Cooperatives against the crisis

Research projects study worker groups formed to take control of bankrupt companies

Nelson ProvaziIn the past four decades, successive economic crises in Brazil have caused thousands of companies to close their doors. To save their jobs, quite a few employees have founded cooperatives and assumed control of the bankrupt firm’s factories in order to keep them going. In May 2016, for example, workers occupied Karmann Ghia, in São Bernardo do Campo (SP), and tried to resurrect the company. They were not the only ones to take that route: according to the Ministry of Labor, 324 cooperatives were established in Brazil in 2014; in 2015, that figure rose to 444.

Attempts to find a collective solution for financial difficulties were born outside the purview of the State. According to Jacob Carlos Lima, a professor in the Department of Sociology of the Federal University of São Carlos (UFSCar) and researcher in the fields of labor sociology and economic sociology, that was the story of the agricultural cooperatives set up by landless Brazilians in the 1980s, the factory recovery movement in the 1990s, and the associations of collectors of recyclable materials in that same decade. At first they had support from agencies affiliated with the Catholic church (like the Pastoral Commission on Land, and Cáritas), and from unions and non-government organizations. They didn’t begin to get government support until 2003, when the National Secretariat of Economic Solidarity (SENAES) was established in the Ministry of Labor, Lima recalls. More recently, in 2012, a program to promote labor cooperatives was instituted.

Lima explains that “cooperatives have always been present at times of crisis,” but now “they have actually become a social policy to keep people working, insert them into the market, and generate income.” Various occupational categories are benefiting from these associations. According to the most recent survey on this issue by the Interunion Department of Statistics and Social-Economic Studies (DIEESE) that covered 2009-2013, Brazil had 19,708 enterprises nationwide that were being managed by the workers themselves, involving 1,423,631 people—farmers, artisans, artists, recyclables collectors, gold prospectors, and independent professionals.

Cooperatives can be divided into three major blocs, maintains sociologist Luiz Inácio Gaiger, a professor at the Vale do Rio dos Sinos University (in Rio Grande do Sul State) in an article published in 2013 in Revista Brasileira da Ciências Sociais, entitled “A economia solidária e a revitalização do paradigma cooperativo” (The socially responsible economy and the revitalization of the cooperative paradigm). One such bloc consists of genuine organizations of workers or consumers, governed by collective bodies in which decisions are made on an equitable basis. Another bloc includes the entrepreneurial cooperatives, in which the partners are owners who join together in order to boost productivity or strengthen their position in the market. The façade cooperatives, which use the legal framework of cooperatives in order to broker the supply of cheap labor, constitute a third bloc. As Gaiger explains in his article, there are enormous contrasts within each bloc: the recovered factory cooperatives, organized by formerly unionized workers, are very different from the so-called people’s cooperatives of seamstresses or scavengers of recyclables, or those formed by rural workers.

Although in theory, the distinctions are relatively clear, cooperatives sometimes slip from one category into another. Difficulties in marketing their products can persuade a workers’ cooperative to become a façade organization that supplies cheap labor to another company. This has already happened with associations of seamstresses, who began to work for apparel manufacturers. In most cases, however, it is the company itself that forms a cooperative to outsource some of its labor force, thereby avoiding a number of payroll charges and worker employment rights stipulated in the Consolidated Labor Laws (CLT). “A cooperative becomes very interesting for a company because it can free itself from labor management problems,” Jacob Lima points out.

An assistant professor in the Department of Sociology of UFSCar, Aline Suelen Pires, recently published a book entitled As fábricas recuperadas no Brasil – O desafio da autogestão [Recovered factories in Brazil – The challenge of self-management] (EdUFSCar), in which she studies nine Brazilian factories that had been resurrected by their workers and compares those initiatives with experiences in Argentina. Pires demonstrates in her book that the obstacles encountered in rescuing a company that has already been declared bankrupt are immense. Usually they have been operating with obsolete machinery and are heavily indebted. Furthermore, the court proceedings necessary to win control of the company move slowly and the effort to reinsert the company into the market and manage it on the basis of worker self-management is not always successful.

