whose raison d’être is collective wellbeing rather than capital accumulation.”12

After the Chavez government won a recall referendum that left his opponents reeling, Chavez defined the “new strategic map” for a subsequent stage of the “Bolivarian Revolution” in a meeting with government officials in November 2004. Among the 10 strategic objectives that Chavez mentioned was the commitment to “advance in the conformation of a new social structure,” to establish “a new democratic model of popular participation,” and to “speed up the construction of a new productive model towards the formation of a new economic system.”13

The creation and support of cooperatives integrated in Núcleos de Desarrollo Endógeno (Endogenous Development Zones – NUDEs) by MINEP is a key strategy towards that aim. A NUDE is formed by one or more Vuelvan Caras‘ cooperatives that join to design a project, with the assistance of MINEP’s specialists, for a physical space (land, factories, installations) they have identified and can be made available by MINEP. When the project proposal is finished and accepted, the cooperatives receive on-site technical support, the necessary credit (generally at zero interest and with some grace period), and the physical space (generally provided in usufruct). In May 2005, there were 115 active development zones with a total of 27,975 Vuelvan Caras graduates (near 10 percent of all graduates) in 960 cooperatives (near 12 percent of all cooperatives created within the mission) — 73.5 percent in agriculture with 20,411 graduates in 699 cooperatives; 14.8 percent in industry with 4,377 graduates in 155 cooperatives; and 10.4 percent in tourism with 3,063 graduates in 103 cooperatives.14

El Lucero Grande
Agricultural cooperative El Lucero Grande, established in NUDE La Hacienda Sanz, Miranda State

Visiting one NUDE specializing in manufacturing, one specializing in agriculture, and another specializing in tourism, I could observe a great deal of the efforts required and difficulties involved in establishing a NUDE. MINEP’s specialists provided constant on-site technical assistance and pushed bureaucracy so that the infrastructure and inputs that cooperatives were supposed to obtain from public institutions, as it was stated in their contracts, were actually delivered.  Most cooperative members referred to internal communication problems as the greatest challenge but seemed to be hopeful that time and practice under equal rights would solve them. Most cooperative members have little administrative and management skills, and only few have started taking the classes on management and administration provided by MINEP. However, most cooperatives I talked to seemed to be very aware of the importance of productivity. Their commitment to productivity is not only moral (“Vuelvan Caras has to be a success”) but also rational in the economic sense. In order to receive new credits and maintain the resources given in usufruct, cooperatives have to pay off their loans and comply with their contracts.

Ruta Bolivariana
Tourism cooperative Ruta Bolivaria brings public school children to an art museum in Caracas

The majority of the cooperatives are in the production of goods and services and in agriculture.15 MINEP’s focus on agricultural and manufacturing cooperatives is indicative of the priority given to production of goods necessary to meet basic needs. It is also consistent with the Chavez administration’s aim of achieving food security and reducing dependency on imports of other products to satisfy basic needs.

Venezuela Avanza
Shoe manufacturing cooperative Venezuela Avanza, established in NUDE Fabricio Ojeda, Caracas

Since March 2005, MINEP has been in the process of installing regional technical committees to decentralize its functions and services. Each regional technical committee encapsulates all state institutions subordinate to MINEP, including SUNACOOP, the National Institute for Cooperative Education (INCE, which provides most of the logistics and specialists), and the six specialized funding institutions, several of them created by the Chavez government. The aim is to create a decentralized “synergy” of public institutions characterized by public accessibility and administrative transparency, allowing more citizen oversight. Additionally, this organizational approach is designed to prevent bureaucratization, inefficiency, corruption, and other evils. Towards its goal of placing all graduates, MINEP soon plans to activate another 140 development zones.16 It also aims to provide funding for all Vuelvan Caras cooperatives, 60 percent of which (4,036) have already received more than $265 million, while an additional 30 percent were expected to receive it in September 2005.17

