Cooperatives Step In When Factories Fail

By Jon Jeter
Washington Post Foreign Service

BUENOS AIRES -- If it's sweet, Ghelco S.A. makes it: ice cream, fudge, chocolate, pastries, about 1,800 sticky, sugary products in all. When the bottom fell out
of the Argentine economy in 2001, the owners of the once flourishing manufacturer of sweets could no longer make a go of it, finally shutting the plant and filing for
bankruptcy.

That's when the employees on the factory floor -- 42 men and one woman -- took a bold step. They refused to stop working, physically blocked the company's
creditors from seizing Ghelco's machinery and continued to show up every weekday, baking, churning, whipping and selling the stuff that made the company name a
synonym for sinful indulgence.

In September, the legislature of Buenos Aires province confiscated the Ghelco factory, and in a step heralded as the first of its kind, gave the operation to the
workers in receivership so they could run it as a cooperative. The workers formed a management team, responsible for all aspects of the factory operation.

The precedent at Ghelco, more of a desperate than hostile takeover, was the beginning of a trend.

Across the country, workers and their families have set up cooperatives at about 100 shuttered factories and shops, keeping the businesses operating and saving
more than 10,000 jobs, according to Luis Alberto Caro, a labor lawyer who represents many of the employee cooperatives.

This factory, located in an aging industrial sector on the southern outskirts of the capital, is now operating 12 hours a day, at 50 percent of capacity. Workers say
they hope to be running at close to 100 percent by year's end. Taking advantage of a trimmed management payroll, the workers have increased their own monthly
wages from about $160 to $265 and lowered the prices of their goods. Part of the improvement comes from subsidies, but the workers say that revenue and
productivity have increased even when state support is taken into account. In a recent survey, retailers said the quality of Ghelco products has improved.

"These are difficult times," said Miguel Robles, a factory employee and secretary of the workers' team that now forms Ghelco's management. "We started doing this
because we knew no one else would. The government wasn't going to help us. The unions couldn't help us and the banks wouldn't help us, so it was up to us. There
are no jobs and people are learning they have to make their own way."

Worker-controlled business ventures such as Ghelco are just one example of the spirit of self-help that runs through Argentine society. When federal and provincial
governments began slashing their health budgets, groups of unemployed citizens opened makeshift medical clinics or recruited volunteer doctors, dentists and nurses
to visit the sick, the pregnant and the elderly at home.

When their children didn't have enough food and the government began to slash pensions, people opened soup kitchens, collected donated clothes and started
communal farms. When credit dried up, people banded together to lend money to aspiring entrepreneurs or homeowners who needed a new roof.

When government officials began cutting funds for public education, teachers set up computer, literacy and math courses under jacaranda trees and inside roofless,
abandoned warehouses. When foreign imports began to crush local industries, enterprising people created new ventures. Thousands of scavengers known as
cartoneros sift through trash on street corners every night looking for salvageable cardboard. Only a decade ago, Argentina imported nearly $100 million annually in
paper products from neighboring Brazil. The country now exports recycled paper and cardboard.

"What we are seeing in Argentina is this tremendous new shift in responsibilities from public institutions to private citizens," said Victor Abramovich, executive
director of the Center for Legal and Social Studies in Buenos Aires. "Government is smaller. The economy is smaller and that's created this vacuum which is being
filled by this expanded pool of very poor people who are isolated from their politicians, estranged from labor unions.

"They have only each other to fend for their interests. Argentina has never had so many people fall outside the traditional spheres of what we consider public space
and so they're recreating their own version of public space," Abramovich said.

Argentina's economic collapse was a product of the 1990s, when the government of then-President Carlos Menem established policies that brought a temporary
economic boom. Menem's economic team pegged the value of the Argentine peso to the dollar, sold off state-owned industries and opened the domestic market to
foreign trade. In the short term, the measures brought down triple-digit inflation and won praise from the World Bank and International Monetary Fund. For a time,
Argentina was cited as a model for free-market reforms.

