News

Under workers' control - Argentina's struggling factories.

469 words
9 November 2002
The Economist
English
© The Economist Newspaper Limited, London 2002. All rights reserved

Argentina's collapse

How some Argentines are saving their jobs

WHEN sacked workers at Ghelco, a bankrupt maker of ingredients for ice cream, discovered earlier this year that the firm's owners were selling its assets, they put up a tent and started camping outside their former workplace in protest. Two months later, their campaign bore fruit, when the court handling the bankruptcy hearings leased the factory to them for a peppercorn rent. Now, minus the managers who accounted for a third of Ghelco's 90 employees, the factory is working again.

Ghelco is just one of 130 Argentine companies that over the past four years have risen from the ashes of bankruptcy under employee management. Together they provide around 10,000 jobs - not to be sniffed at in a country where one in five is unemployed. They are a small part of the explanation for the surprising resilience of Argentina's economy and social fabric, after its December devaluation and debt default. But their existence is also testament to the erosion of property rights that in the long run may make Argentina's recovery harder.

Most of the worker-controlled firms are merely scraping along. IMPA, a manufacturer of aluminium containers, has retained 147 staff, although it could function with 90, admits Eduardo Murrua, the production manager. "We have shared out what we don't have in solidarity," he says. The workers have responded with improved productivity and innovations such as switching to scrap as a raw material, reducing costs by 40%. Ghelco, with monthly sales of only 200,000 pesos ($56,000) stopped paying wages for a while. Now, it pays 190 pesos a week - well above the average wage. Everyone receives the same amount, including the new managers being trained by Luis Caro, a lawyer who is advising the workers.

He argues that the system helps creditors as well as workers, since keeping the factory open stops machinery deteriorating or being vandalised. It also ensures that standing charges, such as property taxes, are paid. If and when the courts decide to put the plant on the market, all of this would ensure a better price.

This cuts little ice with the banks, which generally advocate winding up the company and selling its assets to recover what they can. But rather than bankers, Argentina's judges usually prefer to side with workers who would otherwise become unemployed. Worker-operated factories have also begun to attract support from President Eduardo Duhalde's government, and its provincial counterparts. If all this smacks of past revolutions, from Bolshevik Petrograd in 1917 to "Red Clydeside" in Britain in the 1970s, that might be misleading. "This movement doesn't threaten capitalist companies," says Mr Murrua. "We are simply taking over companies that don't work."