Cooperatives, Politics, and Development in Rural Paraguay

Human Organization, Vol. 70, No. 4, 2011 Copyright © 2011 by the Society for Applied Anthropology 0018-7259/11/040355-11$1.60/1

Cooperatives, Politics, and Development in Rural Paraguay Brian J. Burke and Jessica Piekielek Although national politics and policies strongly influence how cooperatives function, cooperative organizations and advisors increasingly envision cooperatives as primarily economic organizations and avoid direct political engagement and social mobilization. In this paper, we discuss and challenge the depoliticization of cooperatives based on research into how two Paraguayan cooperatives dealt with the aftermath of a debt forgiveness law for small farmers. The law was a major victory for peasant political organizations, but its benefits did not extend to all smallholders, generating discontent that threatened both cooperatives and their development strategies. The cooperatives’ differing responses to these challenges underscore how policy effects and development strategies are shaped by local level decision making based on organizational histories and emergent opportunities. To conclude, we discuss the advantages and challenges of politicizing cooperatives and offer reflections on how these challenges might be overcome. Key words: cooperatives, debt forgiveness, development politics, small farmers, Paraguay

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n 1971, Orlando Fals Borda (1971:146) presented “cooperative experts” with a choice between promoting false cooperatives that fail to transform social inequality or “active peasant organizations that would indeed challenge the status quo.” Like many scholars of the time (e.g., Nash, Dandler, and Hopkins 1976), he envisioned cooperatives as social, political, and economic institutions intertwined with social movements in a broader struggle to decrease inequality and promote the interests of peasants. Cooperatives and cooperative experts increasingly choose Fals Borda’s less radical option, shifting toward the depoliticization of cooperatives.

Brian J. Burke ([email protected]) is a doctoral student in the School of Anthropology at the University of Arizona. Jessica Piekielek ([email protected]) is an Assistant Professor of Anthropology at Southern Oregon University. They conducted this research at the Bureau of Applied Research in Anthropology, University of Arizona, as part of a larger project, Development and Expansion of Economic Assistance Programs that Fully Utilize Cooperatives or Credit Unions, in collaboration with Agricultural Cooperatives Development International/ Volunteers for Overseas Cooperative Assistance (ACDI/VOCA) and funded by the USAID Cooperative Development Program. Paola Ruiz Díaz, Blanca Méndez, and German Riquelme, Human Ecology students at the Universidad Nacional de Asunción, assisted in fieldwork. The authors thank the staff and members of the Cooperativa de Producción y Servicios Ycua Bolaños (the Production and Services Cooperative of Ycua Bolaños), the Cooperativa de Producción Agro-Industrial y de Servicios Coronel Oviedo (the Agro-Industrial Production and Services Cooperative of Coronel Oviedo), and ACDI/VOCA-Paraguay. Maisa Taha, Drexel G. Woodson, and anonymous reviewers offered insightful comments on drafts of this paper.

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They have accepted that structural adjustment and neoliberal economic globalization create increasingly difficult contexts for cooperatives and small farmers and, rather than engage in policy processes to advocate for alternatives, they have sought to develop cooperative strategies fitted to neoliberal contexts and the opportunities provided by globalization. Viewed as primarily economic organizations, cooperatives are urged to “restructure to reposition themselves within their supply chain, improve economies of scale, develop technological capacity, gain market share, and develop management resources” (Davis 1999:79; see also Cracknell 1996; Levin 2000; Taimni 2001). The challenge for rural cooperatives, however, is to pursue these economic strategies without abandoning cooperativist values (including democracy, equity, and solidarity) and programs to address the broad needs of small farmers (including low-interest credit, secure land tenure, marketing assistance, and improved access to education and healthcare). In Davis’ (1999:37) words, cooperatives need “to accept the disciplines of the marketplace without accepting the values and purposes that dominate it.” The path that they steer between their economic and social principles, between professionalized management and democratic member control, between taking advantage of the status quo and pursuing political change, shapes cooperatives’ position within the dynamics of social, political, and economic change. Approaching cooperatives primarily as businesses eschews critical analyses of power, inequality, poverty, and development; divides the diverse groups seeking to advance peasant interests; and creates tension within cooperatives. 355

In this paper, we discuss the consequences of the depoliticization or nonpoliticization of cooperatives based on research into how two Paraguayan cooperatives dealt with the aftermath of a national debt forgiveness law for peasant farmers (campesinos).1 The law was a major victory for campesino political organizations, but its benefits did not extend to all smallholders and cooperatives did not contribute to the policy process. As a result, the law created discontent and misunderstandings among cooperative members and threatened the institutions’ financial stability and long-term grassroots development strategies. In the wake of the law, these cooperatives were held to two conflicting standards: they were expected to operate as efficient capitalist lending institutions and as democratic organizations responsive to members’ broader social and economic interests. Their differing responses illustrate how cooperatives are seeking to balance “the disciplines of the marketplace” with members’ needs and long-term institutional stability. These cases also demonstrate how profoundly cooperatives are affected by national policy, even if those effects are shaped by local level decision making based on organizational histories and emergent opportunities. We therefore conclude by discussing the advantages and challenges of politicizing cooperatives and offer reflections on how these challenges might be overcome. Research for this article was conducted in 2005 as part of a larger project examining how Brazilian and Paraguayan cooperatives support small-scale farmers in the context of globalization (Vásquez-León and Finan 2006). The cooperatives studied were selected by researchers in collaboration with ACDI/VOCA, the project sponsors, to capture a broad cross-section of cooperative experiences, strategies, sizes, production systems, and member populations. On returning from the field and sharing research results, we noted the importance of the debt forgiveness law in the histories of the Ycua Bolaños and Coronel Oviedo cooperatives and decided to conduct a more systematic comparison. Field research on these two cooperatives included semi-structured interviews with 18 current and former cooperative board members, administrators, and staff; interviews with staff at national cooperative organizations, regional government agencies, and banking institutions; and surveys of 30 members at each cooperative, using random or stratified random sampling. Member surveys included open-ended questions on cooperative programs, participation, and leadership as well as basic livelihood data. We also participated in cooperative and related public events concurrent with our field stay.

