Claudia Ocaranza

Cooperativism in Mexico: budget cuts and conflicting views

The budget for the body responsible for implementing and operating strategies for the development of cooperatives in Mexico has fallen 88% in the five years of President Andrés Manuel López Obrador's administration.

By Claudia Ocaranza

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The budget for the National Institute of Social Economy, responsible for implementing and operating strategies for the development of cooperativism in Mexico, has fallen 88% in the five years of the administration of President Andrés Manuel López Obrador. The treatment of cooperativism, inserted in social policies close to populism, means that the movement is not being promoted as the basis for a more democratic and just economy. Different states in the country have programs to support cooperatives and social organizations; however, a national registry of cooperatives is missing, as it was discarded in the 2012 publication of the Law of Social and Solidarity Economy and also in its last modification in 2019. Meanwhile, López Obrador promotes the cooperative movement in the regions where it is convenient for his megaprojects, such as in Quintana Roo with the Mayan Train.

By Claudia Ocaranza, with reporting by Santiago Ancheita / Empower Journalism

"We do support cooperativism," said Mexican President Andrés Manuel López Obrador at his February 27, 2019 press conference in response to a reporter's question about how cooperativism would be integrated into his economic project[1]. Despite López Obrador's statement, that year the budget of the National Institute of Social Economy (INAES), a deconcentrated body of the Welfare Secretariat mandated to promote the social and solidarity economy, was cut by almost 70% compared to 2018. It went from having 1,979,206,256 pesos annually to only 629,362,530 pesos. The fall has not stopped; by 2023 the budget is just 229,486,008 pesos.

Experts interviewed by Empower claim that the lower INAES budget is due, in addition to the austerity promoted by the President, to a change in strategy that includes breaking ties with corporatism and unionism. However, an ambiguous law, the lack of a national registry of cooperatives, regional differences and the lack of a deep understanding of cooperativism mean that in Mexico it is still seen as a factor of social policy and not as the basis for promoting a more democratic and just economy.

According to Eduardo Enrique Aguilar, cooperativist and research professor at the University of Monterrey, with the change from the Secretariat of Social Development (Sedesol) to the Secretariat of Welfare, there was a transfer of funds that "follows a corporate structure but from a different perspective, no longer from what would be a petty cash box as INAES used to be".

The new strategy is based on alliances with organizations such as the German Confederation of Cooperatives (DGRV) and the German Cooperation for Sustainable Development (GIZ)[2], and on programs at the national level with local governments, such as the Nodes for Promoting the Social and Solidarity Economy (NODESS), "a network of territorial alliances made up of at least three different actors: academic institutions, local governments and Organizations of the Social Sector of the Economy (OSSE)", according to INAES[3].

Even so, "the 70% cut to INAES does not make sense because it is not that the social sector of the economy does not need capital, resources or a series of supports for its development. It does, of course, and what they are doing is dismantling the Institute, which was intended for that purpose. Historically, the private sector is strengthened because it has a sufficiently strong government sector with resources that are constantly injected into the private sector," said Aguilar, who also holds a PhD in Political Economy of Development, in an interview with Empower.

No national registry of cooperatives

With the inauguration of María Luisa Albores as Secretary of Welfare at the beginning of López Obrador's administration, a current of the cooperative movement that has been successful in other countries has arrived. This is the Spanish current, headed by the Mondragon Corporation in Spain. Juan Manuel Martínez Louvier, the general director of INAES, studied his master's degree in cooperative business management at Mondragon Unibertsitatea[4]. Both appointments generated expectation and excitement among those who have studied and promoted a change towards a social and solidarity economy.

The appointment of the Advisory Council for the Promotion of the Social and Solidarity Economy 2019-2024 of INAES was attended, in addition to Albores and Martínez Louvier, by people related to cooperativism, such as Héctor Valdés Trejo, cooperativist; César Escalona Fabila, general coordinator of planning and evaluation of INAES; María Luisa de la Garza, doctor in philosophy; and J. Sabás Ledesma Jaime, general manager of Caja Popular Las Huastecas[5].