In September 2005, MINEP held the first of a series of regional meetings with the goal of “debating and solving strategic aspects of the Vuelvan Caras mission’s performance in each state of the country.”18 Once all cooperatives and development zones are active (having received installations, technical assistance, and credit if necessary), MINEP plans to start a new cycle of the Vuelvan Caras mission. Vuelvan Caras II is expected to start in January 2006 with more than 700,000 students and hopes to organize them in another 2,000 cooperatives.19

In addition to providing technical assistance, infrastructure, and credits for cooperatives and micro-enterprises, MINEP also seeks to ensure markets for cooperatives’ products and to help arrange contracts with state institutions and enterprises through business summits. The agency works to integrate small and medium enterprises with cooperatives in production chains and to facilitate contracts with foreign buyers through bilateral agreements. Although cooperatives are expected to initially produce for self-sufficiency and local markets they can reach with their own resources, production for national and foreign markets is also actively pursued. The principal idea is that cooperatives (or development zones) should integrate with other cooperatives (or development zones) to add value through processing and transformation and to distribute and commercialize goods while avoiding intermediaries.

Critics of these policies of the Chavez administration point to the increasing corruption resulting from the handling of credits to cooperatives. Although there is always a way of circumventing a set of rules, MINEP’s funding institutions try to prevent this by tightening loans to the list of specific resources mentioned in the project, which the cooperatives obtain in kind. More importantly, new legal mechanisms established in the Bolivarian Constitution — the Ley Contra la Corrupción (Law against Corruption, 2003), the Ley Orgánica de Contraloría General de la República (Organic Law for the General Auditor of the Republic, 2003) and Ley Orgánica de la Administración Pública (Organic Law for the Public Administration) — allow all citizens to exert “social control” of state resources and make public officials accountable. However, the permanence in public institutions of inherited bureaucrats who are not committed to change, or who use their positions to sabotage the process, seems to be limiting the effectiveness of these mechanisms for social control.

Once oil prices go down, the revenues to fund endogenous development polices will have been lost, critics also argue. Many worry about the size of Venezuela’s oil reserves and have predicted 25-100 years of supply. However, by investing in human capital and promoting small and medium enterprises, the Chavez administration is basically doing what most economists, including neoliberals, have advised. It could be the case that cooperatives are not the most economically efficient way of allocating a nation’s resources, but until a different way of democratizing the economy appears, it seems like a desirable alternative. Although the implementation of these policies is not free from problems, if we consider the limitations and ills of large-scale industrialization, it is hard to envision a better way to create employment, stimulate the economy, and reduce dependency on exports.

In numerous press reports and personal interviews, SUNACOOP’s superintendent and other officials have admitted that there are many deficiencies among the newly formed cooperatives, mainly due to a lack of cooperative values and administrative skills. MINEP’s minister acknowledged that some regular enterprises “have been transformed into cooperatives, but not with the intention of transferring power to their workers . . . but to evade national taxes from which cooperatives are exempt.”20 Of the irregularities detected by SUNACOOP in the fewer than 300 cooperatives audited by July 2005, 50 percent involved bookkeeping and administrative wrongdoings, 30 percent stemmed from the exclusion of members from surpluses, 22 percent from undemocratic decision-making, and one percent from subcontracting wage workers for more than temporary (3-6 months) periods.21 Many steps have been taken in order to remedy these deficiencies, which also resulted from the fact that SUNACOOP was not prepared to deal with such a rapid increase in the number of cooperatives. Indeed, SUNACOOP operated with only eight auditors, though each audit requires an average of two days.22 Since June 2005, SUNACOOP has launched an accelerated effort to certify and audit all cooperatives in order to identify problems and address them. They now have at least one auditor in each of the 24 states (as part of the decentralization process), in addition to six auditors in Caracas, and are planning to audit 1,742 cooperatives from September to December 2005.23 The plan is to audit all cooperatives in order to provide them with a “pedagogical” evaluation, including recommendations and measures that must be taken in order to avoid sanctions or cancellation. SUNACOOP’s budget has been increased and will receive more personnel, equipment, and technology. Since “cooperativism has become a transversal axis of the national government’s public policies,” SUNACOOP is expected to work in conjunction not only with MINEP but also with other state institutions.24 In August 2005, they concluded the first round of a series of meetings to discuss the situation of the cooperative movement and obtain inputs for policy suggestions and changes that should be made to rules and laws. These meetings are also an attempt to push towards the integration of the new cooperative movement with the traditional or pre-Chavez Venezuelan cooperative movement.