Cooperatives, Neoliberal Reforms, and Political Neutrality In 2008, the Instituto Nacional de Cooperativismo (National Institute for Cooperativism) counted 732 cooperatives in Paraguay, with agricultural production cooperatives and credit unions comprising the majority (INCOOP 2008). Other popular cooperatives focus on health services, consumer 356

goods, or a combination of activities. Almost 20 percent of Paraguay’s population belongs to some type of cooperative. Cooperatives in Paraguay and other parts of Latin America draw syncretically from indigenous collective work systems, models brought by European and Japanese immigrants, and frameworks promoted by development institutions (Vásquez-León and Finan 2006). As ways of organizing production, exchange, consumption, and surplus, they have been promoted by governments and social movements of all ideological persuasions, though they are most commonly associated with the Left. Many cooperatives established with state support in the 1960s and 1970s became tools for promoting ruling ideologies and controlling populations (De Campos 1998; Fals Borda 1971) and organizations that deviated from dominant class interests often faced violent repression (Clark 2000; Wood 2003). This general history is well illustrated by the particular case of Paraguay, where indigenous traditions of oñondivepa (communal labor) and yopoi (mutual aid) were strategically adapted and promoted by Jesuit missionaries (Vargas Sánchez and Nacimiento Coronel 2000) and where Russian Mennonite immigrants established very successful, though isolated, cooperatives beginning in the 1930s (Stoesz and Stackley 2000). In the 1960s, two separate cooperative movements developed. The Catholic Church established Agrarian Leagues to improve the lot of the rural poor through political conscientization, collective work, and common ownership of the means of production, often via production and consumption cooperatives. These grassroots organizations significantly threatened Paraguay’s unequal class structure and were subjected to violent political repression during Alfredo Stroessner’s 35-year dictatorship (Bolke Turner 1998; Kleinpenning and Zoomers 1991; Turner 1993). At the same time, Stroessner himself was pressured to promote cooperatives as a condition for foreign assistance from the United States. He grudgingly complied, but the new cooperative laws included complex bureaucratic requirements that discouraged campesino leadership and reinforced the exploitive patronage system between Stroessner’s party, rural elites, and campesinos (Bolke Turner 1998). Stroessner’s government suppressed the political aims of grassroots campesino organizations and maintained indirect control of United States-supported cooperatives. Political violence only partly explains the depoliticization and nonpoliticization of Paraguayan cooperatives; their integration into the international cooperative movement and the dynamics put into place by neoliberal policies have also contributed to the emphasis on political neutrality. The Rochdale Society, among the first modern cooperatives in Great Britain, established “political and religious neutrality” as one of their key principles to ensure that the burgeoning movement was not damaged by discord between socialist and religious groups (Thompson 1994). The neutrality principle, enshrined in the International Co-operative Alliance’s 1937 statement of principles, has guided cooperative thought ever since (ICA 2004b). Political neutrality has helped minimize HUMAN ORGANIZATION

problems of political patronage, social exclusion, and internal divisions that have plagued cooperatives (McGrath 1978; Moberg 1992; Vásquez-León 1998). In Paraguay’s transition from dictatorship to democracy, manipulation of cooperatives by political leaders remains a concern (Piñiero 2004). In rural areas, where campesino politics often entail violent and oppositional struggles between socialist activists and paramilitaries representing the landholding elite, neutrality has even greater significance (Nagel 1999). Recently, the Paraguayan government declared a state of emergency after the apparent activation of a guerrilla army fighting for land reform (Sanford 2010). These dynamics of violently oppositional politics make it difficult for cooperatives to engage with campesino movements while still maintaining links to the economic and governmental sectors they depend on. Neoliberal reforms in Latin America have contributed to the depoliticization of cooperatives in a number of ways. Trade deregulation, privatization, and decreased public support have exposed cooperatives to increased competition with private and international firms and pushed them towards more business-oriented models focused on economic efficiency. In this highly competitive policy environment, many cooperatives have restricted social programs and/or been forced to close (Babb 1995; McDonald 1995). As elsewhere, in Paraguay, economic liberalization, including joining Mercosur and privatizing some national industries, has opened new markets to cooperatives, but has also presented new challenges (Vásquez-León 2010). Small agricultural production and credit cooperatives struggle to survive without external financial support, which increasingly comes from international aid organizations like The World Bank, German Technical Cooperation (GTZ), USAID, and Taiwan International Cooperation and Development Fund (TaiwanICDF), in the case of Paraguay. These external financiers push cooperatives and their members towards “market-oriented” agricultural development. Further, they assert that cooperatives underperform as a result of inadequate “professionalization,” which can be resolved by providing leaders with business training and establishing rational management systems (e.g., USOCDC 2007). Dedication to these new skills and systems can come at the expense of critical analysis of political economic realities, solidarity-building, and political activism. Finally, neoliberal reforms have decreased public welfare spending, increasing pressure on cooperatives to provide for members’ well-being (International Labor Office 2001; Vásquez-León 2010). One effect of reforms in Latin America has been to reduce small farmers’ access to credit from banks and government programs; most small farmers rely on the informal sector for credit for emergency household expenses and farm production investments (Wenner and Proenza 2000). In Paraguay, a series of crises in the 1990s forced banks and credit institutions to close, further limiting potential credit sources. Thus, Paraguayan rural savings and loan cooperatives, like the two discussed below, fill an important need among small farmers. VOL. 70, NO. 4, WINTER 2011

