collective responses to crisis: agricultural cooperatives and intermediaries in the post-sandinista...

8/14/2019 Collective responses to crisis: agricultural cooperatives and intermediaries in the Post-Sandinista Nicaragua

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Collective Responses to Crisis:

Agricultural Cooperatives and Intermediaries

in the Post-Sandinista Nicaragua

Octavio Damiani

Department of Urban Studies and Planning

Massachusetts Institute of Technology,

Cambridge USA, May 1994

A grant from the Inter-American Foundation made it possible thefield research for this paper. All views, interpretations, and

recommendations are mine and do not necessarily represent those of

the Inter-American Foundation.


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LIST OF ACRONYMS

ATC Rural Workers' Association

BANCAM Peasants' Bank

BND National Development Bank

CAS Sandinista Agricultural Cooperatives

CDC Center of Cooperative Development

CCS Credit and Service Cooperatives

ECODEPA Cooperative Enterprise of Agricultural Products

ENABAS National Staple Crops Enterprise

ENAL National Cotton Enterprise

ET Territorial Enterprise

FENACOOP National Federation of Cooperatives

FSLN Sandinista National Liberation Front

INE National Energy Enterprise

INPRHU Nicaraguan Institute of Human Promotion

MIDINRA Ministry of Agriculture and Agrarian Reform

UCA Union of Agricultural Cooperatives

UNAG National Union of Farmers and Ranchers

UNAN National Autonomous University of Nicaragua

UPANIC Union of Agricultural Producers of Nicaragua


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TABLE OF CONTENTS

I. INTRODUCTION

II. THE NICARAGUAN AGRICULTURAL COOPERATIVES

a. Agrarian reform and development of cooperatives

b. The role of intermediaries and unions

c. The Pacific coast region

III. INSTITUTIONAL CHANGE AND MANAGERIAL CAPACITY

a. Reorganization and external institutional linkages: the creation of intermediaries

The role of the UCAs

Old wine in a new bottle?

An extended role for the UCAs

b. Institutional linkages with national cooperative organizations: the UCAs, UNAG,

and FENACOOPc. Turning peasants into managers

IV. CONCLUSIONS

V. REFERENCES


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I. INTRODUCTION

Policies and projects targeting the rural poor in developing countries often focus on production-oriented interventions. These interventions usually attempt to modernize

peasants' production.1 For example, projects introduce cash crops and new production

technology to replace subsistence crops and peasants' backward technology. The use ofsubsidized credit and the provision of extension services frequently promote the purchase of

inputs and agricultural machinery. Government agencies and farmer associations dealing

with the implementation of these projects often receive substantial funding. Heavyinvestments in infrastructure--primarily irrigation and roads--are typically present. While

these interventions may have positive impacts on agricultural production, the results in

terms of poverty alleviation are often disappointing.2 Rural elites often take the most

advantage of projects, credit, and technical assistance.3 Projects are often plagued byimplementation problems because they are too complex and difficult to coordinate. 4 The

connection between projects and policies is often weak, so farmers end up cultivating crops

for which prices decline or which are not favored by national agricultural policy5.

This paper presents an unusual story of positive outcomes both in terms of

agricultural production and the alleviation of rural poverty. It focuses on the story of 19agricultural cooperatives in the Pacific coast region of Nicaragua created by the agrarian

reform implemented by the Sandinista government between 1979 and 1989, and of twoUniones de Cooperativas Agrcolas (Unions of Agricultural Cooperatives, UCAs)--

intermediary organizations to which the cooperatives belong.6 In the last three years, these

1 For an excellent historical revision of agricultural development ideas and policies, see Staatz and Eicher

(1990). See Schultz (1964) as a major foundation of agricultural models based on the development of new

technologies, and Ruttan (1984) for an overview of integrated rural development programs.

2

See Chambers (1983) and Lipton (1989) for an appraisal of the effects on rural poverty of agriculturaldevelopment policies. Also see Peek (1988) for a critical view of the integrated rural development approach.

3 See Tendler (1993a & b) for a detailed account of these problems in World Bank-funded agricultural

projects in the Brazil's Northeast.

4 For example, see Grindle (1981 & 1986)

5 Timmer, Falcon, and Pearson (1983) argue that the weak connection between agricultural projects and

policies relates to the poor coordination between policies directed to production and those targeting

consumption. They stress that most countries attempt to increase food output by implementing a host of

production-oriented government projects, while using food imports and across-the-board food subsidies to protect consumers. The authors argue for a food policy approach that integrates both production and

consumption issues.

6 Esman and Uphoff (1984) used the term intermediary to emphasize the importance of local institutions

that act as intermediaries between rural residents and both government agencies and private commercial firms.While Uphoff did not use this category in his latest work (Uphoff 1993), I found it more appropriate for the

Nicaraguan case. As I will show later, the UCAs in Nicaragua are local, grassroots, non-governmental,

belonging to the collective action sector. But their major feature is precisely their mediation between the

coops and the market by providing services to member coops, and between the individual coops and the

national-level organization of cooperatives, by representing the member coops before the national-level


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cooperatives have been cultivating new crops, adopting new techniques, and increasing the

income of their members. This is striking for many reasons:

a) They have grown and innovated in the wake of a substantial decline in aggregate

agricultural production in the region. This decline resulted from a collapse in the price of

the primary cash crop, cotton, and the fact that its continuous cultivation has led todeterioration of the land and ever-increasing input costs to maintain yields. Within

Nicaragua, the Pacific coast has traditionally been the most developed and export-oriented

region, with an economy based on the production of cotton for export since the 1950s. Thedecline in the world price of cotton since 1990 has led most cooperatives to decrease

cultivated areas sharply and to shift to subsistence crops. Some large farmers have shifted to

cattle production, but most have left their lands idle. These developments have led to a

dramatic increase in unemployment and poverty throughout Nicaragua.

b) The cooperatives included in this case have succeeded at a time of political and

economic upheaval, when traditional government policies that heavily subsidized

agricultural coops have been eliminated in favor of market-oriented policies. This isparticularly unusual because small farmer cooperatives in Nicaragua and elsewhere in Latin

America have often been hurt by the free market policies commonly being applied duringthe last few years. The Sandinista regime that governed Nicaragua between 1979 and 1990

not only created the cooperatives as part of its agrarian reform program, but also protected

them from competition from imported products, and gave them subsidized inputs, credit,

and extension services. Furthermore, farmers sold their production and purchased most oftheir inputs from public enterprises. As part of a stabilization program applied since 1990,

the new government has decreased expenditures by reducing the provision of most

government services. In addition, because rural cooperatives were created by the Sandinistaagrarian reform program and were at the center of the Sandinista agricultural policy, the new

government perceives them as political adversaries as well as inefficient producers. For this

reason, the new government's agricultural policy has been targeting individual farmers,providing little access to credit and government services, such as agricultural extension and

training, to cooperatives.

c) These positive outcomes occurred as a result of the successful coops' initiative in

pursuing institutional innovations of a type unsuccessfully promoted by the Sandinista

government. These coops created Uniones de Cooperativas Agrcolas (Unions of

Agricultural Cooperatives, UCAs), groups of cooperatives at the local level that providethem with services. The Sandinistas had created similar groups of state farms (the

Empresas Territoriales) and groups of agricultural cooperatives (the Centros de DesarrolloCooperativo) at the local level. By concentrating investments and services, as well as theapplication of new technology, these groups were supposed to become an example for coops

and farmers in the surrounding area and to provide technical assistance and services to other

coops and individual farmers. However, these groups were plagued by internal problemsand rarely worked with neighboring coops and farmers.

organizations of the cooperative sector.


