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Grassroots Organizations and Markets: Two Case Studies in the Amazon Region

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Grassroots Organizations and Markets: Two Case Studies in the Amazon Region
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ROJAS, RAFAEL OSWALDO ( Author, Primary )
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2008

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Assets ( jstor )
Community associations ( jstor )
Forests ( jstor )
Nonprofit organizations ( jstor )
Nuts ( jstor )
Political organizations ( jstor )
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Social capital ( jstor )
Social movements ( jstor )
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University of Florida
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University of Florida
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Copyright Rafael Oswaldo Rojas. Permission granted to the University of Florida to digitize, archive and distribute this item for non-profit research and educational purposes. Any reuse of this item in excess of fair use or other copyright exemptions requires permission of the copyright holder.
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4/30/2006
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GRASSROOTS ORGANIZATIONS AND MA RKETS: TWO CASE STUDIES IN THE AMAZON REGION By RAFAEL OSWALDO ROJAS A THESIS PRESENTED TO THE GRADUATE SCHOOL OF THE UNIVERSITY OF FLOR IDA IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE DEGREE OF MASTER OF ARTS UNIVERSITY OF FLORIDA 2003

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Copyright 2003 by Rafael O. Rojas

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To my parents: Edelmira and Oswaldo.

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ACKNOWLEDGMENTS This thesis is part of a process that began many years ago, when I was attending the Catholic University in Peru and got involved with a group of professors and students interested in the Peruvian Amazon as a topic of research. That process continued with my work experience in the field, especially in the Madre Dios region in the southern Peruvian Amazon, and finally with my coming back to the academic realm at the TCD Program in the Center for Latin American Studies. Thus, I must acknowledge everyone that helped me in this process. Ton de Wit, Martha Rodriguez and Marcel Valcarcel were the professors that supported my discovery of the Peruvian Amazon. Julio Lossio, Coco Elgegren and other students shared the discovery with me. I also thank all my friends at CI-Peru and all the “huarayos” friends I met during my work experience in Madre de Dios; because of them the Peruvian Amazon became a commitment rather than a research topic. I must acknowledge Marianne Schmink, who helped me to rediscover the challenges and rewards of research while at TCD. Finally, I should thank Hannah Covert, who provided worthy help in my struggles with the English language and was an important companion during the writing of this thesis. iv

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TABLE OF CONTENTS page ACKNOWLEDGMENTS.................................................................................................iv LIST OF TABLES............................................................................................................vii LIST OF FIGURES.........................................................................................................viii ABSTRACT.......................................................................................................................ix CHAPTER 1 INTRODUCTION........................................................................................................1 The Research Problem..................................................................................................1 Methods........................................................................................................................3 2 DEVELOPMENT PROJECTS.....................................................................................6 The New Development Approaches...........................................................................10 Grassroots Organizations.....................................................................................14 Non-Government Organizations (NGOs)............................................................18 Social Capital.......................................................................................................21 The Market..........................................................................................................24 Productive Projects.....................................................................................................26 3 PRODUCTIVE PROJECTS IN RIBERALTA AND PUERTO MALDONADO.....30 The Cooperativa Agricola Integral “Campesino” – CAIC.........................................31 Physical Characteristics.......................................................................................32 Socio-economic Characteristics..........................................................................33 CAIC’s Formation Process..................................................................................37 Support Organizations.........................................................................................40 The Industrias Alimentarias Madre de Dios – INDAMAD........................................41 Physical Characteristics.......................................................................................43 Socio-Economic Characteristics..........................................................................43 INDAMAD’s Formation Process........................................................................46 Support Organizations.........................................................................................48 v

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4 EXTERNAL FACTORS AND ORGANIZATIONAL CHANGES IN PRODUCTIVE PROJECTS.......................................................................................51 Challenges for Grassroots Organizations...................................................................52 Lack of Participation...........................................................................................52 Unpaid Debts.......................................................................................................53 Diverse Visions...................................................................................................54 Lack of Cohesion.................................................................................................57 Outsider-Driven Proposals..................................................................................58 Weaknesses in Enforcement and Decision-making Systems..............................59 External Factors..........................................................................................................64 Market Conditions...............................................................................................65 Supply...........................................................................................................65 Demand........................................................................................................66 Type of product............................................................................................67 Business services..........................................................................................67 Support Organization Involvement.....................................................................69 Financial capacity.........................................................................................70 Technical capacity and experience...............................................................71 The Political Institutional Context.......................................................................73 Different Organizational Responses...........................................................................76 5 CONCLUSIONS........................................................................................................82 LIST OF REFERENCES...................................................................................................87 BIOGRAPHICAL SKETCH.............................................................................................91 vi

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LIST OF TABLES Table page 3-1 Population Growth in the Pando-Beni Region.........................................................35 3-2 Population in Madre de Dios and Intercensus Growth............................................44 3-3 Distribution of Agriculture Units (AU) by size in provinces in the years 1972 and 1994...................................................................................................................45 vii

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LIST OF FIGURES Figure page 3-1 CAIC Location.........................................................................................................31 3-2 INDAMAD Location...............................................................................................42 4-2 Enhancing Factors....................................................................................................68 4-3 Buffer Factors...........................................................................................................73 viii

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Abstract of Thesis Presented to the Graduate School of the University of Florida in Partial Fulfillment of the Requirements for the Degree of Master of Arts GRASSROOTS ORGANIZATIONS AND MARKETS: TWO CASE STUDIES IN THE AMAZON REGION By Rafael Oswaldo Rojas May 2004 Chair: Marianne Schmink Major Department: Latin American Studies This study focuses on grassroots initiatives that can be referred to as “productive projects.” Productive projects implement collective initiatives to transform and/or commercialize natural resources, in order to generate more income for the population involved. Usually, there is a support organization involved in initiatives or experiences like these projects. The support organization can be a non-governmental organization or some kind of governmental cooperation or aid agency. This thesis entails a comparative analysis of two productive projects: the Cooperativa Agricola Integral “Campesino” (CAIC) in Riberalta, Bolivia, and the Industrias Alimentarias Madre de Dios (INDAMAD) in Madre de Dios, Peru. The study evaluates how well-fit grassroots organizations are to work in the market, and within this main concern, it focuses on the organizational realm of the productive projects and how changes in this realm were affected by external factors. ix

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These external factors can act as buffers or enhancers of the challenges faced by productive projects. These factors include the market characteristics, the support organizations, and the political-institutional context. First, when market conditions are more challenging, there will be more incentive to implement a more agile decision-making system and an enforcement system that assures agreement and compliance among members. Second, outside support can act as a buffer for challenges, and therefore reduce the necessity of adjusting the organization. Finally, the political-institutional context will act as a constraint for change because other organizations that are part of the institutional context assign specific roles to the productive project according to their ideologies and agendas. The organizational changes that both CAIC and INDAMAD undertook were towards a stricter and more effective enforcement system, and a more centralized and agile decision-making system. However, it was found that INDAMAD undertook more extensive changes because it faced tougher market conditions, did not benefit from a large and experienced support organization, and was surrounded by a weak political-institutional context. x

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CHAPTER 1 INTRODUCTION The Research Problem Initiatives of grassroots organizations involved in the market are currently very common. They are usually carried out in rural areas, where grassroots organizations control part of the available natural resources and are interested in marketing their products (Scherr et al. 2002). Grassroots projects are common in part due to the variety of advantages assigned to them. It is assumed that these projects can play an important role in conservation of natural resources (Salafsky et al. 1999), they can act as a sustainable tool to overcome poverty (Alvarez 1990), and they can also be used as a tool to empower specific social groups. This study focuses on grassroots initiatives that can be referred to as “productive projects.” Productive projects implement collective initiatives to transform and/or commercialize natural resources, in order to generate more income for the population involved. Usually, there is a support organization (SO) involved in initiatives or experiences like these projects; it can be a non-governmental organization (NGO) or some kind of governmental cooperation or aid agency. Although there are no comprehensive data about the volume of resources invested in productive projects, any experienced development practitioner is likely to agree that the amounts are significant. This thesis entails a comparative analysis of two productive projects. In analyzing the experiences of the Cooperativa Agricola Integral “Campesino” (CAIC) in Riberalta, Bolivia, and the Industrias Alimentarias Madre de Dios (INDAMAD) in Madre de Dios, 1

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2 Peru, this research will evaluate how well-fit grassroots organizations are to work in the market. Within this main concern, this study will focus on the organizational realm of the productive projects and how changes in this realm were affected by external factors. These external factors can act as buffers or enhancers of the challenges faced by productive projects. These factors include the market characteristics, the support organizations, and the political-institutional context. First of all, when market conditions are more challenging, there will be more incentives to implement a more agile decision-making system and an enforcement system that assures agreement and compliance among members. Secondly, outside support can act as a buffer for challenges, and therefore reduce the necessity of adjusting the organization. Finally, the political-institutional context will act as a constraint for change because other organizations that are part of the institutional context assign specific roles to the productive project according to their ideologies and agendas. This study therefore set out to examine changes in the enforcement of rules and in decision-making systems in two case study grassroots organizations that differed in terms of favorability of market conditions, support from outside organizations, and roles assigned by the institutional context. In order to deal with the challenges of productive projects, the grassroots organizations under study undertook some changes in the realm of the enforcement of rules, and decision-making systems. This is plausible since these systems were a potential pitfall for market-driven initiatives, and were the source of the problems that were relatively easy to fix. The changes in both CAIC and INDAMAD were towards a stricter and more effective enforcement system, and a more centralized and agile decision

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3 making system. However, it was found that INDAMAD undertook more extensive changes because they faced tougher market conditions, did not benefit from a large and experienced support organization, and were surrounded by a weak political-institutional context. The productive projects chosen for this research have been in existence for many years, and both are situated in the Amazon region. It is the long duration of these experiences that makes them interesting cases for research. This feature provides important insights about the interaction of actors in these experiences. As will be shown in the following chapters, these experiences take place on the frontiers of their national economies, and for this reason, they face some common problems. Methods Most of the data used in this thesis were collected during fieldwork conducted in July and August, 2002. The most important tool to collect information was participant observation. I spent approximately three weeks in the CAIC offices observing its daily activities, maintaining informal conversations with the plant workers, and observing the work of the commission in charge of developing the new internal statutes. I also attended a meeting of the rural workers federations that is closely related to CAIC, and did a presentation in Cobija to members of NGOs that work in the area. In the case of INDAMAD, I also spent about three weeks in its offices, observing its activities and interacting with workers in the plant and members that came to the offices. I also conducted interviews with officers and members of both projects. In the case of CAIC, I conducted ten interviews with six of the thirteen officers and four of the approximately fifty active members. At INDAMAD, I conducted eight interviews with four of the eight officers and four of the approximately forty active members. The sample

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4 was selected by using the snowball sampling method (Bernard 2002). This method was chosen because it helped in both introducing me to the interview participants and in their agreeing to be interviewed. The interviews were semi-structured, but the same questions were asked of each person: how old they were, where they were from, how they got involved in the project, what was their opinion about the project, what they thought the main problems were in the projects, and what should be done about them. The same structure was kept for interviews with officers in other grassroots organizations and practitioners in NGOs working in the same area: 3 interviews in the case of INDAMAD and 5 in CAIC. This research design responded to the necessity of building trust with the members. The main purpose of the interviews was to identify perceptions about the projects’ problems and possibilities for solutions. Also, some of the topics this research had to take up (such as unpaid loans) are not openly discussed with outsiders, and often the person you are talking with is part of the problem you want to discuss. Establishing a relaxed and trustful environment was crucial to having a successful interview. The relaxed format of semi-structured interviews allowed me to build a trustful environment during the interview and discuss topics freely as they came up. I was also able to conduct a focus group with members of CAIC, using the same questions used in the interviews. This activity was very interesting due to the diversity among participants: a young male, a young female, an old male, a CAIC officer, and another middle aged male. Participants in this focus group were volunteers selected from a meeting of the local workers federation. The informal environment during this activity

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5 was very useful, allowing participants to openly confront their points of view. Because of political problems in the area, I was unable to conduct a focus group in INDAMAD. 1 In addition to the interviews and focus group, I reviewed official documents to collect information about the internal organization and decision system of each productive project. National and regional socio-economic statistics were also collected in order to define the socioeconomic context of the locations where the projects are conducted. The next chapter is focused on introducing and discussing the main concepts that are going to be used in this thesis. It also includes a description of the evolution of approaches to development, with the purpose of understanding how the idea of productive projects arose. Chapter 3 includes an ample description of the productive projects and the context where they were conducted. This chapter also introduces the main variables that were analyzed. The results and discussion are presented in Chapter 4. Finally, Chapter 5 provides some final conclusions based on the results of the thesis 1 When I conducted my research at INDAMAD (in Madre de Dios), a strike of small loggers developed. This strike lasted more than two weeks and the main roads were closed in the area. The strikers burned down some government buildings and a NGO office. These conditions caused a lot of constraints on my fieldwork.

