In an increasingly complex, uncertain, ambiguous and financially stormy world caused by numerous powerful and negative economic shocks developing high inflation and even deflation in many parts of the world to the extent that, from the Russian, Asian and Brazilian Crisis of 1998 to the Crisis of 2008, we are facing an insurmountable international financial crisis in a triple version: Mortgage, Ecological and Food. All because of a questionable crisis of leadership and values that actually ended up in an incredible crisis of confidence. After all, men are responsible for all these crises, since the market and the State are human products and, therefore, imperfect. Finally, the problem is having Man as Leader or Manager, as Amartya Sen so rightly said: “It is man who is responsible for what he plans and undertakes and for the incorrect handling of the economy.”
In this regard, Georg Vielmetter and Ivo Sell in their book Leadership 2030 refer to six Megatrends that build up a context that helps interpreting a world like today: Globalization which is multipolar. Individualism and pluralism which are on the rise. Technology that empowers individuals in the disbursement of institutions. Demographic change is a constant; there are more people aged 65 or less than Infants aged less than 5. And, finally, the world is massively DIGITAL; there are more cellphones than people. We currently live in a digitalized world and despite this great virtual connection, Inequality is growing, the representative democracy is weak, there is a greater pollution and there are high youth unemployment rates with unpayable debts.
According to the ECLAC Report to March 2015 regarding this critical context, there are 167 million Latin American and Caribbean people living in poverty and 71 million living in indigence. Moreover, 40% of Latin American population lives in conditions of VULNERABILITY, with many risks of falling into poverty. Worst of all, social pressures are growing making politicians and governments trend towards the easiness of populism with a weak and unfavorable environment for business which reduces the domestic and foreign key investment to sustain the economic growth of a country.
Regarding this subject, in April 2015, Olivier Blanchard of the IMF was categorical in pointing out that the influential factors in the progress of Global Economy with greater economic and social impact are: the high indebtedness of families, companies and countries; the ageing of population and lower productivity of labor and capital; the reduction of the price of oil and minerals, and the appreciation of the dollar with the consequent exchange rate fluctuation. Among these pernicious shocks for the life of companies and the human life, all kind of social pressures discouraging domestic and foreign investment continue to increase in spite of being one of the key engines of Economic Growth. However, it does not end here. The Administration in chair that come to power using Populist Government Plans fail to deliver their promises. And at the end, there is no investment in innovation, infrastructure, quality education, and certainly there is not an efficient use of productive resources for the increase of productivity in Latin American countries fail to get a mention.
For such a demanding question is each Government responsibility to comply with and enforce ILO’s Recommendation 193 stating the Cooperative Promotion from and with the State considering that «cooperative companies constitute a better world, but they cannot -or must- save the world». In the light of this important and enlightening motto, from the applied professional research, the Cooperative Promotion is and must be considered as a State policy which also requires that the Cooperative Movement in each country should have the Representative Democracy as «watchword» of its Strategic Vision and Institutional Mission. It gives light and transparency to an intelligent and transparent Leading Class wining synergies and supporting each other through the effective practice of renewal by thirds and the timely accountability used to correlate the cooperative values with the economic and operational efficiency forever.
Among all the expectations for the repositioning of the cooperative movement, there are two serious contention dams for the cooperative promotion. The FICREA law that was already approved by the Chamber of Deputies of Mexico without considering the position and contribution of the Cooperative Savings and Loan Banks. The Chamber of Deputies of Paraguay also approved the law that approved the D’hut System and required the payment of taxes to the Cooperatives. Only these two examples, without considering other bills and policies going against ILO Recommendation 193 in many countries in America, clearly demonstrate that the LEADING CLASS of our Cooperative Organizations rest on their laurels. Too many statements and not enough technical, productive and innovative execution with little or no investment in Professional Research and Skilled Development Programs.
Ignorance and misinformation are the mother of all vices and abuses, says an old saying of the wise people. However, we are like this and this is the way we are going. Therefore, we need, once and for all, to take the historical responsibility of repositioning the Cooperative vision and action by the path of competitiveness and value innovation.
All these considerations arise from the lessons learnt at the International Congress of Cooperatives and Social Solidarity Economy held in Chile with the involvement of the State represented through the Ministry of Economy and the Division of Cooperatives, the Chamber of Deputies was represented by Rodrigo Gonzales and Fua Chahin, and Mario Rodrigan [sic] and the senior leaders of the FECRECOOP, Cooperative Business Forum, COOPRINSEM, FECOT, CAMPOCOOP, COOPELEC, etc. also attended. The Cooperative ideal to make possible the Social Solidarity Economy requires, as Dr. Razeto Magliaro [sic] so rightly said, “the implementation of a profound renewal of Cooperativism to have a Solidarity Economy Reform to correlate theory with practice and thus overcome the Deficit of Theory and Innovation in practice». Integrate the Cooperative Values with economic efficiency and environmental ecology to participate effectively in the creation of a future that promote a Social Economy from and for the people within a better human coexistence, greater democratic participation, and more sociability in a new, more humane and more just civilization.