When talking to members of Venezuela’s traditional cooperative movement, I noticed that, although they had been invited to participate in the writing of the Law of Cooperatives, they felt excluded from policy making. They argued that the government’s promotion of cooperatives is irresponsible and opportunistic because they have made it too easy to create a cooperative (the requirement of proving feasibility was eliminated) and that they are being used for political agendas. Most new cooperatives are doomed to failure, critics say, because they are dependent on state resources and they lack management and administrative skills. They also criticize MINEP for creating cooperatives with members who don’t share the cooperative values and for corrupting them by providing easy credit and too much paternalistic aid.  At times when the political debate over the Chavez administration in Venezuela was highly divisive, tensions ran strong.

But there are signs that the relationship is improving, as SUNACOOP publicly invited these traditional cooperatives to participate in the debates over a cooperative national council and revision of the laws. In September 2005, the Venezuelan Foreign Ministry held a meeting with the National Central of Venezuelan Cooperatives (CECONAVE, the main integration body of the traditional cooperative movement) to explore ways to support them, especially to help them access external markets, and to learn from their successful experiences.25

Valores cooperativos

Artículo 3°. Las cooperativas se basan en los valores de ayuda mutua, esfuerzo propio, responsabilidad, democracia, igualdad, equidad y solidaridad. Sus miembros promueven los valores éticos de honestidad, transparencia, responsabilidad social y compromisos por los demás.

Principios Cooperativos

Artículo 4°. Los principios cooperativos son lineamientos por medio de los cuales las cooperativas ponen en práctica sus valores son: 1º) asociación abierta y voluntaria; 2º) gestión democrática de los asociados; 3º) participación económica igualitaria de los asociados; 4º) autonomía e independencia; 5º) educación, entrenamiento e información; 6º) cooperación entre cooperativas; 7º) compromiso con la comunidad. Las cooperativas se guían también por los principios y criterios de las experiencias y los procesos comunitarios solidarios que son parte de nuestra cultura y recogen la tradición solidaria ancestral que ha conformado nuestro pueblo.

(“Ley Especial de Asociaciones Cooperativas,” Decreto N° 1.440, 30 de agosto de 2001)

It’s still too early to assess the real impact of cooperatives in Venezuela. But it wouldn’t be totally misguided to assert that they have contributed to the increase in formal employment26 and economic output not derived from oil exports.27 Most importantly, the new cooperatives in Venezuela are expected to be committed to the wellbeing of the community in which they are located. In articles three and four of the 2001 Law of Cooperatives, it’s stated that “social responsibility” and “commitment to the community” are, respectively, among the values and principles of cooperatives. In interviews with 25 cooperatives I could observe that these ideas were widely shared. Regardless of their short life and scant resources, many cooperatives have made donations to the community and provided temporary employment to those who are most desperate. Groups of socially-conscious community activists have created non-profit cooperatives to provide much-needed services and improve their communities’ standard of living. To consolidate this “social responsibility,” the Chavez administration is urging cooperatives and other enterprises to become Empresas de Produccion Social (Social Production Enterprises — EPS), which are expected to be highly responsive to the communities in which they are located.

