The BAUEN Hotel Worker Cooperative: an experience of self-management and freedom

Fabián Pierucci and Federico Tonarelli
BAUEN Worker Cooperative, Limited/F.A.C.T.A.
(Argentine Federation of Self-Managed Workers)

Recover (def.): To take back or re-acquire what had been lost. To put back in service what was useless. To work for a given period to compensate for what stopped being done for some reason. To return to oneself. To return to normality after a crisis.

The BAUEN Worker Cooperative, Limited (INAES inscription 25801), has worked at Callao 360 of the Autonomous City of Buenos Aires since March 2003. The venture is the direct heir of a number of experiences that, with a great deal of imagination and courage, were created to alleviate the social and economic consequences of the crisis in 2001. These experiences are known generically as Businesses Recovered by their Workers (BRW) and have been the object of analysis and study, especially for their impact on the creation of jobs, but also for their contribution to new organizational practices which, today, are discussed and valued in worker cooperativism and in cooperativism in general. To date, it is calculated that more than 250 BRWs exist.

Following successive changes in holding companies to make working conditions more “flexible” and to avoid taxes, in 1997, the Bauen S.A.C.I.C. firm, chaired by Marcelo Iurcovich, sells the twenty-story tower that had operated as a hotel since 1978. The buyer, Solari, S.A., a business with Chilean capital, without proven economic solvency and with no experience in the hotel industry, takes charge of the business. This operation takes effect with a bill of sale signed in exchange for an amount of money far lower than real-estate market practices to take possession of a property. Shortly after the hotel begins working under the new firm, assets begin to be stripped, workers begin to be dismissed, and a preventive case is opened, followed by the bankruptcy of Solari, S.A. This situation culminates with the definitive closure of the hotel and dismissal of all the workers who were still employed, the 28th of December, 2001.

From roadblocks to factory takeovers

Expelled from their work environment, without organizational contact with other workers, the newest and most spectacular form of worker resistance organized in the middle of the ’90s is the roadblock, organized by unemployed workers. National assemblies made up mostly of fired workers, but where housewives and youth with no access to the labor market also participate, decide plans of struggle with an agenda linked to demands for denied rights. The method of protest and demand, exercised as a kind of pressure on the State and on capital, is blockading the circulation of goods. Streets are blocked and access prevented to the entry and exit of vehicles with supplies, goods and workers. This modality is no more and no less than the expansion into the transportation aspect of commerce of the historical protests by organized workers in the production aspect of commerce (strikes, work slowdowns, sabotage, etc.). The extent of this organizational form of unemployed workers is massive, occurring across practically the entire nation.

In 2001, protests multiplied, accompanied by aggravation of financial restrictions by the State. There were unprecedented rates of unemployment and labor precarity. The inflation that accompanied the devaluation after the end of monetary convertibility had extreme consequences for family budgets.

The State response to social protest always created great tension. Every roadblock or street protest was accompanied by large repressive deployments. In many cases, police action ended with dead and wounded among the protesters. In the beginning, the answer was government support, with subsidies programs for those below the subsistence level. By the end of 2001, the State response was basically repressive.

Two facts are written in fire in the history of worker and popular struggles:

  • The protests of the 19th and 20th of December, 2001 lead to the resignation of the Minister of the Economy, Domingo Cavallo, and the President of the Argentine Nation, Fernando de la Rúa. On these days, different State and para-State repressive forces kill more than 30 protesters.
  • The massive manifestation of unemployed workers on the Pueyrredón de Avellaneda Bridge, June 26, 2002, which culminates with an attack that wounds hundreds of protesters and kills Darío Santillán and Maximiliano Kosteki.

Businesses recovered by their workers (BRW)

The recovery of factories, workshops and productive spaces by their workers was a defensive and last-ditch effort, within the dynamic of class struggle. The large majority went through three clearly differentiated stages: occupation, the organization of the resistance to maintain the occupation over time and, finally, the decision to produce. The time that each of these stages took had to do with the time for maturing and debate of the collectives that took responsibility for these actions. This process meant a major impact on the subjectivity of each worker that was part of the recovery of their jobs and workplaces. Every experience also left an imprint on the geography surrounding the factories and workshops: for the first time, these spaces were open to the neighbors, who generally participated as sympathizers and sustainers.