Nelson ProvaziThose difficulties also become clear in the thesis “Empresas recuperadas por trabalhadores no Brasil e na Argentina” (Companies recovered by workers in Brazil and Argentina), by Flávio Chedid Henriques, which he defended in 2013 during the Graduate Program in Urban and Regional Planning at the Federal University of Rio de Janeiro (UFRJ). The Research Group on Companies Recovered by Workers (GPERT), of which Henriques is a member, listed 67 active companies that had been recovered by workers and 78 that have since disappeared, either sold off by their partners or permanently shut down. Henriques explained to Pesquisa FAPESP that under no circumstances should those figures be interpreted as a failure of the recovery processes since “many of those 78 cases preserved jobs for an unexpectedly long time.” In some firms, the bankruptcies were due to simple product obsolescence, as happened in the cases of typewriter manufacturers Facit and Remington. “In other cases, industrial facilities closed primarily because of the opening of the Brazilian market to foreign competition, a circumstance that did not only affect cooperatives.” Brazil as a whole went through a very significant process of de-industrialization: from 1986 to 1998, the weight of manufacturing in GDP fell from 32.1% to 19.7%, according to a study entitled “Ocorreu uma desindustrialização no Brasil?” (Did Brazil experience a deindustrialization?). Published on the website of the São Paulo-based Industrial Development Study Institute (IEDI), the paper is signed by economists Carmem Aparecida Feijó, a professor at the Center for Applied Social Studies of Universidade Federal Fluminense; Júlio Sérgio Gomes de Almeida, from the Institute of Economics of the University of Campinas (Unicamp); and Paulo Gonzaga de Carvalho, from the Brazilian Institute of Geography and Statistics (IBGE).

One of the companies forced to shut down was Makerli, a large shoe manufacturer in Franca (SP). Weakened by the opening of the market and depreciation of Brazil’s currency in the wake of the Collor Plan, the factory announced its closing in 1991. With support from the Franca Union of Shoemakers and DIEESE, workers took over the company in 1992. However, they were unable to renew the bank loans and went out of business in 1995. In other cases, however, the recoveries were quite successful. The workers who occupied Cooperminas, a coal company in Criciúma (Santa Catarina State) confronted police and endured court proceedings that took 10 years (1987-1997). Since then, the company has modernized its facilities, raised wages, reduced the work week to 30 hours, and invested in environmental conservation.

Despite the difficulties in administering a company via worker self-management, Henriques points out that, in addition to reducing wage differences among personnel who perform different functions, cooperatives afford “more space for collective decision-making on a company’s strategic issues. Other advantages include: the rotation of functions; fewer accidents, generally related to the possibility of workers determining their own work pace; changes in company layout, such as moving administrative offices closer to the production sector; and improved relationships between the company and the surrounding community.” He emphasizes that he was speaking on the basis of research done in Brazil and in Argentina.

To economist Paul Singer, who organized the SENAES in 2003 and headed it until 2016, cooperatives are the embryo of a mode of production characterized by equality: “The socially responsible economy is completely democratic because no one gives orders in a cooperative,” Singer told Pesquisa FAPESP. The economist, who compiled the book A economia solidária no Brasil: Autogestão como resposta ao desemprego [The socially responsible economy in Brazil: Self-management as an answer to unemployment] in partnership with sociologist André Ricardo de Souza, from the Multidisciplinary and Integrated Center for Socially Responsible Economics of UFSCar, explains that when companies are small, there are no significant distinctions among the personnel and decisions are made by the members in general meetings. When companies get bigger, the executive functions need to be held by elected representatives, who take charge of the day-to-day administration.

The mere participation by partners in the decisions has a profound impact on the working environment, notes economist Henrique Tahan Novaes, author of the book O fetiche da tecnologia: A experiência das fábricas recuperadas [The technology fetish: The experience of the recovered factories] (Expressão Popular). On the faculty of the School of Philosophy and Sciences of the São Paulo State University (Unesp), Marília campus, Novaes says that “workers at the recovered companies promoted several modifications in technology and in decision-making and working procedures,” besides significantly changing the criteria for compensation and use of the surplus. But the researcher makes the point that these companies must operate in the capitalist market, which imposes restrictions on the adoption of an equitable and democratic organization.

Cooperminas, for example, was forced to limit the number of members; now it has 400 partners and 400 salaried employees. It cannot accept more members because it is already anticipated that the coal mine will become exhausted and the cooperative needs to adjust its work force to a future reduction in output. Furthermore, company management has realized that having a large number of partners hinders decision-making.