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In this paper, I examine the reasons why the successful coops being studied have

managed to achieve good results despite the factors working against them. My approachbuilds on previous work in policy analysis which employs an institutional perspective in

order to identify the forces underlying positive policy outcomes.7 I pay special attention to

the relationship between coops' good performance and policies initiated during theSandinista period--although good performance may be related to other factors as well. Such

an emphasis contrasts with most of the literature on Nicaragua, which sees the Sandinista

policies as an example of what should not be done to promote economic and agriculturaldevelopment.8 While most of these criticisms are well grounded, the Sandinista period

represents an unusual experience of a long-term support of the poor as an integral part of

agricultural policy. Land reform and the support to peasant cooperatives were at the center

of the Sandinista agricultural policy, as the Sandinistas saw them both as instruments forbreaking down the pre-revolutionary power structure and for increasing agricultural output

(CIERA 1989). This unique situation offers the opportunity to study what policies or

particular components worked well, even when the overall results were not positive. The

results of this study provide insights not only into what role cooperatives may play in theNicaraguan context, but also about how to design policies that help the rural poor and

agricultural cooperatives in other contexts.

The region that I chose for my study comprises the Nicaraguan Pacific coast.

Because I was looking for cases with successful outcomes, this region's history of well

organized agricultural cooperatives made it attractive for my research. The Pacific coastwas the region in which the Sandinistas drew the most overwhelming rural support during

the 1979 revolution. The first agricultural cooperatives were created by former seasonal

cotton workers during the revolutionary struggle. Many of these coops became the bestorganized cooperatives in the country.

The paper draws on interviews I carried out in Nicaragua between June and August1993.9 My observations and findings build from the analysis of the agricultural cooperatives

and intermediaries included in this study and from comparisons with individual coops and

intermediaries that I visited earlier but I will not discuss here.

7 See Hirschman (1963) and Tendler (1993a & b) for examples of an institutional perspective within the

development literature. Also see DiMaggio & Powell (1991) for a discussion of the new institutionalist

literature in different disciplines.

8 For example, see SIDA (1989) and Martnez (1992). For an analysis of the negative effects of the

macroeconomic policies over the agricultural sector during the Sandinista era, see Biondi-Morra (1993).

9 I conducted in total 88 interviews, including six with officials and planners of the current government, 11

with former officials and planners of the Sandinista government, three with leaders of the national-levelcooperative movement, and 68 with leaders, staff, and members of cooperatives. The interviews were based

on open-ended questionnaires, which varied with the interview. At a first stage, the main objective was to

identify the region in which I would conduct the study given the time constraints, and to make a first

approximation of the selection of cases to be included here. I then made a first round of visits to cooperatives,

which helped me select the cases included here.


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I chose the cases to be examined using the following criteria:

a) Presence of innovative behavior, including the adoption of new crops, new agriculturaltechniques, and new institutional forms.

b) Good performance in terms of agricultural production and productivity, as demonstrated

by higher yields per hectare and per worker than the regional and national averages.c) Positive change in the income level and living conditions of coops' membership as

compared with conditions before they joined.

The first of these criteria was the most important to select the cases because, as I

show later, coops' rapid reaction to select new crops to replace cotton and their adoption of

new institutional forms turned out to be the main factors explaining their relative success. In

addition, the fact that the most successful cooperatives were cultivating crops that were newin the region made it difficult to use the second criterion, i.e., to compare their yields with

those obtained by other coops and individual farmers.

While I restricted my analysis to one of the Nicaraguan regions and to a limitednumber of cases, I believe as a result of my interviews with cooperative leaders and visits to

intermediaries in other regions that similar patterns exist throughout most of the country. Inote, however, that it will be necessary to examine further how intermediaries have worked

in other regions.

In this paper, I argue that the best outcomes are not related primarily to actions takento improve agricultural production, such as providing credit, extension services, training in

farming methods, or modern technology, nor to internal organizational changes that

increased individual production--despite the assumptions underlying most policies targetingthe rural poor. The cooperatives that succeeded in finding new products and markets to

replace cotton were the ones that put a priority on developing external institutional linkages,

creating local organizations and reinforcing their relationship with national-levelcooperative organizations. In addition, the coops that worked better demonstrate that the

presence of individuals with high managerial skills was more important than the knowledge

of agricultural production itself. These findings suggest the presence of complementarities between the development of institutional linkages external to the cooperatives, the

acquisition of managerial skills, and certain production-oriented policies.

My arguments will be presented in two parts. In the first part, I examine the originsof the Nicaraguan agricultural cooperatives, their institutional organization at the local and

national levels, and the problems that they have faced since their creation, first in the

country as a whole, and then in the Pacific coast region. The second part focuses on theinstitutional responses to these problems--the emergence of intermediaries, the

strengthening of institutional linkages with national-level organizations, and the application

of management skills in the case study cooperatives. In the last section, I present theconclusions of the study.


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II. THE NICARAGUAN AGRICULTURAL COOPERATIVES

By 1989, Nicaragua had the largest number of agricultural cooperatives in LatinAmerica--more than 3,300, compared to 80 in Costa Rica, 1,200 in Brazil, and 2,500 in

Mexico (UNAG 1989a & b, OIT 1990). Cooperatives occupied more than 1.6 million

manzanas,10

21% of the national farmland, and they comprised 74,000 members, or 60% ofthe agricultural labor force. By 1993, the number of agricultural coops had fallen to 2,30011,

mainly as a result of the adverse political and economic environment that they faced after

the change in government in April 1990. Because the Pacific coast was Nicaragua's mostproductive cotton region, it suffered most from the fall in the international prices of cotton.

In the following pages, I will provide a brief overview of the origins of the

agricultural cooperatives. As a background to the organizational changes discussed later, Iwill also describe the national and local-level institutional organization of the cooperative

movement, as well as the major changes coops experienced after 1990. Finally, I will

present an overview of the problems that the Pacific coast cooperatives face.

a. Agrarian reform and development of cooperatives

Nicaraguan agricultural cooperatives were first created as part of an ambitious

agrarian reform implemented immediately after the Sandinista revolution in 1979.12 These

cooperatives were mainly of two kinds:

a) Collective production cooperatives, in which members owned and worked the land

collectively, sharing the revenues according to the amount of time worked. These coops,

called Cooperativas Agrcolas Sandinistas (Sandinista Agricultural Cooperatives, CAS),had an average of 480 manzanas of land and 20 members, who were often former landless

rural workers.13

b) Cooperatives of individual small farmers who cultivated the land independently. These

coops, called Cooperativas de Crdito y Servicios (Credit and Service Cooperatives, CCS),

comprised 35 members on average, most of whom owned land before the revolution. Eachmember had an average of 17 manzanas of land. The CCSs had the function of facilitating

the provision of government services, mainly credit and agricultural extension, and they

10 One manzana = 0.705 hectares or 1.73 acres

11 Information from preliminary results of a national census of agricultural cooperatives carried out by

FENACOOP in 1992.

12 There is an extensive literature focused on the Sandinista agrarian reform. This literature arose at

different times in response to a number of different issues. See CIERA (1989) for an official account of the

objectives, strategies, and policies guiding the agrarian reform process. See Peek (1981), Deere and Marchetti

(1981), and Deere, Marchetti and Reinhardt (1985) for early evaluations of the agrarian reform. See

Reinhardt (1989) and Baumeister (1991) for late and ex-post analysis. For a critique, see Martnez (1993).

13 A proposed Law of Cooperatives is expected to give these coops the name of "Cooperativas AgrcolasColectivas" (Collective Agricultural Cooperatives).


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rarely performed other tasks, such as selling production or buying inputs.

In addition to the CAS and CCS, peasants also joined other forms of cooperativessimilar to the CAS, often combining collective property of the land with different degrees of

collective and individual agricultural production. By 1989, 45% of the cooperatives were

CCS, 34% CAS, and 21% other forms. CCS had 62% of the coop members, CAS 34%, andother forms 4% (UNAG 1989a & b).

The evolution of the Nicaraguan cooperatives during the Sandinista period washighly political. The Sandinistas considered the agrarian reform to be their most important

program because it was intended to change the power relations in Nicaraguan society by

redistributing land to the rural landless. For this reason, the newly created cooperatives

received strong support. This support took two main forms:

a) the government provided them with cheap credit, subsidized agricultural inputs and

machinery, free extension services, and a wide range of education and training programs.