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CHAPTER 2 DEVELOPMENT PROJECTS The development issue as we know it appeared after World War II (WWII). By that time, the economic differences between the former colonies and other countries and the United States (U.S.) and European countries could not be denied. In this context, most of the countries in the world met at the Bretton Woods Conference in 1944. At this conference they decided to support national economies on their path toward growth and development. For this purpose, this conference created the International Monetary Fund (IMF) and the International Bank of Reconstruction and Development currently known as The World Bank. In this environment the nations undertook the Marshall Plan for Europe in 1947. Although this plan was influenced by a concern about the spread of communism in Europe, it also reflected the increasing importance of the Keynesian approach, which emphasized the role of government as a key tool to maintain the economic path of stability and growth. This stress on the importance of the state in growth and development would influence the programs and proposals about development over the next 40 years (Colclough 1982; Library of Congress 10/15/2003). In this same atmosphere on the American continent, the Inter-American Development Bank was established in 1959. The activity of this new institution encompassed the underdeveloped countries of South American and the Caribbean, having “economic and social development” as its main goals. The IDB focused its resources on 6

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7 the productive sectors of agriculture and industry and on infrastructure related to energy and transportation (Martin 2002). Because of these events, many call the 50's the “First Development Decade”, one of widespread concern about the need and potential to support development in the new nations that emerged from the colonies. Most of the support was provided for activities aimed to increase income and to improve social welfare (Bennet 1988). In the same way, other types of international agencies were created. Some were governmental agencies as the United States Agency for International Development that was created in 1961 with the goal of “furthering America's foreign policy interests in expanding democracy and free markets while improving the lives of the citizens of the developing world” (The United States Agency for International Development 10/25/2003). At the same time, European countries began to create agencies with similar purposes. For example, the Netherlands development organization, which was founded in 1965, focused its work on providing basic services to poor people in the underdeveloped countries (Stichting Nederlandse Vrijwilligers 10/25/2003). The German government came up with other agencies that undertook development projects; these agencies would fuse into the GTZ by 1975 (The Deutsche Gesellschaft fr Technische Zusammenarbeit 10/26/2003). Although many of these initiatives are explained by the Cold War’s goal of detaining the communist advance, there was also a lot of new thinking about development, especially in the social sciences, that influenced the creation of these agencies. The new notions of development were linked to the idea of social evolution, a very old idea. The concept of social evolution was strongly influenced by Charles Darwin’s

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8 work in biological evolution. In the 19th century, social scientists (Comte, Maine and Morgan) assumed that human society would move from primitive to complex or advanced societies. The stages that society would follow in its path towards “improvement” differ among authors, but the movement itself was rarely questioned (Appelbaum 1970). In the early 1950s, W. W. Rostow started to build his vision about development, and in 1960 published The Stages of Economic Growth: A Non-Communist Manifesto . This book is important because it became the customary version of development. It defined five stages of development and the necessary conditions for developmental "take off" (Rostow 1971). In Rostow’s vision the mechanism or drivers of development are not specified. From a different perspective, other authors provided additional insights about development that were more subjective. The differences between primitive and modern society were linked to the psychological attitude of their members. In modern societies, the motivation for achievement was seen as a driving force for most of their members (McClelland 1961). Thus, changes in attitudes were necessary in order to reach development. The Lewis Theory of Development to some degree assumed the Rostow approach. However, the Lewis approach does not focus on defining specific stages in the path towards development, but rather defines the mechanics of change (Lewis 1955). While Lewis maintains the vision of development as a transition from a primitive society toward a modern society, his theory also embraces the discussion about the relationship between two sectors within societies: the agricultural-rural and the industrialized-urban (Todaro

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9 1977). However, as in Rostow’s proposal, the model of development is western industrialized society. Since Lewis’ Theory incorporated the discussion about internal relationships within societies as a way to understand the process of development, it can be considered as a bridge between Rostow and the new theories such as Dependency Theory and the approach developed by the Economic Commission for Latin America (ECLA). Both approaches, while focused on the internal dynamics in underdeveloped societies, also added the international context as a key factor to understand the development (or underdevelopment) process. Dependency theory stressed the inequity among nations produced by imperialism; by assigning roles as exporters of raw material and producers of manufactured goods, the system amplified and reproduced the inequity between nations (Cardoso 1972). The ECLA also focused its proposal about development on the relationship between center (industrialized) and periphery (non-industrialized) countries. The cornerstone in its approach was the assumption that the terms of trade deteriorate over time. This condition is related to the features of technological change in the center, and to the labor market and the relation between rural and urban realms in the periphery. The main consequence is the transfer of surplus from the center to the periphery (Baer 1962). While in Dependency Theory the path to development was associated with change in political conditions, the emphasis in the ECLA approach was on the economic sphere. Its proposal was to undertake industrialization, with the subsidies and support of the state. This industrialization should be based on the substitution of manufactured goods that were imported from the center.

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10 At this point it is important to stress that in almost all development approaches reviewed, the state plays an important role. Through the implementation of certain reforms related to investment, industry or education, with the support of the developed countries, the state would direct development. However, in most of the proposals, the state does not have a defined face; it represents all and anybody. In addition to the role assigned to the state, these approaches considered development as something inevitable and also as a process that underdeveloped countries had to follow in order to “catch up” with the developed western world (Bennet 1988). In the 1980s a new approach started to gain importance. A market-driven approach to development became widespread. It pushed economic policies to abolish tariff barriers to commerce, eliminate subsidies to consumers, have government withdraw from the economy, and open national economies to the flow of foreign capital. The outcome of this approach was not uniform it accounts for some successes and also for many failures in developing countries (Portes 2000a). By the same time a new element was included in the discussion about development: the environment. This element arose from evaluating the effect of development on the environment through pollution and from questioning the potential of development by taking into account the availability of resources. Although the inclusion of this issue in the development discussion is recent, it has influenced all of the approaches on different levels (Sutcliffe 2000). The New Development Approaches In the 1970s the so-called “development projects” pushed by governments were assigned an important role. With the support of international agencies such as the World Bank, governments started to invest in roads, electrification programs, education, and

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11 health. Developed countries also provided resources for the implementation of development projects. However, by the beginning of the 70’s it was clear that the implementation of development projects was facing a lot of problems. The critics provided different reasons for the difficulties and they (the reasons) came from different realms: The negative results of the so called “development projects” New practitioners that came into the development field, such as anthropologists, began to rethink the theory behind development projects. New social actors appeared, such as the social movements in Latin America. The presence of these actors fostered a rethinking of development approaches. In the 70's, the evaluations of development projects were generally negative. Most of the projects supported by the international development agencies did not have the expected outcome. On the contrary, most of them generated additional problems such as income inequality (Bennet 1988). In addition, many development projects faced some failure in the implementation phase because of the outrageous bureaucracy within the governments of the underdeveloped countries, as well as problems of corruption. Furthermore, many development projects caused serious negative impacts on the environment and in some cases on indigenous populations. These negative outcomes were due to the simplicities of the economistic approach (Bennet 1988), which assumed that development or improving living conditions was only a matter of providing some technical skills or building some key infrastructure. This approach disregarded the socio-cultural conditions that are very important in many social groups in underdeveloped countries. Another reason given for failures of development projects was the lack of government capacity to conduct development projects.

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12 The incorporation of practitioners from different backgrounds also implied the rise of new critics of the current development approach. Anthropologists played an important role in this awareness; their main concern was related to the defense of local populations’ right to participate in the definition of their destiny (Bennet 1988). The concern of anthropologists was related not only to the theoretical frameworks, but also to the work they typically conducted. Most of the anthropological research before the 70’s was focused on cultural change. For that reason, anthropologists and development practitioners had almost the same work subjects: the “poor social groups” targeted by development projects were “traditional social groups” studied by anthropologists. On the other hand, the holistic tendency in anthropological theories helped to overcome the simplistic approach used by development practitioners in the 70’s. Anthropology made evident the complexity of relationships within traditional groups, and also the means-ends relationships in development projects (Hoben 1982). The ascendance of social movements in Latin America is another important factor to explain the change in the development approach. Social movements were consolidated as a consequence of the mobilizations of urban sectors against authoritarian and military regimes. The role of these movements in the process of democratization in Latin America was key due to the political character of these mobilizations. However, these movements were basically motivated by material demands. They became political because the state did not attend to the demands, and the movement for better conditions turned into a movement for conditions to place demands and make claims (Foweraker 2000).

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13 There is a lot of debate about the potential of social movements, and the frameworks used to understand them ( Foweraker 2000; Stokes 1995). Nevertheless, what is above any disagreement is that the rise of social movements implied the rise of a new actor in the social realm in Latin America, a new actor that demanded to be taken into account in the sphere of development practices. In addition, it is important to stress that most of the collective action of these movements implied not only political participation, but also social action to improve living conditions in urban neighborhoods. Thus, the rise of social movements also meant capacity building among the poorer sectors in Latin America to solve their problems. Another key element of social movements is the role played by the social context. Tanaka (1999) points out that collective action will be more likely when there are more possibilities of being successful, and the possibilities of success are strongly related to the presence of “support groups.” The support groups provide resources and capacity building to the social movement. These groups usually came from the leftist parties, NGOs, and organizations close to the Catholic Church. In regard to the Catholic Church, the role it played was the result of a process that began after WWII with the Second Vatican Council in 1961-65. In the case of Latin America, the Catholic bishops shaped this process through the Medellin and Puebla Conferences in 1968 and 1977. This process produced and at the same time was fostered by Liberation Theology, developed by Latin American priests. This new theology stressed the necessity that the church accompany poor people in the struggle of liberation from oppression, as well as support the option of the poorest as the right way for the praxis of Catholicism (Smith 1991).

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14 As a result of this new approach in the Catholic Church, a huge organizational task was carried out. By 1978, there were approximately 200,000 Ecclesial Base Communities in Latin America (Smith 1991). In some instances they were developed through semi-official organizations such as the Comisso Pastoral do Terra in Brazil or the Pastoral Social in Peru and Bolivia. In others, individual priests developed them. As a final result of this activity of the Catholic Church, there would be a denser network of organizations within the rural and urban sectors, and also some new capacities within these sectors to address their problems and further, to develop proposals about what they needed and how to implement them. The previous development approach labeled as “top-down” because of its failure to include local stakeholders in development project implementation (Carrol 1992) was replaced by new development proposals that incorporated new features and new actors. In the following section some of these new features will be briefly discussed. The main focus, however, will be some of the new features or ideas that are important for this study: grassroots organizations, support organizations, and the concept of social capital. Grassroots Organizations In the last two decades, grassroots organizations have acquired an important role as development actors (Annis and Hakim 1988). This importance is related to the post-structuralist critiques of development, which stressed development as a discourse imposed to people in developing countries (Everett 1997) . Under this approach, the autonomous participation of grassroots organizations would legitimize development models by re-creating them. Grassroots organizations usually are created within poor sectors of society with the purpose of defending their rights and bringing state attention to their needs. In the case of

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15 Peru and Bolivia, grassroots organizations have a long history. We can see in traditional Andean highland communities a precedent of grassroots organizations. These communities safeguarded the members’ interests; moreover, they ruled the main activities within the community. Although Andean communities lost importance in the second half of the twentieth century because of high rates of migration from the country to cities, they are still relevant today because migrants from these communities carry an experience of working collectively, and try to recreate this experience in their new communities. As mentioned previously, the rise of grassroots organizations is explained by the ascendance of social movements in Latin America during the 1970’s. In the case of Peru, this boom was also related to the reforms conducted by the Velazco government after 1968. These reforms introduced the cooperative model to the Peruvian economy by creating cooperatives in the agricultural and industrial sectors. After that, in the 1980’s, social movements became stronger. By this time the urban movements demanded public services from the state, and these movements also fought for democracy and civil rights. This experience is important because many groups involved in these movements would participate in grassroots organizations later. In the Peruvian Amazon, grassroots organizations appeared involving settlers that were migrants from the Andes. In the 70’s, many “Frentes de Defensa Regionales” (Regional Defense Fronts) and “Comits de Productores” (Producers’ Committees) were created throughout the Peruvian Amazon. The “Frentes de Defensa Regionales” were groups of organizations from rural and urban areas that were organized to present economic demands to the central government such as for roads, social infrastructure, tax

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16 exemptions, etc. The “Frentes de Defensa” were umbrella organizations that incorporated other organizations such as unions, producer associations, and chambers of commerce. The “Comit de Productores” were associations of producers or farmers organized around specific products at the provincial or regional level. The main objective of these organizations was to demand support from the state (Rodriguez 1991). In other countries in the Amazon region, the same kind of organizations arose. For example, in Bolivia, as a result of the scarcity of lands in the highlands and of the ensuing migration, federations of colonists were organized around localities and/or commodities (Bebbington 1996). Again, as in Peru, the author points out that these organizations had either political or economic orientations. By the end of the 90’s, the “Frentes Regionales” and the “Comites de Productores” were no longer active. The “Frentes Regionales” declined due to their political radicalism that was no longer viable in a context of political violence. The “Comits de Productores” declined because the products they organized around, such as rice or corn, were no longer important as a consequence of government cuts on loans and protective prices. However, another type of grassroots organizations did appear. This time they worked at the community and local level. Some grassroots organizations were still organized around specific products, but this time these were not products favored by government subsidies, but products that were clearly rooted in the market, such as coffee, wood, and Brazil nuts. At the same time, the new grassroots organizations become more proactive and assumed different forms: producer or farmer associations, cooperatives, and rural enterprises.

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17 Although Bebbington calls them: “rural people’s organizations” (1996), he is more specific and points out an interesting differentiation within grassroots organizations based on the purpose for their creation: Organizations that began with a primarily political purpose These organizations were concerned with claims to the government, the defense of rights, and in some cases, they were created to work as an interface between the government and a population. Organizations created to access a particular resource In this case the organization is looking for access to new resources such as credit or electricity. Organizations created with the purpose to conduct an economic activity related to natural resources These organizations can assume the form of cooperatives or an enterprise to transform and commercialize products. These features are dynamic; the organizations can adopt other purposes and even combine two or more of the above. However, these initial purposes will shape future organizational processes. This shift from some other purpose to an economically-oriented “productive projects” entails organizational changes that are the focus of this study. There are also differences regarding membership criteria: Automatic individual memberships with no barriers to entry In this case membership is obtained just by living in a community and/or by being involved in a specific activity. Many times there is a contribution required for membership in the organization, but it is nominal and not really enforced. These organizations can be settlers’, farmers’ or small logger associations. Individual membership with barriers to entry The individual has to meet some membership requirements, which typically include a payment. These organizations are usually cooperatives or other economic organizations that include individuals involved in specific activities. Group membership with barriers to the entry The organization is composed of other organizations and membership requires payment. This type of membership is related to federations of settlers or farmers, and cooperative associations. The features mentioned above do not completely determine the final outcome of the organizations’ activity. Nevertheless, they are very important in explaining the

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18 organizations’ capacities and the members’ behavior within each organization. The shift to greater barriers on entry will be part of the analysis of “productive projects.” It is clear that grassroots organizations were welcomed as the solution to many problems in development projects. However, grassroots organizations’ participation in development projects shows a wide disparity in outcomes. The reasons are many. First of all, grassroots organizations are subject to the mistakes that plague other organizations. Corruption was not absent in projects involving grassroots organizations. Lack of skills to conduct projects was another handicap that affected the participation of grassroots organizations. In some cases this participation had a negative impact on the organizations themselves as the leadership became too focused on particular projects or personal benefits they could gain from their involvement. As a consequence, leaders lost contact with the organization members, and the organizations were no longer representative. These problems associated with productive projects will be explored in this thesis. The outcomes just mentioned are also related to the presence of other actors, such as NGOs in the realm of development projects. The following section will discuss this important actor. Non-Government Organizations (NGOs) The emergence of NGOs in Latin America is also linked to the social movements in the 70’s and 80’s. Many of the participants in the new NGOs were practitioners that were active in those social movements. Others were involved in government social programs. The NGOs’ appearance is also connected with support provided by international development agencies, since these agencies recognized the NGOs’ efficiency in development project implementation (Carrol 1992).