Even if many of the new cooperatives fail, it doesn’t mean that the promotion of cooperatives is an undesirable development policy. Rather, it shows that development requires effective state support in providing both education and resources to break with the cycle of poverty and underdevelopment. As Chavez has said, borrowing from Bolivar’s teacher Simon Rodríguez: “if we don’t try, we’ve already made a mistake” (“o inventamos o erramos”). The key to the success of the new cooperatives in Venezuela is to find a balance between voluntarism and pragmatism, so that the impetus for change is effectively translated into concrete and lasting transformation.

1 575 cooperatives have been contracted for more than $3.2 million worth of services in 2004, and for nearly $3 million from January to June 2005 (CADELA, “Informe NO. 21040-0000-26,” July 2005).

2 In 2004, 50 percent of all the projects in the municipality were carried out by 170 cooperatives, amounting to almost $1 million (Marta Harnecker, La Experiencia del Presupuesto Participativo de Caracas, December 2004].

3 SUNACOOP, “Monthly Report” (August 2005).

4 Greg Albo, “Venezuela under Chávez: the Bolivarian Revolution against Neo-liberalism,” The Unexpected Revolution: the Venezuelan People Confront Neo-Liberalism (Socialist Interventions Pamphlet Series.  March 2005).

5 Economic Commission for Latin America and the Caribbean (ECLAC), Statistical Yearbook for Latin America and the Caribbean, 2004 (Santiago: United Nations Publication, April 2005).

6 PROVEA, Situación de los Derechos Humanos en Venezuela: Informe Anual: Oct. 2003- Sept. 2004 (Caracas, 2004), pp. 57.

7 MINEP, Informe de Gestión para la Asamblea General de la OEA (May 2005).

8 Ibid.

9 Ibid.

10 Ibid.

11 Ibid.

12 Ibid.

13 Ministry of Communications and Information: Taller de Alto Nivel “El nuevo mapa estratégico.September 2004.

14 MINEP: Informe de Gestión para la Asamblea General de la OEA. May 2005.

15 Of the total number of cooperatives, 54 percent are in goods and services production, 30 percent are in agricultural production, 9 percent in transportation, 4 percent in social services, 2 percent in consumption, and 1 percent in savings and credits (SUNACOOP, “Monthly Report,” August 2005).

16 Ibid.

17 MINEP, “Financiadas 60% de cooperativas de Vuelvan Caras: MINEP inicia gabinetes regionales” (September 2005).

18 Ibid.

19 MINEP, “Vuelvan Caras II buscará consolidar el modelo económico cooperativista” (September 2005).

20 SUNACOOP, “Presupuesto Nacional 2006: MINEP destina 13 millardos de bolívares para SUNACOOP(September 2005).

21 SUNACOOP, “Plan de Fiscalización Nacional de Cooperativas” (September 2005); and other reports.

22 Declarations of SUNACOOP’s audit department officials.

23 SUNACOOP, “Plan de Fiscalización Nacional de Cooperativas” (September 2005).

24 SUNACOOP, “SUNACOOP profundiza vigilancia en las cooperativas” (September 2005).

25 Patrick J. O’Donoghue, “Foreign Ministry (MRE) to Help Venezuelan Cooperative Movement to Expand Abroad,” VHeadline (16 September 16 2005).

26 The unemployment rate decreased from 16.8% in 2003 to 13.7% in 2004. Most significantly, the employment rate in the formal sector increased from 47.3% in 2003 to 54.2% in January-June 2005 and the employment rate in the informal sector decreased from 52.7% in 2003 to 45.8% in 2005 (National Statistics Institute: June 2005).

27 In the first semester of 2005, construction grew at 20.3%, commerce and non-governmental services at 20.3% and manufacture at 12.4 % (Governmental Economic Report. 2005 at

Camila Piñeiro Harnecker is a graduate student in Latin American Studies at the University of California, Berkeley. A native of Cuba, she is currently researching the impact of participatory democracy on community development in Venezuela.