CATAUNIDOS Business Plan and my Future in Brazil

Ever since I decided to come to Belo Horizonte to study cooperatives of catadores, I knew that my goal was not simply to perform a year of research and leave. Rather, I wanted to lay the foundation for a more long-term participation, understanding this movement in general in order to figure out what role I could play in moving it forward. As my Fulbright draws to a close at the end of this month, the answer is finally beginning to come into focus. Although I was not accepted into the masters program I applied for at UFMG, I actually believe that this was for the best, as I have decided to stay in the area and focus my work with INSEA. I will be dedicating myself to a large challenge: creating and executing a new business plan for the CATAUNIDOS network.

Although CATAUNIDOS has existed for several years, in many ways we are starting from scratch in creating the cooperative. The idea of the network centered originally on the plastic processing factory, which is currently closed. During its short span of operation, the factory experienced numerous difficulties, stemming primarily from problems with establishing a functioning management structure and organizing efficient logistics for collecting material from the cooperatives and transporting the final product to buyers. The factory is currently closed for restructuring, and SEBRAE consultants are helping INSEA to devise a new business plan for the organization.

Talking with the SEBRAE consultants has been very helpful for me, as their analysis is very similar to mine, thus reassuring me that my thoughts about the future of CATAUNIDOS are not just personal opinion but legitimate business insight. In order to be successful, CATAUNIDOS must change its focus from industrialization (value-added plastic processing) to commercialization (logistics of coordinating sales among the cooperatives).

As I have explained before, the recycling industry has four main steps: source separation, collection, sorting, and transformation. Since the catadores already work together with local governments to handle collection and sorting (and encourage residents to source segregate materials), the logical next step was to enter into the transformation industry by setting up a materials processing factory that turned plastic into pellets. However, doing this skipped a crucial step. Actually getting material from the cooperatives to the industries that process materials is a huge undertaking in itself, requiring detailed systems of information control and logistics. This is currently done by the middlemen, who are able to gain huge profits simply by acting as the intermediaries between catadores and the factories. Trying to create a factory without first assuming the function of the middlemen is putting the cart before the horse. Instead of trying to increase income in the cooperatives by value-added processing, we should be trying to capture more of the value from commercialization, which in itself is a gold mine that can double or triple the price of recyclables for the catadores.

The most optimistic news regarding a commercialization venture is that we already know it is economically viable, given the success that middlemen have had in the market. In fact, the profitability of these enterprises shows that commercialization can work even without strengthening control of materials and information at the level of the individual cooperatives. Despite the organizational weaknesses of the organizations of catadores, middlemen still run dynamic businesses that sell their materials directly to industry.

Instead of trying to focus on developing economic autonomy at the local level, we can turn CATAUNIDOS into a commercially-viable umbrella organization that will provide organizational and financial support to the local cooperatives in a sustainable way. Once we have achieved this, we will be able to provide more support services to the local cooperatives from a stronger position. As a network of social enterprises overseen by a profitable commercialization venture, the cooperatives will be able to reduce their political dependency and have access to sustainable financing for infrastructure improvements and operating capital. Furthermore, we will be able to fund a more permanent and deeper participation by INSEA technicians within the enterprises, thus helping to simultaneously strengthen the groups from the grassroots, improving their management and working conditions, while giving them more leverage in their negotiations with municipal governments. This stands in sharp contrast to the situation today, where many cooperatives lack basic infrastructure and equipment and are completely dependent on ongoing financial and managerial support from government technicians and local NGOs.

There are, however, lots of challenges ahead to make this dream a reality. Creating a commercialization center to serve as a logistical hub for this new enterprise will require a lots of time, effort, and money. We will face stiff competition in the market from current middlemen, who will certainly have no interest in relinquishing the domination they currently have over the catadores. We will have to find talented, passionate personnel interested in helping to run this start-up. And of course, we will need a large initial capital investment to build a physical structure, purchase equipment (scales and presses, trucks, computers), and fund salaries for our workers. There is also the risk that the factory project, a large endeavor in itself, will become a major distraction that limits our ability to focus on commercialization.

Perhaps most challenging of all, we will have to develop an organizational structure that allows CATAUNIDOS to function as a regular, efficient business in the market while still maintaining its characteristics as a cooperative owned by the catadores. The relationship between the catador leaders, who will make up the advisory board, and the CATAUNIDOS technicians, who will actually run the business, will be complicated, and will certainly cause some uncomfortable questions regarding the catador-technician partnership. Having catadores as the owners (in essence, shareholders) but also the employees who perform the more onerous physical work, while the technicians serve as the managers, relates back to the “outsourcing management” problem I discussed earlier in my writing.

Overall, there is a lot of work ahead of us, and many profoundly difficult questions we must try to tackle. While I have no way of knowing how this initiative will turn out, I am very excited to help try and make it a reality. I will continue to post with regular updates about the project, and now that my Fulbright is ending, the new focus of this blog will not be general research reflections, but rather specific observations regarding the process we are making in turning CATAUNIDOS into a model social enterprise.