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19 In the Peruvian case, NGOs began to show up in the 70’s, steadily grew through the 80’s, and then stabilized in number in the 90’s. As one author points out (Noriega 1997) in recent years there has been a shift in the issues addressed by NGOs. NGOs left behind issues such as publishing and research, and they developed tasks such as technical assistance and organization. In addition, NGOs began to work in closer collaboration with governmental agencies. Another important change in the panorama is the creation of environmentalist and conservationist NGOs, which concentrate their work in the Amazon. These kinds of NGOs have two big areas of involvement: sustainable development and biodiversity conservation. While the latter type focuses on conservation, the former type of NGO stresses the importance of resource management, and under this vision the productive projects were a way to enhance “sustainable” resource use. It is complicated to define NGOs. Usually, due to their proximity to local populations, they are considered as “intermediaries” between the development agencies and the target population. Some authors stress the intermediary role as the main feature of NGOs ( Carrol 1992; Esman and Uphoff 1984). However, when this feature is stressed the difference between NGOs and grassroots organizations may be blurred, especially in the case of federations. Many federations that involve local organizations play an important role as intermediaries. In this study, the definition of “NGO” will be used in a more restricted way, because it is important to differentiate between an NGO and a grassroots organization. The first and most important difference is accountability. By definition, grassroots organizations are accountable to their members/beneficiaries, while NGOs are not. The

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20 second important distinction is related to the relation between beneficiaries and members: in NGOs there is usually a clear differentiation between members and beneficiaries, whereas the two are usually the same in grassroots organizations. Finally, the notion of outsiders and insiders is key. Grassroots organization members are direct stakeholders, while NGO members are professional middle or upper class people from a social group different than that of the beneficiaries (Carrol 1992). As in the case of grassroots organizations, it is important to establish some features that allow us to classify and understand the logic in NGOs: Scope and level of operation In this realm, Carroll (1992) takes into consideration local, regional, and national levels. However, it is important to add the international level since there are some NGOs with headquarters in the United States or Europe that are directly involved (through practitioners) in projects within the developing world. This feature is important because there is likely to be more accountability and commitment to local groups when the NGOs have a small scope, in part because the NGO’s fate is more tied to its relation with local groups. Function This is associated with the type of activities conducted by the NGO, such as: productive and income-generating activity, conservation of natural resources, education, or health. The NGOs’ activities can be very focused or very broad and can include more than one activity. This feature is usually associated with the NGOs’ capacities. When the NGO is more focused, the level of expertise is usually higher. Inspiration/affiliation This characteristic is related to the origins or dominant philosophy of the NGOs. NGOs can be inspired by a cooperative movement, by the church, by leftist organizations, or by a conservationist movement. Clientele – This is related to the NGO’s target group; for example, rural or urban groups, or being even more specific, ethnic groups, women, or children. Although these features do not consider all the facets of NGOs, they are important to understand their behavior and experiences. In this study, I focused on these aspects of NGOs to assess their role in supporting productive projects. The link between NGOs and grassroots organizations is easier to understand if the social capital concept is taken into account.

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21 Social Capital While in some cases the decision to support grassroots organizations was founded on ideological premises, as in the case of the Catholic Church, in other cases this decision was supported by the belief that grassroots organizations had something that made them feasible as partners, meaning social capital. The concept developed by Bordieu is associated to two other types of capital, monetary and cultural (Portes 2000; Portes and Landolt 2000). These three capitals are interchangeable, that is to say, it is possible to obtain one through the others. Social capital constitutes family networks, social relations or structures that a certain individual acquires due to participation in a certain social group, which allows the individual to obtain or access certain resources. The same authors also stress the importance of taking into account the sources of social capital, which are both altruistic and instrumental. The first includes those values that are undergirded by the socialization process (gifts for children), and those values of solidarity shared with the members of the same community or ethnic group (bounded solidarity). On the other hand, the instrumental sources of social capital are reciprocal transactions (simple reciprocity), and those transactions that are embedded in larger social structures that play the role of guarantors (enforceable trust). The concept of social capital appears as an answer to the limitations of an exclusively economic approach toward the achievement of basic development goals (Portes and Landolt 2000, 529). However, despite its broad acceptance, there is more than one definition of social capital. Much of the confusion is related to the use of social capital in different units of analysis (Portes 2000; Portes and Landolt 2000). Thus some practitioners use the concept in relation to individuals or small groups and others in relation to communities or even countries.

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22 The reasons for the quick success of the idea of social capital are varied. The practitioners that came from development agencies and used to work with an approach based on the economy such as the World Bank – welcomed the social capital concept because it allowed them to incorporate “social aspects” within their projects. Social capital gave them “the promise of a ground-up alternative to the top-down policies promoted by international financial organizations in the recent past” (Portes and Landolt 2000, 530). In this sense, it is clear why some organizations, such as the World Bank, have pushed the issue of social capital measurement as an attempt to obtain good indicators about social capital assets in communities and countries. With good indicators, the likelihood of success of a development project could be predicted. On the other hand, development practitioners that had a more social approach to development and had experienced failure also took up the social capital idea. In this case, the practitioners wanted a more “technical” approach. This was provided by social capital because they were able to measure assets and obtain indicators. Maybe the most well known advocate for the use of the social capital concept is Putnam (1993). Putnam defines this concept by analogy with physical and human capital (tools and training). Social capital is related to the “features of social organization such as networks, norms and trust that facilitate coordination and cooperation for mutual benefit. Social capital enhances the benefits of investment in physical and human capital” (Putnam 1993, 35-36). Based on this definition, Putnam establishes a link between development or prosperity and social capital. Societies with a good stock of social capital would be more efficient, because the existence of trust and norms facilitates social life, and dense networking fosters the diffusion of information about a person’s reliability.

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23 As Portes (2000) points out, two important issues relate to social capital. The relation between social capital and development can be a circular one, especially when “civicness” explains the existence of good governments and at the same time “civicness” is inferred by the existence of good government. Additionally, social capital is an individual asset in the Bordieu version and a community asset in the Putnam version, and how an individual asset becomes a communal asset is never explained. In this study, the concept of social capital will be used to examine the institutional context of market-oriented productive projects. Under Putnam’s approach, the existence of norms and networks is a guarantee of trust and, therefore, development is a real possibility. This idea is usually stretched to the extent that the existence of any grassroots organization or any organizational structure in the community is assumed to be an indicator of social capital stock. The importance of norms and trust requires us to analyze the existence of an enforcement system along with the norms. If there is no effective enforcement system, the norms are worthless. The enforcement system can be traditional or modern, but it has to be effective. Putnam used very old social groups as examples of norms and network, indirectly recognizing that norms and network as well as trust require some time to be built like any social institution. In regard to local institutions, it is important to stress that they can play an important role not only in the progress of social groups but also in the collective management of natural resources. However, for these institution to be relevant they have to be able to monitor and sanction in an efficient way (Gibson and Becker 2000).

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24 The issue of trust and norms is important for this study, because they are also important for the market, and this study is about grassroots organizations that became involved in market related initiatives. In order to fully understand what being involved in market means, the following section will discus some features of markets. The Market In this study the more conventional definition of market is going to be used. The market is a mechanism by which buyers and sellers meet to exchange products (Samuelson and Nordhamus 1992). I am aware of the limitations of this definition, in particular in newly developed markets where social and cultural factors are important for the final outcome of market activity (Plattner 1989). However, the markets this study is about are conventional markets; it is about the Brazil nut market, which is a product that has been commercialized for more than 70 years, and it is about the groceries market. The market is a permanent source of challenges, a realm defined by problems and opportunities (Hiebing and Cooper 2003) where competitors must be ready to overcome the former and use the latter. The market is a space where many producers compete to sell their products. They compete by offering lower prices, better quality, and through other non-monetary advantages such as: quick delivery, good product-presentation, etc. Competition in the market is enhanced by the fact that it is dynamic. This means that a product/producer that has reached a good position in the market due to a convenient price, good quality or any other advantage over competitors can have this position threatened. Competitors are (by definition) always trying to improve their productive process and quality with the purpose of getting a better position in the market, and therefore, increasing their profits.

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25 The features I just mentioned are those that are expected in a normal market. However, there are other factors usually not taken into account, such as institutions and productive infrastructure. The role of institutions in market activity is often underestimated. Institutions are understood as the “rules of the game” in a society; they reduce the uncertainty involved in human interaction by giving us patterns for our behavior. These patterns are established through three components: formal rules, informal rules and enforcement mechanisms (Yeager 1999). With regard to this research, the most important element is the enforcement mechanism, and the organizations that implement them. These organizations are government agencies in charge of justice administration, natural resource access and administration, security, etc. In regions such as Madre de Dios and Beni these organizations are not entirely consolidated; they have problems of lack of resources and capacities to fulfill their duties, as well as corruption. Along with institutions, business services facilitate market activity. The possibility of success in any productive initiative is strongly related to the existence of business services. These services include: management services; organizational support; technical assistance for production, conservation and processing; market information; insurance; etc (Scherr et al. 2002). In areas like Madre de Dios and Beni, which are far away from the centers of consumption, the role played by roads is important. However, the roads connecting this area with other areas (and markets) are not complete or have problems when the weather becomes severe, such as in the rainy season, and it is the same with the airports. These features and the lack of institutions previously mentioned add difficulty and uncertainty to economic activity.

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26 However, in the same way that certain conditions increase the difficulty of survival in business activity, others facilitate it by adding opportunities. This is the case of the niche market, a consequence of being able to segment the market, meaning that it is possible to reserve part of the demand to a specific group of producers. This segmentation is expressed through many different niche markets: the solidarity market, the organic market, the green market, certification, etc (Camino and Alfaro 1998). These are markets developed by organizations with the purpose of supporting a particular group of producers and/or type of products. The organizers appeal to the consumers’ willingness to support some special producer and/or product, by paying a premium over the normal price. This overprice would be transferred to the producers. In these markets the competition among producers is less, since the numbers of producers trying to sell their products is reduced. However, even in these markets, competition sooner or later arises because more producers want to access these markets each day. The characteristics of demand and supply, as well as the existence of productive services, will define the level of competition in the market. In addition to this, the existence and performance of institutions that guarantee the interplay among actors in the market will also play a role. This factor will be analyzed in their influence over how productive projects respond to market challenges. Productive Projects All these factors and ideas discussed above combine in productive projects, which arise as a result of the appearance of grassroots organizations and NGOs within an environment of searching for new forms to foster development of poor social groups through engagement with the market. These projects are undertaken with the objective of

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27 obtaining a permanent increase in the income level for local populations with whom NGOs work. This study will focus on productive projects undertaken by grassroots organizations, usually with the support of an NGO. This support can be expressed through funds, technical assistance or patronization. I understand productive project to mean a project that involves a collective initiative to produce, transform and market a product. These projects usually have the objective of raising the standard of living of the involved population (Alvarez 1990). They also have other objectives related to development, such as the introduction of new technologies and training. These projects have diverse scales. They can be at a large scale, with significant investment and regional organization, and with production addressing the national and international markets. Also there are small-scale operations with little investment, which address only local or regional markets. These projects can be developed in different areas. They can involve the transformation and sale of forest or farm products, handicraft products, or eco-tourism. They can be developed under different forms: cooperatives, community enterprises, or even as private enterprises. Also there are experiences that are conducted in an informal manner without a legally defined form. There are many reasons and assumptions that push NGOs and grassroots organizations to undertake these kinds of projects. One motivation is the large amount of natural resources that are controlled by communities (Scherr et al. 2002). Another is the belief in the great potential for an increase of income through technical innovations in

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28 harvesting, storage, and transport and also through market access with preferential prices (Clay 1996). Additionally, there is a widespread perception that intermediaries take control of a great part of the value of the merchandise marketed by small producers. Clay indicates that in some merchandise the single producer receives only between 2% and 15% of the final selling price (Clay 1996). In accordance with this belief, many productive projects work on different aspects of marketing, both of the final product and in the purchase of inputs for the activity, in order to capture more of the returns for the producers. It is often assumed that existing traditional knowledge about the activity and the product facilitates the fulfillment of the objectives of the project. On the other hand, the presence of a grassroots organization is assumed to provide social capital, which will contribute to the success of the project. Often these types of capital are perceived as an advantage, as opposed to non-collective initiatives. The lack of private initiatives in the area where the project is developed may be an incentive for the development of productive projects because it leaves productive projects without competitors. However, the absence of the private sector may also be due to the lack of profitability in the areas where the productive projects are conducted. Productive projects can be seen as a conclusion of a process that began in the 1950s. The productive project is the latest proposal of development policies with two main actors, grassroots organizations and NGOs, in a new scenario: the market. This thesis will focus on the changes in the organizational structure of grassroots organizations. The role played by the NGO support organization, the market characteristics, and the institutional context will be analyzed in order to understand these

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29 changes. In the following chapters, the experiences of CAIC and INDAMAD will be discussed. The factors presented in this section will be identified as well as their roles in the changes that took place with the CAIC and INDAMAD experiences.

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CHAPTER 3 PRODUCTIVE PROJECTS IN RIBERALTA AND PUERTO MALDONADO In this chapter, a description of each project and its evolution will be provided. First, however, information about the historical, socioeconomic, and biophysical context of both cases will be discussed. This contextual information is important for understanding the evolution of each project and will be useful for the comparative analysis of the two projects that is presented in the next chapter. The selection of these two cases was influenced by my work experience in the southern Peruvian Amazon for almost eight years as a practitioner, which included directing a project to support a grassroots organization in the processing and trading of Brazil nuts. Although my knowledge of the projects was not complete prior to carrying out this research, some features of these experiences drew my attention: for example, the organizational change at INDAMAD from a communal enterprise to a “sociedad annima” which is the form of private enterprises held by shareholders, the struggle at CAIC to overcome the lack of compliance by its members, and the long existence of both organizations, which is not usual in these experiences. All of these aspects provided a good opportunity to analyze the struggle of grassroots organizations in the market. As stated previously, my experience as a practitioner in the region allowed me to become acquainted with both experiences before developing this thesis. This previous knowledge was useful in defining my research question, and in providing informational contacts. However, it also implied some bias on my part because I went to do my field research with preconceived ideas. This previous knowledge also prevented me from 30

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31 documenting certain data, which I took for granted due to my previous knowledge of the projects. The Cooperativa Agricola Integral “Campesino” – CAIC The Bolivian Amazon is composed of the departments of Pando, Beni, and Santa Cruz. This discussion will focus on the departments of Pando and Beni because they are very integrated, economically and socially, and share key geographical features. The Cooperativa Agricola Integral “Campesino” (CAIC) is located in the province of Vaca Diez in Beni. Figure 3-1. CAIC Location. As evident on the map, the department of Pando borders Peru and Brazil. The capital, Cobija, is also located on the border with Brazil. The province of Vaca Diez, part of the department of Beni, neighbors Brazil, with the capital, Riberalta, located on the

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32 edge of the Madre de Dios River. The Madre de Dios is the main transportation network within the region. It is navigable throughout the year and is deep enough for large ships to sail. While not shown on the map, a road links Riberalta and Cobija. Although it is not yet paved, it allows for truck transit all year. Transit can be difficult in the rainy season, but it is passable without too much difficulty. Physical Characteristics Pando and Beni are part of the Amazon Basin Lowlands (Caviedes and Knapp 1995). The region is approximately 86, 261 km2, and its altitude varies between 80 and 280 meters above sea level. It is possible to differentiate a dry season from May to September; however, the rains are almost constant. In this area, the term “dry season” really means that the frequency of rains decreases during these months (Beekma et al. 1996). Although there are some small areas along the Madre de Dios and Beni Rivers that have good soil fertility, in general, soils in Beni and Pando do not have good natural fertility. Thus, they cannot support intensive monocrops, but do best with agricultural systems based on a diversity of crops (Beekma et al. 1996). In addition to the Madre de Dios River, the Beni, Orthon, Abuna, Mamore and Acre Rivers all play a role in shaping the basin. These rivers are part of the Madeira Basin. The forests in Beni and Pando share many ecological characteristics. However, it is possible to distinguish between alluvial forests and “terra firme” forests, which vary in terms of tree species, height and density. Both types of forest have a high diversity of tree species. Some researchers estimate that there are 750 species in the area (Beekma et