The government also created or reformed already existing institutions to deal with theagrarian reform program. The Ministerio de Desarrollo Agropecuario y Reforma Agraria

(Ministry of Agricultural Development and Agrarian Reform, MIDINRA), which designedand implemented the agricultural and agrarian reform policies and provided extension

services, became the most powerful agency within the Sandinista government. TheBancoNacional de Desarrollo (National Development Bank, BND) opened new offices all over

rural Nicaragua. The government also created a number of government enterprises toprovide marketing services, inputs, and machinery.

b) The Sandinistas created a national-level organization consisting of cooperatives andindividual small and medium size farmers, the Unin Nacional de Agricultores y

Ganaderos (National Union of Farmers and Ranchers, UNAG), providing it with substantial

political support and funding.

The support given to cooperatives made them a centerpiece of Sandinista

agricultural policy, in contrast to the situation in most developing countries, in whichagricultural cooperatives have been at most an instrument of poverty alleviation policies.

However, despite their preferential treatment and importance, Nicaraguan cooperatives

faced many problems. The Contra war that started in 1982 demanded great sacrifices.

Coops had to select members to send to the front, and had to continue to pay their normalsalary for periods lasting from three to six months. It is estimated that more than 5,300 coop

members lost their lives in the Contra war. Coops also lost more than 1,300 dwellings and

15,000 head of cattle (UNAG 1989a). In addition, the organization of cooperatives wasstrongly affected by political and military factors. For example, the small size and collective

nature of the CAS--undoubtedly the highest-priority type of coop from the government's

perspective--was more influenced by military objectives than by economic considerations.In fact, many CASs were organized as local defense organizations that were supposed to be

able to ward off attacks by the Contra forces. The government also responded to many


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cooperatives' problems with solutions based on political rather than economic rationales.14

In addition to these problems, the newly created cooperatives often lackedmanagement skills, in part because most of their members were illiterate, and more

generally, unfamiliar with management of coop enterprise. Although the government

implemented a literacy program (the "Alphabetization Crusade") to provide basic educationfor the peasantry, the results were not dramatic enough to improve coop members' capacity

to learn managerial skills (Colburn 1984).15 In addition, government policies did not help

foster a managerial mentality among cooperative members. Government monopoliescontrolled the marketing of products for domestic consumption, such as beans, corn, and

rice, paying low prices to farmers and coops in order to subsidize urban consumers (Colburn

1984). The government strongly controlled the crop mix and the agricultural technology

applied by agricultural cooperatives according to the national and regional plans, refusing to provide credit to those coops that did not comply. These policies discouraged coop

members from learning managerial skills because decisions about production and marketing

were mostly out of their control. Furthermore, the subsidization of credit, inputs, and

machinery distorted prices, encouraging coops to use too much capital instead of theabundant labor available to them. Finally, the war expenses caused macroeconomic

imbalances that drove the economy into high inflation and prolonged recession.16 This had anegative impact on the provision of some government services.

As a result of these problems, the cooperatives faced great difficulties when the new

government made a drastic shift to free-market policies beginning in 1990, which led to theelimination of government intervention in the marketing of all agricultural products, direct

subsidies and the provision of some government services (notably agricultural extension). 17

14 For example, the government repeatedly forgave large debts to cooperatives to maintain their support in

the war against the Contras. This criteria led to the de-capitalization of the BND. Another example resulted

from negotiations that the government held with the UNAG and the Asociacin de Trabajadores del Campo(Rural Workers' Association, ATC) regarding the reduction of the length of the workday to three hours

immediately after the revolution. While the government initially argued that such a short workday was

unacceptable because it affected production dramatically, the arguments quickly turned into political

arguments. The workers argued that a short workday would compensate them for the exploitation suffered

during the Somoza times (Colburn 1984, Baumeister 1991). The government ended up agreeing to increase

the workday to only four hours in 1984.

15 Most of the coop members that I interviewed said that they had participated in recent training activities

focused on managerial skills (e.g. accounting). The majority expressed that they were unable to take full

advantage of these training activities because of they had a poor background in mathematics. UNAG and

FENACOOP have repeatedly stressed that the lack of managerial skills remains as one of the primary

constraints for the development of agricultural coops. For example, see UNAG (1989) and FENACOOP

(1993).

16 The Gross Domestic Product (GDP) has not grown since 1981, falling 13.4% between 1981 and 1992.

The GDP per capita fell 38.6% (CEPAL 1993) during the same period. Inflation ranged from 334% in 1985

to 33,500% in 1988 (Ricciardi 1993).

17 These measures were part of a stabilization program applied immediately after the new government took

over in April 1990. The program included the devaluation of the national currency, the reduction of the

money supply and availability of credit, an increase in the charges for government services, and the


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In addition, the international prices of the principal Nicaraguan agricultural exports have

been declining. This has resulted in the decline of the cultivated area of cotton to

insignificant levels, and has negatively affected sugar and coffee production.

Cooperatives reacted in a variety of ways to this new adverse environment. In many

cases, members dissolved the coops and divided the land among themselves, leading to thedecrease in the number of coops.18 A second type of reaction involved internal

organizational changes, such as the decision by coop members to shift from collective to

individual production. This process could take different forms, ranging from preserving thecollective property but undertaking most agricultural production individually to the total

division and the transformation of a CAS (a collective production coop) to a CCS (a coop of

individual, independent producers). A third type of reaction has been the creation of

organizations of cooperatives at the local level. Organizations of this type--which are theprimary focus of this study--now perform a wide range of functions, including the marketing

of inputs and outputs, credit administration, lobbying local government offices, and

representing members before the national-level organization of cooperatives.

In the next pages, I offer a brief overview of the organizational framework of the

Nicaraguan cooperative sector, explaining in more detail the changes implemented at thenational and local levels during and after the Sandinista era.

b. The role of intermediaries and unions

During the first two years after the 1979 revolution, members of agricultural

cooperatives were represented by theAsociacin de Trabajadores del Campo (Association

of Rural Workers, ATC), a national-level organization that also included all individual smallfarmers and landless rural workers. ATC found it extremely difficult to satisfy different--

and sometimes conflicting--demands from such a diverse membership.19 As a result, many

small farmers started to leave the ATC to join the Unin de Productores Agropecuarios de

Nicaragua (Union of Agricultural Producers of Nicaragua, UPANIC), which represented

large farmers opposed to the Sandinista government. This phenomenon prompted the

Sandinistas to create UNAG in early 1981 (Colburn 1986; Martnez 1993). UNAG was to provide cooperatives and small individual farmers with their own national-level

elimination of most social programs (Nitlapan 1990a, 1990b, & 1990c). The devaluation aimed to benefit the

traditional agricultural exports--cotton, coffee, and sugar--and to provide additional credit for these crops.

Although the program was successful in reducing inflation (9.9% in 1992), the GDP only grew 0.5%--which

meant a fall in the GDP per capita--and the unemployment rate reached 55% in Managua.

18 Research focused on the emerging land markets is relatively recent so there is still no complete evaluation

of land sales by agricultural cooperatives. See Amador and Ribbink (1993) for an analysis of the recentdevelopment of Nicaraguan land market and some case studies. See Jonakin (1994a) for a study of land sales

by collective production cooperatives in the departments of Chinandega and Len.

19 See IHC (1987 & 1989) for a discussion of this problem by ATC's and UNAG's leaders. Also see Serra

and Frenkel (1988) and Serra (1991) for a detailed history of ATC and UNAG, and of the problems associatedwith their diverse membership.


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organization, with the ATC remaining as the organization of agricultural wage workers.

UNAG's membership quickly grew to 125,000, comprising both cooperative members and

individual farmers not participating in coops.

