Platform Cooperatives in Costa Rica

Costa Rica, like many other countries in Latin America, faces acute problems with unemployment and labor informality: the most recent data corresponding to May 2022 reflects a 12% unemployment and 44% labor informality rate. This situation has led to thousands of people seeking irregular and short-term work in the gig economy (or platform economy), particularly through rideshare platforms such as Uber and Didi or food delivery platforms like Uber Eats and Rappi. 

While they function as a job source of last resort, according to an article by the Semanario Universidad, there are constant complaints of the “partner collaborators” of these platforms regarding their work conditions, which has triggered the formation of at least two unions. The claims presented by these “partner collaborators” are similar to those that have been expressed in other latitudes: reduction of rates, arbitrary decrease of assigned rides, impossibility of appealing decisions, total absence of labor benefits or protections, excessive work hours.  

While Uber -the platform with the biggest presence in the country- does not share data on the number of its drivers and deliverers, by December 2020 -three years after Uber Eats started its operation- the number of registered restaurants in the app ascended to 3.000, to which must be added 350 stores that sell their products through the platform. The worker unions calculate that before the Covid-19 pandemic around 10.000 deliverers were active, a number that could have risen to 30.000 by the year 2021. Incidentally, the 2021 LATAM Index on the Collaborative Economy revealed that the Costa Rica cities of Alajuela and San José were in second place in the region in terms of the amount of platforms that were openly operating.  

Despite the ever increasing role that these businesses play in the national economy, in Costa Rica the efforts to regulate platforms and the working conditions related to their services have been insufficient. In 2019 the Legislative Assembly approved a law to regulate lodging platforms, and recently two bills (21587 and 23110) have been introduced to regulate ridesharing platforms but none have been approved. Two other bills have been presented to protect the labor rights of deliverers (21567) and to limit rises in the fees that platforms charge restaurants (22142) but none have reached the voting phase of the legislative process. 

It’s plain to see that tech platforms as intermediaries in the sale of goods and services are here to stay and they’ll be a permanent part of our economy. Consequently, while it’s important to criticize their impact on work precarity, traffic congestion, gentrification, data extractivism and all sorts of other problems that have been detected as consequences of their business model, it’s also urgently necessary to identify tangible alternatives that can exemplify a different way of developing and managing these platforms to benefit its workers and users and the overall social and environmental context in which they’re situated. 

Enter platform cooperatives. These are associative businesses that use a website, mobile app, or protocol to sell goods or services, but they’re different from traditional platforms since the ownership of the platform is shared by workers and users and they rely on democratic decision-making for most business decisions. Platform cooperatives can bring benefits such as more resilience in the face of economic crises, more productivity and worker retention, decent salaries, control over labor conditions, stricter data and privacy protections, among others. According to the Platform Cooperativism Consortium, currently there are about 500 projects related to the cooperative ownership of digital platforms in more than 34 countries.  

In Costa Rica there’s a deep-seated cooperative tradition and a thriving technology sector that in 2018 generated around 42.256 direct jobs and $1.300 millions of dollars in revenue, which would seem to indicate that the country could be a receptive environment for platform and digital economy cooperatives. But is this potential currently being leveraged?

Cooperativism and Digital Technology in Costa Rica

For more than eight decades the Costa Rican government has encouraged cooperatives as a viable mechanism to improve the conditions of workers. Since 1943 cooperatives have been enshrined in the Constitution and in 1968 the Law of Cooperative Associations N° 4179 was promulgated to regulate them. This law declared cooperatives to be of public and social interest, a status which gives them preferential access to public and financial services and various fiscal and tax exemptions. 

Furthermore, in 1982 self-managed cooperatives (also known as worker cooperatives) were included in the law and a National Fund for Self-managed Cooperatives was also created to invest in this type of co-ops. That same year, co-management cooperatives were likewise established, in which ownership, management and surpluses are shared between workers, producers of raw materials and/or the State. Platform cooperatives precisely tend to be self-managed or co-managed co-ops. 

By 2020, 617 cooperatives existed in Costa Rica, but to get more detailed data we have to go back to 2012, the year in which the last census of the cooperative sector was conducted. At that time, the census showed that cooperatives generated 21.632 direct jobs and had 887.355 members, the equivalent of 21% of the population of the country. There were also 92 self-managed cooperatives, mainly in the service sector (57%), industry (25%) and agriculture, forestry and fishing (25%). 