Despite the pressures of neoliberal reforms on cooperatives, international development institutions often describe cooperatives as a solution to the “glitches” of neoliberal globalization, namely increasing poverty and marginalization in developing countries (ICA 2004a; WCSDG 2004). Cooperatives are trumpeted as the “third way,” more equitably integrating small farmers into global markets (Frafjord Johnson 2003; Rodrigues 2004). Presented as such, they became part of efforts to “soften” neoliberal reforms. Much recent scholarship on cooperatives in the neoliberal context focuses on technical, marketing, and managerial strategies for global integration. Few recent cooperative scholars question how participating in globalization might challenge core cooperative principles (e.g., Cracknell 1996; Davis 1999; Halary 2006; Levin 2000). Pragmatic discussions of organizational management and economic strategy are useful, but they accept the disciplines, values, and perspectives of the capitalist marketplace, thereby masking other potential responses to contemporary challenges. That cooperatives might engage in sociopolitical actions to create a more favorable political economic context has remained largely undiscussed.2 Pragmatic discussions of cooperatives-as-businesses also ignore the unique, complex, and sometimes contradictory nature of these organizations. Mooney (2004) suggests that, rather than try to rationalize, cooperatives can embrace the institutional tensions endemic to their form. He argues that the greatest strength of cooperatives as social change agents is that they maintain (rather than resolve) tensions between capitalism and democracy, production and consumption, the local and the global, and new social movements and old social movements. These tensions become productive through effective ethico-political negotiation. We argue that refusing to take an overtly political role— and by this we mean an active role in framing political debates and constructing a favorable legal environment—can damage cooperatives and the members that they serve. Our case studies show how two Paraguayan cooperatives negotiated the political aftermath of a national debt forgiveness law for campesinos. The cooperatives responded differently, based on their specific histories, contexts, and limitations, but neither has engaged directly with national politics or campesino movements, despite their obvious impacts. We conclude by suggesting potential areas for political engagement and strategic alliances with national campesino organizations.

Paraguay’s Small Farmers and the 1999 National Debt Forgiveness Law Paraguay is the most rural country in Latin America, with 42 percent of the population living in rural areas, primarily the eastern lowlands, where land holdings are highly concentrated and most farmers hold fewer than 10 hectares of land (IICA 2004; Sanford 2010). Smallholders combine subsistence agriculture with cash crops (especially cotton and tobacco). They often rely on human and animal traction, slash-and-burn techniques, and family labor. Small producers face significant 357

socioeconomic inequalities and increasing adversity. Poverty predominates in rural Paraguay, where 57 percent of the nation’s poor live (Valdovinos and Naranjo 2004). Rural secondary school enrollment is at 17 percent compared to 31 percent nationally, and the income gap is widening most rapidly in rural areas (Valdovinos and Naranjo 2004). As the country becomes more urbanized and government policies increasingly favor large-scale, export-oriented agribusinesses, there is growing sentiment among campesinos that the nation is deserting its rural base. Small farmers historically contributed substantially to the Paraguayan economy. During Stroessner’s dictatorship, Paraguay pursued economic growth through agro-exports from two sectors: small farmers and large agribusiness. On the one hand, the government celebrated campesinos as the engine propelling Paraguay’s economic success. It offered small farmers land parcels in the eastern hinterlands as part of a large-scale colonization project in the 1960s and 1970s and promoted smallholder cotton production through seed distribution, credit, and technical assistance. On the other hand, the state sold large tracts of land to latifundistas (wealthy, largely absentee, estate owners) and multinational agribusinesses, often from the United States and Brazil, who produced high volumes of export crops such as soy, cotton, and beef. Smallholders’ importance in national agricultural production continued after the Stroessner era. Small farms generated over one third of the country’s total agricultural earnings (Sorrenson, Duarte, and Portillo 1998), and agriculture employed roughly a third of the nation’s workforce (IICA 2004). Cotton continued to be a key cash crop for smallholders; in 1991, farms smaller than 10 hectares produced 58 percent of the nation’s cotton (IICA 2004). But the cotton economy entered a prolonged crisis in the 1990s. Small farmers faced low world market prices, poor weather conditions, pest plagues, inconsistent government support, and low soil fertility due to mismanagement and years of intensive cotton production (Piñiero 2004). Compounding this problem, enterprising Brazilian farmers have steadily expanded their large cotton and soy farms, decreasing the total land available to small farmers and precluding crop rotation and fallowing practices traditionally used to maintain soil health. For small farmers, debt is a standard part of cotton production (Gillette 2004). Unable to afford the costly inputs of seeds, pesticides, and fertilizers, they borrow from government lenders, intermediaries, and agricultural cooperatives. Typically, these loans are repaid at harvest, but the cotton crisis rapidly led to entrenched debt and vulnerability for most small farmers (Piñiero 2004). By the mid-1990s, roughly 80 percent of small producers were in debt, with an estimated 100,000 producers holding public debts. In response, campesino organizations advocated for debt forgiveness for small farmers. The Federación Nacional Campesina (National Campesino Federation or FNC) joined several other organizations as the Mesa Coordinadora Interdepartamental de Organizaciones Campesinas (Interdepartmental Coordinating Board of Campesino Organizations 358