UNAG's leadership frequently faced some of the same dilemmas as ATC. 20 Its

membership included both coop members and individual middle-sized farmers, groupswhose interests at times conflicted. In addition, it was subject to the influence of theFrente

Sandinista de Liberacin Nacional(Sandinista Front of National Liberation, FSLN), which

created both UNAG and ATC, and from which the leadership of both organizations wasdrawn. Both the characteristics of UNAG's membership and the close ties to the FSLN

influenced substantially the nature of UNAG's demands to the government, the kind of tasks

undertaken, how UNAG's organizational structure evolved, and how cooperatives were

represented within that structure.21

During the first few years, UNAG's motivations and actions were predominantly

political. Because of its ties to the FSLN, UNAG sometimes had to convince its

membership to support unpopular policies, such as recruiting cooperative members for themilitary service during the Contra war (IHCA 1989). The close relationship with the FSLN

and the government influenced the regional structure of UNAG and the cooperative sector,which began to reflect the geographical organization of government agencies, the military,

and the FSLN (Serra 1991; Serra & Frenkel 1989).

Over time, UNAG became less influenced by the FSLN, and began to exert moreinfluence on the government than other organizations. The principal reason for UNAG's

influence was its large size; moreover, the Sandinistas felt that allowing the organization

some independence would win the support of the rural population, among whom the Contraenjoyed their greatest popularity . The support of coop members was key to the Sandinistas,

as they comprised a high proportion of the conscript army members, and the collective

cooperatives (CAS) were organized as a defense structure against the Contra (Colburn 1986,Martnez 1993). This more independent UNAG played an influential role in agrarian reform

and agricultural policy. UNAG's pressure, for example, influenced the shift of the agrarian

reform program in 1982 from its initial emphasis on the creation of state farms to theprovision of land to collective production cooperatives. UNAG also played an important

role in 1986, when the agrarian reform shifted towards providing titles to individual farmers

who had been irregular tenants before the revolution (IHCA 1989; Luciak 1987; Reinhardt

1989).

Over the years, UNAG undertook its own marketing and industrial activities. In

1984, it obtained funding from the Swedish government to create the Empresa Cooperativa

de Productos Agropecuarios (Cooperative Enterprise of Agricultural Products, ECODEPA).

ECODEPA started a network of input supply and consumer stores, which currently has 60

stores spread all over rural Nicaragua. These stores also provide credit for working capital

20 See interview to UNAG's leadership in IHCA (1989).

21 For an account of UNAG's history, see Serra (1991) and Serra & Frenkel (1989).


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to cooperatives and individual small farmers and purchase staple grains (especially corn and

beans), which are then sold in the cities. UNAG also created CARNIC, the largest beef

processing facility in Nicaragua, processing 40% of the country's beef exports.

UNAG's shift towards marketing, processing, and financial tasks took a whole new

dimension after the defeat of the Sandinistas in the 1990 election.22

The new governmentimmediately began to privatize agricultural enterprises and suspended government

intervention in the marketing of agricultural inputs and products. In addition, it restricted

agricultural credit and closed a high proportion of the BND's rural branches as a part ofstabilization measures. UNAG's leadership felt that the organization had to occupy the

space left by the increasingly diminished role of the state in marketing, processing, and

financial tasks. This led to the creation of the Banco Campesino (Peasants' Bank,

BANCAM) in 1993 to target credit to cooperatives and small farmers.

This shift towards commercial activities led to substantial changes in UNAG's

organizational structure after 1990. The organization's leadership felt that each of the main

activities needed its own management structure, and converted ECODEPA and CARNICinto cooperatives with their own management and organizational structures. UNAG

continued to be the umbrella organization and to handle more political issues, as thenegotiation of agricultural policies with the government.

UNAG's leadership was also concerned with the possibility of conflicts over

expropriated lands received by cooperatives. As a result, the leadership more closely linkedto the cooperative sector promoted the creation of theFederacin Nacional de Cooperativas

(National Federation of Cooperatives, FENACOOP) within UNAG. FENACOOP was to

deal with problems specific to the cooperative sector, especially conflicts over land. Crop-specific associations within UNAG would represent individual members (mainly medium-

size and some large farmers) who were not members of agricultural cooperatives.

FENACOOP and the crop-associations, along with ECODEPA and CARNIC, became themain components of UNAG's decision-making structure.23

One of the first measures of the newly created FENACOOP was to call for thetransformation of the former UNAG's local chapters into Uniones de Cooperativas

Agrcolas (Unions of Agricultural Cooperatives, UCAs), groups of cooperatives at the local

level. This decision was made during a general assembly of FENACOOP in April 1990.

Because FENACOOP's leadership expected that former landowners expropriated by theSandinista agrarian reform would attempt to take over land from cooperatives, they wanted

to create organizations capable of mobilizing a large number of people to defend the land.

22 The most recent developments described in the rest of this section are based on my own interviews with

23 UNAG's board of directors comprises 13 members, four representing FENACOOP, three from the crop-

specific associations, three from ECODEPA, and three from CARNIC. The BANCAM will also berepresented in UNAG's organizational structure.


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FENACOOP's leadership also envisioned that the UCAs would become local chapters of

their organization.24 However, because the creation of the UCAs was such a top-down

decision, only cooperatives in areas where UNAG's local representative had close contactswith the organization's national leadership initially created them. Only ten UCAs were

established immediately after the creation of FENACOOP. In most UCAs, UNAG's local

representative became the president and manager of the UCA and the UCA took over thehouse in which the local chapter of UNAG used to work.

Because of their initial success in preventing land takeovers, the number of UCAs in Nicaragua increased rapidly to 55, where it stands now, comprising in total 588

cooperatives.25 Most UCAs focus on the acquisition of funds and administration of credit

for member cooperatives, inputs supply, and occasionally, on extension services and

training. Local UNAG chapters and the UCAs overlap substantially, with many of theformer local UNAG representatives having become leaders and managers of the UCAs.

The UCAs included in this study were among the first ten created in 1990, and the

first ones in the Pacific coast region. In the next section, I will briefly describe the mainproblems that cooperatives and UCAs in the Pacific coast have been facing since 1990.

c. The Pacific coast region

The Pacific coast region--especially its northern part--had been the most dynamic of

the Nicaraguan regions before the Sandinista revolution. Peasants occupying small plotscultivated staple crops (mainly beans and corn) until the early 1950s, when cotton emerged

as a major export crop. Cotton producers were large capitalist farmers who used modern

technology and hired seasonal labor for low wages. They frequently raised cotton inconjunction with cattle, selling beef for domestic consumption and for export to neighboring

countries. By the mid-1960s, cotton had replaced coffee as Nicaragua's primary export

crop, all of it being cultivated in the Pacific coast region. Cotton occupied 40% of thecountry's cultivated land (Wheelock 1980), and cotton and cattle producers had displaced a

high proportion of the peasantry from the Pacific coast.26 Part of them emigrated to less

fertile regions in the central highlands. The rest became seasonal workers in the cottonfields. The Pacific coast become the region with the highest concentration of landless

workers in Nicaragua, and demand for labor was so large that thousands of workers from

24 The literature about Nicaraguan agricultural cooperatives makes almost no reference to the existence of

the UCAs. I found only one reference (Alemn et al 1990) to the UCAs as organizations of significantimportance in the description of recent changes in Nicaraguan coops. A corrected version of this paper

25 Information provided by FENACOOP.

26 Sugar and bananas were also cultivated in the northern Pacific coast. Sugar was substantially moreimportant in terms of exports and employment. Production was concentrated mostly in lands owned by

Somoza and his close associates. These lands were the first that the Sandinistas expropriated after the

revolution, creating state farms that continued to produce sugar for export. In the southern part of the region,

subsistence crops, mainly beans, rice, and corn are important, as well as coffee in the highlands of the

department of Carazo.


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Honduras and Salvador used to arrive every year during the harvest season. Seasonal cotton

workers in the Pacific coast became the basis of the Sandinista revolution. Even before the

end of the revolutionary struggle in July 1979, they created the first collective productioncoops on lands abandoned by Somoza and his close associates. Over the years, many of

them became some of the most productive and best organized coops all over Nicaragua.