However, after inspecting the directory of active cooperatives, it was possible to identify only a small number of cooperatives that were focused on digital technologies. And even though there are no self-described platform cooperatives as such, a few examples were detected of cooperatives that have used some sort of platform or website to sell their goods and services, but most of these initiatives are currently inactive or they suffer from a lack of maintenance and unattractive designs that limits their use. 

What reasons can explain this low penetration of cooperatives in the platform and digital economy? On the one hand, there are singular aspects of the business culture that has developed around certain strands of the digital economy, in which individualism personified in the figure of the genius entrepreneur prevails, and venture capital is a fundamental necessity to scale quickly. But, on the other hand, there are weaknesses in the cooperative sector in Costa Rica that discourage the formation of this kind of associative enterprise. 

For example, the law demands that a self-managed cooperative must have at least 12 members before it can be formed, which can be excessive for digital economy businesses. In addition, all cooperatives must be approved by the National Institute of Cooperative Advancement (INFOCOOP) and this institution has been criticized for its slowness in handling the requests for the formation of new cooperatives, since this process can take as much as two years.  

Institutional disarticulation and a lack of modernization of the services provided by the entities in charge of developing cooperativism has also been identified as a problem; INFOCOOP even had to face an intervention by the government due to mismanagement. It has been also mentioned that the cooperative sector has become too dependent on the State, which has resulted in a lack of preparation to take the reins of their destiny with their own resources. 

Cooperatives likewise suffer from an evident lack of diversity. According to the 2012 census, 57% of its associates, 61,5% of its directory members, 70% of its managers and 78% of its presidents are male. And while the census did not measure age groups, it’s very probable that the data would have shown a majority of middle-aged males, with relatively few young people involved. This lack of diversity can have negative impacts in the emergence of innovative ideas and the use of new tools and technologies.

Favorable Context

Beyond these difficulties, there are a series of favorable conditions that can make it possible for Costa Rica to be a fertile ground for the emergence of platform and digital economy platforms. 

To begin with, there’s the influence of the international environment, Platform cooperatives are turning into an increasingly viable and real alternative to traditional platforms not only in Europe or the United States, but also in Latin America, as shown by the fact that the Platform Cooperativism Consortium’s conference will take place this year in Rio de Janeiro. Furthermore, digital tech cooperatives are strong in countries like Brazil and Argentina, where they’re grouped under their own federation. And the importance of the social economy -including cooperatives- has been highlighted by the OECD, to which Costa Rica belongs, and whose Council recently issued a Recommendation on the Social and Solidarity Economy in which it calls for countries to advance and expand these businesses.  

At the national level, there’s the Popular Bank of Community Development, a public bank co-owned by workers whose general orientation is decided by an Assembly of Workers with representation from multiple social sectors, including cooperatives. In the current document of Guidelines and Orientation approved by this Assembly, actions such as creating and financing business incubators and supporting the technological development of social solidarity enterprises were established. 

INFOCOOP appears strengthened after its period of government intervention and in its Institutional Strategic Plan 2019-2023 it proposed to foster innovation and technological transfer between cooperatives, as well as improving the participation of young people in co-ops through dissemination and joint projects with universities. In that vein, the Technological Institute of Costa Rica recently teamed up with Coop Americas to prepare an online course on digital technologies and innovation for the social economy. 

The last two governments advanced on the institutionalization of support for the social economy, creating a Viceministry and a Directorate with that end in the Ministry of Labor and Social Security and approving a Public Policy on the Social Solidarity Economy 2021-2025, which pursues initiatives such as grant funds, incubators and accelerators that can promote innovation in the social economy and broaden the sources of decent jobs, particularly for young people. 

At the local level, municipalities have shown a renewed interest in cooperatives and the social economy. For example, in 2020 Nicoya was declared the first canton of the social solidarity economy and more recently 9 municipalities formed a network of local governments in support of the social solidarity economy, while the Municipality of Santa Ana decided to spearhead the creation of cooperatives among its policies to reactivate the local economy. And there are other cantons or regions that can be particularly receptive to platform and digital economy cooperatives, such as San Carlos (see below).

