Spain's Basque co-op thrives despite crisis

In a quiet northern Spanish valley nestles a secret weapon against recession: a unique cooperative employing more than 80,000 people in the Basque Country and beyond. Founded in the 1950s by local priest Jose Maria Arizmendiarrieta as a small workers' cooperative, the Mondragon Corporation has grown into an international conglomerate, but stays true to his mission: maintaining jobs. The corporation's international director Josu Ugarte said Mondragon has made a major contribution to easing unemployment in the Basque Country, which though high at 14.5 percent is far below the nearly 25-percent national rate. "We develop a lot of activity here and invest a lot," he said. Its various branches, present in 20 countries, include industry, distribution and finance. "We believe that growth comes through spreading internationally," Ugarte told AFP in his office on the green hillside overlooking the river Deba."We have made up for all the loss of business in Spain through international sales," he added. "Most of our biggest growth has come from Brazil, Russia, India and China, where we have been growing 30 percent a year in recent years." Foreign sales reached nearly four billion euros ($5.2 billion) in 2011, accounting for two thirds of the corporation's industrial division, which produces consumer electronics, car parts, machinery, sports gear and more. But despite its international presence, Mondragon's co-operative structure has kept most of its jobs and production in Spain. It has 35,000 employees in the Spanish Basque Country, 35,000 elsewhere in Spain and about 13,500 abroad. Most of its workers are partners in the firm, voting to elect the bosses and determine sensitive decisions. In May, for example, workers of its flagship electronics brand Fagor agreed between them to cut their salaries by 7.5 percent and to move workers to different locations. It has its own bank which helps finance its co-operative projects, its own health insurance fund for workers, and its own private university which trains many of its employees. The company's many cooperative branches are helping support the local and regional economy during a nationwide recession brought on by the collapse of Spain's building boom. They directly employ half of the workers in the 20,000-strong town from which it takes its name. The firm says it alone accounted for 7.4 percent of the Basque Country region's output in 2010, helping ease the crisis. The economy of the region, which votes to elect a new government on Sunday, contracted by 0.9 percent in the first half of this year from a year earlier, compared to a 1.3-percent contraction nationwide.Last year, half of its 335 million euros of investment went on research and development and one fifth of its industrial sales were of products newly developed in the past five years. "It takes us between six months and three years from having the idea to being able to produce the product," said Xabier Gorritxategi, innovation director at Fagor. Ugarte says the company sees industry, innovation and globalisation as the keys to getting out of the crisis, which is making itself felt despite the firm's strengths. Outside Spain, "the markets are not growing and it looks like they are not going to grow much for the next few years," Ugarte said. In Spain, "we haven't touched bottom yet."