The 21st of March, 2003, living among the consequences of the economic crisis, especially large-scale unemployment and the impoverishment of popular sectors, former workers of the Hotel BAUEN, assembled in the Chilavert printing cooperative, decided to occupy the lobby of the building at Callao 360 with the purpose of demanding a solution to the social drama they were living in. They were already organized as the Buenos Aires, Una Empresa Nacional [Buenos Aires, A National Business, or BAUEN] Worker Cooperative, because, for months, they had received no response from the State, employers, or union. Gradually, they began to carry out economic activities to be able to subsist. So it was, as the fruit of much labor and saving most of the income the cooperative had for a long time, which made the draws quite meager, that each of the sections and stories of the building were reconditioned.

When the floors were opened to guests, an explosion of good, new jobs was created, which continues practically through today. From twenty-five founding members of the cooperative, they grew to a hundred and sixty. That is, growth of 640% in the labor force which, today, has an income comparable to the prevailing wage in the sector. But if there is a characteristic that is distinctive to the experience of the BAUEN, for which it is known in innumerable places across the world, it is the cooperative worker-members’ policy of openness towards the community. Without losing the central objective of improving the quality of life of its members, the cooperative has housed countless social and political events, and a multitude of personalities of art, of culture, of social movements and of the political representatives of popular sectors have passed through its doors. In fact, the main slogans used for years have “The BAUEN is everyone’s” and “BAUEN: struggle, culture, and work.” Both expressions are goals of daily action. And all this takes place in a framework of legal insecurity, of not having resolved the root problem, which is legal ownership of the property.

Beginning of this story

The Hotel BAUEN was constructed in record time with a credit from the BANADE (National Bank of Development) between 1977 and 1978. This credit was provided in the framework of the infrastructure program for the World Cup of 1978 approved by the military dictatorship. The disbursements made by BANADE (according to the mortgage record in the land register) were the following:

03/10/77 800,000,000 Pesos Ley (US$ 2,335,760)

11/21/77 743,852,000 Pesos Ley (US$ 1,352,450)

12/28/77 1,537,148,000 Pesos Ley (US$ 2,566,190)

01/05/78 508,000,000 Pesos Ley (US$ 798,740)

07/10/78 342,500,000 Pesos Ley (US$ 429,730)

10/30/78 92,800,000 Pesos Ley (US$ 101,860)

11/03/78 354,500,000 Pesos Ley (US$ 370,810)

11/03/78 54,700,000 Pesos Ley (US$ 68,040)

Total 4,433,500,000 Pesos Ley (US$ 8,023,580)

In these 34 years, the Argentine Republic changed currency four times:

The US$8,023,580 of 1977/78 becomes US$18,870,812.34 in 2012, which is an increase of 235% in 34 years, assuming an inflation rate of 7%, the annual average in the USA.

If we take the updated amount of capital of $86,805,736.77 and apply the preferential 5% annual interest rate that appears in the contract of the original credit, it gives a total of $147,569,752.50.

BANADE

In the framework of the closure of the BANADE and attempts to collect the remainder through the Banco Nación, which managed the residual portfolio, an agreement is reached in 1994 between the bank and Bauen, S. A., for US$6,000,000 as the total balance of the original debt. This agreement was unfulfilled. The balance as of 2000, the year of the liquidation of BANADE, gives a balance of the updated debt to that date of $85,476,895 [pesos], considered entirely uncollectible.