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33 al. 1996). Savannas, with a high diversity of grasses and small trees, are another important ecological feature. There are two tree species that can be found only in this area of Bolivia and have accounted for the economic and social transformation of the region. The first is “siringa” or rubber (Hevea Brasiliensies), which was heavily exploited in the early decades of the twentieth century. The other is “castanha” or Brazil nuts (Bertolletia excelsa), which is still being exploited today. Socio-economic Characteristics The first attempts to colonize the Bolivian Amazon came about due to Jesuit missions and to the search for the “quina” or quinine plants (used in the treatment of malaria) in the nineteenth century. The quina boom lasted from 1847 to 1878, laying the groundwork for the rubber boom in the early twentieth century. The discovery of quina opened northern Bolivia to non-native populations, increased the contact of natives with the market (increasing their interest in commodities exchange), established a network of roads and rivers for trading, and finally, created the organizational basis for labor recruitment (Stoian 2000). The most important period of the rubber boom was from 1898 to 1919. This boom, involving both Beni and Pando, profoundly transformed the region. One of the most striking consequences of the boom was related to indigenous groups in the area – the existing groups completely disappeared or were integrated into the market economy. Despite the enormous volume of economic resources that the rubber boom contributed to the Bolivian economy, this region did not become more integrated with the rest of Bolivia. This situation is explained by the fact that all rubber commerce took place via the Atlantic Ocean, not the Pacific. Trade and transportation took place through

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34 Brazil. Although by the end of the rubber boom there were some local elites in the Bolivian Amazon, the integration of this region with the country came about later in the century through immigrants from Santa Cruz, Beni and La Paz (Stoian 2000). Rubber activity reappeared several times throughout the 20 th century, but in the end, Brazil nut gathering prevailed as the main force in the regional economy. Beginning in 1920, economic activities related to Brazil nut became increasingly important. Initially, most of the Brazil nuts were processed in Brazilian plants. Currently, due to lower labor cots, and bigger technological development that provides better processing capacities in Bolivia, most of the Brazil nuts gathered in Brazil are processed in Bolivia (Stoian 2000). It is important to stress that the decrease in rubber activity brought about crucial changes in land tenure. Most of the land previously monopolized by the rubber barons was distributed or, in some cases, abandoned to the managers, possessors and others associated with the industry. The rubber tracts were composed of huge areas of forest, called barracas. When the barraca system declined, some of the forest became fragmented or divided into smaller landholdings (Stoian 2000). By the same token, the 1950s Agrarian Reform allowed communities to establish within those lands not claimed by former barracas’ employees. In the long term, the Reform brought about the formation of independent producers (Ormachea and Fernandez 1989). Although there is some discussion about the beneficiaries of the rubber and quina booms, the most widespread idea is that these activities signified an extraction of surplus from the region, in the sense that these activities did not produce regional economic development (Stoian 2000). However, one of the main consequences of these economic booms was the growth of cities, such as Riberalta, where CAIC developed.

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35 Population growth has been impressive in the past few decades. The negative rates in some provinces in the period from 1976 to 1992 can be explained by the urbanization (and consequent population growth) of the cities of Cobija (Nicolas Suarez) and Riberalta (Vaca Diez). According to the Bolivian Population Census, by 2001 the region had a population of 168,941.Most of this population was in the province of Vaca Diez that had 116,421 inhabitants. Within this province, the city of Riberalta accounted for more than 85% of population with 97,606 inhabitants (INE 2002). Table 3-1. Annual Population Growth in the Pando-Beni Region 1976 – 92 (%) 1992-2001 (%) Total Region 3.73 4.18 Dpt. Beni 6.23 4.17 Vaca Diez 6.23 4.17 Dpt. Pando 0.65 4.22 Nicolas Suarez 3.14 6.68 Manuripe -0.64 1.31 Madre de Dios -0.59 1.95 Abuna -0.84 1.44 Federico Roman -1.54 5.32 Source: Instituto Nacional de Estadistica de Bolivia This accentuated urbanization process can be related to the system of land ownership in the area. Although the barracas system has experienced some decline, it is still the dominant land tenancy in this area. “Barracas” are parcels of land that range from 500 to more than 50,000 has. Individuals have production rights and occupy the barracas, but are often not the owners of the land. Labor is hired for the harvest of both products. The barracas account for 78% of the land in the rubber-Brazil nut area (Ormachea and Fernandez 1989). As a consequence, peasants with no land have few possibilities to find lands to settle on. The landless end up settling in urban areas and population grows faster there than in rural areas.

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36 Another important factor is that Riberalta and Cobija are essentially industrial cities that attract migrants in search of work. Cobija has two Brazil nut factories and Riberalta has fourteen. Through these plants, Bolivia supplies about 75% of the Brazil nuts for the world market. Some of the nuts are bought from Brazil and shelled and packed in Bolivia (BOLFOR & Conservation International 1998). The factories account for thousand of jobs in these cities, despite the fact that some of them are very mechanized. Stoian (2000) mentions that the Brazil nut industry provides jobs for 5,500 persons in factories and 12,500 as collectors. Other economic activities are also important in Riberalta. Although most of the logging activity is conducted within the department of Pando, the main sawmills are in Riberalta (Beijnun 1996; Stoian 2000). The processing of palm heart is also increasingly important in Riberalta with the establishment of canning plants (Beekma et al. 1996; Stoian 2000). Due to its proximity to Guarayamerin, a city on the Brazilian border, Riberalta has increasing commercial activity. This commerce is based on Chinese products or other imported products that are very attractive for Brazilian consumers (Beijnun 1996). The road that comes from La Paz to Guarayamerin fosters this commerce by transporting products to and from La Paz. The existence of a product aimed for the international market, Brazil nut, also underscores the importance of roads. The roads that connect Riberalta and Cobija with La Paz are crucial for the economy of this area. Nevertheless, this road of 1,300 km is not yet paved. The processed Brazil nuts are stored in La Paz and then transported to Arica,

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37 Chile in order to be shipped to the U.S. and Europe. Transport time from Riberalta to La Paz can take two days in the dry season and more than a week in the rainy season There is an important feature that shapes the socio-economic context of Riberalta, as well as Puerto Maldonado the emigration of people to Japan. Most of the initial colonists in the area were Japanese migrants and current Japanese laws allow descendants of these Japanese immigrants to work in Japan. The information available for Riberalta estimated that 1,600 riberalteos are working in Japan and that they send between US$ 150,000 and 200,000 monthly to Riberalta (Beijnum 1996). Although there is no information about the final destination of these funds, it is reasonable to assume that most of it is staying in the city and contributing to urban growth. CAIC’s Formation Process The development of agriculture in the region is strongly related to the barracas system of rubber and Brazil nuts. Agriculture was originally developed by the barracas owners as a mean to provide food for workers. Lately, the decline of the rubber activity combined with the Agrarian Reform fostered the appearance of the so-called “independent communities”, that were established within the barracas, on lands no longer in use. It is from the realm of independent communities that most of the CAIC members originated. CAIC was founded January 6, 1980. Its formation was the outcome of social activity brought about by new social actors in Riberalta, such as independent communities and certain sectors within the Catholic Church. This increasing social activism corresponds with the rise of a concept that affected much of Latin America, Liberation Theology.

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38 The Equipos Moviles de Educacion Integral Rural (EMEIR) played an important role in mobilizing people in the Pando-Beni region. The EMEIR were organized with the support of priests from the Maryknoll Order in 1973. They based their work on Pablo Freire’s (Freire 1970) idea that education is a vehicle to empower and liberate people (Hector Salas personal communication). The EMEIR were composed of teams of three members that focused their educational work in the communities in and around Riberalta. Soon the EMEIR teams got involved in activities other than education. After internal discussion within the group, they decided that in order to be effective in supporting the development of the independent communities they must be involved in the communities’ economics activities. As a result, Grupos Economicos (Economic Groups) were created within communities with the purpose of supporting economic initiatives through technical assistance or by trading their products as a group. The formation of the Grupos Economicos was a significant step in the sense that it illustrates the perception of NGO and grassroots organization members that in order to be effective in supporting community development, they should undertake initiatives involving transformation and/or commercialization of natural products. Thus, this transition marked the shift to productive projects, the focus of this study. The 1970s was a period of social mobilization for farmers, as they constantly demanded better prices for their products from the government. It was in this context of peasant activism that CAIC was founded in 1980. CAIC was strongly supported by EMEIR and the Maryknoll Order, and most of its first members were former rubber tappers.

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39 In this first stage, CAIC was only focused on the marketing of rubber and Brazil nuts. There was no transformation of the raw materials, which were sold to the local processing plants. The most important aspect of this stage was a riverboat that allowed CAIC to provide foodstuffs to the rubber tappers and Brazil nut gatherers in the forest, and by the same token collect their products to trade in Riberalta. By 1984, two other riverboats were added to the CAIC float. In 1985, CAIC, with assistance from EMEIR, asked for support from the Dutch Cooperation Service (SNV). This support consisted of the participation of a practitioner to help with the accounting system. Through this first contact, SNV became more and more involved in the CAIC initiative, and this continues to the present day. By 1989, CAIC decided to focus its activity only on Brazil nuts. In the 1990s, CAIC undertook its first attempt at exporting by selling 1.5 containers to the NGO SOS in Europe. (The Brazil nuts for this order was processed in another factory.) The organization obtained credit from ANED and contracted the services of local plants to process the Brazil nut. Around 1995 the building of the new plant for CAIC started, and in 1996 the plant began operation. Most of these activities were undertaken with credit, usually guaranteed by the Catholic Church, EMEIR and SNV. The sources of credit were usually national organizations; however, later CAIC started to obtain credit from international organizations such as Oikos Credit, with the SNV guarantee. By the year 2000, CAIC exported 193 metric tons of Brazil nuts to the international market with a value of US$ 648,000. CAIC is also certificated as organic producer of Brazil nut. They processed Brazil nuts from 127 member farmer families and 275 non

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40 member farmer families, as well as hired 103 female Brazil nutcrackers, plus 60 gatherers and 30 employees at the CAIC plant. Support Organizations While CAIC has been supported by many NGOs throughout its more than 20 years of activity, the SNV has been the most important and influential for CAIC’s activity. As mentioned before, the initial involvement of SNV was through practitioners that worked closely with CAIC. The first SNV practitioner was Vicente Driest, who came to Riberalta in 1994. This type of involvement can be stronger and more powerful than might be expected. Since the practitioners work permanently with the grassroots organizations and share the day-to-day experience with the members, their capacity to influence the projects and the grassroots organization is quite large. However, the influence of the practitioner over the project and the grassroots organization depends upon the capacity and experience of both the practitioner and the organization. In general, the SNV practitioners involved in CAIC had extensive previous experience, and they exhibited enough commitment with CAIC to gain the confidence of and influence over grassroots organization members. SNV’s support to the CAIC experience is minimal in financial terms. Most of the SNV support is related to technical advice, making it’s impact more like that of an NGO. It also leads and/or develops key initiatives, such as obtaining the organic label and introducing CAIC to the green European market. SNV also acts as a guarantee for many of CAIC’s loans. These loans allowed CAIC to improve its infrastructure and finance the buying of Brazil nut. This role was crucial

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41 and could be played only by an organization such as SNV, because most of the loans were large, and others were lent by international creditors such as Oikos. It can be said that CAIC was, in some sense, the conclusion of a social mobilization process in the northern Bolivian Amazon. And although in the beginning very ideological persons and NGOs were involved, in the final part, bigger organizations became involved, bringing more experience and a more practical approach to CAIC activities. The CAIC experience has implied full involvement in the market. Although the organization had problems in the organizational realm, they have undertaken a few changes in their organization. How this was related to the characteristics of the market they faced, and to the institutional context within which they worked, will be analyzed in the next chapter. The Industrias Alimentarias Madre de Dios – INDAMAD The department of Madre de Dios is situated in southeastern Peru and it is composed of the provinces of Tambopata, Manu and Tahuamanu. The departments of Cuzco, Puno and Ucayali in the west and north surround it. In the east it borders Bolivia and Brazil. The Industrias Agroalimentarias Madre de Dios (INDAMAD) is located in the city of Puerto Maldonado, which is also the department capital. Most of INDAMAD’s activities are focused in the areas close to Puerto Maldonado along two roads, the one that goes from Puerto Maldonado to Cuzco and the other from Puerto Maldonado to the Brazilian border.

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42 Figure 3-2. INDAMAD Location Madre de Dios is connected with the rest of Peru by an unpaved road that reaches Lima through Cuzco after climbing over the Andes. Although the road from Cuzco to Puerto Maldonado was one of the first roads started in the 1950s, it did not reach Puerto Maldonado until the late 1980s. Since the road that links Cuzco and Puerto Maldonado is not paved, transit along this road depends on the seasons. In the rainy season the travel between these two cities normally takes more than three days. If any ground slides have occurred, transit will take

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43 weeks. Additionally, due to the low quality of the road and to the fact that most of the road goes through the eastern Andean slope, the trip can only be made by trucks. Physical Characteristics Although Madre de Dios has some highlands around Cuzco and Puno, most of its territory can be defined as “Omagua” (Vidal 1981). Omagua refers to forest on the eastern side of the Andes between 80 and 400 mts above sea level. The main rivers in the area are the Upper Madre de Dios, Tambopata and Inambari, which together form the Madre de Dios River near the border with Bolivia. Most of the physical features are the same as those in Pando-Beni. The main difference is that due to its proximity with the Andes, there are few flat, sandy areas or “playas” that can be used for agriculture near the rivers in this area. The slope is also slightly higher than in Bolivia. On the other hand, the presence of “siringa” and “castanha” is common in the Madre de Dios forest, just as it is in the Pando-Beni area. The proximity to the Andean region is also important to the formation of alluvial gold deposits in the rivers. These deposits are common in the Inambari and Madre de Dios Rivers. The presence of gold is important because it will shape most of the area due to the development of gold mining. Another important characteristic is related to the presence of the Cachuela Esperanza in the lower Madre de Dios River. This small waterfall provides a barrier that causes some difference between the aquatic fauna in the area of Madre de Dios and other regions in the Amazon basin. Socio-Economic Characteristics Madre de Dios is perhaps the last isolated area in the Peruvian Amazon. The first contact of Madre de Dios with the rest of the Peruvian economy was through the rubber

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44 boom in the first decade of the twentieth century. After this boom, the area became isolated again. Before World War I small groups of migrants arrived in Madre de Dios for the purpose of gold mining. Unlike other areas in the Peruvian Amazon, Madre de Dios was little impacted by internal migration after World War II. The difficult access to the region, and the lack of roads connecting Puerto Maldonado with the rest of the country did not allow for a flow of migrants. The initial settlers focused on rubber and Brazil nuts as their main economic activities. The following chart introduces some information about population growth in the Peruvian Amazon, and in the three provinces that make up Madre de Dios. The most striking factor is the concentration of population in the province of Tambopata, which contains the department capital: Puerto Maldonado Table 3-2. Population in Madre de Dios and Intercensus Growth 1961 1972 1981 1993 1961-72 1972-81 1981-93 (%) (%) (%) Madre de Dios 14,890 21,304 33,007 68,008 3.92 6.10 11.78 Tambopata 8,925 14,760 24,583 47,738 5.94 7.39 7.85 Manu 1,488 1,208 3,496 13,827 -1.71 21.04 24.63 Tahuamanu 4,477 5,336 4,928 6,443 1.74 -0.85 2.56 Source: INEI As we can see in the chart, the occupation process in Madre de Dios goes against the general trend in the rest of the Amazon. The population growth rates decreased during the period from 1961 to 1972 when, due to the governmental investment in roads and socioeconomic infrastructure, population had its highest increase in other parts of the Amazon.

