Co-operative Trade in the Americas

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    This document has been made available in electronic format
         by the International Co-operative Alliance ICA 
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                         June, 1995

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               Co-operative Trade in the Americas
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                    by Juan Diego Pacheco* 


Trade, Not Aid

Trade is not synonymous with development, although development
is not possible without trade, since trade extends richness. 
The generation of richness depends ultimately not in
productivity but in the capacity of trading the products and
services so generated.  Ecuador has the highest world level
capacity for producing bananas, but this was of no use when
the European Community closed its market.  This reality
applies to all businesses, including co-operatives, in all
countries, regions and continents.

The combined effect of the end of the Cold War, the
consolidation of the European bloc with a highly protectionist
orientation, the exhaustion of the model of substitution of
imports which imposed limits on the development of this region
for over four decades, the fanaticism for the market focus of
international organizations, and some initial stories of
success such as Chile, Mexico and now Brazil, have left one
single item in the agenda for all economic protagonists of the
American Continent, including co-operatives: trade.

Trade in the Americas

Since the beginning of the nineties, after more than four
decades of protectionism, there is a prevailing tendency
throughout Latin America of promoting trade and forming
commercial blocs which appear as the only efficient
alternative for competitivity and penetration into world
trade.  Responding to the new circumstances, all Governments
have focused on promoting international competitivity, giving
priority to signals from the market, promoting the acquisition
of managerial skills, and trying to attract direct
investments.  Diplomacy itself has become an affair of
marketing.
In this framework of accelerated managerial economic opening,
four principles guide the course of regional and worldwide
trade:

1)   rules are set by the rich ones; 

2)   domain of information is domain of the market; 

3)   to have access to a market is not a big problem, to
     retain it, is; and 

4)   only those who are competitive survive.  This applies to
     all economic agents, independently of whether they are
     liked or not, of whether they are co-operatives or not.

The sector is then taking actions at the national or
continental level, to attain competitivity and to ensure
survival, which is ultimately the product of the combination
of  productivity at the business level and the correction of
distortions at the macroeconomical level.  Since most of these
sectorial and national actions (unilateral opening of markets,
elimination of customs tariffs, elimination of the fiscal
deficit, privatization, etc) are taken from the guidelines of
international financing organizations, there is no need to go
over it in detail.

America's Trade Blocks: Battle Fields

Although it is true that the economical adjustment measures
implemented by the International Monetary Fund, World Bank and
International Development Bank have had a strong impact on the
countries during the last five years, their ultimate goal is
to improve the countries' capacity for development in
international markets.

Geographically, the Region of the Americas is composed of 48
countries and foreign territories with a population of over
600 million.  Anchored by two of the wealthiest countries in
the world, Canada and US, the combined Gross Domestic Product
(GDP) of the Americas is US$7 trillion.

The making or reactivation of the commercial blocs is now
considered a positive form of multilateralism and not as a
protectionist menace.   From this perspective, the Americas
may be divided in 5 main blocks: NAFTA, MCCA, CARICOM,
MERCOSUR, ANDEAN PACT.

NAFTA:  The North American Free Trade Agreement, formed by
United States,  Canada and  Mexico is the largest trade bloc
in the world in terms of size:  300 million square kilometers
and 365 million inhabitants and US$6.4 billions of economical
activity.  This bloc alone represented 18% of the world trade
and 85% of the trade of the American continent  with the rest
of the world.  The participation of Mexico in the activity of
the bloc which represents only 21% of the total trade is
strategically important for the other countries of the
continent.

MERCOSUR:  Formed by Argentina, Brazil, Uruguay and Paraguay,
is a market of 190 millions of inhabitants and a territory of
11 million square kilometers.  With a total of US$76,100,000
of trade, it has a participation of 1%  of the world trade
level and 5% of the American continent trade level.  This
continental bloc has more solid links with Europe: most of the
exports (49%) go to Europe and Asia, (33% and 16%
respectively), and only 27.6% of the exports are within the
continent.