At the beginning of the ’80s, Bauen, S. A., filed suit against BANADE for noncompliance in the granting of the above-mentioned credit, as a strategy to repudiate the original debt, to extend the terms and to liquidate the amount originally borrowed in a context of high inflation. After having made only a few consistent payments towards amortizating the interest, until se efectivizó the total of the agreed amount with BANADE, plus the expansions to the original credit for changes to the building project, no more payments were ever made to the bank. In March 2007, there was a judgment by the Court of Appeals which, today, is in the Supreme Court of the Nation in the case of Bauen SACIC vs BANADE, where the liquidation indicates that the debt to BANADE, updated as of 04/01/91, is $4,670,262.84, to which an 5% annual interest rate is applied from 01/01/83 to 03/31/2007, which gives, as of that date, the amount of $11,118,718, minus a penalty imposed on BANADE for noncompliance at the point of granting of the tranches of $2,502,193, leaving a balance favorable to BANADE of $8,616,524.

In the liquidation, we can realize that the period 1991-2007 was not updated, which meant a considerable liquifaction of the debt. Now, if we do the exercise of applying the rate for noncompliance with the sentence of 5% monthly on the original capital in the 62 months since the sentence through the present, the amount of $4,670,262.84 becomes 14,477,814.80, which, updated by the 2012/2007 IPM brings us close to a debt of $25.000.000 to date. This judgment largely achieves the objective of the economic group led by Iurcovich: hold on to the building that he used since its construction essentially without paying. This strategy of a chain of successive scams allowed the economic group, which, today, demands ownership of the building, to use the flow of revenue created by the hotel to become rich and invest in other publicly known enterprises (the Bauen Suite in Buenos Aires, Bauen Buzios in Brazil, etc.) without any kind of State control.

We note that the difference between our first $86,805,736.77 of updated capital with no interest and the $25,000,000 from the updated calculation of the judicial judgment that would shed light on Iurcovich’s thirty-year debt, show us that the loss to the Nation-state would be $60,000,000 [Argentine pesos].

The legal structure adopted by all the BRWs was the worker cooperative. This organizational structure meant learning, which happened, in cases, with some resistance. Going from a wage relationship to taking responsibility for running the business meant crossing an abyss. Also, the “bad press” worker cooperatives were getting played a negative role when it came time to define the direction of the recovered businesses.

The need for an assembly-based organization for political decision-making and for the reorganization of production created a practice that radicalized the cooperative principle of internal democracy. The BRWs breathed a good dose of grassroots participation into the statutory tradition that delegates most operational responsibility for the cooperatives to the administrative council. The legal structure of the worker cooperative and the concrete practice of the BRWs, led to thinking, or, rather, rethinking the concept of self-management to describe these new experiences.

In the nine years of cooperative management by the workers of the BAUEN Hotel, there was an inverse proportion in the application of the income generated by the services they provided between investment and each cooperative member’s draw. In the beginning, investment meant that almost all earnings were applied to restoring the facilities. To the extent that reactivating the different spaces allowed, the income of the workers increased. This process made nearly 100% of the facilities of tower housing the cooperative at Callao 360 productively viable, with an investment of $5,000,000, without counting with the cost of the working time, when improvements were made by cooperative members. This amount, updated to 2012, is approximately $15,000,000. All this, with savings of earnings produced by their own efforts. The experience of the BAUEN Cooperative revitalized an abandoned building and created a business that is self-sustaining over time, with an auspicious future. These data show a notable contrast between the results of employer management, 1978-2001, and worker management, from 2003 to today.

Proportion of income received by the workers of the BAUEN compared to investment in the building over time. (Source: the workers themselves).