Taking into account that the ravages of the Financial Crisis affect equally Private Companies, Cooperatives and Community Banks regardless of their size, we consider very important to assess the pros and cons of the spectacular bankruptcy of FAGOR Cooperative, member of the NETWORK or Mondragon Cooperative Group of Spain, recognized as the largest Cooperative Association in the world with 257 companies and cooperatives, 74 060 people affiliated, 15 technology centers, with commercial presence in five continents and their competitiveness is based on the innovative vocation by grouping in their model: Research, Training and Banking Services. But, why did the bankruptcy of FARGOR clearly represent a shock for being part of the Mondragon Cooperative Model crisis, despite being one of the most admired and valued models throughout the world for its excellence in Management and Innovation? In this regard, FAGOR Cooperative went into debt for 850 million euros, about 1 160 million dollars. The Mondragon network paid only 70 million euros for the refinancing of the debt of its affiliated FAGOR. This small contribution given the size of the debt was severely criticized. The headline for the newspaper “El confidential» was: «The Benefits of the Mondragon Model with more than 170 Cooperatives have COLLAPSED». In the BLOG SALMON, FAGOR CEO said: «The time has taught us that the Cooperative Model is not an anti-crisis guarantee». The truth is that the FRAGOR [sic] Crisis has been painful, but it does not question the Cooperative Model. However, it does teach us Master Lessons that we must bear in mind for the future.
The Cooperative Business World also is and will be affected by every Financial Crisis and it requires having a very Competitive and Transparent Management Leadership.
1. Better regulation and supervision from and by the State to avoid conflicts of interest at all levels.
2. Have more and better institutions with a legal framework that correlate cooperative values with economic, technical and operational efficiency.
3. Professionalize the Cooperative, Economic and Financial Management to its fullest by using modern tools that provide a good administration with value innovation.
4. Invest in research and development to increase productivity through technological innovation, infrastructure development, efficiency in terms of necessity-cost-benefit, and quality education for employees, including young people, for the proper development of their knowledge and skills in pursuit of a better generational training for the efficient and effective management of the Cooperative.
5. Formalize the economic funding of internal resources through the capitalization of a percentage of the annual economic surplus until reaching 100% in the best-case scenario.
6. Institutionalize the Intelligent and Transparent Cooperative Leadership focusing on the timely Renewal by Thirds and convenient Accountability with the unrestricted implementation of good practices of the Corporate and Economic Governance.
7. Improve the Enterprise Risks Management and the Money Laundering and Terrorist Financing Prevention System to ensure the technical and moral fitness of Cooperatives and Integration Bodies.
8. Make the Cooperative Education an Integrated System that correlate doctrinal formation with the economic and operative efficiency that allows having a leadership and management staff completely integrated into a transformative and innovative commitment and transform thus education into an effective catalyst of social mobility for a better human coexistence.
9. Provide products and services that contribute mainly to personal entrepreneurship for the partners and their families taking full advantage of the opportunities given by the State for the development of micro, small and medium enterprises. The Cooperative Company must be then a virtuous cycle of new and increased opportunities for the efficient socio-economic and cultural growth.
10. Access to advanced technology to efficiently contribute to the productive diversification of the country and to overcome therefore the limitations that are brought on by the Primary Model, exporter that significantly affects the economies of the developing countries given the reduction of prices for metals such as gold and copper.
Given these large implications of the International Financial Crisis, the actual Cooperativism must achieve its competitive repositioning. It is important to implement in a technical and legal basis the reforms of the case. This requires having a Leading Class with real leadership to meet and enforce the representative democracy, including the active participation of women and young people currently excluded. All this means to THINK and WORK BIG. Not only in the size of the Company but in the innovation of value for a better life with honor making «simple things extraordinarily well», as it was claimed by the poet Eduardo Galeano. Do not forget that in times of economic turbulence and uncertainty, institutions as strong as the oak are needed to generate mutual trust in Human Exchange, Economic and Financial Transaction and Social Cohesion.
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Chilean Deputy Dr. Fuad Chahin , presenting the Panelist Dr. Arnold Encomendero Davalos after Conference for further intervention.
A photo for the story to Dr. Rodrigo Gonzalez President of the Association of Parliamentarians for Social Economy and Cooperatives of the Chamber of Deputies of Chile.
QUILLOTA a reminder of Agro Industrial Center of Chile Southern Chile with officials from CORFO , Chile EMPRENDE Lic . Sergio Castillo and Guillermo Aqueveche , President of Chile Fecrecoop.