or MCNOC). In 1994, this coalition brought 25,000 demonstrators to the capital city to demand debt foregiveness, land reform, and advances in education, healthcare, and infrastructure. For the next five years, campesinos returned to Asunción in comparable numbers each March with similar concerns. The annual campesino demonstration took an unanticipated turn in 1999 when a national political crisis provided an opening for leaders to negotiate a national debt forgiveness law. The protestors’ arrival in the capital coincided with the assassination of Vice President Luis María Argaña, for which President Raúl Cubas was eventually tried. Cubas originally ran as the vice presidential candidate under former army general Lino Oviedo. When Oviedo was arrested for his role in a 1996 coup, anti-Oviedo members of his party forced Cubas to accept Argaña as his running mate. On taking office, Cubas released Oviedo from prison. This loyalty, combined with the suspicious assassination of Argaña, sparked widespread demands for presidential impeachment. Student protestors and union members poured into the streets, joining 35,000 campesino demonstrators in what became known as the Marzo Paraguayo (Paraguay’s March). Campesino leaders leveraged their numbers and organizational capacity, agreeing with national congressional members to support presidential impeachment in exchange for debt forgiveness (Piñiero 2004). Cubas was dismissed from office, and both houses of the National Congress passed the debt forgiveness law. Cooperatives were not excluded from these negotiations; they simply missed a seat at the policy table because they were not involved in the demonstrations and related campesino advocacy efforts, according to one research participant. Paraguayan Laws 1418/99 and 1470/99 offered debt forgiveness to small farmers holding loans from the primary national banks, the Banco Nacional de Fomento (National Promotion Development Bank or BNF), the Crédito Agrícola de Habilitación (Agricultural Credit Agency or CAH), and the Fondo de Desarrollo Campesino (Campesino Development Fund or FDC). The law relieved small farmers of up to 6,000,000 Guaranies ($1,924) of debt incurred before 1998, provided that the initial loan was less than 15,000,000 Guaranies ($4,810). Passage of the law was an achievement for campesino organizations, although Formento (2003) characterizes it as a limited victory because it reinstated leaders unsympathetic to campesino interests. Small producers whose debts were absolved would hardly call the law a blanket failure. CAH forgave 146 billion Guaranies ($47 million) held by 64,000 small producers (CDE 2006). By 2002, BNF and FDC had pardoned 134 billion Guaranies ($42 million) and 4.4 billion ($1.4 million) respectively (World Bank 2002). But the debt forgiveness law was more limited than the universal debt forgiveness envisioned by campesino groups and caused financial problems for BNF, CAH, and FDC. Further, it challenged the organizational and financial capacity of rural lending cooperatives that were unable to forgive members’ debts. A representative from one of the national lending institutions told us, “There was a problem with debt forgiveness. It was HUMAN ORGANIZATION

horrible for everyone. Campesinos, cooperatives, institutions, the government. It was a disaster for everyone.” Below, we discuss two agricultural cooperatives destabilized by the uneven application of the debt forgiveness law.

