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Allententown Morning Call
Puerto Ricans Find Hope In Cooperative Ownership
By Matthew Hay Brown
September 19, 2002
(RICARDO FIGUEROA/Allententown Morning Call)
FAJARDO, Puerto Rico -- When the plant that employed John Vallejo announced in February that it was closing down in seven weeks, he tried plotting out his narrowing future.
"The first thing I thought was that I was going to have to go to the unemployment center," remembers the father of four, a quality assurance inspector at the Comar Inc. plastics plant. "Then I started thinking about how I was going to take care of the bills. I assumed I was going to be out of work."
That was until a visiting consultant gave Vallejo and his co-workers an idea: They could buy the operation from its stateside owner and run it as an industrial cooperative.
Doing business since May, the newly christened Mar-Coop Molding has joined a small but growing number of employee-owned companies that have sprung up on this Caribbean U.S. commonwealth in the space left by departed mainland investors.
The trend remains modest. In most of the half-dozen or so cases so far, the new cooperatives have employed only some of the workers released by previous management.
But on an island buffeted by plant closings and capital flight, they offer the hope that local industry finally might begin to develop the homegrown ownership that ultimately could protect jobs here from the comings and goings of overseas investors.
"In the long term," says Irma Hilerio, head of the government agency that promotes the development of cooperatives, "this is going to give Puerto Ricans more control of the Puerto Rican economy."
That economy has struggled in the six years since Congress eliminated federal tax breaks that once lured manufacturers to the island. Stateside corporations have closed dozens of plants, leaving more than 28,000 workers jobless. After ranking in the 20s among U.S. states in manufacturing growth, Puerto Rico fell to last.
New Jersey-based Comar Inc., a manufacturer of pharmaceuticals packaging, had been in Puerto Rico for 15 years when it announced plans to sell or close its 26,000-square-foot Fajardo plant by the end of March.
As potential buyers toured the operation, consultant José Alsina asked for permission to meet with employees. A retired former manager with Warner-Lambert, Atari and General Signal, he encouraged workers to purchase the plant themselves.
The workers were intrigued, and Alsina went to work. He talked Comar officials down from their $3 million asking price to $2.25 million and identified a series of tax credits and grants that would reduce the effective price to $950,000.
Twenty-six of the 56 employees contributed from $2,500 to $25,000 each, for a total investment of $178,500. Together, they borrowed the difference and bought the plant.
The cooperative movement has deep roots in Puerto Rico, where a quarter of the 3.8 million inhabitants belongs to a credit union. But the industrial cooperative is a new phenomenon.
"Puerto Rico has been a colony," Alsina says. "We are an island of employees. We need to decolonize the mind. The first step of the cooperative movement is to train people from being employees to being entrepreneurs."
Former workers at Transworld Plastics in Sabana Grande; Pan-Am Shoes in Hatillo; Platex in Comerío; Hanes in Camuy; Orocoveña Biscuit in Orocovis; Creación de la Montaña in Utuado; and Coami in Isabela are at different stages of establishing or operating new employee-owned businesses.
"The important thing is the ownership the people gain," Hilerio says. "It's the best way to make business because it's the democratic way."
Hilerio's agency, Fomento Cooperativo, helps new cooperatives draw up bylaws and business plans, conduct economic studies and find grants and loans. Amid continued plant closings, its work is gaining attention.
"In the beginning, we had to sell the idea," Hilerio says. "Now people are coming to us."
Now the agency is gathering experienced business executives to develop a management-consulting cooperative, which would provide consulting services to new start-ups.
Economist José Villamil, president of the Puerto Rican Chamber of Commerce, says such companies could be part of a comprehensive economic plan for the island.
"They are certainly a step forward and can help resolve a major problem, particularly in industrial sectors, which are heavily labor intensive," Villamil says. "Obviously, the co-ops alone are not sufficient."
But Alsina calls the cooperative movement a "sleeping giant."
"The credit unions have combined assets of $5.5 billion, all making money," he says. "Close to 1 million people are members of credit unions.
"If you put together all this power, in terms of money, in terms of people, you have the most powerful organization on the island."
Ultimately, Alsina says, that power could be used not only to revitalize Puerto Rico's economy, but also to resolve finally its political status with the larger United States.
"Sooner or later, the relations between the island and the United States are going to have to be revised," he says. "The solution will be to sit down at the table, Congress and an assembly of the people, to set up a relationship. And it won't be a political relationship. It will be a business relationship."
Back in Fajardo, Vallejo still works as a quality assurance inspector, working the same hours for the same pay. But now he's a shareholder in Mar-Coop, looking forward to taking home his portion of the company's profits at the end of the year.
"It's very difficult to believe I've gone from being an employee to being an owner," Vallejo says. "I'm looking forward to building the company up."
Cooperative members have retained their co-workers, all of whom may buy in, and have added temporary workers to increase production. Now able to make marketing and sales decisions without going through New Jersey, they anticipate sales gains from a high of $4.9 million under Comar to a projected $10 million by the end of 2003. Profits will be shared according to each member's investment.
Quality assurance director Maria Pérez says she has seen the workplace atmosphere improve.
"The attitude here was good, and now it's even better," says Pérez, a member of the cooperative board. "I see workers being more proactive, taking the initiative, making sure everything is perfect.
"Of course, we all knew if this didn't work out, we'd be seeing each other at the unemployment line."