The case of San Carlos

Even though platform and digital economy cooperatives would possibly have a more nurturing environment in the main cities of Costa Rica’s Greater Metropolitan Area (GAM), where most economic activities and human talent are concentrated, outside of the GAM there are also favorable possibilities in places like San Carlos, an agricultural region in the northern part of the country that has a strong presence of cooperatives and that also has developed an enclave of tech businesses and startups. According to the Estado de la Nación research program, the main economic activities in this canton are services provision (55%) and agriculture (25%), and there’s a relevant concentration of qualified talent both in agroindustry and in digital technologies. 

Due to these characteristics, this region can be positioned as a future pole for development of platform and digital economy co-ops, especially to support those agriculture cooperatives and businesses that have suffered difficulties in their digital modernization. There’s a big possibility of fostering productive linkages between both sectors through cooperativism, as long as adequate supports and incentives are offered.  

Route Map to Bolster Digital Economy

As has been shown, in Costa Rica there are favorable conditions for the establishment of cooperatives that, through technological innovation, can position themselves as an alternative to the extractivist and precarizing platforms that have controlled the market until now. However, to ensure that this promising terrain can turn into a reality, the following recommendations should be considered: 

– Increase the level of knowledge and information about platform and digital economy cooperatives. In Costa Rica cooperatives like Sulá Batsú have been involved in initiatives of this kind, but there’s much still to be done to disseminate the synergistic possibilities between the cooperative model and the digital economy, and to network with existing cooperatives in areas like transportation, package delivery, health, child care, ecotourism and recycling that could benefit from using platforms to connect with their clients. 

– Simplify procedures and paperwork. It’s important that the institutions in charge of formalizing cooperatives -especially INFOCOOP- contribute to facilitate procedures, simplify paperwork and eliminate unnecessary red tape to start and develop a cooperative. Even though there may be particularities in the co-op legal model that could require more regulation, forming a cooperative should not be that complicated of a process when compared to registering a traditional business.  

– Reduce the necessary number of members to form a self-managed cooperative. To achieve this it’s necessary to reform article 31 of the Law of Cooperative Associations so the minimum number of members to start a self-managed co-op can be lower, so as to incentivize the formation of new cooperatives in areas of the economy (such as tech) that initially do not require much human resources. Article 120 could also be reformed to allow for co-managed cooperatives to include the users/clients of the services provided by the co-ops, so they can truly become multi-stakeholder cooperatives. 

– Direct participation of the State in cooperatives and the creation of incubators. Public institutions and, particularly, municipalities can support this type of cooperatives by actively participating in them through the co-managed modality. Article 14 of the Law of Cooperative Associations already encourages municipalities to join cooperatives as members. Also, municipalities and other institutions can create incubators, open grant funds and facilitate physical infrastructure so incipient co-ops can experiment and learn from each other. 

– Active role of universities in research and training. Public universities can play an important role conducting research to identify sectors of the economy in which cooperatives can prosper, as well as contributing in the incubation and acceleration of platform and digital economy co-ops. The Technological Institute and the University of Costa Rica through its Directorate for Promotion of Innovation and Connections for Development can get involved in these initiatives. 

– Facilitate financing and investment. To achieve this it is important that financial entities consider not only the potential economic outcomes of the cooperative, but also its social and even environmental impacts. Furthermore, financial entities where the co-op sector has influence can be leveraged, such as the Workers Assembly of the Popular Bank and the National Fund for Self-managed Cooperatives, so they can invest specifically on platform and digital economy cooperatives. 

– Contracting their services through public procurement. Article 6 of the Law of Cooperative Associations already establishes the right of cooperatives to be contracted preferentially by the State but, in order to streghten this provision, social value criteria should be included in the evaluation of the tenders. The General Law of Public Procurement that will come into effect in December 2022 allows for the inclusion of such criteria, but it is important to train procurement staff as well as cooperatives themselves so these policies can be effective. 

The constant crises that affect our present, alongside the persistent problems of structural unemployment and rising labor informality, appear to augur a dark future for the social well-being of Costa Rica and many other countries in similar conditions. Nevertheless, platform and digital economy cooperatives demonstrate that there is an alternative to the oligopolistic platforms that, pumped by speculative capital, today extract our data and money while deepening precarity and inequality. Cooperatives are an alternative that in Costa Rica we have known for many decades, but it is necessary to modernize and adapt this model to the needs and demands of an increasingly digitized economy. Because today, as before, we need more labor protection, better jobs, more well-being, more social justice, and more democracy. Platform and digital economy cooperatives are an important tool to drive us in that direction. 

References

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