Options for popular economy

Transition from the very small to medium scale ventures of the popular economy. Can it be addressed? What kind of support is needed?

 

We have said that popular economy is not like a hunting preserve to leave the poor and marginalized cornered; on the contrary, it can be transformed in one of the founding columns of the new course and way of functioning orientated towards the general wellbeing and the protection of the environment.

However, a very strong dynamic concentrator of wealth and decisional power prevails in the world, which considers popular economy as a space to be ignored or, at most, to serve very tepidly with charity programs disconnected from the march of the economy. Without political backing or support systems, popular economy and social movements that are part of such space survive unable to reverse the restrictions that grip their evolution.

Facing harsh conditions of lack of capital (own savings or those of third parties), of commercial and technological management, with little information regarding opportunities and market access, almost without contacts with eventual strategic partners and with a rudimentary organization for addressing productive activities, participants of the popular economy are familiarized with the causes that explain their situation, previous step for identifying substantive solutions. Solutions that might let them access cycles of expanded reproduction without losing values of solidarity towards their communities. That is, stocking up on effective productive responses while preserving attitudes distant from endless greed, selfishness of working without considering the impact of one’s own actions on the community.

In this context, a critical factor to solve is the transition from the very small scale of ventures of the popular economy towards new productive and commercial activities of medium and large size.

In other articles, we have presented support modalities for the popular economy from a systemic perspective. Whereas, in these lines we will analyze how to unfold support options from the case of a specific project that was recently announced: a medium-size international investment favored with some protections that reduce initial risks and reinforce its viability. The question that will guide our analysis is if, with equal protections, a similar productive initiative could be assumed by some segment of the popular economy.

Reference case[1]

 It is worth to explicit that we do not question the announced investment as we do not know such relevant aspects as of who leads it, their motivations, honorability, which attitudes they will assume before the local community. This is, it is not about evaluating its merits but rather to extract lessons from how it was planned; lessons that might be useful to favor popular economy, of course, provided that they are developed correctly.

The reference case is a Polish enterprise that invests 7 million Euros in a plant for producing LED luminaire[2] in Misiones province, Argentina. The enterprise operates in 70 countries, not a minor data, but its production is done in two plants in Poland. The factory that has just been inaugurated in Misiones is the first one outside their country of origin.

The new enterprise will focus first in the public luminaries market: lights for parks, streets, highways and other public spaces. Then, they will add illumination for buildings such as schools, hospitals, offices and libraries.

The plant will produce the modules, the core part of the LED luminaries where you find the circuits, and it will assemble the other parts such as the casings and glasses. They are already working on integrating ever more local components into the final product.

Misiones province assured the Polish firm two purchase orders along the following years for a total of 20.6 million Euros.

Possibility of undertaking similar initiatives in the popular economy

It is worth considering if this modality of investment is the unique way that exist to establish medium-size promising industries in our countries or if similar projects could be promoted to strengthen popular economy; the LED luminaries is just one example. Let’s see.

The investment that has just established in Misiones must have assessed several positive factors to decide its location. Certainly, a location with easy access to three interesting markets: the own Argentina and also the proximity with Brazil and Paraguay. In those countries, there is a still unattended demand derived from the need to transform the current provision of conventional luminaries. The availability of well-trained labor force with low salaries measured in dollars and the possibility of developing local suppliers of certain inputs such as casings and glasses must have influenced. A critical factor must have been the agreement with the province government, of which we only know about the two purchasing orders for 20.6 million Euros, assured sales that significantly reduce commercial risk.

If we wanted to develop this type of new middle-size ventures within popular economy we would have to solve how it would be materialized and prove that this modality better serves the interests of the country.

How to materialize this eventual venture of the popular economy

An associative middle-size venture of the popular economy must address several questions, mainly, the structure of ownership of the venture, the need of counting on start-up capital and then operation financing, having appropriate technology and an effective managerial ability, adequate information regarding commercial opportunities and having a marketing structure able to access markets where those opportunities appear. These are huge challenges that must be addressed and solved. Here are some possibilities.

In relation with ownership structure of the venture, it must be defined in a way to preserve its associative base and assure efficiency in management, including modalities of minority inclusion of eventual investors and, if needed, strategic partners. There is a large variety of associative ways of addressing productive processes, such as cooperatives, community marketers, producers’ consortiums for stocking up on inputs and services, stockpiling, processing, and transport ventures,   holdings to integrate several ventures, locomotive agro-industries, popular franchises, community supermarkets and other already existent forms or that might be developed as time goes by and new technological, economic, or political circumstances appear.

In relation with start-up capital and operational financing, albeit they are significant figures for the popular economy universe, they are not for groups of contributors committed with backing solidarity initiatives. This can be solved case by case resorting to contributions from the national, provincial, and municipal public sector, solidarity resources from foundations and secular or worship development entities; non-reimbursable contributions from private enterprises with social and environmental responsibility. Certainly, it would be more effective not having to work case by case gathering such diversity of contributors, but rather having trusts funds specialized in investing in the popular economy and funding financial entities that serve operational needs, a public policy aspect that is explained in detail at the end of this article.