Ycua Bolaños The Cooperativa de Producción y Servicios Ycua Bolaños (Ycua Bolaños Production and Services Cooperative) is a mixed service cooperative located in Caazapá, an isolated, poor, rural department in the central zone of eastern Paraguay.3 Founded by educators in the capital of Caazapá in 1989, the cooperative offered credit at reasonable interest rates for government teachers who regularly did not receive paychecks. Though primarily organized by and for teachers, national law required the cooperative to include rural producers in its founding membership. The cooperative principally serves as a savings and credit union for its 2,500 members, but has expanded its rural membership and development programs. Staff and founders envisioned it as more than “just” a credit union; they identified themselves as “cooperativists” committed to educating the general public about cooperative principles and to extending financial services to underserved sectors in Caazapá. One leading member explained to us that banks are for rich people, but cooperatives belong to everyone. Members elect a board of member-directors and approve an annual plan; the board and annual plan guide cooperative management. The 1999 debt forgiveness law presented the cooperative administration with the most serious challenge the cooperative has faced. Ycua Bolaños had borrowed from the FDC prior to 1998 to extend credit to small producers. In a wellintentioned effort at fiscal responsibility, the cooperative paid off its loans to the FDC ahead of schedule using the cooperative’s general funds, primarily investments from its majority urban membership. By the time the debt forgiveness law was passed, the cooperative had already completed payments to the FDC, effectively transferring members’ debts from the government to the cooperative itself. Thus, although members were still indebted, their debts were not publicly held and did not qualify for forgiveness. The cooperative administration explained to rural members the conditions of the law and the fact that the national government would not bankroll the cooperative for any unpaid debts. Nonetheless, rural members expected the cooperative to fulfill the spirit of the law, refusing to accede that the debt forgiveness law should not also apply to their debts. The cooperative manager explained his considerations in responding to rural members. First, he wanted the cooperative administration to tread carefully because it would ultimately be accountable to members in the general assembly. Second, most cooperative loans to small producers are guaranteed not with a borrower’s assets, but by a personal guarantee from a fellow member. These guarantees allow farmers with few assets to access credit but make the cooperative vulnerable if a large group of rural lenders simultaneously defaults. Finally, VOL. 70, NO. 4, WINTER 2011

staff and board members worried that protracted conflict might lead urban members to panic and withdraw their savings, forcing the cooperative into insolvency. Rural members and the administration negotiated a compromise. The cooperative would refinance members’ loans, extending the repayment period five additional years. The consequences for the cooperative were serious. To afford the refinancing arrangement, it reduced services in other areas, eliminated loan programs for home construction and small artisans, and reduced repayment periods for other loan programs. Because Ycua Bolaños renegotiated members’ loans (unlike other cooperatives) most members repaid their loans within the new five-year time frame. Though it appears that the Ycua Bolaños cooperative weathered the difficulties better than other agricultural cooperatives, including Coronel Oveido (discussed below), the events reshaped the administration’s perspective. Staff and board members felt that negotiations with members were handled in a professional and effective manner and that, while refinancing required some austerity, the compromise was acceptable. But the debt forgiveness law, along with other factors, has prompted the administration to reassess its use of outside credit. Some leaders would like to see the cooperative become self-sufficient in providing loans. They hope that self-sufficiency will protect the cooperative from policy changes instituted by outside funding agencies and allow the cooperative to provide loans at lower interest rates than those offered by national lending institutions. This would require a large enough member base to ensure sustainable funding. In rural Caazapá, small producers are the only population large enough to make that kind of growth feasible. Since its inception, a segment of the cooperative’s leadership has pushed for the cooperative to promote householdlevel agricultural development to reduce rural poverty. More recently, the cooperative has actively recruited rural members through membership drives and a new agricultural production department that offers limited technical and marketing support to small farmers. Despite the incidents surrounding the debt forgiveness law, Ycua Bolaños has experienced unprecedented growth, including 180 percent surges in membership in 1999 and 2004. Most of this growth occurred in the rural sector, which grew from one-quarter of total membership in 2000 to roughly half of the membership in 2005. The cooperative’s increasing role in rural communities in Caazapá has been supported by a coalition of government agencies and Non-Governmental Organizations (NGOs) that promote crop diversification, international export, and expansion of Caazapá’s agro-industrial base. Following the coalition’s lead, the cooperative has introduced new products, such as honey and sesame, and provided loans and technical support to small producers interested in diversifying production. Financial support from international donors, including GTZ and TaiwanICDF, has bolstered the cooperative’s rural activities. Ycua Bolaños staff and board members are optimistic about future growth, especially in the area of rural development. 359

Coronel Oviedo The Cooperativa de Producción Agro-Industrial y de Servicios Coronel Oviedo (Coronel Oviedo Cooperative for Agro-Industrial Production and Services) is one of the largest and most successful cooperatives in Paraguay. The cooperative was founded in 1971 with USAID support by a small group of teachers and farmers who overcame fears of organizing during the Stroessner dictatorship. The Coronel Oviedo cooperative has paired a majority urban membership and a strong savings and credit program with rural development in Caaguazú, an “eminently campesino” department (Campos 2003), that is the country’s second most important agricultural region (Casa de Cultura n.d.). Successful savings and loans programs have made the cooperative a major player in the regional economy. Up to 2005, it held almost $2 million in personal savings accounts; provided millions of dollars in loans each year for production, commerce, and consumption; and had loaned more than $39 million over the course of its history. In the 1980s and 1990s, the cooperative began to expand its role in rural development. Working through 57 rural community committees, the cooperative provided technical assistance for production, quality improvement, sophisticated marketing, and export of a variety of crops. It also promoted significant participation by rural members who were isolated by poor communication and transportation infrastructure (Moran and Villalba 1989). Rural members met weekly in the committees to discuss cooperativism, learn about and provide feedback on cooperative programs, and plan monthly meetings with cooperative administrators about local needs and issues. Importantly, the committees united, organized, and mobilized small farmers who were regularly ignored or repressed during the Stroessner dictatorship. One of the cooperative’s first major rural development programs, a partnership with the Japanese International Cooperation Agency to export high-quality specialty fruits and vegetables, provided an important new income source when cotton and other traditional cash crops were underperforming. By 1998, 30 percent of the rural members were selling fruits and vegetables to Argentina and Uruguay. According to cooperative agricultural extension agents and members, this “golden era” was made possible by committees that facilitated communication, participation, and active engagement with rural members. At the height of its rural activities, the Coronel Oviedo cooperative suffered two unexpected crises that caused rural membership to decline sharply, led to the dissolution of many rural committees, and threatened the cooperative’s development program. The first occurred in 1996, when an attempt to restructure cooperative management and elect new leaders sparked internal conflict. In the end, the leadership remained the same, but several highly qualified young agricultural technicians who had supported the change, and who were deeply committed to participatory rural development, were fired or resigned. As a whole, the institution recovered from this crisis fairly well, but the rural sector suffered. The 360