Because of cotton's high international price, farmers cultivated the crop year after

year in the same plots. In order to do so, farmers needed to apply increasing amounts of

inputs, especially a wide variety of pesticides to control various cotton pests, most notablythe boll weevil. In the 1970s, the Nicaraguan Pacific coast had become one of the regions

with the highest consumption of pesticides per acreage in the world (Murray 1985). The

costs of production of cotton became extremely high. As a result, the fall in the

international price of cotton had dramatic effects in the cultivated areas, which decreasedfrom 150,000 to 1,300 manzanas between 1990 and 1993. In the last two years, most of the

former cotton areas have not been cultivated at all, and unemployment and poverty have

risen to unprecedented levels. These problems are being aggravated by high levels of soil

deterioration due to the cultivation of cotton year after year and the excessive use ofpesticides on cotton crops.

Cooperatives have been facing the challenge of finding new crops to substitute for

cotton, in a context of a drastic change in government policies. A significant number have

not been able to survive. In fact, the number of cooperatives in Len, the most important

department the Northern Pacific coast region, fell from 410 to 140 between 1989 and 1992.In Masaya, the main department in the southern part of the region, the number fell from 170

to 140.27 Nevertheless, in spite of the deteriorating overall situation, a number of

cooperatives continued to perform well. I now turn to an examination of the organizationalchanges that the cooperatives in this study have undertaken to help them to overcome some

of the problems outlined above.

III. INSTITUTIONAL CHANGE AND MANAGERIAL CAPACITY

Policies and projects targeting the rural poor in developing countries usually focuson modernizing agricultural production. Most of these projects attempt to increase peasants'

agricultural output by introducing cash crops and modern technology. Projects often

provide basic infrastructure to allow peasants access to markets, as well as heavy subsidies

through the provision of cheap credit and a wide range of government services, primarilyagricultural research and extension, and training. Government agencies and farmer

associations dealing with the implementation of these projects often receive substantial

funding. Heavy investments in infrastructure--primarily roads and irrigation--are typicallypresent.28 While these policies and projects oriented to alleviate rural poverty have involved

27 Information provided by local delegates of UNAG in Len and Masaya.

28 See Staatz and Eicher (1990) for a historical revision of agricultural development ideas and policies.


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heavy expenditures, results have often been disappointing.29 The World Bank, for example,

evaluated as satisfactory only 65% of its 887 agricultural projects between 1970 and 1985,

compared to 79% of the rest of its portfolio.30

The Sandinistas' approach towards rural poverty and agricultural development was

in many ways similar to the World Bank and other international donors. Although theSandinistas ideological approach and its emphasis on land redistribution was indeed

different, the government focus on the "modernization" of agriculture, the availability of

heavy subsidies to promote the use of credit, inputs, and agricultural machinery, and theprovision of a wide range of free government services, such as agricultural extension and

training, had striking similarities. These policies involved heavy budget expenditures, and

the agricultural sector still showed poor results.31 While it is true that the counterrevolution

contributed enormously to the poor performance of Nicaraguan agriculture, other problemsmentioned earlier were evident. In the period after 1990, the agricultural sector was deeply

affected by the sharp fall in credit, the fall in domestic consumption, and declining prices for

some crops (e.g., cotton). Average yields for most crops in the late 1980s in all Nicaraguan

regions were similar to or lower than before the revolution.

If the evolution of the Nicaraguan agricultural sector has been poor, what doesexplain the good performance of the cooperatives in this case? The most recent literature

analyzing Nicaraguan agricultural coops have focused on changes in their internal

organizational structure to explain their performance.32 In many collective production coops

that have been examined, their members have been increasing individual production at theexpense of the areas cultivated collectively. Consequently, analysts often argue that these

changes reflect the search of cooperative members for ways to realize more efficient

production.33 Most authors also stress the top-down policies of the Sandinistas' policiestoward the CAS, arguing that the MIDINRA forced collective production by making it a

condition (until 1984) for receiving land under the agrarian reform.34 Hence, coop members

had no choice but to work the land collectively. When they were freed from thecompulsory mechanisms, they started to increase individual production.

29 See Chambers (1983), Lipton (1989), and Peek (1988) for a critique of the approach to poverty in

agricultural projects.

30 From an unpublished World Bank report.

31 For an extensive analysis of the evolution of the agricultural sector during the Sandinista period, see

Biondi-Morra (1993).

32 For example, see Jonakin (1994a) for a recent analysis of land sales, internal organizational changes, andland use among Nicaraguan collective production cooperatives.

33 There is an extensive literature analyzing the problem of efficiency in collective farming as compared

with individual holdings. Among others, see Lipton (1974 & 1993) and Putterman (1989). For an analysis of

the Nicaraguan case, see Jonakin (1994b).

34 Among others, see Baumeister (1991), Colburn (1986), and IHCA (1989).


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In the following pages, I focus on the factors underlying the positive transformation

of the 19 cooperatives in this case. In contrast to the literature focusing on coops' internal

features, I focus on the coops' relationship with their outside world. I argue that whileinternal organizational changes in the Nicaraguan cooperatives have been widespread and

may have a substantial positive effect on productivity, they are one part of an ongoing

process whose results have yet to be evaluated. This paper focuses on another type oforganizational change, which involves the development of external institutional linkages by

creating intermediaries and by reinforcing coop relationships with national-level cooperative

organizations. In addition, the successful coops illustrate the fact that the presence ofindividuals with high managerial skills was more important than the knowledge of

agricultural production itself.

a. Reorganization and external institutional linkages: the creation of

intermediaries.

Most individual agricultural cooperatives in Nicaragua are too weak to face free

market conditions. The majority of their members are illiterate, so they are unable to

establish a minimally acceptable accounting system and to deal effectively with keyinstitutions, such as banks, suppliers, and potential buyers. In addition, most of the coop

members have had little or no experience in dealing with market institutions. Thus, coop

members do not know alternative markets for their products and lack access to information

about international prices. Most of the cooperatives in Telica and Tisma, the local areas inwhich the cases analyzed here are located, share these characteristics, so they reacted to the

fall of cotton by minimizing their relations with the market in order to minimize risks. As

one coop leader argued: "With the fall of cotton, most of us decided to cultivate beans andcorn. We don't have anything to sell and we don't make any money, but at least we are able

to feed our families." This attitude is typical of most of the coop members I interviewed.

In contrast to other cooperatives and farmers in the region, the coops I am profiling

initiated rapid changes in production in response to the cotton crisis. Until 1990, they had

specialized in the cultivation of cotton, obtaining yields higher than the national average. 35

After the decline in cotton price, coops in Telica started to cultivate other crops, primarilysesame, soybean, sorghum, and tempate.36 In Tisma, some of the cooperatives are shifting

to cattle production and others have shifted to the production of sorghum.37 Sesame,

35 The coops in Telica often obtained higher yields due to soils and climate being more appropriate than in

Tisma.

36 Tempate is a Nicaraguan native tree, whose scientific name is Jatropha curcas. Its seeds are used to

obtain vegetable oil and a good quality substitute for gas-oil. The Engineering School at the Universidad

Nacional Autnoma de Nicaragua (Autonomous University of Nicaragua, UNAN) has been investigating theindustrial process in the last five years with the support from the Austrian government aid agency and INE.

INE has found the technology profitable and it expects to produce 25% of the domestic demand for gas-oil

from tempate within the next five years.

37 Sesame and sorghum were not new in the Pacific coast, but the coops in Telica and Tisma have beenobtaining higher yields than the national and regional average. Soybean and tempate are new crops, which


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soybean, and sorghum are appropriate for the type of soils and climate of the Pacific coast.

Although coop members in Telica and Tisma had no experience cultivating these crops, they

were able to learn quickly because the required techniques were easier than cottonproduction, which is a very demanding crop in terms of input and machinery use. Cattle

production, also makes sense in some of Tisma's cooperatives where soils are poorer and

continued cultivation of cotton has dramatically reduced soil fertility. More important,demand for most of these products has been growing. The demand for sorghum is

associated with a fast-growing poultry industry, as well as with pork and cattle farmers who

produce for the domestic market and use sorghum as the main component of feed.ECODEPA and other private firms purchase sesame for export to countries such as Canada

and Mexico. The Instituto Nacional de Energa (National Energy Institute, INE), the

government energy agency, purchases Telica's tempate in order to produce gas-oil at a lower

cost.