However, four years later, INAES has not published on its website who currently makes up the council. According to Miguel Torres Cruzaley, a specialist in solidarity economy from the Andalusian School of Solidarity Economy, "with the changes and cutbacks, many of those members were pushed back," he said in an interview with Empower.

The last evaluation of the Program for the Promotion of Social Economy (PFES), operated by INAES to "strengthen the capacities and means of the Organizations of the Social Sector of the Economy (OSSE)", was made in 2019-20 by the National Council for the Evaluation of Social Development Policy (CONEVAL)[6], which found that in 2019 the program supported 2,539 OSSE, "80% less OSSE than in 2018". One of the causes defined by CONEVAL was the reduction in the INAES budget. Article 52 of the Social and Solidarity Economy Law marks that there must be an evaluation of compliance every three years. Although there are audits by the Federal Superior Audit Office (ASF) from previous years, there are no audits from 2020 onwards.

For Aguilar, author of the book "Co-laboramos. Manual on cooperatives", the problem arises in the origin of said law, created in 2012, which left out the social demand on the need to have a national registry of cooperatives. The Law was amended in 2015 and 2019, but the creation of the registry was not included.

"The sense of the Law is that of co-optation, of being able to control one more sector in terms of what the State does. But it is so badly done that it does not even represent that because it is extremely ambiguous," said Aguilar.

Torres Cruzaley adds that the first setback of the Law was when it went from being the responsibility of the Ministry of Economy, as it had been since its enactment[7], to being the responsibility of Sedesol, which added to the fact that Mexico has "a more social than economic vision of cooperativism" and that this is still the case today.

The Law also establishes the existence of an Observatory of the Social Sector of the Economy, promoted by INAES, but there are few references to it on its web page and the official web page sends to a site of magical towns[8].

Cooperativism at the service of the presidential agenda

Just as there is no national registry of cooperatives, there is no single way of exercising the movement in the country. However, the people interviewed for this report agree that the lessons learned at the state level do not translate into actions at the national level.

"Despite the rich history that exists at the local level in many parts of the country, it does not permeate and they do not leave their niches, and there is a lack of recognition of this at the federal level," Carolina Maldonado, an expert in gender, development and economics from the Instituto Tecnológico Autónomo de México (ITAM) and the University of Sussex, told Empower.

For Maldonado, the current government's lack of recognition of cooperativism as an economic movement is also reflected in the way López Obrador's administration grants economic support.

"There is incompatibility between how social programs are delivered and a cooperative vision. The vision of individual support seeks for each person to resolve it individually, with the single mother support you pay the grandmothers, as AMLO said. And that is a vision that does not go with cooperativism," said Maldonado.

According to Torres Cruzaley, the place of cooperativism in the current administration gravitates on its usefulness for López Obrador's objectives and megaprojects.

Examples exist. INAES and the Undersecretariat of Productive Inclusion and Rural Development collaborate in the "Value Networks Strategy" of the Sembrando Vida program through actions "in the area of Social and Solidarity Economy (...) to strengthen the organizational and entrepreneurial capacities of planters"[9].

"The beneficiaries of Sembrando Vida receive a monthly amount and another little goes into a fund that has to be used for social benefit, but there is not much monitoring of this. A new structure or network is generated, but it is conditioned to participate in the program. This does not necessarily generate solid organizations. Nor does it respond to how what comes out of the cooperatives is sold or what the connections with the different markets are," explained Torres Cruzaley.

In January of this year, López Obrador received members of the Union of Cooperatives Tosepan, Puebla, linked to the current Secretary of the Environment, María Luisa Albores[10], who was the one who installed the new social economy strategy in Bienestar between December 1, 2018 and September 2, 2020.

In May, the President invited to his daily conference Mara Lezama, Governor of Quintana Roo, who announced a new plan to support cooperatives in that state, where Section 4 of the Mayan Train will pass. "The multiplier effect in benefits of the Mayan Train led us to create this model, because we must support and follow up on all the economic growth that will continue to arise from new ideas, new business models and, in general, new opportunities to achieve social wellbeing," said Lezama[11].

INAES did not respond to interview requests or questions sent before the close of this report.