Andean Group:  Formed by Colombia, Peru, Venezuela and
Ecuador, is today an open State of 100,000,000 inhabitants
within a free trade zone which is soon to become a single
customs tariff area.  Intra-regional exports of this group in
1993 have reached a satisfactory level of US$ 2.2 billions. 
Some countries of this bloc have recently confronted some
internal political problems (war Ecuador-Peru,  disputes
between Colombia and Venezuela), and drug trafficking which
have a negative effect on the strategies for commercial
penetration.

Central American Common Market:  Is one of the oldest blocs of
the region which was started in the sixties and at the
beginning of the seventies suffered by exhaustion of the
imports substitution model. In the nineties, after a crisis of
several years, it was reactivated, focusing on open markets
and penetration of international markets. The attainment of
peace in the region has allowed the group as such to have a
better perspective and to increase the intra-regional trade
from 500 millions in 1986 to 1,300 millions in 1993.

CARICOM:  It has a population of 12.5 million inhabitants and
a territory of 305,500 square kilometers.  On 1990, CARICOM
reports a participation of 0.1% of the world trade and 0.8% of
the trade in the American continent.  This trade is mainly
focused on the United States and the Andean Bloc.  In spite of
its vicinity to Central America, the trade with this region is
not significant.

A considerable number of bilateral and trilateral agreements
of free trade form the changing reality of this region.  The
United States is very important for the trade in the region,
being the market for over 90% of the exports from Mexico and
Central America, 74% for Canada and CARICOM.

Once the emotional shock, although not the economical shock,
caused by the Mexican crisis is over,  financial markets and
the economies of the region have retaken their positive
trends.  An element which is a good perspective for the
economic protagonists and that should be seen closely by the
co-operatives, is the political agreement reached in the
Summit of the Americas (MIAMI, DEC, 1994) about converting the
whole American continent in a free trade zone.  Probably, this
goal foreseen for the year 2005 will depend on external
factors, such as the consolidation of the European and Asian
blocs and, definitely, on the commercial will of the United
States of America.


Co-operative Challenges 

It may be said that, up to present, the Co-operative Movement
in Latin America has overcome a stage of 'political answers'
to the new context and it articulates more effectively and
quickly a business-oriented response, with strategies for the
penetration of the markets by co-operatives based upon a
philosophy of specializing and improving the productivity,
quality, service, and of course, price.

Co-operatives in the United States and Canada make fast
progress towards 'business oriented' approaches towards Latin
America, in production and services.  Besides the problems
known by all, changes in world trade are also generating
adequate opportunities for the Co-operative Movement to
develop and increase the capacity to provide services to its
members, and focus on production and services that generate
aggregated value, rather than in traditional activities which
generate raw materials.

The fast growth pace of the service sector, which is more and
more profitable, gives co-operatives opportunities of trade
because co-operatives can reach sectors of the population that
traditional private sectors cannot reach.

The fact that co-operatives have continental and international
networks for financial aspects (COLAC - WOCCI), insurance
(ICMIF, CUNA), exchange of commercial information (CO-OPNET -
COMPUNET), and the business opportunities available, provides
better possibilities of success in the penetration of world
trade.

A significant part of this war for penetration and
consolidation of the positions of co-operatives will no doubt
take place in the co-operative institution itself, as economic
and social agent.  However, the most significant battle will
take place in the minds of the leaders and managers who,
understanding the new scene, must be capable of leading the
processes of production reconversion and, at the same time,
maintain the identity of co-operatives.  Out of those two
battles, the last one is the most difficult.

In view of the new challenges,  organizations should be armed
with new weapons.  The relevance of  the co-operative sector
according to its economic activity should be underlined in the
present commercial conditions and it should be reflected in
the organizational aspects at the national and international
level.  To a large extent the crisis of the apex organizations
in the region comes from the difficulty of giving answers to
the specific demands each co-operative economical sector has
when dealing with the markets.

Precisely by strengthening the organization of the different
sectors, it is possible to establish links with the structures
of the private sector that defend the interests of the
industry at the national level and with those entities of the
public sector who are responsible for negotiating trade
agreements and giving follow up to the economical integration
process.  These two actors have strategic importance because
of the information they handle and the power they exert.