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45 Although the growth rate in Madre de Dios seems very high, we have to take into account that in 1940 the population of the entire department was less than 5,000. The late population growth in Madre de Dios was focused in Puerto Maldonado, and some provinces show a negative growth rate even in the last period. However, despite the high population growth rate, the population density in the area is one of the lowest in the Amazon, with 1.15 km2 per person. This low population level is reflected in the agricultural structure. Unlike other areas of the Peruvian Amazon, where there has been a clear “minifundizacion” process, agriculture in Madre de Dios is developed on the basis of larger agricultural units, as we can see in the following chart. Table 3-3. Distribution of Agriculture Units (AU) by size in provinces in the years 1972 and 1994 % AU % AU % AU % AU 0 5 ha 5 20 ha 20 50 ha 50 + ha 1994 1994 1994 1994 Peruvian Amazon 40.59 37.96 14.98 6.47 High Amazon 39.49 39.30 15.32 5.88 Low Amazon 43.39 34.53 14.09 7.99 Tambopata 8.07 12.79 44.64 34.49 Manu 23.53 16.76 29.41 30.30 Tahuamanu 1.00 1.91 40.16 56.93 Source: INEI, Censos Nacionales Agropecuarios Within the three provinces of Madre de Dios, more than 50% of the agriculture units are more than 20 hectares. Moreover, in the Tahuamanu province, more than 56% of agriculture units are more than 50 hectares. This feature, along with the low population density, is important to understand the household economy in this area.

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46 However, the size of the agricultural units does not mean that the farms are wealthy. As in most of the Amazon, the soils in Madre de Dios are very poor. The soil nutrients are hardly enough to produce for two years after the forest has been cleared. On the other hand, the low population density implies the existence of forests available for use by farmers. This forest can be used in many ways: as a source of meat from hunting, as a source of medicinal plants, and as a source of income from the extraction of building materials and timber. The government or state has a slight presence in the area. This area is also isolated in the sense that the government has not invested heavily in infrastructure. Likewise, the government’s capacity to control and enforce rules about the use of natural resources in the area is minimal. Lack of government resources reinforces this problem because the particular conditions of the area raise control costs. Unlike the Pando-Beni region, the lands that have castanha in Madre de Dios are organized around parcels that range from 300 to 2000 has. Since this activity cannot provide for a household throughout the year, it is just one part of the subsistence strategy for many small farmers in Madre the Dios. INDAMAD’s Formation Process Currently INDAMAD is an enterprise focused on the processing of soy and other products from the region. Its production is organized around flour from soy, rice, maize and other regional grains, on juices and soymilk from soy and other regional products, and jellies made from regional fruits. INDAMAD has the most complex machinery in the department. Its technology is comparable with that used by some companies in Lima. INDAMAD is under a regime ruled by the Peruvian laws concerning private enterprises. The shareholders are the Provincial Government of Tambopata, the Empresa

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47 Agroalimentaria Inambari, the Civil Association “Huarayo”, and the District Governments of Laberinto, Inambari, Las Piedras, Tahuamanu, and Iberia. However, INDAMAD is the final outcome of a long process. The beginning of this process is related to settlement of migrants along the Puerto Maldonado – Cuzco road in the early 1980s. Most of these migrants came from the Andean departments of Cuzco, Apurimac, Puno and Ayacucho. They settled between the 100 and 168 km markers of the road (Claveri 1995). This was a second wave of migration. The first migration to this area was associated with logging activity in the 1950s and 1960s. For that reason, some sawmills were established in the area. When the high value timber was depleted, the sawmills moved away and the area became almost desolate. In the 1980s the communities of Nueva Arequipa, Primavera Baja, Primavera Alta, Santa Rita Baja, Santa Rita Alta, Santa Rosa, Villa Santiago y Dos de Mayo were established in the area (Claveri 1995). At the end of the 1980s, these migrants played an important role in a farmers’ movement that arose, to demand better prices from the government for rice and better conditions for loan repayments from the Agrarian Bank. Maybe the most important consequence of this mobilization was the re-establishment of the Agrarian Federation of Madre de Dios (FADEMAD). This organization acquired a more important role after this mobilization, and the communities along the Puerto Maldonado – Cuzco road were crucial in this new role (Victor Zambrano, personal communication). Another important factor in the farmers’ mobilization of 1989 was the presence of the Catholic priest, Xavier Arbex. His active participation in the mobilization established a strong link with the communities on the road. It is important since Father Arbex played

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48 an important role as both a facilitator for and an actor in many initiatives related to developing the communities on the road. The first antecedent of INDAMAD can be traced to the establishment of rice peeling houses in all the communities in 1989. The Experimental Program for Farmer Assistance (PEASAGRO) and the Farmer’s Association of Inambari ran this initiative. In the early 1990s a soy program was established in the area and eventually a small plant was started to produce soy flour and oil. The Apostolic Vicerectory of Puerto Maldonado and its Agroindustrial Program supported the initiative this time. The plant was established in the community of Santa Rita and problems soon began. The difficulties were related to the lack of commitment by the farmers to repay loans and to contribute soy for the plant. In addition, the complex internal organization of the program made the plant almost stop due to the difficulties in making decisions. The solution for these problems was the creation of INDAMAD. Through INDAMAD a more executive decision-making system was created and new partners were also incorporated. The previous Farmer’s Association of Inambari was incorporated as one of the shareholders. With this, a process of deep organizational change at INDAMAD finished. The relation of this change with market features and the institutional context that surrounded INDAMAD will be presented in the next chapter. Support Organizations The INDAMAD process has been marked by the participation of more than one NGO. However, in the beginning the participation of Father Xavier Arbex was important, first from the city of Mazuko, near the communities this research focuses on. After that, he played an important role by leading the Agroindustrial Program at the Apostolic Vicerectory of Puerto Maldonado.

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49 Father Xavier Arbez also played an important role in fostering the participation of other organizations such as PESAGRO, the Swiss Technical Cooperation and Caritas. The latter is an NGO strongly linked to the Catholic Church that has activities in almost all of the Peruvian departments. These programs depend directly on the Vicerectory. Caritas received support from the Fondo Contravalor Peru-Canada, which is an organization controlled by the Peruvian and Canadian governments focused on support for productive projects throughout Peru. The “Caja Rural of Quillabamba” also played an important role in financing INDAMAD. 1 When INDAMAD was established, the organizations with more influence were the Fondo Contravalor and the Cajas Rurales. Both organizations focused on tangible results, with a strong focus on technological innovation as a means to success. This approach was crucial in the process that ended in INDAMAD, as we will see in the next chapter. In general, INDAMAD has undergone a noticeable change, from a small experience based on a classical communal organizational model with the support of a small NGO, to an experience deeply involved in the market based on an entrepreneurial organizational model with the support of an NGO focused on results. This organizational change was the result of looking for alternatives to overcome problems within INDAMAD and to respond to market challenges. In this chapter, it has been possible to appreciate the many similarities between CAIC and INDAMAD, and also the dynamics of change within them. They were similar in their relation with the social movements in their areas and both experiences were 1 The Fondo Contravalor Peru-Canada also funded the Cajas Rurales.

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50 developed in areas situated far away from the economic and political centers of their respective countries. Also, the presence of the Catholic Church, although in different ways, is important in both experiences. Finally both projects are long lasting experiences. The main differences between CAIC and INDAMAD are related to the bigger and more powerful support organizations involved in CAIC’s experience, and to the organizational changes that took place in the each project. The fact that different changes took place in the productive projects raises some questions about other factors that can play a role in change aside from the internal dynamics of the projects themselves. The long existence of both projects provides an opportunity to identify these factors. In the next chapter the market characteristics, the support organization directly involved and the type of support they provided, and also the institutional context of both projects will be reviewed in order to understand the changes.

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CHAPTER 4 EXTERNAL FACTORS AND ORGANIZATIONAL CHANGES IN PRODUCTIVE PROJECTS The experience of grassroots organizations involved in the market – such as those presented in the previous chapter is full of problems and the consequent struggles to overcome these problems. As has been presented, the responses are different between experiences. Although the response to market challenges and opportunities can be produced at different levels, this chapter will address the changes in the organizational realm. This realm is important in the case of grassroots organizations since they were not originally designed to compete in the market, but rather have shifted from political and social objectives to market oriented activities. Thus, what are the factors that influence the changes in the decision-making and enforcement system at INDAMAD and CAIC? This is the question that will be answered in this chapter. However, other preliminary questions must first be answered. This chapter is organized around these preliminary questions. The first part addresses two questions: What are the problems that productive projects undergo by participating in the market? And why do those problems arise? The second part of this chapter introduces the external factors and the relationship between these factors and the organizational changes undertaken to face the problems experienced by the productive projects. All of this analysis will be conducted by comparing the experiences of INDAMAD and CAIC. 51

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52 Challenges for Grassroots Organizations As with any other enterprise, grassroots organizations face a lot of problems in their market activities. Most of the difficulties they encounter are the usual problems in the day-to-day activities of a normal enterprise: for example, machinery breakdowns or repairs, delays in delivery of raw materials, or customers not paying their bills, etc. These are everyday, normal problems and do not cause a serious impediment to business if they are not recurrent and/or cannot be solved in the short term. The problems discussed in the following section, however, are not encountered by most business enterprises and are specific to grassroots organizations involved in the market. The question about the main problems faced by the productive projects was part of all the interviews at CAIC and INDAMAD. The answers did not focus on normal business problems. They unanimously pointed to the lack of participation of members, and to loans never being returned, as the two main problems. Emphases as to the importance of each issue varied among people, but both issues were always mentioned. In some cases the lack of capacity of leaders to carry out a business and corruption were also mentioned. Other problems that were not mentioned, but that emerged from the interviews, were diversity of visions, lack of cohesion, outsider-driven proposals, and weakness in enforcement and decision-making systems. Lack of Participation In regards to the lack of participation, the problem of members not attending assemblies was always mentioned. In the case of CAIC, the normal attendance for an Assembly is around 50 members, which is small for an organization with more than one

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53 hundred members. 1 The same pattern was mentioned in INDAMAD. However, the lack of participation concerned not only attendance at assemblies, but also other activities of the organizations. Assemblies are mentioned because they are a key activity in a grassroots organization’s work. In the formal realm they are the highest level of decision-making. Although decisions can be made even with reduced attendance, the importance of Assemblies with good attendance is that it legitimizes decisions. Other members can easily contest decisions taken with small attendance. It can be argued that lack of participation is a normal problem in grassroots organizations and that it is not peculiar to those oriented to market activities. However, this failure acquires a new meaning when grassroots organizations are involved in market initiatives since it has an economic cost. Members interviewed may not have a clear understanding of this new implication, but they do understand that members’ participation will strengthen the organizations and its activities. Unpaid Debts It was not easy to talk with grassroots members about their problems as these are not issues that they were willing to share with outsiders. This reluctance was more evident when the problem of unpaid debts was brought up. Their reluctance to speak about debts must be related to the fact that most of them are themselves debtors. However, the unpaid loans are a problem that cannot be ignored. Although these debts have been accumulating since the beginning of the productive projects, officers of both CAIC and INDAMAD stated that the debts were not growing any more because they are 1 CAIC officer.

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54 not lending money as they used to do. However, the decision about not lending money seems more related to a scarcity of capital than to a strategic decision. Unpaid loans are approximately US $ 23,000 2 at INDAMAD and US $80,000 at CAIC. 3 These debts may not be overwhelming to the projects, as they represent a small proportion of the production value in both cases: 6.47 % in the case of INDAMAD 4 and 16% in the case of CAIC. 5 However, it is an important amount for grassroots organizations' members. If the personal incomes and assets of members are considered, these debts represent a very big burden for them. The unpaid loans are also important as they serve as a bad precedent, creating the perception that it is easy to avoid commitments with the projects. This factor, in addition to the weakness in enforcement systems discussed below, can increase the incentive to not return the loans. This situation can significantly weaken any market initiative if this perception spreads to people or organizations with which they do business. Diverse Visions Although not mentioned as a problem by members of the projects, it was quite clear that there was a very broad range of perceptions on what the projects' goals should be. This diversity of opinion represents a problem since it makes it hard to design and implement any activity, because of the difficulty to reach agreements and define strategies. This diversity in visions about goals would be a problem in any organization. 2 Interview with INDAMAD officer. 3 Interview with CAIC officer. 4 The value of production at INDAMAD was about US $ 355,000 by 2002. 5 The value of production at CAIC was about US $ 500,000 in 2002.

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55 However, it is a bigger problem for grassroots organizations where decisions are reached through consensus as well as legitimized by having broad agreement. The range of visions or goals for the projects is very wide, and the range can be defined by two extremes that I call the “activist vision” and the “business vision.” The activist vision is mainly oriented toward the productive project providing some sort of economic or social support for its members, as opposed to existing simply to turn a profit. For example, throughout my participant observation, I commonly heard expressions such as: “the cooperative is here to help poor people” (la cooperativa esta para ayudar a los pobres) or “the cooperative was not created to be entrepreneurial” (la cooperativa no fue creada para ser empresarial). The positions about unpaid loans are useful to illustrate the presence of the activist vision. Most of the discussion about this issue is limited to pointing out that it is very hard to recover debts. No proposals have been made that resemble the implementation of sanctions against those who have not paid back loans. Usually, those who support the activist position agree that defaulting on loans is an important problem, but in some cases it is understandable because the members are poor. This is consistent with a perspective among grassroots organizations that causes them to identify themselves as organizations that provide and give (electricity, land titles, technical assistance, etc), rather than as organizations that need support in order to function and survive. This becomes more complicated when the support that grassroots organizations (or projects) request is not soon returned to members in some tangible form such as better prices for members’ products or more accessible loans.