cooperative lost the momentum it had gained through several years of grassroots mobilization and export-led development, and its advisory board even discussed eliminating its agricultural production support programs altogether to focus exclusively on more economically efficient urban programs and rural lending. The second crisis, of much greater consequence, resulted from the 1999 debt forgiveness law. Rural members of the Coronel Oviedo cooperative expected substantial benefits from this law, but, like Ycua Bolaños, the fiscally conservative cooperative had already repaid virtually all of its public debt and was therefore not obliged to forgive members’ debts. Many rural members saw their neighbors’ debts vanish and felt cheated by their cooperative. The cooperative offered to renegotiate the terms of loans, but failed to resolve misunderstandings about why members did not qualify for debt forgiveness. In Caagauzú, there is long history of campesino mobilization (Campos 2003), including organizing by the FNC, which helped negotiate debt forgiveness. FNC representatives encouraged Coronel Oveido members to protest by refusing to repay their loans to the cooperative. Approximately 500 of the cooperative’s 1,200 rural members made the difficult decision to leave the organization that had been their most consistent support over the years. Many others stopped repaying their loans and were expelled from the cooperative. Although new rural members continued to join the cooperative, the impact of the debt forgiveness law cannot be overstated. The loss of confidence, communication networks, and rural members and community leaders effectively ended farmers’ organization through rural committees, reversed most of the gains made through the vegetable and fruit marketing project, and significantly damaged the cooperative’s ability to provide effective and efficient services in rural areas. The cooperative director called the debt forgiveness conflict the greatest challenge the cooperative has faced: “That is precisely where we fell…. It was our fault, but the debt forgiveness caused everything to disintegrate.” In our interviews, long-term cooperative members regularly recounted the extent of cooperative assistance prior to the crises of the 1990s, using it as a point of comparison for the low levels of organization and interaction today. Several interviewees felt left behind by the cooperative and said this was only made worse by the cooperative’s all-urban advisory board. Cooperative staff and the board members themselves recognized that the board was incapable of making informed decisions about rural issues. Farnan (2007:49) also described farmers’ sense of betrayal and outrage at the cooperative as a “sea change” from the excitement and optimism she witnessed from 1996-1998. Farmers told her that the cooperative “no longer represents the interests of farmers” (Farnan 2007:40). The discontent farmers expressed to us in 2005 was less intense than that described by Farnan, perhaps in part because cooperative lending policies had improved. Nonetheless, many rural members and former members continued to criticize the cooperative for focusing more on money than production and marketing HUMAN ORGANIZATION

support and for permitting the collapse of their primary channels for democratic participation in the cooperative. Because the cooperative has seemed to abandon rural development activities in favor of lending, the next generation of farmers and virtually all of the new members we interviewed are learning to see the cooperative as a bank rather than a leader in social organization and rural development. That said, the Coronel Oviedo cooperative remains an important resource for small and mid-sized farmers. It continues to provide some technical assistance, low cost agricultural inputs, veterinary assistance, occasional health services, and educational loans, but the cooperative’s credit lines are its most important service. In 2004, only 12.8 percent of the cooperative’s 10,656 active members were rural residents (Cooperativa Coronel Oviedo 2004). While these widely dispersed rural members face difficulties accessing many of the cooperative’s urban-based services, they receive a disproportionate amount (31%) of the cooperative’s credit. As multiple cooperative staff people informed us, “the urban members practically subsidize the rural ones.” Cooperative leaders are aware of the decline in the rural sector and the need to reinstitute rural committees and develop more rural leaders; they have initiated several projects to reinvigorate development activities. The granja modelo (model farm) project began in 2000 with nine rural households to demonstrate techniques for high productivity and ecological sustainability through diversification, industrialization, and the production of high-value crops. Cooperative leaders hope that these model farms will be “poles of attraction” for other rural members, stimulating a new form of rural organization that converts each household into an efficient agribusiness. To capitalize on the heterogeneous urban-rural membership of the cooperative, they have initiated twice-weekly farmers’ markets in Coronel Oviedo and considered opening a cooperative supermarket. Also, like Ycua Bolaños, they have begun new productive projects through alliances with government agencies and NGOs and are hopeful that they can recover some of their former success.