Public utility: work, value and hierarchy

Legislation on “public utility,” in which goods necessary for State infrastructure projects or for public use had been the most common application of this concept, is expanded by provincial legislatures to give legality to the BRWs. Public utility (which makes assets subject to expropriation) was declared to include those means of production, facilities and complementary parts of economic use that were abandoned by the employers, in almost all cases after assets were stripped and workers were fired en masse. This legislative practice gives an account of an widespread phenomenon in the defense of labor rights called Businesses Recovered by their Workers. The BRWs were tools, in these last ten years, of safeguarding rights denied to workers, as well as organizational forms in popular sectors of new management practices in productive enterprises. The hierarchical organizational forms imposed in the wage bond are replaced by strategic decision-making in the organization of labor and the internal life of each experience in a collective and democratic way. This new way of thinking and acting created a logic absolutely opposed to that of the world of capital. While the main and perhaps sole objective of a business managed by capital is the highest profit rate, as fast as possible, the fundamental objective of the BRWs is the preservation of jobs and the improvement of the quality of life of their members, closely connected to the surrounding community. This characteristic makes the BRWs eligible not just to be considered a practical alternative to unresolved market “failures,” but to be included in general legislation, now that these practices are considered to be profoundly linked to the material and spiritual well-being of the people that participate in them, which are so numerous that they are seen as connected with, and possibly even conflated with, the general social good of the working classes. These considerations, we think, expand the scope of the concept of “public utility.” Work, jobs linked to the means of production, the infrastructure that houses them, productive processes, as well as the “know-how” or worker knowledge that guarantees the quality of the finished products of factories, workshops and service businesses — we maintain — should be considered to be of “public utility,” given that their destruction or loss would impose a grave economic and social cost for the whole population.

Economics, law and politics

To date, there is a firm eviction notice handed down by judge Paula Hualde of Commercial Court No. 9, in 2007, with an appeal by the cooperative to a higher court and a grievance before the Supreme Court, both of which were rejected. Recently, the judge ordered meetings aimed at arranging a resolution between the parties (Mercoteles S.A., the bankruptcy trustee, Solari S.A., and workers from the BAUEN Cooperative, together with representatives of the State) to evaluate the social problem that would result from the announced measure.

Given this situation, we express that the social cost and the cultural impact of the dislocation of the cooperative and its eviction from its headquarters at Callao 360 in the C.A.B.A. would be of an irreparable magnitude:

  • one hundred sixty good jobs would be lost in a historical context where work came to be valued as much more than a mere contract between parties — it is considered a social good. Clearly, this would constitute a serious social drama for the members of the cooperative and would have a negative fiscal impact for the State, because of the loss of a value producing unit, and because of the cost of subsidies to unemployed families.
  • hundreds of small agents in the social economy that were developed as providers of goods and services to the cooperative (a priority from its beginning) would be affected.
  • a self-managed space would disappear, a space that has become a point of reference for social movements and popular sectors across the country and across the world that use the cooperative’s facilities for their activities. This would have an extremely negative impact on cultural dissemination and production in the city of Buenos Aires.
  • It would be the end of a space used by the nation-State for its events and activities across all ministries and government agencies that signed agreements to use the cooperative’s facilities (Ministries of Security, Education, Agriculture, etc.).

Because of this, with our legal options exhausted, having developed our cooperative experience for almost ten years in conditions of legal precarity, and now at risk of losing 160 good jobs, we express the need for a definitive political solution to the conflict.

The processes of cooperative integration, social movements, and the BAUEN

The BAUEN hotel and the story of its recovery as a productive space are intimately linked to social movements born of the resistance against the consequences of the crisis of 2001. Countless political, cultural and social organizations have passed through the facilities of the hotel. The BAUEN workers were also active in worker and popular struggles with participation and initiatives, from assessment and accompaniment of each factory or workshop in conflict, to demonstrations against FTAA. Since 2007, there has been a second-generation discussion about the stage of resistance and production. There was a debate about movement nature of the BRWs and the need for give institutionality to forms of social, political, economic and productive integration, which have been ever-present and distinctive qualities since their birth. In this framework, FACTA (Argentine Federation of Cooperatives of Self-Managed Workers) was created to meet this need. From its beginning, FACTA has been made up of BRWs, worker cooperatives formed by social movements, and of cooperatives strongly linked to these traditions. For two consecutive terms, the BAUEN cooperative was chosen to preside over FACTA. FACTA is a third-degree associated of the CNCT (the National Confederation of Worker Cooperatives) and a member of COOPERAR (the Cooperative Confederation of the Argentine Republic).

FACTA, the CNCT, and the Cooperative Printers’ Network have located their headquarters in the building of the BAUEN.