However, Menem's government borrowed heavily, and the peso's parity with the dollar made Argentine exports less competitive abroad and crippled domestic
industries. Shortly after Menem left office in 1999, Argentina suffered a broad recession and in December 2001 defaulted on its private foreign debt. The value of
the peso plummeted 70 percent against the dollar. Menem, who is now seeking reelection, was accused of corruption and cronyism that exacerbated the economic
collapse. Ten senior government officials were implicated in corruption scandals; Menem himself was jailed briefly last year on arms-trafficking charges but eventually
was cleared of wrongdoing.

One consequence of the economic breakdown has been an unprecedented surge in unemployment in Argentina's cities, leaving nearly a quarter of the workforce
jobless and more than half of Argentina's 37 million people -- about 20 million -- so vexingly poor they are unable to buy the most basic basket of staple food items.

The unemployed have little faith in Argentina's public institutions. The frequency of demonstrations against the government has increased. It is common to see jobless
workers and their families blocking major thoroughfares to demand jobs or an increase in the government's monthly $45 subsidy to the poor.

"This has really changed everything," said Daniel Funes Rioja, a labor lawyer here who represents major corporations. "The unions don't control the street anymore;
the unemployed do."

The most outspoken and organized self-help populist organization is the Movement of Unemployed Workers, known by its Spanish initials, MTD. It pools the $45
monthly subsidies of members to buy food, medicine and tools. The organization has created communes across the country to feed, clothe and house its members.

"We needed to find a way to survive," said Andres Fernandez, who heads an MTD camp in the potholed, dirt-poor Buenos Aires suburb of Solano. "We had needs
that were going unmet and our situation was worsening. We had to do something."

In Solano, they built a wood and concrete community bakery and soup kitchen that guarantees its members at least one meal per day. The pharmacy provides
painkillers, bandages and basic medicines. With credit dried up, the group has provided start-up loans for small businesses whose owners get nothing but cold stares
in Argentina's banks.

"The government doesn't even give our hospitals enough basic supplies like gauze," Fernandez said.

The MTD site in Solano was buzzing one recent morning as cooks began to prepare bread and vegetable empanadas -- there is rarely enough money for meat --
while donated clothes were unbundled on folding tables for distribution.

Ariel Gonzalez, one of the men who heads the cooperative farm, was inspecting tomatoes, zucchini, peppers and chickens just as a heavy downpour began.

"We're not farmers," he said. "Most of us don't know a lot about seeds or insects or fertilizer. But we decided that if we want to eat, we need to do this and we
gathered up our members who know something about farming to teach the ones who don't."

Inside a crumbling, roofless, abandoned automobile factory, the MTD is preparing to install computers for a technology job-training course. Once a week, volunteer
doctors visit to treat members who are unable to travel to a distant government health clinic. In a rural province north of here, the MTD has built schools for children
whose nearest public school may be four miles away.

But it is the takeover of bankrupt businesses that has gone furthest in legitimizing self-help for Argentina's jobless poor. Using a little-used public indemnity law that
allows the government to seize homes for state construction projects, Caro and other lawyers successfully argued that worker takeovers of shuttered plants were in
the public interest.

Argentine courts agreed, and the law has become a powerful weapon in relieving Argentina's poverty. There are still problems, according to Caro, who said that
with credit so tight, many workers have to negotiate ways to buy equipment or supplies to keep the factories running.

The workers at Ghelco are gradually finding ways around that problem. With so little capital, the plant requires customers to supply the raw materials for their orders
or pay for them up front. But they deliver the final product at prices much lower than before the bankruptcy, even when the retailers' contribution is accounted for.

The factory also is benefiting from dropping 29 higher-paid managers from the payroll. Lately, orders have begun to pick up. The company was operating at 60
percent capacity when the owners filed for bankruptcy; Caro said he hopes Ghelco will surpass that by mid-year.

"Right at the beginning there was no one there for the average Argentine on the street," said Norbert Monzon, president of the Ghelco workers' cooperative. "We're
doing what we've always done, what we know we can do as well as anyone. And now we're doing it knowing that if we don't, there won't be a job, there won't be a
paycheck."

After it became clear that the workers were turning the factory around, labor unions began to call, asking how they could help, Monzon said. The government has
formed an agency to assist workers in reopening closed plants.

And the owners?

"They called us a few months ago," Monzon said. "They asked us if they could buy the plant back from us."

                                               © 2003