According to the conclusions of the Regional Conference
"Commercial Blocs: Co-operative penetration", (Quito, August
94), organized by ROAM, in order to effectively penetrate into
international markets, co-operatives must effect processes of
reconversion in three main structures:  Cost structures,
capital structures and organizational structures. 

Fixed costs must be minimized, co-operative capital based on
savings and contributions and the organizational structure
should respond to the changing conditions of the environment. 
All these changes are in agreement with the co-operative
values and principles.

We must recognize that the panorama described does not leave
many alternatives: either there is reconversion or
co-operatives will disappear.  ROAM has designed, together
with Desjardin International Society for Development, a
methodology for the reconversion of productivity of
co-operative organizations, which is now being evaluated. 

ICA Actions

Members of the International Co-operative Alliance of the
region evaluated this problem in their Regional Meeting of the
Americas, designating ACI for an active role to support their
efforts to achieve competitivity in their respective markets.

The Regional Office is attempting to achieve three concrete
results:

Reconversion

Promotion of the concept and methodology to assist in the
processes of reconversion of productivity of the
co-operatives.

Information

To expand the opportunities of information exchange and to
promote trade by preparing and distributing a report by
countries, called "Doing Business with the Co-operatives
of...".  This effort receives the support of DID and SCC and
encompasses 10 countries, and will be available in Spanish,
English and French.

Joint Venture

Continental conference (MIAMI, DEC 95) on joint venture of
co-operatives.  We will have the support of  the Multilateral
Investment Guarantee Fund (World Bank)  to guarantee possible
investments of co-operatives from developed countries into the
co-operatives of Latin America.

Specialized Bodies:  Will give support to specialized
committees as business forums and official request to support
the competitivity of the sector.


Trade Initiatives

On the other hand, members of ACI in the region are acting
quickly to promote the co-operative trade exchange.  At the 
regional level  the confederation of Co-operatives of the
Caribbean and Central America have created the marketing
company, COREXI, based upon the trade project that has been
developed for several years.

The Central-American Marketing Co-operative, formed by
agricultural co-operatives of the region have been established
with the support of the CCA, Co-operative Canadian
Association.  CCA have also begun a program of co-operative
trade focused on the promotion of business exchange between
Latin America and Canada, which could be very promising,
taking into account that the trade between Canada and Central
America grew by 63% during the last two years.

NCBA of the United States also develops since 1984 the
Co-operative Business International (CBI), a successful
program of co-operative business exchange, which offers
services in trade and marketing, investments, joint venture
and consultancy services.  Although its activity has been
focused in Asia and Europe,  CBI is expected to have a more
important role in the framework of the Region of the Americas.

In the different countries of the region there are new
consortiums and marketing agencies that join the old ones,
such as EXIMCO-OP from Brazil, FEDECO-OP, the marketing
organization for Coffee Co-operatives in Costa Rica, and CRUZ
AZUL in Mexico.
Experience is showing that even with the new adjustments, the
unfairness of the world market and the fanaticism of the
market, co-operatives are able to make spaces for themselves
and create successful experiences for the benefit of their
members.
Experience also shows us that institutional support may
accelerate these processes, but it can also suffocate them. 
Trade requires a certain speed, flexibility and maneuvering
space, which is normally absent in traditional structures.

In trade exchange, too much institutional framework is of no
help, because in the end, businesses and trade exchange, as
with many other things, including co-operativism,  is a matter
of the people.

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Abbreviations

CARICOM:  Caribbean Community

COLAC:    Confederacion Latino Americano de Cooperativas de
          Ahorro y  Credito 

CUNA:     Mutual Insurance Group

CCA:      Canadian Co-operative  Association

EXIMCO-OP: Exportadora e Importadora de Cooperativas
Brasileiras 

ICMIF:    International Co-operative and Mutual Insurance
          Federation 

FEDECO-OP: Federacion de Co-operativas de Caficultores R.L

ROAM:     Regional  Office for the Americas 

SDID:     Developpement International Desjardins 

SCC:      Swedish Co-operative Centre 

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* Mr  Pacheco is Regional Director of ICA for the Americas,
MBA Business Administration and Industrial Psychologist. He
has been the ICA's Regional Director since 1990.