The Cooperative Movement of Credit in Argentina

Some historical references:

The cooperative movement of credit in Argentina was developed in our country apart from four types of institutions:

  1. Popular Banks (1887 - 1912)
  2. Rural Unions (1911 - 1930)
  3. Regional Unions of loan and saving (1941 - 1950)
  4. Credit Unions

The last ones, the only ones that acquire a significant level of development and permanence, were born at the beginning of the twentieth century like mutual entities of the Jewish community where the immigrants gathered together according to their economic activity or their place of origin. Their members had access to the different means of production necessaries to install themselves in the country or to the financing of small sums of money to acquire them, thanks to these institutions.

The first experiences of this type were the Cooperativa de Crédito La Capilla (Ing. Sagaroff, Entre Rios, 1913) and the Primera Caja Mercantil Coop. Ltda. in the porteño neighborhood of Villa Crespo (1918).

Along the years, these co-operative movements went through different periods:

1. Vegetative growth (1913 - 1957)

The Credit Unions had a slow growth, standing out for mixing co-operative and mutual characteristics. They worked basically with capital of its own or inorganic ways of saving and covered the necessities of the handmade and commercial activity in the cities and the necessities of the rural landlords and tenants. Most of these unions also financed the activity of libraries, schools, clubs, and other communal institutions.

Towards the mid 1940's the Credit Unions started to reflect the industrial development that was produced in our country, giving birth to a small growth and diversification of the sectors helped. In this context, some unions started to develop the legislation of ¨Sight Accounts¨ with Payment Orders as a way to overdraw their balances. In 1950 fourteen entities created the Federacion Argentina de Cooperativas de Credito to co-ordinate the union representation and the legal and tax accounting consulting.

The 1955 Coup that overthrew the government of Juan Domingo Peron, modified the economic rules. The reforms of the financial system put forward by the auto-claimed Revolucion Libertadora consisted mainly of:

  1. Revoke the regime of "nationalized deposits" founded by the Peronist government in 1946.
  2. Reduce significantly the credit assistance of the public banks.
  3. Favor the penetration of the foreign banks and motivate the establishment of capital coming from abroad as the engine of the Argentine economic development.
  4. Intensify the restrictions of the credit assistance to the small and medium companies of national capital.

In this context, a group of co-operative leaders proposed themselves to push forward the function of the credit accounts transforming them into small "popular banks" that could finance the activity of the small and medium national company.

2. Development (1958 - 1966)

The engine of this transformation was the Instituto Movilizador de Fondos Cooperativos Soc. Coop. Ltda. (IMFC), entity of second grade created on behalf of the Congreso Argentino de la Cooperacion held in the city of Rosario in November, 1958. Among other main starting objectives was the will to motivate the idea of solidarity and contribute to the creation of new co-operative movements of credit in each neighborhood and city of the country.

From the creation of the institute,the spread of the Payment Order that started to work with difficulties but imposing gradually, is widened. «Understood its Interco-operative compensation by the IMFC, it developed rapidly into an instrument of payment of growing circulation, that facilitated the deposit taking and the sedimentation of the financial resources of the small and medium managers and favored the collocation in credits accessible to the same sectors, as well as motivated a vigorous growth of the entities, demonstrative of the existent conditions and objective necessities for its development".[1]

At the same time , the foundational objective to promote the creation of new co-operative movements was fulfilled successfully. . Between 1958 and 1966 the credit unions increased from 197 (124 of which were settled in Buenos Aires) to 974, spread in the whole country.

The new co-operative movements were created by groups of neighbors that went to the call of the Instituto Movilizador or that worked motivated by the success of the institutions created in neighboring villages or towns. They are organizations that are born in a democratic way, vote for their authorities and promote the idea of the active participation in the management of the social entity that they are creating.

The rapid expansion of the co-operative movement of credit started to worry the capital and its representatives above all because of its role of demonstrative testimony of the perspectives of the assistance credit. This preoccupation was expressed through press campaigns and tries to restrict the rules that didn’t get to anything precisely because of the capacity of this assistance movement of credit.

3. Attack, restrictions and partial recuperation (1966 - 1976)

In 1966, the government of the auto-claimed "Revolucion Libertadora" led by General Ongania started, soon after taking the power, a double attack on the cooperative movement: put into practice a restrictive legislation of its financial operation and promote a defamatory campaign against the authorities of the IMFC in the main means of press with the objective of generating a crisis of trust with the subsequent "move" among the people who save their money in the bank.

Having overcome the confusion of the initial instants leaders and associates started to go through the hard way of reconstruction. In the operative aspect, they began the progressive refund of the deposits as soon as the total of loans started to recover, at the same time a new restricted legislation was put into practice, due to the prohibition to endorse and compensate the Demand Drafts made its generalized acceptance difficult and impede the capitation of deposits affecting substantially the normal profitability of the entities. In the institutional field, the co-operative movement started a long fight to achieve the reestablishment of the faculties arbitrarily cut.

In spite of the effort realized to reverse this situation, of the nearly 1000 cooperative movements of credit existent in the mid 1966's only a few more than 400 could work at the moment of the democratic restoration in 1973. The short institutional period didn’t allow that what were potential perspectives could develop; as a result the surviving entities could only recover partially during this period.

4. The purpose of total destruction and transformation into Cooperative banks (1976 - 1979)

In March, 1976 the institutional continuity was violently interrupted in our country, and the Armed forces assume again the government starting the auto-proclaimed -Proceso de Reorganizacion Nacional-.

The capitalist international crisis of 1973 meant that the third world countries like Argentina put an end to the model based on the replacing industrialization, full employment, the Benefactor State and the growth of the working class.

In our country, the previous historical cycle finishes and the re-foundational project of the military dictatorship that installs a new ¨modernizing¨, starts and it is wildly authoritarian and excluding. The alliance between the military power and the new economic power pointed at structural transformations of the argentine society that would become in an irreversible starting point for the next constitutional governments to the dictatorship.

In this context, the Ministry of Economy led by Jose Alfredo Martinez de Hoz elaborated a project to be passed as a law, called Ley de Entidades Financieras that pointed at eliminating the cooperative movement of credit by the elimination of the co-operative as the bases to structure the bank services.

By means of an important political and social demand headed by the IMFC, it was possible to modify partially the initial proposal, due to the fact that the "Ley" 21526 de Entidades Financieras (1977) didn't give the Credit Unions the possibility to operate with Sight Accounts but granted them the possibility of transforming themselves into commercial banks , keeping their legal cooperative system.

As a result of this situation, 273 out of the 375 existent Credit Unions chose to change into Cooperative banks. From those, 41 unions made it in an individual way and 232 did it melting with others, originating -between 1978 and 1979- a total of 77 new cooperative banks.

From all these banks, today only one survives: the Banco Credicoop Coop. Ltdo.


[1] Gleizer, Aron. «La experiencia del movimiento cooperativo de crédito en la República Argentina como instrumento de transformación económico y social» en Revista del Instituto de Cooperación Nº 4/1979. p. 431.