In relation with having appropriate technology and managerial ability, they already exist in the countries or can be imported. LED technology is well-known and applied in almost every country. What is not so easy is to manage a venture of such size and nature, thus, it will be necessary to carefully select who will manage it, assist him/her with whatever is needed, form an efficient team of workers, and associate to some extent incomes to results so as to align correctly the interests of all participants. When experienced professionals in management, appropriate technologies, marketing, logistics or stockpiling management, among other fields of specialization, are needed, it will be strategic to include local cadres to teamwork with them as a way to develop that expertise inside the own popular economy for all levels of the business.

In relation with information on opportunities and market access, it is very likely that it will be necessary, at least in the beginning, to establish very well defined commercialization agreements with strategic partners that might have expertise and structures to promote and sustain sales in non-local markets.

 Each challenge has its complexities and not always we find the experience and knowledge needed within the popular economy. Thus, the strategic importance of counting on developers of this type of associative middle-size ventures to assist them in its startup structure and functioning, another issue that is analyzed below.

 Why does this initiative better serve the interests of the country?

In principle, positive impacts of addressing this type of project from the space of the popular economy will be highly superior to the option of doing it as a foreign investment. On the one side, it would imply mobilizing local capital towards a good investment opportunity inside the country. It would be useful for developing medium-size ventures in the popular economy, which in turn would contribute to a more effective and sustainable productive inclusion of important population segments that are currently unemployed or underemployed in survival activities. Given their origin and nature, these ventures of the popular economy would assure that most, if not all, of the multiplying effects they create may remain inside the country (particularly, subcontracting). This type of venture would not contribute to the permanent outflow of foreign currencies, a very important restriction in economies with recurrent external sector bottlenecks. It would also allow for getting to know and eventually access new external markets, opening perspectives to promote other exports. It would orientate part of the scientific and technological development towards a productive fabric centered in national medium-size production. It would develop responsible productive units closely linked with their communities and territories, with a decisional power based on the country instead of in international headquarters whose decisions are adopted in terms of maximizing the return of the whole corporation and not necessarily on the interests of the countries where their investments are located.

From this perspective, popular economy will travel a more promissory path for its development as a critical sector of the country’s economy.

Returning to the systemic perspective

 The example used in these lines just adds arguments to support those who work hard with organizations of the popular economy. There is no doubt that there is a variety of options to develop popular economy in a sustainable way, carefully preserving their values and associative base. What is missing is an ad hoc support system that would allow for identifying good opportunities and assisting in the structuring and functioning of new medium-size ventures.

The challenge is to identify appropriate instruments that can be accepted and eventually adopted by the organizations that operate in such a heterogeneous social universe. This means that those instruments be of real usefulness for the communities of the popular economy, embracing the diversity of cultural and economic circumstances that coexist within it.

With that warning, we consider two significant support instruments.

Developers of ventures from the popular economy

These developers should operate under the leadership of the organizations of the popular economy as instruments to support the strengthening of existent ventures and assist in the creation of new ones of larger scale based on the association of efforts. It is up to each organization the definition of whether to count on a developer and, if so, which would be its profile, reach, and way of functioning.

Middle-size ventures facilitate access to a progressive capitalization that, in turn, influences over better management and allows for entering more promissory markets. We are talking about management excellence, appropriate technologies, retaining the generated value to allocate it to what members of the venture decide. All this while guarding values of solidarity, respect for the other, for the communities they live in and with which they relate, for the protection of the environment and a responsible participation in the local and national course.

Trust funds specialized in popular economy

A necessary complement to developers of popular ventures is to count on resources to finance the startup and operation of these ventures. One modality, among others, that could serve this purpose are trust funds specialized in financing popular economy. Their functions would include an investment line in startup capital for new ventures and another in assigning resources to entities that provide credit to the popular economy.

These trusts can be capitalized through a diversity of funding sources depending on the prevailing circumstances in the country and territories. What is important is that non-commercial sources take prevalence as the criterion for allocating resources is not limited to maximizing financial results but also in strengthening popular economy. This does not imply allocating resources as non-repayable because it is necessary to obtain modest benefits that assure the sustainability and continual operation of the trusts.

The capitalization of the trusts can come from national and local public contributions, solidarity contributions from foundations and enterprises, external backings committed with equity and sustainability and, surely, own operative results. It is important that organizations of the popular economy also participate at the management level of the trusts.

Let us close these lines by answering its initial questions. Definitely, it can be addressed the passage from a very small scale of ventures of the popular economy to another of medium size. Also, yes, to achieve it, we need the supports (the ones suggested here and others) as it always happens throughout any economic system that functions with equity, effectiveness, and social harmony.

[1] Martin Boerr, article published in La Nacion, October 31st, 2018

[2] LED lights consume 60% less energy than conventional ones

 

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