Discussion In Paraguay, campesinos are often hailed as the motor of national economic development even as the public and private sectors regularly fail to meet their socioeconomic needs. At different points in their history, both the Ycua Bolaños and Coronel Oviedo cooperatives have attempted to fill this gap by providing low interest loans and pursuing holistic development. Cooperatives can promote rural development by intervening at all stages of the commodity chain—financing, production, transport, marketing, sales, and information—as well as by providing other types of social benefits, such as education and healthcare. Historically, the Coronel Oviedo cooperative took these possibilities even further by uniting small farmers in committees to provide a sense of empowerment and facilitate participation in cooperative decision making. These committees were risky steps VOL. 70, NO. 4, WINTER 2011

toward the “active peasant organizations” that Fals Borda envisioned, organizations firmly rooted in cooperativist social values and easily articulated with other campesino political organizations. But the deterioration of the cooperative’s rural development programs shifted the organization’s focus from broad transformations to more limited financial support. The Ycua Bolaños and Coronel Oviedo cooperatives shared similar rural development goals and strategies, but they were affected differently by the debt forgiveness law. The cooperatives’ decisions reflected different histories and recent changes in the capacity of each cooperative. While neither cooperative could extend debt forgiveness to its members, the Ycua Bolanos cooperative renegotiated the terms of members’ loans, renewed efforts to recruit rural members, and developed new programs to benefit small farmers. Unlike Coronel Oviedo, Ycua Bolaños did not have a vibrant urban sector to turn to for new membership and therefore redoubled its work with rural members. The Coronel Oviedo cooperative also offered to renegotiate loan repayment, but widespread farmer discontent, inflamed by campesino political movements, led cooperative managers to restrict the cooperative’s main rural programs to financial lending. Instead of maintaining the cooperative’s more holistic rural development program, it refocused its energies on the growing urban sector. This choice confirmed rural members’ belief that the cooperative had deserted its broader commitment to empower small farmers. Ycua’s more recent entrance into rural lending and development meant the cooperative did not have a historic relationship with rural members that might color their expectations. Cooperatives have been promoted as a “third way” that balances the advantages of capitalism and socialism without incorporating their weaknesses. But, as Mooney (2004) notes, the “third way” requires negotiating tensions between dynamics that can be contradictory, such as democratic participation and market competition or advocating for a member constituency and remaining politically neutral. The debt forgiveness law brought these tensions to the fore, holding the cooperatives to the conflicting standards of operating as efficient capitalist lending institutions and democratic organizations responsive to members’ social and economic needs. Small farmers expected their cooperatives to relieve them of burdensome debts, but managers argued that they lacked the financial ability to do this because of responsibilities to funding and loan agencies and other members. Managers of both cooperatives tried to resolve this tension by focusing on the overall well-being of their institution. In the case of Ycua Bolaños, this meant spreading the costs of refinancing across the various sectors of membership. For Coronel Oviedo, it meant accepting the loss of rural members and activities. These cases illustrate how national policy effects depend on local responses. The different outcomes in these two cooperatives resulted from strategic decisions based on a rational consideration of economic opportunities and the capacity of each cooperative to incorporate and respond to disagreement rather than political or ideological commitments. 361

By highlighting the intersection between politics, cooperative-led development, and institutional stability, these cases demonstrate the value of cooperatives engaging in politics rather than focusing narrowly on economic development. While we cannot examine what might have happened had cooperatives been involved in writing the debt forgiveness laws, it seems likely that increased involvement from the cooperative sector might have led to more favorable results for cooperatives, political movements, and the campesinos that they represent. In 1999, Paraguayan cooperatives represented 325,000 members, held one-quarter of personal savings, and generated 7 percent of national employment (Vargas Sánchez and Nacimiento Coronel 2000). Thus, they had the potential to be a formidable political force. At the very least, involving members in policy discussions and developing a working relationship with the FNC could have helped to prevent the misunderstandings that proved so damaging in Coronel Oviedo. The challenges of effective political engagement should not be underestimated. Pragmatically, political advocacy consumes resources that could be devoted to other activities and often requires different skills than those necessary for the economic management of the cooperative business. Furthermore, cooperatives already face a significant challenge in balancing capitalist and cooperativist values in developing their internal strategies. Extending this balancing act into the political realm will prove even more difficult. Adapting to neoliberal changes will likely continue to push cooperatives away from political engagement. There are clear economic and ecological reasons for campesinos to seek alternatives to traditional cash crops, and both Ycua Bolaños and Coronel Oveido see this as an important part of their rural development strategies. Responding to new market opportunities, the cooperatives see crop diversification, agro-industrialization, and international export as keys to the future success of their rural programs and members. This transition will likely require continued support from external funding agencies, rationalization of cooperative operations and campesino production, and strong working relationships with government and foreign NGOs, precisely the factors that potentially depoliticize cooperatives. Most importantly, the mobilization of campesinos in Paraguay is highly divisive and often provokes violent responses. In addition, while possibilities for political cooptation and repression have decreased, high levels of corruption could lead politically-involved cooperatives toward clientelistic relationships and quid pro quo compromises that create inefficiencies and vulnerabilities. It is therefore with substantial caution and humility that we suggest increased involvement in rural politics. Despite these challenges, we argue that cooperatives can benefit from attempts to understand and anticipate political changes so that they can (1) prepare for them, (2) prepare members for them, (3) respond effectively, and (4) engage in processes to create a more beneficial political-economic context. We are not suggesting that cooperatives adopt the radical political activism of the Agrarian Leagues and contemporary campesino political organizations. Such postures 362