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56 The activist vision fosters decision-making systems that are very inclusive. All decisions, “even to buy a bolt” (aun para comprar un perno), must be consulted among the members through a general assembly. This situation is without doubt a consequence of a common practice within grassroots organization of debating all decisions affecting the group, be it related to the hiring of a teacher for the communal school or how much the interest rate for the community loans is going to be. At the same time, however, often there is a lack of trust in others’ capacities or in others’ honesty, due to a long history of deceptive treatment suffered by the grassroots organization either from the government or powerful economic groups. At the other extreme, the “business vision”, has very different implications for enforcement and decision-making systems. In general, the business vision is more focused on making profits and attaining efficiency. The actors within productive projects do not all share this position; the emphasis on the business approach varies among those involved. In fact, most of the time the word “business” is not actually used. Instead, “efficiency” and “accomplishment of duties” are commonly mentioned. In general, the “business vision” holds a tougher stance regarding enforcement systems in relation to unpaid loans. Opinions about debts range from not favoring lending more money to those that defaulted, to applying sanctions, such as expelling members or seizing possessions. The business vision proposes a more dynamic and executive decision-making system in order to be more efficient. The reason for proposing such a system is related, first of all, to capacities and skills. Proponents of the business vision believe that some specialized knowledge or experience is required in order to make

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57 decisions, and not all organization members have this knowledge or experience. 6 Usually people with more skills and experience are most in favor of this position; past experience leads them to believe that a dynamic decision-making system that is controlled by people with more knowledge is preferable. Some actors within productive projects can hold a vision with elements from both extremes. Positions and visions about project goals can also change over time, and many times the visions they assume are related to personal interests. This divergence in visions is a problem for an organization based mainly on consensus, and the problem is increased by the failure of enforcement systems in grassroots organizations. Lack of Cohesion The lack of participation seems to be strongly related to the lack of cohesion within the communities participating in CAIC and INDAMAD. Communities are often viewed as uniform and cohesive groups of people. But, in reality it is rarely that way and it is not this way for the two cases studied here. These two communities were recently settled, much like most colonist communities in the Amazon region. In the case of INDAMAD, most of the settlers are migrants from the Andean departments of Puno and Cuzco (Claveri 1995). While these common Andean roots might facilitate interaction among settlers, they are communities without a long organizational tradition. Most of their collective experience is related to asking for assistance from the government, not in providing or building, much less in dealing with the market. 6 Interview with “quebradoras” leader at CAIC.

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58 A similar situation exists among the communities involved in CAIC. Most community members are colonists from the regions of Santa Cruz or Beni, though some are “mestizos.” The government pushed the formation of many of these communities as a condition for giving out land. As a consequence of this, many settlers who used to work independently were forced to integrate into a community. The community’s creation was not the result of an internal process or the final stage of a cohesion process, but an external imposition. As with INDAMAD, we are dealing with communities without extensive experience in collective work, or a strong organizational tradition. Outsider-Driven Proposals Often, it is the NGOs that work with the grassroots organizations, as opposed to the members, that push for productive projects. Consequently, there is not sufficient discussion about the project with the members prior to its implementation in regards to the goals of the project or the potential problems or situations that might result. In the cases I studied, the idea for the projects, a cooperative to process Brazil nuts and an enterprise to develop products based on soy, came from the practitioners of the NGOs that used to work with the grassroots organizations. This is, in some sense, understandable because the development of the project required technical knowledge and experience that grassroots members did not have due to the lack of education and previous experience. The fact that the projects were initiated and promoted by outsiders means that their goals and activities were imposed on organizations originally formed for other purposes. There was no transition stage or preparation for these new activities. The same ideas and organizations were used to undertake the new activities.

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59 Weaknesses in Enforcement and Decision-making Systems The existence of unpaid loans is strongly related to weaknesses in the enforcement and decision-making systems. The lack of definition in the enforcement system allowed the unfulfillment of duties with no liability. The extensive decision-making system delayed any action in facing problems, especially those where private interests could be affected, such as unpaid loans. These weaknesses can be fully appreciated if the laws and rules that define the organizations' regulations are reviewed. CAIC has a classic cooperative structure. As in many Latin American countries, Bolivian law provides a framework for all cooperatives in the country. It is called the General Law for Cooperative Societies (Ley General de Sociedades Cooperativas), which was enacted in 1958. The law is very vague about the enforcement system and only refers to sanctions in two articles. Articles 18 and 19 state: “Those members of the cooperative societies that compromise the common interests, opposing the disposition of this law, will be civilly responsible to a third party.” (Sern civilmente responsables ante terceros los miembros de las sociedades cooperativas que comprometen los intereses comunes contrariando las disposiciones de esta ley.); 7 and “Those members that with acts or omissions, that are attributable to them, gravely damage the common interests of the cooperative will be directly responsible to the cooperative societies.” (Sern directamente responsables ante las sociedades cooperativas los miembros que con hechos positivos u omisiones que les sean imputables, lesionen gravemente los intereses comunes de la cooperativa.). 8 7 Article 18. 8 Article 19.

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60 The statutes provide a little more information on enforcement, establishing that cooperative members can be expelled for the following reasons: causing damage to the cooperative’s patrimony, having interests contrary to those of the cooperatives, bad behavior and lack of cooperative spirit, exploiting the peasant class, and being rude and assaulting cooperative officers. As a consequence of committing the above transgressions, the cooperative members will lose his/her membership, as well as his/her initial contributions and benefits. Also, the expelled members are still responsible for making any payment levied on cooperative members. An additional document, the Internal Regulations (Reglamento Interno), further defines the enforcement system, pointing out sanctions, as well as duties and rights of each position. According to the Internal Regulations, the chosen sanction depends on whether the wrongdoing is related to: contradicting the cooperative’s goals, bad behavior, or inflicting economic damage to the cooperative’s assets. The procedure for determining the appropriate sanction depends upon whether the misconduct is related to economic damage or not, and if the offender is an officer or just a member. The sanctions include temporary suspension of membership, expulsion from the cooperative, and denunciation to judicial authorities. Expulsion from the cooperative implies losing all the rights and financial assets that members put into the cooperative. When no economic damage to the cooperative has occurred, the members can always appeal to the General Assembly. However, those situations that go to the judicial realm are beyond the cooperative’s scope, and the sanction is not guaranteed despite the extensive provisions in the Internal Regulations. Thus, it can be said that the only effective sanctions available to the

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61 cooperative are expulsion and membership suspension, but the loss of a member’s contributions may not be considered as a real sanction since these contributions sometimes amounted to little. Almost all the above-mentioned characteristics are similar in the case of INDAMAD. As I mentioned before, the INDAMAD experience began with the Inambari Enterprise (Empresa Inambari). Its entire organizational structure was based on a law related to peasant communities enacted in 1992, called the Regulation on Title VII of the Economic Regime of the General Law on Peasant Communities, enacted through Supreme Decree No 004-92-TR. The General Law on Peasant Communities was enacted in 1987. This general law pays no attention to the enforcement system and has no definition of fault and liability. It does mention that internal statutes will provide more definitions, but this document only discusses actions against the enterprise's interest and establishes expulsion as a sanction. In general, both organizations had very weak enforcement systems. In both cases, the maximum punishment is expulsion from the organization. However, since the issue of defining wrongdoing and penalties is so poorly developed in the rules, it is hard to reach an agreement about somebody’s punishment. In addition to this, expulsion does not imply any monetary punishment. Expulsion causes the loss of contributions related to membership, but these are not real contributions. In the case of CAIC, the main components of the decision-making system are the General Assembly (Asamblea General), the Management Council (Consejo de Administracin), the Surveillance Council (Consejo de Vigilancia), and the Manager (Gerente). In this organizational set up, the General Assembly holds the most power. The

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62 law states, “The General Assembly will be the sovereign and supreme authority in a cooperative society and its agreements bind all members absent or present “(La Asamblea General ser soberana y la autoridad suprema en una sociedad cooperativa y sus acuerdos obligan a todos los miembros ausentes y presentes ). The Management Council is the executive branch of the General Assembly. It implements the General Assembly’s agreements. The Surveillance Council is in charge of monitoring all activities within cooperatives to ensure that the General Assembly’s agreements are accomplished. The scope of the Surveillance Council is striking. It can overrule cooperative members, officers and employees in both organizational and productive aspects. The statutes and the Organization and Function Manual (Manual de Organizacin y Funciones) add more specification in the same direction. CAIC’s organizational structure, as derived from the documents discussed, can be seen in the following diagram. The organizational structure is very clear under the Executive Committee. In the higher levels, however, there is some confusion. There is more than one line of relation among the Assembly and the inferior levels. There are also three offices (Management and Surveillance Committees, and the Board of Directors) that are at the same level without a clear understanding of the relationship among them. Although the offices in this level are only considered normative or advisory, the scrutinizing power conferred to the Surveillance Committee turns this level into one with executive authority. Moreover, during participant observation it was noticed that members of the Surveillance Committee have a permanent presence in the day-to-day activities of the cooperative, becoming executive in an informal way. The official executive officer, the General Manager, described this situation as one of “permanent

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63 dialogue” (permanente dialogo). In actual daily activities, there are few decisions that the General Manager can make by himself. GENERAL ASSEMBLY Management Council Board of Directors Surveillance Council Executive Committee General Manager Production Line 1 Production Line 2 Production Line 3 Figure 4-1. CAICs Organizational Chart In INDAMAD, which began as a communal enterprise, the General Assembly is also the main authority, even when the enterprise involves only a few members of the community. The General Assembly has the authority to create and liquidate the enterprise, as well as to design the main policies related to the enterprise. The new directive to be created to run the enterprise (if any is created) has only executive functions. (More details about the new directive are provided in the next section.) The law is very vague about the decision-making system of communal enterprises and simply points out that more specification should be provided in the Internal

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64 Regulations. The statutes established an Executive Committee and a General Manager under the General Assembly. In terms of the decision-making system both structures are very decentralized. Consequently there are a lot of people involved in the decision-making process, slowing the process and making it confusing. Although this model can work very well, there is a common tendency to get entangled due to personal differences. This is clear in regards to the unpaid loans. Although there was a consensus about the necessity of taking action about the problems, little is done because of the difficulty of penalizing members. In order to understand the responses to the problems just mentioned, other factors must be taken into account. In the following section, external factors that shape the context within which grassroots organizations respond to challenges will be discussed. In comparing these factors for both experiences, explanations for the different responses of both at CAIC and INDAMAD swill be provided. External Factors External factors are important to understand the picture or context of productive projects. The most important is the market, which is the new element in grassroots organizations' activity. This new factor will change the scenario for grassroots organizations, characterizing the scenario by competition. In this new situation, grassroots organizations have to endure the challenge of competition or lose money. The other influential factors are the support organizations involved with the project, and the project's political-institutional context. Both can buffer or enhance the challenges that grassroots organizations face when they get involved in production-based market initiatives. By enhancing challenges, these external factors will foster the assumption of more efficient approaches in the project activities. Depending on the level of the

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65 challenges, this shift can be expressed in a change of the organizational structure or by isolated actions. When the external factors act as buffers, the tendency will be to maintain the organizational structure. Under this vision, the market, the support organization and the political-institutional context will be considered by comparing how they are present in both experiences. Market Conditions Market conditions are a main source of challenges for producers, and therefore can put the producers (grassroots organizations, in this case) under stress because they must respond to these challenges in order to be profitable. In this section, I am going to analyze four components that provide an indication of the difficulty that CAIC and INDAMAD experience in negotiating the market. These factors are: supply conditions, demand conditions, type of products, business services, and enforcement organizations. Supply The toughness of a market varies inversely to the size of demand and directly to the size of supply or number of producers who compete to satisfy the demand. In order to simplify the analysis, it is assumed that increasing the amount of producers increases the size of supply. However, the relation among competitors is important, as is the number of them. This relation can vary from collaboration to competition beyond market standards (such as sabotage and spying). For CAIC the competition among Brazil nut processors is not very tough. There are fourteen processors and they have a good relationship. They all belong to the Northern Brazil Nut Processors Association called ABAN (Asociacin de Beneficiadoras de Almendra del Norte). This association decides important prices related

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66 to Brazil nuts. Also, they collaborate by selling each other Brazil nuts when one of them has difficulty in completing orders. On the other hand, INDAMAD has almost no competitors because there is no other enterprise in the region with the same products. However there are huge enterprises in the area that have similar products that address the same demand as CAIC. While this competition is through normal market parameters, there is no collaboration because producers do not interact on a personal level as in CAIC's case. Therefore, in regarding to supply conditions INDAMAD faces more difficult conditions in the market. Demand Demand conditions work in opposite ways than supply conditions. The bigger the demand, the less challenging the market is, and when demand increases, it is easier for producers to find buyers for its products. However, market conditions can be softened when part of the demand is reserved for specific producers, and this is the way niche markets work. This mechanism widens the demand for specific producers. Nowadays there are niche markets organized in order to support organic or certified producers, for example. In this study, only CAIC has access to a niche market through the solidarity market in Europe. By 2000 they sold more than 80% of its production on the solidarity market. They consistently receive a surplus for Brazil nuts on this market. Besides the reduction of competition, participation in this market also entails other advantages, due to the market organizers' interest in supporting the producers. On the contrary, INDAMAD competes in a market without any segmentation and against huge companies. So they face harder conditions in regards to demand.

