Venezuela Tries the Worker-Managed Route

While worker-managed businesses have been the dream of the world's socialists, in Venezuela they may become a reality. Using tottering companies as the entry point, Venezuela is offering financial incentives in exchange for implementing "co-management," in which workers are decision makers, in some cases even owners, of businesses across the country.

By Brian Ellsworth - The New York Times
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PUERTO ORDAZ, Venezuela--For 20 years, Pedro Gómez felt like he was just part of the machinery at his job at Aluminio del Caroní, a state-owned aluminum company in an industrial zone where the Caroní and Orinoco rivers converge in southeastern Venezuela. Gómez, 51, a casting table operator who shovels molten aluminum down a channel from an industrial oven into a cast that makes 3.6-meter, or 12-foot, billets, says management never listened to his complaints about corrupt contractors or shoddy equipment. But things have changed. Management is now heeding his request for a new casting table, he said, and will allow him to help determine the company's 2006 budget. This April, he was permitted to vote along with the company's other 2,700 workers to elect some of Alcasa's 19 managers and two of its five corporate directors. Most of the candidates were drawn from the rank and file. "The managers and the workers are running this business together," Gómez said above the din of rumbling forklifts and humming industrial fans, sweat dripping down his face from the heat of the casting house. "It gives us new motivation to work hard." While worker-managed businesses have been the dream of the world's socialists, in Venezuela they may become a reality. Using tottering companies as the entry point, Venezuela is offering financial incentives in exchange for implementing "co-management," in which workers are decision makers, in some cases even owners, of businesses across the country. The plan essentially casts the state in the role of rescuer. Four state-owned companies - another aluminum plant in addition to Alcasa, a coal plant and a power plant - have begun the programs. But incentives like cheap credit and debt writedowns from the government have also enticed more than 100 private, small and medium-size companies to adopt worker management models. Twenty-three of those have agreed to hand over between 10 percent and 49 percent of their shares to employees. Driving the campaign is President Hugo Chávez, who has promised to reverse the historical dominance of Venezuela's $64 billion oil industry over the economy by revitalizing sectors like textiles and paper, reducing reliance on imports and creating jobs at the same time - a task he believes is best left to workers. The worker management campaign comes as Chávez has embraced socialism in a political project that promises to roll back the free-market policies implemented in Latin America throughout the 1990s. "This is a new organizational culture," says Alcasa's president, Carlos Lanz, 62, a Marxist former guerrilla with no background in aluminum who most recently developed educational programs in rural Venezuela. "The workers are operating as a collective rather than receiving orders from a group of experts." Despite the enthusiasm of Alcasa's workers, the company's balance sheet leaves little room for optimism. Alcasa has lost money for years, posting a $90 million loss in 2004, and this year's budget indicates that the company could lose as much as $59 million as outdated technology and foreign competition continue to take a toll. A planned $650 million investment by the Swiss commodities trading company Glencore, aimed at doubling Alcasa's output, has been suspended. Critics say state involvement in co-managed businesses will likely create uncompetitive enterprises, much like the sluggish state-owned companies that survived throughout the 1970s and 1980s on government subsidies. It is also unlikely to bring about the diversification from oil that Chávez is seeking. "Since the discovery of oil in Venezuela, businesses have lived from the transfer of oil revenue, but have never produced sustainable economic activity that didn't depend on oil," said Orlando Ochoa, an opposition-affiliated economist who is a professor at Andrés Bello Catholic University in Caracas. "Chávez is now insisting that co-management can resolve this problem, which is simply naïve." Since the program began this year, the government has spent at least $25 million to revive bankrupt and failing private enterprises. Chávez has said he would expropriate as many as 700 bankrupt companies and others that are working below capacity. Here at Alcasa, in the industrial city of Puerto Ordaz in Venezuela's sweltering southeastern savanna, Lanz speaks more comfortably about Latin American currents of Marxism than about aluminum production. Lanz served seven years in jail for the 1976 abduction of the American glass industry executive William Niehaus, who was held for three and a half years. But workers also point to changes in the workplace that they say will make the company run smoother. Johnny Viera, a 35-year-old maintenance worker in Alcasa's stamping plant, along with his 300 co-workers, participate in roundtables that make recommendations to management, a process that recently allowed him to quickly purchase $5,000 worth of wrenches, drills and screwdrivers. It is too soon to say what the outcome of the worker management program will be, but workers seem optimistic. "This is the workers' opportunity to improve this company's performance," said Estalin Orta, 42, a recently elected manager of Alcasa's casting plant, chatting in an air-conditioned office above the din of the manufacturing operations below. "And we've started at a company that has had serious financial problems - so no one can say we took the easy road."