The CDMX Case: unmatched numbers and amounts

Although according to the experts interviewed by Empower, the Social Economy program of the Secretariat of Labor and Employment Promotion (STyFE) of Mexico City is one of the programs that works the most with grassroots communities, since it is divided into three sub-programs for the creation and strengthening of cooperatives, the challenges remain.

Year after year the program increased its budget to reach more cooperatives and social organizations. Between 2013 and 2022, 3,682 cooperatives received 459,313,254.78 pesos from the program, according to data obtained via information requests and analyzed for this report. But only one cooperative received support for seven years, reaching a total of 1,040,506.94 pesos.

The majority of the cooperatives (2,674) only received some economic amount for one year. Meanwhile, the number of beneficiary cooperatives that repeated access to support for several years dropped considerably (1,606 received the resource for two years and only 501 for three years).

In 2023, the STyFE published in the Official Gazette that the program would allocate 140 million pesos to 770 cooperatives through the impulse, creation and strengthening sub-programs[12]. However, in a response to a request for information[13] submitted by Empower, the Secretariat responded textually that, for 2023, "there are still no cooperatives benefiting from the program", while the box accompanying the response marks "In process" for 2023.

Furthermore, the total amounts of economic support per year and the number of cooperatives supported do not coincide between what is reported in the beneficiary lists and what the STyFE responded to in requests for information.

The case of greatest disparity is 2018 when, according to the data analysis conducted by Empower from the program's registry, the STyFE distributed 10,130,000 pesos among 110 cooperatives. But the same secretariat responded via information requests that that year it supported 356 cooperatives with a total of 43,581,485 pesos.

For Aguilar, the discrepancy in the data supports the need for a national registry of cooperatives.

STyFE did not respond to interview requests or questions sent before the close of this report.

Cooperatives are not enough

Traditionally, the constitution of cooperatives has been a solution for a family to access economic aid for their family business, without this meaning that, de facto, the business functions as a cooperative, that is, in a horizontal manner and with an equal distribution of profits. The Social Economy Law itself names as subjects of the law figures that are not cooperatives, such as ejidos and communities.

"It results in a generic law that, by allowing everything to come in, inflates the numbers in terms of cooperatives," explains Torres Cruzaley.

In 2019, 59% of 686 people representing cooperatives responded to a census conducted by the firm Parametría, provided to Empower by the STyFE via a request for information, that the reason for starting a cooperative was that "a family member brought together other family members"[14].

According to this study, the surveyed cooperatives earned an average of 20,070 pesos per month, which meant a monthly income per member of 5,358 pesos. The majority of those surveyed belonged to a cooperative with five members and an average monthly income of 19,134 pesos. That is, the majority earned 3,827 pesos per month, just above the 3,139.20 pesos that was the monthly minimum wage in 2019[15].

With this data, 23% of the respondents said that they "cannot afford to pay debts and/or loans and support themselves", while another 23% responded that they have "just enough".

The experts and the expert interviewed agree on the need to move from a vision of cooperativism as a social policy to one that includes it as a basis for the country's economic development, even aspiring to the creation of cooperatives in the large sectors of the economy and not only in the third sector.

"It is a fine line between being independent cooperatives and depending on external support or external resources, but cooperatives always require long-term support. One year is nothing. It is necessary for the members to learn over time what happens in order to face and resolve conflicts and make decisions," said Maldonado.

For the gender specialist, promoting cooperativism from an economic model and providing it with sufficient funds would also generate a greater development opportunity for women, who find it difficult to integrate into formal employment as they are responsible for family care and economic support, so many opt to create cooperatives that allow them to work and carry out care work collectively.
For years, collectives, international organizations, citizen organizations, cooperatives and cooperative unions have been advocating a social economy model to counteract the effects of voracious capitalism and as an alternative way of life and organization. Simel Esim, head of the Cooperative Service of the International Labor Organization (ILO), stated that the social and solidarity economy "has gained recognition for its role in creating and sustaining jobs and providing services for members, users and communities during the AIDS pandemic. At a time when the call for new ways of doing business is growing, the social and solidarity economy can provide a basis for a model of enterprise that drives inclusion, sustainability and resilience.