Overview of Corporate Governance Issues for Co-operatives - IFC

form of co-operative is replicated elsewhere in China is not available. The authors pointout that the governance structures of Chinese co-operatives vary substantially in termsof equity, membership structures and size.Latin AmericaFor Latin American countries, co-operatives were also subject to strong governmentinfluence except for the countries of southern cone (Argentina, Chile, Brazil andUruguay) where European immigrants established more autonomous forms ofco-operatives. There are few studies available in English on the co-operative sector inLatin America and no comparative studies were located. Findings from two detailedcase studies of co-operatives in Bolivia and Mexico, however, provide some usefulinsights. Both emphasise the centrality of good corporate governance practices to thecommercial sustainability of the co-operative enterprises involved and can provide somevaluable examples of good practice.In Bolivia, a World Bank study considers the experience of the Sanguapac consumerco-operative which provides water supply and sanitation services. The research findingsconclude that a co-operative model for utilities can and does possess advantages overprivate and public sector models. Indeed this ownership and governance model has thecapacity to provide sustainable services at affordable costs. Sanguapac has complexbut effective democratic structures and strong accountability mechanisms. The paperconcludes that:Successful co-operatives are normally those able to attract capable andcommitted board members, achieve a high degree of participation, isolate theirdecisions from political influence, and maintain an environment in whichcooperative values thrive (Ruiz-Meyer and van Ginneken 2006).In the case of Sanguapac, good quality management and governance have enabled itto overcome the problems faced by other co-operative water services providers, ofwhom the majority are conflict-ridden, inefficient and have financially weak.The second study looks at coffee co-operatives in the Chiapas region of Mexico. Itexplores the impact of access to Fair Trade markets in both commercial andgovernance terms for the co-operatives. In a review of the experience of agriculturalco-operatives in developing countries, Milford argues that the co-operative models canhave benefits in terms of innovation, economies of scale, improving competition andincreasing social capital. The danger of external financial support and externally-drivendevelopment is that it can reduce levels of participation among the members, inhibit thedevelopment of social capital and make free riding more likely (Milford 2004).However Milford finds that support from Fair Trade has proven a more effective form ofexternal support for co-operatives than that provided by governments or NGOs. Thisappears to be due to the market-related nature of the support plus the fact that thePage 28