The InterDependent

High in the mountains outside of Ayacucho, Peru, all 60 families in the community of Tambobamba are involved in cultivating quinoa, a crop grown for its seeds that are rich with nutrients and nutty flavor. Their Inca ancestors called quinoa chisiya mama, or the "mother of all grains," and today, women wearing long, black braids stir a pot of the seeds, which have become a popular addition to international grocery shelves.

Not long ago, the women of Tambobamba, like those in many isolated villages in this country, struggled to make ends meet. Today, all that has changed. These farmers are members of a savings and credit cooperative (also known as a credit union) that lets them take out loans, invest in infrastructure, expand production, and identify new products. This year, the community produced 35 tons of quinoa. Next year, that amount is expected to double. And the benefits don't stop there. The Ayacucho credit union that serves Tambobamba opens health clinics, organizes lending groups for women, and provides children with computer access. Other cooperatives, such as those involved in coffee production, teach their members farming management, reforestation, and organic farming.

According to the World Council of Credit Unions, nearly 20 percent of Peru's population of 29 million belongs to cooperatives producing products from corn to cacao and peas to plantains. The cooperative movement has forged partnerships between financial institutions and agricultural communities, brought credit to rural areas, and helped small-scale producers compete in the market. The UN argues that such cooperatives have not only boosted incomes, but also have improved a whole host of social outcomes, from gender equality to the number of children in school.

Yet despite the social and economic benefits, these enterprises have faced many challenges, including an uphill battle for official government recognition. Hundreds of the 1,600 cooperatives in Peru were headed for bankruptcy until May of this year, when the government passed a law acknowledging their not-for-profit status and exempting them from paying sales taxes. It was a small victory, but an important one; in Peru, as elsewhere, the cooperative movement cannot thrive without government support.

The UN General Assembly designated 2012 as the International Year of Cooperatives in part to encourage just this sort of legislative support. And cooperatives worldwide plan to come together and capitalize on well-timed international attention, pushing their progress beyond sales tax exemption. They'll point to the incredible benefits the movements provide 800 million members in more than 100 countries.

"We want to take advantage of this global recognition so that the government will put cooperatives on the agenda and so that we can better position ourselves," says Lorenzo Castillo, head of the National Coffee Council of Peru, a cooperative comprised of 40,000 member families.

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The International Year of Cooperatives was announced in 2009, after the cooperative model had drawn UN recognition for its ability to reduce poverty, generate employment, and promote social and economic development. Worldwide, cooperatives range from small groups to large businesses, and exist in sectors as diverse as housing, financial services, agriculture, transportation, and health care.

Cooperatives work like this: Individuals come together and pool their resources to meet common needs. As an example, farmers looking to expand production, increase income, and improve their quality of life may decide to join a financial cooperative as well as to form their own agricultural cooperative. The financial cooperative helps the farmers build credit, access loans, and start saving. The agricultural cooperative allows them to combine their land and their crops, thereby creating collective bargaining power and the ability to buy and sell at more competitive prices. The profits the farmers earn are directed toward outcomes that benefit the cooperative as a whole, such as purchasing new equipment or introducing a new crop.

"A cooperative is a socially responsible enterprise. It is an enterprise that makes business, but has a very strong social component. It cares for the people that are its constituents," says Nora Ourabah Haddad, a rural employment and institutions officer at the Food and Agriculture Organization. "It is a business, but not any business. It is a human business."

Ourabah Haddad is part of the Committee for the Promotion and Advancement of Cooperatives, a coordinating committee made up of cooperative associations and UN agencies that is tasked with implementing the goals of the international year: raising awareness of cooperatives, providing them with a supportive environment, and promoting their growth.

The committee manages Facebook and LinkedIn pages and produces communications materials with the slogan, "Cooperative enterprises build a better world." Its members also work with advisers and national committees to organize public events and gather research on the global cooperative movement. The expectation is that cooperatives from Peru to Pakistan will piggyback on this campaign by lobbying their governments to support the movement.