The role of the UCAs

How were coop members able to find out about these new crops and obtain fundingto initiate them? The successful cooperatives in Tisma and Telica shared many of the

typical weaknesses of agricultural coops in Nicaragua, such as the high levels of illiteracyand their lack of experience with market institutions. The crucial decision they made,

however, was to create linkages with each other rather than close their doors to the outside

world. Coops in both Tisma and Telica formed UCAs; the UCA in Tisma comprises seven

cooperatives and in Telica, of 12 coops. Both UCAs carry out tasks that, while uncommonin Nicaraguan individual coops, are common for cooperatives in other developing countries.

For example, Telica provides extension services and sells inputs, while Tisma provides a

rental machinery service. However, Telica's and Tisma other major functions require highmanagerial skills: both organizations lobby government agencies, search for new products

and markets, and search for new sources of credit (see Table No. 1).

The formation of the UCAs has made an enormous difference for the member

coops. Through the UCA, coops learned about production alternatives to cotton, found

markets for these new products, and obtained alternative sources of credit to cultivate them.The UCA-Tisma, for example, gave the cooperatives the idea of cultivating sorghum and

sesame, and suggested shifting to cattle production in two of the cooperatives whose soils

were impoverished due to continued cotton cultivation. The UCA obtained technical

assistance and credit to cover part of these changes from the INPRHU, a Nicaraguan non-profit organization that manages Dutch funds. The UCA-Telica brought the cooperatives

the idea of cultivating tempate, sesame, soybean, and sorghum. In this case, the manager of

the UCA knew about the tempate through his contacts in FENACOOP. FENACOOP hadbeen visited by representatives of the Austrian government aid agency, who were working

on a project with the INE, the government energy agency, to fund the commercial

production of gas-oil from tempate. INE wanted to promote the tempate in the Pacificcoast, and was looking for cooperatives with good

Table No.1. Characteristics of the UCAs in Telica and Tisma.

have worked for many reasons explained in this section.


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UCA-Telica UCA-Tisma

Location (department)Len Masaya

Number of cooperatives

12 7Total number of members

228 139

Total land area 7,487 manzanas 1,280 manzanas

Main cash crops and products

at present Tempate, soybean, sesame,

sorghum Sorghum, cattle

Main services provided

Input sale, extension services,

credit administration

Rental of machinery,

credit administration

Main source of revenue

Input sale

Rental of machinery

Main source of credit Foreign cooperation agency and

BND

Non-Profit

Notes: * 1 manzana = 0.705 hectares = 1.73 acres

managerial capacity to initiate the cultivation of the crop. FENACOOP recommended the UCA-

Telica and arranged a meeting between representatives of the Austrian agency and Telica in its

offices in Managua. This allowed the UCA manager to learn about the

tempate and to negotiate funding for the cooperatives to cultivate it. Because INE will buy thetempate at a good price to produce gas-oil, the crop has a safe market. For these reasons, other coopsand individual producers in the Pacific coast are now very interested in cultivating tempate. Inaddition to promoting the tempate, the UCA-Telica suggested the idea of cultivating sesame,soybean, and sorghum.

Soybean marketing involves the establishment of new contracting relation with private

industry. The UCA-Telica sells soybean through a contract that its manager worked out with

Gracsa, an oil processing firm in the city of Chinandega, 30 kilometers northwest of Telica. This

relationship is interesting because contracts with private industries are usually seen as exploitative, as

these firms often pay very low prices. Technicians from Gracsa and from Agrocentro, a firm selling

inputs in Chinandega, contacted the UCA manager to discuss the idea of cultivating soybean and

sorghum at the same time. The manager was able to work out a contract under which Gracsa wouldpurchase all of the output, paying a price set in US dollars before the planting began. The contract

included the provision of the seeds from Agrocentro.

In addition to searching for new products and markets, the UCAs were able to find sources

of funding to cultivate them. This was crucial because the coops in Telica and


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Tisma, like many other Nicaraguan coops became ineligible for credit from the BND in 1991

because they had defaulted on previous debt. The UCA-Tisma, for example, obtained funding from

international donors through a Nicaraguan non-profit organization. The UCA-Telica has been able

to obtain credit for working capital from the BND for eight of the 12 cooperatives since 1992. One

of the factors in their success was that the UCAs appeared to be stronger organizations in the eyes ofthe donors and bank officials than individual cooperatives. As one official from the local branch of

the BND stressed: "We look for sufficiently well organized groups because we did not want tothrow away our money." Another important factor in the success in Telica was that the two

extension agents hired by the UCA-Telica designed simple but well developed project proposals for

each cooperative, including projections of land use, investments, expenses, and revenues. The UCA-

Telica manager attended the meetings with bank officials accompanied by the extension agents, who

helped him with the formal presentation of the projects. Such a strategy is uncommon among

cooperatives because they lack the skills to employ it, so the bank officials were impressed by such a

formal proposal.

Old Wine in a New Bottle?

The success of the UCAs in this case stands in contrast to failure of the Sandinista

government's efforts to create a similar kind of structures elsewhere. These organizations consistedof groups of state farms and groups of cooperatives at the local level that received heavy investments

and privileged attention from government services. These groups were supposed to become an

example for coops and individual farmers in the surrounding areas.

During the first few years after the revolution, the Sandinistas gave the strongest support to

state farms (CIERA 1989; Deere & Marchetti 1981; Deere, Marchetti, & Reinhardt 1985).

MIDINRA and other government agencies provided them with technical assistance, machinery, and

investments in infrastructure. Groups of state farms located close to each other became EmpresasTerritoriales, (Territorial Enterprises, ET), which were supposed to provide services to cooperatives

and farmers in their surrounding area, such as fumigation, soil preparation, harvest of cotton, sale of

coffee plants, or help with the harvest. ETs' activities had few spillover effects, however, because

state farms were plagued of management problems. State farms ended up being highly self-sufficient and self-centered, becoming increasingly isolated from their surrounding area and from

other state units (CIERA 1989). As a result, the provision of services in the rural areas became

deficient, which in some parts of the country contributed significantly to the popularity of the Contra.

After this failure of state farms to generate more broadly enjoyed benefits, MIDINRA

started to promote groups of cooperatives at the local level. MIDINRA created four of these groups

in the southern Pacific coast (department of Carazo) in 1986. It considered them to be "pilot

projects" and gave them the name of UCAs. Although they had the same name, these organizations

were very different than the UCAs created after 1990. Not only were these UCAs created by the

government, but also their main function was to serve as a channel for the government to providecoops with infrastructure (silage, storage), machinery, and technical assistance--a drastic shift from

the earlier emphasis on supporting coops by the provision of land and extension services. MIDINRAdid not wait to evaluate the results of the pilot project and rapidly began implementing it in other

regions in 1987. These new organizations were called Centros de Desarrollo Cooperativo (Centersof Cooperative Development, CDC).38 Because UNAG and the cooperatives perceived the CDCs as

top-down organizations, they did not support them enthusiastically. In fact, rather than supporting

the CDCs, UNAG promoted its own network of inputs and staples stores. At the same time, UNAG

38 For an account of the objectives of the CDCs, see CIERA (1989), vol. V.


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geographically organized its activities with cooperatives.39 The local chapters of UNAG comprised

groups of cooperatives. The local chapters had a local representative, and discussed issues such as

the amount of credit needed for every crop and cooperative, the need for improving government

services, and the presence of potential lands for agrarian reform.

Most of the national and local cooperative leaders who I interviewed had little idea that the

name of the UCAs had existed before 1990. As one of FENACOOP's top leaders said:"At that time, the UCAs and the CDCs were the same thing with a different name. The

CDC was just a new name that sounded better because it suggested that the peasantry

participated in some way. We took the old name and created an organization that has

nothing to do with the previous organization."