Work proposals for the BAUEN conflict

For six years, different expropriation bills in favor of this worker cooperative were presented in Congress of the Nation. The first was sponsored by Francisco Gutiérrez (today mayor of the municipality of Quilmes), the second by Deputy Carlos Tinnirello, and on three occasions by deputy Victoria Donda Pérez, which each successively lost its parliamentary chance by not being brought to a vote. Currently, the bill presented by Deputy Carlos Heller has a favorable opinion in the Committee on Cooperative Affairs. These bills propose to declare the tower at Callao 360 in the C.A.B.A. to be of public utility and that it be given in loan for use to the BAUEN cooperative.

Common sense indicates that any elemental calculation to update the debt contracted by Marcelo Iurcovich with the Argentine State in 1978 would far exceed the price of the property. There is also the need to review and consolidate debts of the Iurcovich group with the State for other reasons which should be added to the mortgage credits recieved from the now-defunct BANADE. So, the fiscal cost of a possible expropriation should be essentially zero.

Another aspect that we put a consideration is the fact of the obvious and proven link of complicity of the economic group with the military dictatorship. It would be a public affront to return the building to the same ones who participated and benefitted from economic links with the worst contemporary tragedy for popular sectors, with a measure that would fly in the face of the current policy of Human Rights of the National Government to pursue Memory and Justice.

In synthesis

The actors participating in the BAUEN conflict are:

Judicial Power
National State
Mercoteles S. A.
BAUEN Worker Cooperative, Ltd.

Judicial Power:

  • Has a firm judgment for restitution to Mercoteles, S. A., of the building (calls hearings with proposed agreements between parties)
  • An appeal is in process in the case of Bauen SACIC vs BANADE in the Supreme Court of Justice, which should define the final amount of Iurcovich’s debt to the Argentine State.

National State:

  • Is a user of the BAUEN Cooperative’s services
  • Is a provider of consulting and financing services to the BAUEN Cooperative
  • Is a creditor of Mercoteles S. A.’s mortgage
  • It is a creditor of as yet undetermined debts of Bauen S. A. and Mercoteles S. A.

Mercoteles S. A.:

  • Complicity with the military dictatorship to organize the hotel business in 1978
  • Simulated sale of the tower by Bauen, S. A., to Mercoteles, S. A., in 2001
  • Successive failures to abide by agreements with financial bodies
  • Judgement against it in the Chamber of Appeals
  • Extraordinary liquidation of original debt to BANADE
  • Process of accreditation for consolidation of other debts with state bodies
  • Disappearance of work credits of former Bauen, S. A., workers

BAUEN Worker Cooperative :

  • Founded in the year 2003 with 30 members; today, it provides 160 good jobs
  • Restarting the venture required refurbishing nearly every part of the tower at Callao 360
  • Projects of expansion of services with optimization of the productivity of associated labor
  • Process of cooperative integration through federated association
  • Process of horizontal cooperative integration with other hotel cooperatives
  • Process of vertical cooperative integration with providers and users in the social and solidarity economy
  • Associative projects for common undertakings with cooperative sector
  • Associative projects for financing of investment in cooperative sector
  • Process of IRAM/ISO 9001 certification with consulting from the Ministry of Labor of the Nation
  • Application to the National Congress for declaration of Public Utility, subject to expropriation, of building at Callao 360
  • Preservation of State assets and denunciation of historic inaction with respect to collecting on debts.

Conclusion:

The resolution of the conflict over the building at Callao 360 of C.A.B.A., and giving legality to the legitimacy won by the BAUEN Co-op over the last ten years, will significantly increase the potential of this experience, and will also be a very important achievement for the whole solidarity sector. The BRWs are a new associative tool in defense of workers’ rights, and the BAUEN hotel is of the BRWs with the most symbolic weight, nationally and internationally.

This is why we say that the cooperative sector, and the working class in general, should declare itself to be in favor of a resolution of the conflict that includes labor continuity for the workers who recovered and self-managed this building for the whole community, understanding that this worker victory will be written into the pages of the history of worker struggle and self-management in Argentina.

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