Because cooperatives operate with a business model that takes into account factors other than profit, they may struggle unless governments tax and regulate them differently than other businesses. And here's where the UN can help: by furthering the cause of cooperatives both in public and the halls of government. "Policy makers," explains Mathieu de Poorter, coordinator of the Committee for the Promotion and Advancement of Cooperatives, need to create "legal, regulatory and financial environments that allow cooperatives to be established and grow."

A July 2011 report of the Secretary-General echoed that call, challenging governments to start "establishing a level playing field for cooperatives as compared with other enterprises, in order to provide an ever more supportive and enabling environment for cooperative formation and participation in national development efforts."

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Cooperatives have a long history in Peru. They were first formed in the 1960s, says Castillo of the National Coffee Council, "when the government passed reforms that allowed farmers to come together, eliminate middlemen, and guarantee fairer prices." After disappearing during the country's civil war in the 1980s and 1990s, cooperatives came back together between 1995 and 2005, doubling the production and exportation of coffee. Now, Castillo says, 28 percent of the 150,000 coffee-growing families in Peru belong to cooperatives.

Breaking even, however, has always been a challenge, since cooperatives focus not only on their bottom line, but also on the social benefits they provide for their members. "Of the many challenges that cooperatives may face, one is sustainability," explains Ourabah Haddad. "Because cooperatives are businesses, so sometimes it's hard for them to find the right balance between the niche that they're targeting and competitiveness in the market and balancing that with the social aspects."

Adding to the list of challenges, the Peruvian government had been taxing cooperatives like their competitors until a year and a half of lobbying led to modification of the cooperatives law. Ricardo Pérez Luyo, the director of cooperatives in the Ministry of Production, says the new legislation limits or eliminates sales tax on cooperative transactions because "it is understood that between cooperatives and their members there is no ‘profit motive.'"

Still, the cooperatives' position is far from secure. Concerned over the potential growth of their cooperative counterparts, a private coffee corporation and export company convinced the government to consider repealing the law this fall. "To our astonishment, and in widespread rejection of the national cooperative movement, two bills have been submitted to Congress that propose to repeal these provisions," wrote Roque Montero Huamani, chairman of the board of directors of the National Federation of Credit Unions, in the September edition of Panorama Cooperativa magazine. The National Coffee Council said that if the government did not move forward, coffee producers could not rule out taking to the streets in protest. Luckily, on November 24, the president and prime minister wrote to Congress requesting that the repeal efforts be withdrawn, putting an end to the debate-for now.

Manuel Rabines of the National Federation of Credit Unions attributes the success to the UN support. "The International Year of Cooperatives influenced the decision of the president to remove the bills intended to repeal the law," he says. "The government, I think, began to understand that we are the only system that has since our founding been centered on social and financial inclusion, in places where even the government is not present."

"The current government of President Ollanta Humala has put a strong emphasis on economic growth, and that also involves a process of social inclusion," says Luyo. He pointed out that the new president and prime minister, who took office in July, cannot ignore the connections between cooperatives and development, particularly with the international attention in the year to come. "I believe cooperatives are an effective and efficient tool for generating wealth, but also improving the conditions and the income levels of their members."

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With the International Year of Cooperatives on itsway, cooperatives around the world, like those in Peru, have the best opportunity yet to strengthen their cause both on the ground and in the government.

Says Ourabah Haddad of the Food and Agriculture Organization, "We hope that this year will attract and pull the attention of decision makers and encourage them to create enabling environments to provide the right policies to encourage cooperatives and other similar types of associations to develop and thrive."

"If more people understood that cooperatives were created for the development of communities, then more people would join cooperatives," says Mark Cifuentes, senior vice president of technical services at the World Council of Credit Unions. "The United Nations is recognizing the furthest, most remote of cooperatives, such as the cooperatives in Peru."