would limit cooperatives’ abilities to support members’ shortand medium-term social and economic interests. However, engagement with the relevant policy context is essential. As long as cooperatives remain neutral, their development programs will only respond to national policy. If they engage in the policy process, they can begin to actively create a policy environment that supports their goals and strategies for rural development. In doing so, as the ICA (1972) suggested, cooperatives can use their grassroots organization to promote broader political education and participation. We offer two preliminary recommendations for how cooperatives can overcome the challenges of political engagement and advocate effectively for their members. First, by limiting their initial political activity to those topics most directly relevant to the cooperative as an institution, they can safely build political capacity and members’ trust without diverting significant amounts of resources from other activities. Second, cooperatives should comply with the new ICA principle of autonomy and independence by ensuring that members control political advocacy and carefully avoiding clientelism. Laycock (1989:790) observed that the internally democratic structure of Canadian cooperatives significantly limits their ability to influence policy, but restructuring to increase leaders’ independent negotiating power creates a dangerous “slippery slope” away from genuine cooperativism. Grounding political engagement in democratic processes is not only important for maintaining cooperative ethics but should also help to ensure that political stances are broadly endorsed and their possible ramifications thoroughly understood. As part of this repoliticization, we recommend that cooperatives engage in cautious alliance building with existing political organizations, especially campesino movements. Selective collaboration with campesino movements can help insert cooperatives into already existing political debates and, most importantly, ensure that future policies are crafted based on a broad understanding of the diverse interests of Paraguay’s heterogeneous rural society. Paraguayan cooperatives and campesino political organizations have often had opposing perspectives on rural development issues. For example, while cooperatives have focused on integrating small farmers into a capitalist regional economy, many campesino organizations have pushed for withdrawal from Mercosur and government protection against international capitalism. As one of the Coronel Oviedo rural development agents said, “[Campesino organizations] are putting up a strong fight, but they are fighting against ways of earning money and against development, and so they’re against the cooperative. They do the same thing as cooperatives—bring people together—but in order to ask things of the government.” If the two sides can see beyond these differences, they will find significant overlap in their social, economic, and political interests. Effective and appropriately structured debt forgiveness would have been one such topic. Land reform and land titling would benefit both groups while radically increasing small farmers’ stability and access to credit and productive assets. Both groups would also likely support government HUMAN ORGANIZATION

promotion of domestic markets, including increased control over black market imports from Brazil and Argentina, and limitations on the development of foreign owned, large scale soy farms that threaten small farmers’ access to land. The chances of creating successful sociopolitical and economic changes that address the full spectrum of rural socioeconomic realities will increase to the extent that cooperatives and campesino political organizations can coordinate their efforts. Bebbington (1996) notes that coordination can help rural political organizations expand their benefits to include development activities that sustain member interest beyond narrower political victories. In our interviews, three government representatives explained that coordination would also make their work more effective. They noted that their agencies lack the capacity to organize campesinos, but that they can “channel resources” and “form alliances with others who have organized campesinos” in order to improve tenure arrangements, legalize land titles, and improve farmers’ position in regional markets. Cooperatives might serve as politically acceptable mediators between government institutions and the small farmers represented by campesino movements. A final benefit of coordination is that cooperatives might, over time, extend benefits to the more disadvantaged segments of rural society represented by radical political organizations. A farmer who described himself as “probably the poorest member of the [Coronel Oviedo] cooperative” noted that there are many people in Caaguazú who lack land security, formal education, productive capital, and the economic security necessary to join a cooperative and access the finances that would increase their economic stability. A former cooperative employee agreed that financial services are useful for those who can afford to save money or pay back loans, but “the smallest producers are left today without the help of the cooperative.” The economic stability that the Coronel Oviedo cooperative has achieved provides an opportunity to extend special programs to the poorest rural dwellers, but only if the cooperative decides to commit itself to grassroots mobilization and development and coordinates with NGOs and political movements that have a record of success working with the most marginalized rural people. Likewise, as the Ycua Bolaños cooperative grows, it might learn from the history of Coronel Oviedo’s rural community committees and work to develop an inclusive grassroots member base, a process that will benefit from cooperation rather than competition with campesino political organization. Notes While the meanings of campesino and peasant, its most common English translation, are contested (Kearney 1996), we use these terms because they are part of the Paraguayan vernacular and they convey the household and livelihood dynamics of most of the rural members of these two cooperatives. We conceptualize the peasantry as a highly differentiated social group that is generally characterized by limited financial resources and at least partial reliance on agriculture for subsistence, typically on small plots of land that are owned, rented, or accessed through other financial agreements such as sharecropping. 1

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In Paraguay, the concentration of land in large estates, colonization by Brazilian farmers (usually though not always more capitalized), and split inheritance systems have led to the gradual shrinking of peasant landholdings to levels that cannot sustain families (a process known as “minifundización”). Thus, most peasants supplement their on-farm activities with agricultural labor, seasonal urban migration, and other off-farm livelihood strategies. 2 Mooney, Roahrig, and Gray (1996) offer a notable exception, arguing that repoliticization of cooperatives is necessary to ensure the protection of extra-economic values. 3 Paraguay is divided into 17 departments and the district of Asunción. Department administrations are local units of the national government.

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