Nelson ProvaziAnother big problem is making the partners aware that all of them are responsible for the company’s performance. According to Jacob Lima, one of the principal researchers on the thematic project “Labor conditions in current Brazil: formalization, job insecurity, outsourcing and regulation,” it is difficult to preserve the ideal of achieving worker self-management in a company that depends on the market. “You can’t keep raising wages, and you have to impose discipline because you can’t make the factory run without discipline. Some of the ones that closed went off the tracks that way: since people thought of themselves as owners, everyone figured they could do what they wanted.”

Paradoxically, the success of an enterprise also creates problems. If the company begins to expand it needs, at least in theory, to incorporate new partners in order to handle the orders. But not all professionals want to become members of a cooperative because that would mean abandoning certain labor entitlements, such as the Unemployment Compensation Fund (FGTS). Singer emphasizes this, saying: “An employee who has an up-to-date employment record book (carteira assinada) is safe, he has certain vested rights, no matter what happens to the company. If the company fails, he will be one of the first to get paid.” That is why some people refuse to join a cooperative, says Singer. “For example, a cooperative may invite an engineer to become a partner, but he wants to continue as an employee. He knows that members are the ones who run things in a cooperative but prefers the security afforded by Brazil’s labor laws.”

“If the cooperative becomes a success, it usually has trouble continuing as a cooperative because of that success,” says Jacob Lima. The researcher mentions the case of Uniforja, a metalworking company in Diadema (SP). “There was a plan to make everyone a member of a cooperative. When a big order comes in, they would simply contract extra workers. When production falls, it is easy to dismiss wage-earners but you can’t kick out a partner.” He cites the cooperatives in the Mondragón Cooperative Corporation, a corporation and federation of worker cooperatives in the Basque region of Spain, which operates like a multinational. “The companies in the federation became internationally well-known, but not as cooperatives.” One of them, a huge international success, makes bus bodies (even in Brazil) but left the Cooperative Corporation.

Flávio Chedid Henriques disagrees, arguing that the companies can expand even without hiring more employees. He says that a survey conducted in 2013 pointed out that 60% of recovered companies in Brazil had no more than salaried workers. In Argentina, for example, cooperatives are prohibited from hiring employees, except as interns for a probationary period. And in Argentina, the number of companies revived by workers is much larger: 295 are actively functioning, compared with 67 in Brazil and 50 in Uruguay, according to figures gathered by Henrique Tahan Novaes.

Today there is an ongoing debate within universities about the nature of cooperatives. Some theoreticians, like Paul Singer, argue that cooperatives open the way for a more democratic and egalitarian society. Others, like Ginez Leopoldo Rodrigues de Campos, a professor at the Institute of Philosophy and Human Sciences of the University of Passo Fundo, in Rio Grande do Sul, say they are merely an unreliable form of social inclusion that weakens workers. This was the topic of the 2006 doctoral dissertation that Campos defended at the Federal University of Santa Catarina: “Trabalho precário, terceirização e cooperativas de trabalho: Quando ‘estar juntos’ se torna uma forma coletiva e precária de inclusão social” (Job Insecurity, outsourcing and worker cooperatives: When “being together” becomes a collective and precarious form of social inclusion).

To Aline Pires, despite their limitations, the cooperatives in the case of recovered factories have made it possible to save jobs and, in general to adopt more inclusive and democratic management practices. In the case of the peoples’ cooperatives, according to Pires, they raised the income of social classes that had been kept out of the market. According to Ministry of Labor figures, about 1.5 million people benefited from those associations.

1. Labor conditions in current Brazil: formalization, job insecurity, outsourcing and regulation (nº 2012/20408-1); Grant Mechanism Regular Research Grant – Thematic; Principal Investigator Marcia de Paula Leite (FE-Unicamp); Investment R$967,823.39.
2. Recovered factories and the workers: Self-management between theory and practice (nº 2009/54878-1); Grant Mechanism Scholarships in Brazil – Regular – Doctoral; Principal Investigator Jacob Carlos Lima (CECH-UFSCar); Grantee Aline Suelen Pires; Investment R$157,846.70.

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