Only after 1990 were the UCAs able to emerge as strong organizations, largely for reasons

not directly related to their effect on agricultural production. As discussed earlier, the defeat of the

Sandinistas in the 1990 election precipitated the creation of FENACOOP, which in turn pushed for

the establishment of the UCAs. These UCAs are the same that the ones created in Telica and Tisma

in June 1990. Short afterwards, a group of peasants backed by former landowners invaded one of the

cooperatives in Telica. These peasants had been promised land by the landowners. As one coop

member said:

"When 'Juan de Dios Muoz' [one of the cooperatives of Telica] was invaded by a group of

peasants sent by the former landowners, we met with the other cooperatives to decide what

to do. We first sent a small group that asked them to leave, but they refused. As a result,all the cooperatives supported the decision to send a group of around 30 well-equipped men

as a "show of force". We showed up there, telling them that they had eighteen hours to

leave or we would expel them by the use of force. In fact, we were able to mobilize two

hundred well equipped men, all of them with experience in the counterrevolution. When

they went back the following morning, they had all left."

Land invasions occurred all over Nicaragua, but most UCAs succeeded in avoiding

takeovers. This initial success in preventing takeovers legitimized the UCA to the coop members,who were also concerned with land invasions, but initially saw the creation of the UCAs as another

decision from above. The UCAs' success demonstrated that they served members' interests, and that

cooperatives could trust each other. Another coop member expressed his feelings about the UCA in

this way:

"The defense of the land was our very first action as an UCA, and we felt very proud of it.

We felt that we were strong and, more importantly, we all knew that all the cooperatives

would support the one running into trouble. If anything like that happens again we can

trust the others to come to our aid."

An Extended Role for the UCAs

Although defending the land against the claims of the former landowners was the major

reason for creating the UCAs, their success convinced both the leadership of FENACOOP and of the

39 At the same time, UNAG organized its individual members under associations formed for producers ofparticular crops.


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coops themselves that the UCAs were potentially very important in the changing political and

economic environment. At that time, FENACOOP's leaders were more interested in their political

dimensions, but most of the coops' leaders thought of them more in their potential economic

functions. One of the UCA-Tisma leaders, for example, argued that "... we were having a hard time

obtaining credit because we had defaulted on previous debt. In the eyes of the banks and foreigndonors the UCA looked much stronger as an economic unit than the isolated cooperatives." A Telica

leader also noted that "... it was obvious for most of us that the new government would suspend orprivatize most government services, especially marketing of inputs and products and extension

services. We thought that we had to occupy that space, or private entrepreneurs--maybe the same as

before the revolution--would do it." Thus, cooperatives thought that the UCAs could present a

strong image before the banks--as they presented a strong image to those who had invaded their land.

Obtaining credit, as well as undertaking important tasks that government agencies used to provide,

was essential for the cooperatives because they needed to find alternatives to the cotton production.

The UCAs in Telica and Tisma, as well as other UCAs in Nicaragua, did not undertake

services unusual for cooperatives in other developing countries. What was unusual was that the

UCAs "took off" economically after achieving an initial success in a political and military tasks.

This contrasts with most projects and programs targeting the rural poor in developing countries,

which are based on the premise that mixing political and productive objectives often result innegative economic outcomes.

In the Nicaraguan case, however, one could argue that the organization of collective action

by coop members for political and military objectives had a substantial effect on the way in whichthey later organized agricultural production. During the Sandinista period, coop members had

frequent meetings, usually to consider politically-oriented problems. For example, assemblies

discussed the situation in the war zones and the need for selecting coop members to send to the front.

Alternatively, they discussed measures to increase their capacity to defend the coops in case of

attacks by the Contra. These frequent meetings gave coop members extensive experience with group

discussion and decision-making. During one of my visits to one of the coops in Telica, for example,

I arrived with the UCA's extension agent. Before I started talking to coop members, they asked the

extension agent to have a meeting to discuss some technical problems with the tempate. Whatfollowed was a lively discussion in which coop members disagreed with the recommendations of the

extension agent. Some coop members complained that the number of plantings per hour required to

pay their salaries was too high. Another member argued that the amount of fertilizer used was too

high, or that transplantation was taking place too late. Such a discussion shows a collective problem-

solving process that I found unusual when compared to other countries I have visited.

b. Institutional linkages with national cooperative organizations: the UCAs, UNAG, and

FENACOOP.

As discussed previously, the UCAs would have not been created without the influence oftwo national organizations, UNAG (the National Union of Farmers and Ranchers) and FENACOOP

(the National Federation of Cooperatives). The links between the cooperatives to these national levelinstitutions is key to explaining the success of UCA-Telica and UCA-Tisma, as well as to

understanding the specific tasks that they carry out.

How did the UCAs in Telica and Tisma create strong linkages with UNAG and

FENACOOP? The principal connection was through the strong informal ties of UCA managers with

the leadership of UNAG and FENACOOP in Managua. Telica's manager had been the local

delegate of UNAG in Len since 1986. Tisma's President had been a leader of the Asociacin de


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Trabajadores del Campo (Association of Landless Rural Workers, ATC) since the 1979 revolution,and a mayor of the municipality of Tisma from 1984 to 1990. Thus, they both knew UNAG's and

FENACOOP's leadership well, and shared the same ideology and perspectives on the struggles

within the cooperative sector. Because FENACOOP considers the UCAs to be local representatives,

the leaders of these UCAs travel almost every week to participate in meetings and negotiations withthe government, mainly about land policies and credit.

How do the UCAs benefit from their linkages with UNAG and FENACOOP? UNAG andFENACOOP are major sources of information regarding what is likely to happen in terms of policy,

trends in the international markets and domestic prices. This information is essential in an

environment as uncertain as the one cooperatives have faced recently. Isolated cooperatives have no

way to learn anything about international markets and what is taking place in national government

policy. The close contact with FENACOOP and UNAG not only gives them a sense of security, but

also provides useful information about agricultural markets essential to make decisions, for example,

regarding what to cultivate and what technologies to use. FENACOOP collects information about

international prices and has a small but well prepared professional staff in agricultural economics.

Because it frequently receives missions from European countries, FENACOOP also has updated

information about what crops are potentially good for exporting, mainly to European countries. In

addition, UNAG and FENACOOP have privileged access to information about the Nicaraguan

government policies because the government frequently consults them when designing agriculturalpolicy. As I explained earlier, this centralized source of information has been key for Telica and

Tisma, as well for other successful UCAs that I visited.

The evidence presented above suggests that the national level organizations represent asignificant and lasting contribution of the Sandinista regime--as the peasantry had no representative

organizations before the 1979 revolution. It also suggests that the centralization of marketing

information and technical capacity in national organizations, and the reinforcement of the linkages

between cooperatives and these institutions may be more critical to success in an uncertain and

changing context than the traditional policies directly targeting agricultural production, such as credit

and technical assistance.

c. Turning peasants into managers

The previous discussion suggested that state intervention and funding from international

donors in Nicaragua and elsewhere, which focused on transforming agricultural production, had

quite limited effects. As part of these policies, cooperatives in both Telica and Tisma received

substantial funding and technical assistance in the cultivation of cotton. Local branches of the BND

provided them with credit for working capital every year, as well as capital for the purchase of

machinery and other improvements. MIDINRA provided free extension services through local

branches in Telica and Masaya, with eight and four extension agents respectively working full time

for the coops included in this study.

These policies not only did not work very well, but also failed to provide coop members

with managerial and market experience. Highly subsidized credit and frequent forgiveness of theirdebt distorted coop members' idea of credit, making them see it as a transfer of funds from the state

that they did not need to repay. This in turn led to many problems. For example, cooperatives found

it so cheap to buy new machinery that they often did not care about maintenance. As one coop

member in Tisma said: "Buying a new tractor was often cheaper than repairing a broken one.

Interests rates were so low that in the times of higher inflation, we were able to pay back loans with


24/32

which we had used to buy a tractor by selling a motorcycle." Another coop member in Telica said:

"Our cooperative used to pay back loans, but when we saw that the government forgave everybody's

debt every two or three years, we realized that it did not make any sense to repay."

In addition, the excessive participation of the government in marketing left coop memberswith little idea about how markets for agricultural products work. In Tisma and Telica, the coops

sold the cotton to ENAL--the government enterprise purchasing and exporting cotton. When theyhad a surplus of corn and beans, the coops had to sell them to the Empresa Nacional de Granos

Bsicos (National Staple Crops Enterprise, ENABAS)--another government enterprise which thensold these products in Managua and other Nicaraguan cities.