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67 Type of product It is harder to sell a new product in comparison with an old product that is well known by consumers. Therefore, the type of product is also important in determining the toughness of the market. Ingredients, for example, can define a new product. Thus, the cooking oil derived from Brazil nuts can be considered a new product in comparison with other, more conventional cooking oils like corn. CAIC and INDAMAD show obvious differences in regards to type of product. CAIC is involved in the production of a well-known product with clear commercialization channels and well-defined standards. On the contrary, INDAMAD has to introduce new and diverse products based on a little known crop such as soy. Consequently, INDAMAD faces more difficulties than CAIC in regards to the product they deal with because INDAMAD has to convince consumers about a new product. Business services Two types of business services are considered here. The first is the roads that allow INDAMAD and CAIC to reach the market with their products. Both INDAMAD and CAIC have had to overcome the difficulties of transporting products by a road that is not paved and not passable in the rainy season. This raises costs and adds a lot of uncertainty to the commercial activities of both projects. In the case of INDAMAD, the closest big city, which is Cusco, is located 510 km far away from Puerto Maldonado, and then it is 1106 km to Lima. Riberalta faces the same problem with 1414 km to La Paz, adding to this the transport to the port of Arica in the Chilean cost where the Brazil nut is shipped to the U.S. and Europe. Another important component in business services is technical assistance for production. This refers to the services required by enterprises to maintain their

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68 equipment. Usually all productive development fosters the creation of an infrastructure to provide necessary services. However, the development of these services is dissimilar between CAIC and INDAMAD. I believe this difference is related to the distinct productive development of each organization. The processing of Brazil nuts has a long history in the region of Riberalta and because of this, most of the equipment used in this activity has been developed within the region. Therefore, in the case of CAIC, almost all of the necessary equipment can be repaired in Riberalta. Market Factors Levels of Market Challenges CAIC INDAMAD High: Too many producers and competition beyond normal standards Medium: Normal amount of competitors and no collaboration among them X Suppy conditions Low: Normal amount of competitors and collaboration among them X High: Production is sold in the normal market X Medium: Production is sold in both segmented and normal market Demand conditions Low: Production is sold in a segmented market X High: Production is only new products X Medium: Production is a combination of new and old products Type of product Low: Production is only old products X High: Production is in market beyond the region X X Medium: Production is sold in regional market Roads Low: Production is sold in local market High: Technicians from the capital are needed to repair equipment X Medium: Equipment must be repaired by other technicians but within the same region Technical assistance to production Low: Equipment can be repaired by local technicians X Figure 4-2. Enhancing Factors

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69 On the contrary, because soy processing is a new activity in Puerto Maldonado and the equipment is quite complex, INDAMAD's equipment has to be sent not to another city in the region, but to Lima in order to be repaired. The other option is to bring a technician from Lima to repair the equipment in Puerto Maldonado. Therefore, the lack of productive services in Puerto Maldonado represents a big challenge that INDAMAD has to overcome. The table shows that INDAMAD faces more difficulties in pursuing its economic activity because the factors that enhance market competition are more pronounced in the INDAMAD experience. Only in regards to roads and the enforcement organizations do CAIC and INDAMAD face the same high level of difficulty. Support Organization Involvement As I mentioned before, the organization that support market initiatives of grassroots organizations play a crucial role in the final outcome of these initiatives. The participation of a SO in initiatives of this type is common, but their role is rarely assessed. Nonetheless, the characteristics of the support organization, as well as its weaknesses and strengths, will influence the evolution and final result of the market initiatives. In the following section, the relationship between the support organization involved and the evolution of CAIC's and INDAMAD's experiences will be discussed. Three aspects of the organizations will be taken into account in the following analysis: financial capacity, technical capacity, and experience. In general these factors can act as a buffer for the project in regards to market challenges. Therefore, the more financial and technical capacity, the less incentive there is to modify the organization to respond to market difficulties. The experience of SO will play a similar role.

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70 Financial capacity Financial capacity refers not only to the availability of financial resources, but also to the capacity to get it from other sources. This capacity can be used to maintain the SO activity as well as to carry out initiatives with other organizations. In terms of this research, the financial capacity of the SO is important because it can (or cannot) allow the SO to shoulder the failures of the initiatives they support. This financial capacity also permits the SO to support productive projects even when they are losing money if the SO considers either the productive project to be reaching other goals or that there are opportunities to improve the productive projects' performance. The differences in the SO involved in INDAMAD and CAIC are very clear. As I mentioned before, the first SO involved with CAIC was EMEIR. That was not a big organization, but was created in the region and its work was always focused within the Pando-Beni region. EMEIR's financial capacity was not outstanding, but they did not require significant financial resources, as their main role was to build capacity and empower grassroots organizations, rather than to provide resources. After a few years and in conjunction with the withdrawal of EMEIR, the Dutch cooperation agency (SNV) appeared. SNV is a completely different type of organization and in fact, they better fit the definition of a funding agency although in many ways they function as an NGO. SNV works in almost every country in the developing world. They manage their own resources so their continuity is not related to the success or failure in any particular initiative they support. Even when the SNV did not provide financial resources to CAIC, they were extremely important in establishing contact with another agencies, and providing support for the management of the funds provided. This is clear in the biggest

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71 loan CAIC got from Oikos Credit, a Dutch development bank. It is also important to stress that aside from SNV’s financial strength, SNV emphasized other social goals; for this reason the exigency for business success was not overwhelming. On the contrary, the NGOs involved with INDAMAD were small. In the beginning, the support for INDAMAD came from an individual more than from an organization: Father Xavier Arbex. Most of the resources used in the beginning came from the Arbex family and from other people in his hometown. Later, a small cooperation agency from a Swiss canton supported this initiative by providing a practitioner. After the changes in this productive project, bigger NGOs became involved such as the “Fondo Contravalor Peru-Canada” and a credit organization called the “Caja Rural of Quillabamba.” Since these NGOs were focused on providing credit, the recovery of the loans was important for them because they required immediate success from the market initiatives they support In comparing both cases, it is clear that CAIC enjoyed more room for failure due to the strength and financial solvency of the organizations that supported its initiatives. On the contrary, success at INDAMAD was required in a comparatively shorter time period because financial resources were not available to cover failure due to the financial weakness of the SO involved. Technical capacity and experience Technical capacity and experience are almost always related to financial capacity, and this holds true for the cases of CAIC and INDAMAD. These factors play an important role in the process of productive projects as they increase the possibilities of success and help in the search for alternatives to overcome problems. An organization is

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72 more likely to face significant problems and have to come up with great changes when technical capacities and experience are insufficient. Because of its long and extensive experience in developing countries, SNV has the most capacity among all of the support organizations involved. SNV has more than 40 years of experience in different countries and with different type of projects. Certainly, productive projects are not a new type of initiative for them. By the same token, its practitioners are not only well experienced but also very diverse. Thus, you can find in Bolivia practitioners with previous work outside Latin America, as well as lawyers, economists, and engineers. For INDAMAD, the capacities and experience of the NGOs involved were significantly less. As I mentioned before, the first NGO working with the INDAMAD was almost a one-person NGO, Father Xavier Arbex. Additionally, the NGO was learning with this productive project as it progressed. They did not have any previous experience with this type of project. Only in the final stage of INDAMAD did bigger NGOs get involved. In this case, however, they never reached the levels of SNV. Therefore, the availability of financial resources, as well as the experience and practitioners' capacities, were smaller than in CAIC's case. This is shown in the following chart.

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73 Support Organization Factors SOs Features CAIC INDAMAD High: There are resources or capacity to get more financial resources if project fails, and the the SO future is not at risk X Medium: There is no resources or capacity to get more financial resources is project fails; but the SO future is not at risk Financial capacity Low: There are no resources or capacity to get more financial resources is project fails; and the SO future is at risk X High: The SO has extensive experience and a diverse practitioner staff X Medium: The SO has either an extensive experience or a diverse practitioner staff Technical capacity and experience Low: The SO does not have neither an extensive experience nor a diverse practitioner staff X Figure 4-3. Buffer Factors The Political Institutional Context The political-institutional context is the last, but not least, factor taken into account. This factor relates to the institutions that are not directly involved with the productive project, but that play an important role. These organizations are important because they have the same constituencies as the productive projects. Therefore, their opinion can influence the grassroots organizations members and then the project itself. These institutions can also be organizations whose opinions are important to the funding sources for the productive project or they can be organizations or institutions that have some ideological or political parenthood over the grassroots organizations. Such organizations might be workers' unions, regional federations, NGOs, government agencies, or church organizations. They are important in the process of the

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74 productive projects because they have their own vision about what the project should be. These visions will constrain the productive projects and they can establish boundaries within which the project should move. The density and strength of this context varies between the experiences I analyzed. In the case of CAIC, the institutional context is very dense. The organizations that have an opinion and show it ranges from the union of women working in peeling Brazil nuts to the association of Brazil nut exporters. Although there are some variances among their visions, all of them agree on giving CAIC a crucial role in the economic activity of Brazil nuts. The variances are related to specific features of each organization. The Association of Manufacturing Workers of Riberalta (Asociacin de Trabajadores Fabriles de Riberalta) is composed of the women that peel Brazil nuts (called “quebradoras”); the main labor force involved in the Brazil nut processing. While they assume the CAIC experience as theirs and are committed to fulfilling special duties in order to reach certain levels of quality and productivity, they also demand participation in the project. Furthermore, they claim that good salaries and work conditions are a “natural” condition in an experience such as CAIC, and this idea is more or less accepted by CAIC. The “quebradoras” participate in the Assemblies, and the salaries and work conditions are the best among all the Brazil nut processing plants in Riberalta. CAIC emerged at the same time as the association that involved all of the colonists in the Beni department. This association considers CAIC as an initiative that came up from its social bases and that was meant to be its economic branch. According to these ideas, CAIC has to pay a correct price for the colonists' products and in general, help colonists to overcome their difficult conditions. Other NGOs and government agencies

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75 also play an important, though indirect, role with CAIC. They express opinions that affect CAIC, serving as references for the colonists or other organizations. One example of the importance of these organizations is related to the joint venture made by CAIC and ARENARMAPA in 2001. Through this activity CAIC processed Brazil nuts provided by ARENARMAPA and shared the profits after the nuts were sold on the international market. Although this was a successful operation, it has been hard to repeat because of criticism due to the fact that ARENARMAPA is composed of medium-sized landowners (the “pequenos barraqueros"), who still have a negative reputation in the region. Some organizations are pushing CAIC to a similar joint venture with colonist associations. However, in this case the main advantage for CAIC disappears because the risk is again to be assumed by CAIC due the colonists' necessity for cash. This is a clear example of how external organizations influence CAIC's activities or at least establish some parameters for them The scenario for INDAMAD is quite different. INDAMAD was essentially an isolated experience. For example, it began when the number of NGOs in the area was very small, it is focused on agriculture while most of the NGOs in the area are focused on the forest and its conservation, and many of the organizations in the area see INDAMAD as a project that received very special support that they did not. Even FADEMAD, which has all the communities involved in INDAMAD as its main (and older) base, did not try to influence this project. They recognized it as the result of the personal effort of the Father Xavier Arbex and it seems that they did not feel entitled to participate. In addition to this, FADEMAD tried to develop their own initiative

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76 of processing agricultural products, but they failed. Perhaps, this experience warned them against being involved in other productive projects. Therefore, it is clear that the institutional context serves as a more important constraint in the case of CAIC than in INDAMAD. This constraint influences the decisions made within the productive project. Different Organizational Responses Keeping in mind the differences in the external factors, this section will review the actions CAIC and INDAMAD undertook in their attempt to overcome their problems. The actions the grassroots organizations undertook were focused on changing the organizational structures in order to develop more effective enforcement and decision-making systems. These actions were not undertaken in similar fashions by the projects. As I will explain in the following paragraphs, the scope of the changes and the rate of change differed between projects. In the case of CAIC, the changes were mainly slow and partial. Because the unpaid loans caused a huge problem, they tried to change the way loans were given. Under the new system, the members would sign an agreement that carried more effective sanctions. However, this was an ad hoc mechanism and it was not put into regular practice. Due to rising opposition, it was soon put aside. The other action to improve the systems that rule the CAIC's organizational structure is the proposal to change the statutes. Although this is a process that has been underway for more than two years, and it is unclear if any changes will actually take place, the changes proposed are crucial. When this research was conducted, the draft of the statutes was under review by an ad hoc commission.

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77 In general, the proposed statutes are better organized than the previous ones. Perhaps the most striking change with the new statutes is in the chapter about the mission and goals, which are not only more coherent but also different in meaning. The new statutes are very clear about CAIC's mission: “To improve the quality of life of the members' families and of the farmers settled in the area of influence of the Cooperative, developing in an associative way, entrepreneurial activities and services in a competitive manner, to reach sustainability with equity” Mejorar la calidad de vida de las familias socias y de los agricultores asentados en el rea de influencia de la Cooperativa, desarrollando de forma asociativa actividades empresariales y de servicios de manera competitiva, para alcanzar la sostenibilidad con equidad Although the combination of associative and entrepreneurial goals can be seen as potentially contradictory, the mere mention of entrepreneurial goals is important because it could signal intentions to re-accommodate the organizations to the new activities. It is also an indicator that cooperative members are aware of the necessity of efficiency, as well as other features of the entrepreneurial realm. The objectives proposed in the new statutes are also worthy of mention. The new statute has fewer objectives, but they are more organized and better fit the definition of an "objective." What is most striking is their stress on competitiveness and capacity. Of the seven objectives, three are related to development of capacity and three address competitiveness as a way to conduct the cooperative’s activities. The stress on competitiveness and capacity is important because it illustrates another different and new proposal within the cooperative movement. While the objective of improving members’ livelihoods is still maintained as the main goal, it is clearly stated

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78 that this goal can only be accomplished through increasing capacity among members and by being competitive in the market. There is little change to the decision-making and enforcement systems in the proposed statutes. The most noticeable changes are related to the elimination of the opportunity to appeal to the General Assembly in case of expulsion. Also, a new reason for separation from the cooperative is added: a member can be separated from the cooperative because of his/her inability to fulfill the social and economic requirements of the cooperative. This is noteworthy because it could potentially be applied to the poorest cooperative members. Although the main changes in CAIC have not taken place yet, the tendency for change within the cooperative is expressed through specific actions such as the toughening or strengthening of loan conditions and in the introduction of entrepreneurial concepts in the statutes. The consolidation of this tendency into different decision-making and enforcements systems would be the final stage of a process that CAIC has yet to complete. This final stage of organizational restructuring was reached by INDAMAD in a huge break that occurred in 2000. Beginning with that year, a different law began to rule INDAMAD’s organizational structure. This is the General Law of Societies (Ley General de Sociedades) enacted in 1997, which provides for the organization and main definitions of all business societies. The law has four hundred and forty-eight articles organized in four books, seventeen sections, and thirty-two titles. The second book concerns the Anonymous Society (Sociedad Annima), the most widespread model and the model chosen by INDAMAD.