Coop members lacked market experience, as well as knowledge about management

techniques such as accounting and budgeting. The Sandinista government practiced centralized

agricultural planning. The office of MIDINRA in Managua decided what crops would receive credit

from the BND in every local area, according to a certain set of decision rules. In the words of a

former MIDINRA extension agent in Tisma:

"Our office in Masaya annually received the agricultural production plan for Tisma and

other areas in the department of Masaya. Rather than responding to the demands from thecooperatives, our mission as extension agents was more to convince the coops that the

crops in the plan were the best choice--even when in some cases members did not want to

cultivate them."

Surprisingly, the key for the successful performance of UCA-Tisma and UCA-Telica relates

to managerial rather than production skills. In contrast to most of the individual coop members, who

are illiterate and do not have any managerial and marketing experience, the managers of the UCAs in

Telica and Tisma have outstanding experience in both fields. This experience enabled to effectively

search for and evaluate new crops and markets when the price of cotton declined, and to obtain credit

for the projected changes in production.

How did these managers gained the experience they needed while existing agriculturalpolicies failed to build managerial capacity among coop members? In both Telica and Tisma, the

managers had substantial experience in production and marketing decisions because they had

occupied political positions during the Sandinista government. As discussed previously, the manager

of UCA-Telica had been a local delegate of UNAG in Telica since 1986. The manager of UCA-

Tisma had been a mayor of the municipality. When the new government suspended the provision of

funding to UNAG, the organization had to lay off most of the local leaders, who used to receive a

monthly wage. Local mayors also lost their jobs. Many of these local leaders--among them the ones

in Telica and Tisma--became managers of UCAs.

During their previous tenure in political positions, both managers participated in trainingcourses that MIDINRA gave to leaders of UNAG and ATC. These were 6-month courses that

included organizational and management techniques, primarily budgeting and accounting. Almostno attention was given to issues related to agricultural technology. In addition, as a local

representative of UNAG, the managers used to be part of a local commission comprising one

representative each from the local branch of BND, the local office of MIDINRA, the FSLN, and the

local chapter of UNAG. This commission dealt with every detail of agricultural production at the

municipal level. At the beginning of every cycle, the commission had long meetings to decide the

allocation of credit among cooperatives and individual farmers. The UNAG representative

represented coops and farmers in the negotiation process. In this context, the manager of UCA-


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Telica says:

"The BND officer would tell the others the amount of credit available to the municipality.

The Midinra representative would explain the crops and areas included in the plan for the

municipality. Then the discussion would go for a long time concerning the amount ofcredit that every coop and individual farmer would receive. The delegate of the FSLN had

certain veto power over who would receive credit. The UNAG representative was like amediator between the commission and the local coops. We discussed with the MIDINRA

representative about how much fertilizer or labor a crop would need, or how much fuel the

tractors would consume for that crop, insisting on correcting indicators suggested by the

extension agents that cooperatives felt were wrong. We would negotiate increases in wage

levels or would suggest changes in technology that the coops felt necessary."

The political positions in which they worked provided the managers of Telica and Tisma

with excellent experience in negotiation and gave them a good idea of the institutions involved in the

life of a cooperative. They also became familiar with agricultural planning concepts, technologies

and costs of production for different crops, and budgeting methods. Negotiations of debt from

previous years gave them knowledge about credit and interest rates. Finally, their prior experience

gave them important contacts in major Nicaraguan institutions, including UNAG, FENACOOP, andenterprises owned by their workers. All these skills and experience are unusual for the average

cooperative leader.

In summary, the cases discussed in this paper show that investments in human capitalimplemented during the Sandinista era had greater effects than production-oriented policies. These

investments in human capital had mainly political and military motivations. They grew out of the

formal training of local leaders, and most frequently of their on-the-job training by participating in

credit and planning committees. It also relates to the practice of collective decision-making acquired

by coop members during the Sandinista period. This training based on management techniques and

organization has paid off through the good managerial skills currently present in intermediary

organizations.

IV. CONCLUSIONS

This paper has focused on the relative success of a group of agricultural cooperatives in the

Pacific coast region of Nicaragua created by the Sandinista agrarian reform during the early 1980s,

and of the two intermediary organizations of which they are part. The Pacific coast region has been

traditionally the most developed, export-oriented in the country, but it has suffered a tremendous

economic decline since 1990 due primarily to the fall in the international price of cotton. Despite

this decline, the coops described in this paper were able to diversify their traditionally specialized

production by cultivating new crops instead of cotton, and to open market channels for their new

products. In addition, they were able to locate technical assistance to cultivate these new crops, andto obtain credit to initiate these changes.

These achievements contrast with the situation of other cooperatives and individual farmers

in the same region, who have left most of their former cotton land idle. More important, these

successes occurred even though cooperatives have faced tremendous external constraints since their

creation. Although the Sandinista government provided them with substantial support, marked

macroeconomic imbalances and excessive government influence on crop selection and management


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negatively affected all agricultural coops. After 1990, the new government instituted market-

oriented policies that have led to higher production costs and risks for agricultural cooperatives. The

government has also applied measures to reduce the budget deficit, which has led to a reduction in

the coops' access to government information and credit. Moreover, in addition to these problems,

demand and prices for the principal agricultural products of Nicaragua declined both in the domesticand world markets.

What explains such a positive outcome in the cooperatives presented in this case? This

study has identified three major factors:

a) First, cooperatives adapted old structures that the Sandinistas had promoted

unsuccessfully.

These organizations, the Uniones de Cooperativas Agrcolas (Unions of AgriculturalCooperatives, UCAs), provide their member coops with services. The Sandinistas had created

similar groups of state farms (the Empresas Territoriales) and groups of agricultural cooperatives(the Centros de Desarrollo Cooperativo) at the local level. By concentrating investments andservices, as well as the application of new technology, these groups were supposed to become an

example for coops and farmers in the surrounding area and to provide technical assistance and

services to other coops and individual farmers. However, these groups were plagued by internalproblems and rarely worked with neighboring coops and farmers. In addition, UNAG and the coops

saw them as top-down initiatives created just to channel government funds and services, so they did

not support the effort.

Like other groups created during the Sandinista era, the UCAs resulted from a top-down

decision of FENACOOP, the national-level organization of cooperatives. FENACOOP's leaders

promoted the creation of the UCAs after the defeat of the Sandinistas in the 1990 election because

they feared that former landowners might attempt a takeover of the land that coops had received

from the agrarian reform. The initial success of the UCAs in a political struggle legitimized them to

their members. The UCAs in this case, as well as elsewhere in Nicaragua, were successful in

resisting land takeovers because they were able to mobilize a large number of well-equipped men.

This initial success made cooperative members feel proud of themselves, it created trust amongcooperatives, and made them feel strong enough to initiate other tasks.

In contrast with ETs and CDCs, UCAs do not channel government resources according to

government plans, but instead operate independently with their own resources. The external

constraints of the post-Sandinista era made the search for new sources of credit and design of project

proposals the first of the UCA's tasks. Afterwards, they were faced with the need for services that

the government suspended or started to privatize, primarily the marketing of agricultural products

and inputs and agricultural extension.

b) These intermediary organizations had strong links with key national organizations,mainly UNAG and FENACOOP.

Leaders of FENACOOP not only promoted the creation of the UCAs, but they considered

them to be the local chapters of their organization. In addition, a high proportion of UCAs' managers

are former representatives of UNAG, which gives them direct access both to UNAG and

FENACOOP. The relationship with FENACOOP and UNAG were essential for the success of the

UCAs and their member coops because these linkages provided the coops with a centralized source

of information about domestic and international markets, trends in government policy, and contacts

with foreign donors.


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c) The relative success of the coops in this case had to do with an extraordinary capacity of

key members of the UCAs, particularly the managers.

In contrast with the production-oriented skills emphasized by most agricultural projects,

these ac

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