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79 The book pertaining to Anonymous Societies is very extensive and detailed. It provides general guidelines for the most important organizational aspects of the enterprise, and states that more specific internal statutes should be developed by each enterprise after it is formed. The main characteristic of this type of enterprise is that a member's participation in benefits, losses, and decision-making is related to his/her participation in contributing to the enterprise's capital. Another important aspect is that wrongdoing can result not only in civil penalties, but also criminal penalties. This means that any transgressor can be put in jail, a significant difference in comparison with the previous regulations. The main directive body is the General Shareholders Assembly (Junta General de Accionistas), which can appoint a Board of Directors and a Manager. It is stressed that the Board of Directors is accountable for any wrongdoing The directors answer, unlimitedly and jointly, to the society, the shareholders and third parties, for the damages and financial losses that they cause by agreements or acts contrary to law or to the statutes or carried out by fraud, abuse of power or grave negligence. Los directores responden, ilimitada y solidariamente, ante la sociedad, los accionistas y los terceros por los danos y perjuicios que causen por los acuerdos o actos contrarios a la ley, al estatuto o por los realizados con dolo, abuso de facultades o negligencia grave In the same way, the law establishes a minimum set of issues for which the Manager is accountable. The Manager is accountable for any wrongdoing committed by the Board of Directors if he does not inform the General Shareholders Assembly. Although INDAMAD has its own set of statutes or regulations, their only purpose is to add details such as the specific participation of shareholders in the enterprise's capital or the frequency of meeting dates of assemblies. The law provides all the necessary specifications to rule the enterprise. Maybe the most important factor about

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80 assuming the Anonymous Society as a model is that it is very widespread, and the Peruvian legal system takes this model into account in most of the laws enacted. Therefore, any legal controversy, such as suing debtors, can be easily resolved. It is clear that INDAMAD has undergone a huge change regarding its organizational structure. The decision-making system has been expedited because the decision chains are simpler; there is only one line between the Shareholders Assembly and the Manager. In contrast with the Communal Enterprise, the Assembly has a defined time and channel for intervening. These changes in the decision-making system were associated with changes in the enforcement system. Under the new model, infractions are clearly identified, as well as the sanctions. In analyzing both cases, INDAMAD and CAIC, it is clear that more significant changes to the organizational structure have been carried out by INDAMAD. Although there are some indications of a shift towards more of a business approach in CAIC, such as the intent to implement a stricter loan system, these attempts were not consolidated in a new organizational structure. It is clear that this difference in the level of change is related to the difference in the external factors that each productive project experienced. The tougher market conditions faced by INDAMAD were an important pressure for undertaking organizational changes. Likewise, the likelihood for changes was greater in the case of INDAMAD due to the lack of available financial resources from the support organization involved. For INDAMAD, there was no room for failure. Success was imperative, and it required a specific timetable and a specific amount of revenue. In addition to this, the capacity and experience of the practitioners assisting INDAMAD were weaker than in CAIC's case,

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81 providing INDAMAD less help to overcome challenges. Finally, the political-institutional context served as a more important, stronger constraint in the case of CAIC than in INDAMAD, not allowing CAIC to undertake change. Similarly, the weakness of the institutional context in the case of INDAMAD has facilitated the changes that have occurred within the project.

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CHAPTER 5 CONCLUSIONS This thesis is mainly a comparative study and in this sense the conclusions developed here are more along the line of insights, rather than conclusions supported by some type of scientific proof. However, the information presented in this study is enough to support some interesting observations, as well as guidelines for additional research about the performance of grassroots organizations in the market. The issue of grassroots organizations in the market is very broad. It can be analyzed or evaluated from many perspectives: social, financial and political. This study focused on the organizational realm. Many times, the fact that grassroots organizations were designed to pursue political and social goals, as opposed to purely financial ones, is overlooked. Or, it is assumed that no special organizational arrangements are required for grassroots organizations to compete in the market. The first general insight about the performance of grassroots organizations in the market is that the analysis of these experiences should include external factors. In both CAIC and INDAMAD, it is clear that external factors conditioned the organizational responses to market challenges. Unlike private enterprises, in the case of productive projects there are actors, such as market conditions, the features of the support organization involved, and the political-institutional context that can foster or constrain the adjustment of the organizational structure. The market characteristics, the support organization, and the institutional context can act as enhancers or buffers of the need for grassroots organization to undertake 82

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83 organizational changes to respond to market challenges. The market, through the interplay between demand and supply, and the availability of productive services will define the level of market challenges. Thus, the market will foster changes in organizational structure to face these challenges. The SO involved can act as a buffer to market challenges by isolating the grassroots organization with its financial and technical support. In this way, SO can reduce the necessity for adjusting the organizational structure. Finally, the political-institutional context formed by other organizations that are related to the productive project and work in the area (other SOs, governmental agencies, activist groups) will act as a constraint for changes in grassroots organizations. By trying to enforce their agendas on the project, they set up conditions that they think the project should fulfill. The previous comment implies that productive projects should be understood as a process. Since grassroots organizations were not designed for the market, they have to undertake an adjustment process when they become involved in market initiatives. The final outcome of these market initiatives will depend on the specific characteristics of the above-mentioned factors. Many assessments of productive projects do not take into account these dynamics, nor do they evaluate the other factors mentioned in this thesis. These types of assessment are incomplete and inaccurate, and as a result failures and lack of response can be incorrectly attributed only to grassroots organizations. This thesis also provides some insights about the capacities of grassroots organizations. The existence of an organizational structure within a community does not necessarily mean that it has “social capital” that will allow it to undertake any activity and be successful. Many times those structures were created for specific purposes under

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84 specific conditions and therefore, those structures can hinder more than help with certain activities. One of the main drawbacks of this particular study is related to methodology. One of the main issues for productive projects is the vision that members hold about the projects and I would have liked to develop this more fully. Because of political turmoil in Puerto Maldonado, I could not dedicate sufficient time to collecting information in a systematic fashion. Another limitation was not collecting enough information about the person interviewed so as to identify the relationship among personal positions and interests. The focus group tool did allow me to overcome this problem in some regard. It is important that focus group participants are well selected so different visions are presented. Another difficulty that I could not overcome was the lack of financial records to build indicators about the financial performance. This information is usually incomplete, and could require some work to put the information together. In addition to these problems, it could be hard to get access to the information that does exist. To this respect, my familiarity with the area and the people involved was important; however, the time was always a constraint. I believe there are some main topics to address in future studies of the issue of grassroots organizations involved in market-related initiatives. The first is to conduct more in depth work in relation to the perceptions among grassroots organization members about productive projects’ goals and about the market. These perceptions or visions that members bring to the project will affect the final outcome of productive projects. This research should pay attention to the many interests that shape personal positions in

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85 productive projects. Research of this kind enhances the necessity to develop good relationships with grassroots organizations’ members and let them clearly know the purpose of the study. The second line of research for this issue could focus on further integrating the many aspects of grassroots organizations’ participation in the market. For this, it is important to understand how the adjustment process of the organizational structure is related to the financial performance of the project. And, it is necessary to look at the connection between the changes in organizational structure and the development of human resource capacity within grassroots organizations. This second line of research should also consider the external factors analyzed in this thesis. It is also important to address the relationship between organizational changes and the economic performance of productive projects. The information available shows that production value has increased over the years for both of the experiences analyzed. Although it was impossible to analyze this issue due to the lack of good financial information, this is a topic that should be addressed in the future. Finally, it is necessary to add more case studies, since different responses and changes other than those in CAIC and INDAMAD will take place under different conditions. Thus, it would be interesting to conduct the analysis that I did with grassroots organizations that do have experience in developing collective activities and that do have a high level of cohesion. Both cases studied in this thesis do not present a good level of cohesion. It is possible that grassroots organizations with more experience and better capacities can deal better with market challenges, without changing their organizational structure.

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86 Although the outcomes of productive projects can look disappointing, they are an important development mechanism, and the non-economic benefits should be accounted in order to do a full evaluation. On the other side, if there is a well-integrated community, at some scenarios productive projects can be the only feasible option to reach some level of development. In those scenarios, characterized by the difficulties to conduct economic activities, the additional strengths provided by collective action and the knowledge accumulated by communities will be important to overcome those difficulties. However, in order to reach the potential of productive projects all the actors and conditions involved must be carefully assessed.

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LIST OF REFERENCES Alvarez, M. (1990). "Agroindustria y Promocion del Desarrollo: los Desafios del Mercado." Debate Agrario(9): 69-90. Annis, S. and P. Hakim, Eds. (1988). Direct to the Poor: Grassroots Development in Latin America. Boulder, Lynne Publisher. Appelbaum, R. (1970). Theories of Social Change. Chicago, Markham Pub. Co. Baer, W. (1962). "The Economics of Prebish and ECLA." Development and Cultural Change 10(2): 169-182. Bebbington, A. (1996). "Organizations and Intensifications: Campesino Federations, Rural Livelihoods and Agricultural Technology in the Andes and Amazonia." World Development 24(7): 1161-1177. Beekma, J., A. Zonta and B. Keijzer (1996). Departamento de Pando y la Provincia de Vaca Diez: Base Ambiental para el Desarrollo. La Paz, SNV-Bolivia. Beijnum, P. V. (1996). Riberalta: Problematica Urbana. Riberalta, SNV-Bolivia. Bennet, J. W. (1988). "Anthropology and Development: the Ambiguos Engagement." Development 4: 6-16. Bernard, H. R. (2002). Research Methods in Anthropology. New York, Altamira Press. Camino, R. D. and M. Alfaro (1998). Certification in Latin America: Experience to Date. London, Rural Development Forestry Network. Cardoso, F. H. (1972). "Dependency and Development in Latin America." New Left Review 74: 83-95. Carrol, T. (1992). Intermediary NGOs: The Supporting Link in Grassroots Development. West Hartford, Kumarian Press. Caviedes, C. and G. W. Knapp (1995). South America. Englewood Cliffs, Prentice-Hall. Claveri, R. (1995). Diagnostico Socio-Economico de las Comunidades de Mazuco. Quillabamba, Vicariato Apostolico de Puerto Maldonado. Clay, J. (1996). Generating Income and Conserving Resources: 20 lessons from the field. New York, WWF Publications. 87

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88 Colclough, C. (1982). "Lessons from the Development Debate for Western Economic Policy." International Affairs 58(3): 489-500. Esman, M. J. and N. Uphoff (1984). Local organizations: Intermediaries in Rural Development. Ithaca, Cornell University Press. Everett, M. (1997). "The Ghost in the Machine: Agency in "Poststructural" Critiques of Development." Anthropological Quarterly 70(3): 137-151. Foweraker, J. (2000). Towards a Political Sociology of Social Mobilization in Latin America. Center for Latin America Studies Conference, Gainesville, Florida. Freire, P. (1970). Pedagogy of the Oppressed. New York, Herder and Herder. Gibson, C. C. and C. D. Becker (2000). A Lack of Institutional Demand: why a Strong Local Community in Western Ecuador Fails to Protect its Forest. People and Forests. C. C. Gibson, M. A. McKean and E. Ostrom. Cambridge, The MIT Press. Hiebing, R. G. and S. W. Cooper (2003). The Successful Marketing Plan. New York, McGraw-Hill. Hoben, A. (1982). "Anthropologists and Development." Annual Review of Anthropology 11: 349-375. INE (2002). Bolivia: Distribucion de la Poblacion. La Paz, Instituto Nacional de Estadistica. Larance, L. Y. (2001). "Fostering Social Capital through NGO Design." International Social Work 44(1): 7-18. Lewis, W. A. (1955). The Theory of Economic Growth. London, Allen & Unwin. Library of Congress, For European Recovery: The Fiftieth Anniversary of the Marshall Plan. http://www.loc.gov/exhibits/marshall/ , 10/15/2003. Martin, D. B., Ed. (2002). Inter-American Development Bank: Annual Report 2001. Washington, Inter-American Development Bank. McClelland, D. (1961). The Achieving Society. New York, Van Nostrand. Noriega, J. (1997). Peru: las Organizaciones No Gubernamentales de Desarrollo (ONGD). Lima, DESCO. Ormachea, E. and J. Fernandez (1989). Amazonia Boliviana y Campesinado. La Paz, Cooperativa Agricola Integral "Campesino". Plattner, S. (1989). Economic Anthropology. Stanford, Stanford University Press.

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89 Portes, A. (2000). "The Two Meanings of Social Capital." Sociological Forum 15(1): 1-11. Portes, A. (2000a). Neoliberalism and the Sociology of Development: Emerging Trends and Unanticipated Facts. From Modernization to Globalization. J. T. Roberts and A. Hite. Malden, Blackwell Publishers. Portes, A. and P. Landolt (2000). "Social Capital: Promise and Pitfalls of its Role in Development." Journal of Latin American Studies 32: 529-547. Putnam, R. D. (1993). "The Prosperous Community, Social Capital and Public Life." The American Prospect Sping: 35-42. Rodriguez, M. (1991). Proceso de Ocupacion y Construccion del Espacio Amazonico. Amazonia 1940-1990: el extravio de una ilusion. F. Barclay, M. Rodriguez, F. Santos and M. Valcarcel. Lima, Fondo Editorial PUCP. Rostow, W. W. (1971). The Stages of Economic Growth; an Non-Comunits Manifesto. Cambridge, University Press. Salafsky, N., B. Cordes, J. Parks and C. Hochman (1999). Evaluating Linkages Between Business, the Environment, and Local Communities: Final Analytical Results. Washington D.C., Biodiversity Support Program. Samuelson, P. A. and W. D. Nordhamus (1992). Economics. New York, McGraw-Hill, Inc. Scherr, S. J., A. White and D. Kaimowitz (2002). Making Markets Work for Forest Communities. Washington DC, Center for International Forest Research. Smith, C. (1991). The Emergence of Liberation Theology: Radical Religion and Social Movement Theory. Chicago, University of Chicago Press. Smith, D. H. (2000). Grassrrots Organizations. Thousand Oak, Sage Publications. Stichting Nederlandse Vrijwilligers, Working Worldwide. http://www.snvworld.org/ , 10/25/2003. Stoian, D. (2000). Variations and Dynamics of Extractive Economies: the Rural-urban Nexus of Non-timber Forest Use in the Bolivian Amazon. Freiburg, Albert-Ludwigs Universitat. Stokes, S. C. (1995). Cultures in Conflict: Social Movements and the State in Peru. Berkeley, University of California Press. Sutcliffe, B. (2000). Development After Ecology. From Modernization to Globalization. J. T. Roberts and A. Hite. Malden, Blackwell Publishers.

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90 Tanaka, M. (1999). Del Movimientismo a la Media-politica: Cambios en las Relaciones entre la Sociedad y la Politica en el Peru de Fujimori. El Peru de Fujimori. J. Crabtree and J. Thomas. Lima, Universidad del Pacifico. The United States Agency for International Development, USAID. http://www.usaid.gov/ , 10/25/2003. The Deutsche Gesellschaft fr Technische Zusammenarbeit, GTZ. http://www.gtz.de/english/ , 10/26/2003. Todaro, M. (1977). Lewis Theory of Development. Economic Development in the Third World: an introduction to problems and policies in a global perspective. M. Todaro. London, Longman. Vidal, J. P. (1981). Geografia del Peru: las Ocho Regiones Naturales del Peru. Lima, Editorial Universo. Woolcock, M. (1998). "Social Capital and Economic Development: Toward a Theoretical Synthesis and Policy Framework." Theory and Society 27: 151-208. Yeager, T. J. (1999). Institutions, Transition Economies, and Economic Development. Boulder, Westview.

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BIOGRAPHICAL SKETCH Rafael Rojas was born in 1963 in Nasca, a small town located on the southern Peruvian coast. In 1982, he moved to Lima where her enrolled in the Catholic University, graduating in 1999 with a bachelor’s degree in social sciences, with a specialization in Economics. His work experience has involved researching sustainable development in the Peruvian Amazon while working at the Catholic University, and many years as a development practitioner in different non-government organizations in the Peruvian Amazon. He started the Ph.D. program in interdisciplinary ecology at the University of Florida in 2003. 91