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FEDERAL
BANK
RESERVE
KANSAS
OF
FEDERAL A.~SH1VE U~NK
OF KANSAS CITY
•
community
JAN 1 3 19ss
t
invest
COMMUNITY
AFFAIRS
CITY
DEPARTMENT
inter 1997
In this issue ...
Sovereignty: The Strength of Nations and of Business ......................................................................... 1
The borders we create shape nations, affect business
and influence our individual lives.
Perspective
Nation-Building:
Creating a Place for Business .................................................. 3
The co-founder of the Harvard Project on American Indian
Economic Development talks about a new approach to
economic prosperity that's been effective in Indian Country
and in nations around the world.
Sovereignty, Prosperity and Policy
in Indian Country Today ................................. ............................ 5
Key factors and methods of using sovereignty as a tool
for economic development.
Profiles
Practical Sovereignty .......................... ....................................... 14
The Laguna, Pojoaque and Santa Ana Pueblos of New Mexico
and a business on the U.S.-Mexico border have significant
sin:u,larities-and differences-in how they address sovereignty issues and undertake successful business development.
Sovereignty:
The Strength of Nations
- and of Business
overeignty creates borders.
Its essence is the power and
the freedom to do things on
one side of a border that can't or
won't be done on the other side.
Decisions of sovereignties affect
individuals and families, shape
communities, and encourage or
inhibit enterprise.
The ongoing debate about the
powers of Indian nations in the
United States reflects the core
issues of the debate over sovereignty, in this country and around
the world. Who has the right to
make and enforce what kinds of
decisions, within what boundaries?
AfterWord
A nation-building approach to economic development can
lead to sustained economic prosperity for widely varying
cultures, businesses and governments ................................ ... 24
Resources
Easing the Way: A Model Tribal Code for
Secured Business Transactions ............................................. 25
Commercial codes save time and money and encourage
economic development.
Resource Materials
Resources for further information ............................ .... .. ... .... 26
-- - - -- - - - - - - - --1
Community
Re i n v e s t m e n t
The sovereignty of the indigenous people of
this continent was assumed when tribes and
the U.S. government first entered into treaties
and agreements. While the courts have generally upheld the sovereignty of t1·ibes as "limited
dependent nations," just what that means is
subject to heated debate. Congress, tribal members, and state officials argue about tax powers,
who has rights to natural resources, and
tlement or taxation areas such as school or
water districts are defined in terms of access to
services and funds or exemptions from regulations and taxes.
Philosophers, government officials, religious
leaders, commercial traders and legal scholars
have studied sovereignty for centuries. What
can Community Reinvestment add to the discussion? We think that someplace between the
broad philosophical implications and the specific legal rulings, there's need for a pragmatic
look at sovereignty as a tool for economic development. Our interests are in ensuring equal
access to credit and in fostering the ongoing
development that helps build a strong U.S.
economy. As global corporations and cyberspace
force us to develop new perspectives on regional
and international sovereignty, we need both a
context and practical tools for community
development.
Our interest in sovereignty was piqued by
Stephen Cornell, co-director of the Harvard Project on American Indian Economic Development
and professor of sociology at the University of
Sovereignty defines nations,
but it also defines
interest z ones that cross
national boundaries
and other political borders.
whether tribes should be immune from lawsuits. The authority to levy taxes, educate children, and build roads and sewers may be under
federal, tribal, state, county, municipal or special district jurisdiction. Over time, already
complex laws continue to evolve and become
even more complex.
Although the status of Indian reservations
in the U.S. is unique, dilemmas over the boundaries of overlapping interests and sovereignties
are common. Sovereignties around the world
struggle with each other for political control.
"Business wars" are fought by cities and states
and nations and continents competing for jobs
and prosperity.
Sovereignty defines nations, but it also
defines interest areas that cross national
boundaries and other political borders. Free
trade zones, enterprise zones and special enti-
There's a need for a pragmatic
look at sovereignty as a tool
for economic development.
California, San Diego. The Harvard Project
research indicates that tribes that use their
sovereignty to create effective legal and business infrastructure are more prosperous than
those that don't. In this issue of Community
Reinvestment we've focused on how sovereignty affects business.
2
Winter
199 7
We visited the Laguna, Pojoaque and Santa
Ana Pueblos in New Mexico to learn more firsthand about how tribes with successful businesses have addressed sovereignty issues. We talked
with a Latina business owner who established
similar businesses less than a mile apart in the
United States and Mexico, because the laws of
these two nations enabled her to do things on
one side of the border that she could not do on
the other.
Sovereignty affects our everyday lives in
profound ways. It's a symbol that represents
freedom and power, and it's a practical matter
defined by laws. It's most effectively implemented through shared understanding and unwritten custom, but negotiation, legislation, and
"Out in the field we encounter
two very different concepts
of economic development.
One is a 'jobs and income'
approach .... The second is
'nation-building.'"
sometimes force are needed to maintain sovereign boundaries, especially between people from
different cultures with sometimes-competing
interests.
We've written about the pragmatic ways in
which sovereignty affects the way we exchange
goods and services, and about how sovereignty
can be used as a tool for economic development.
But our underlying assumption is that in democratic societies, we the people shape our sovereignty as we learn about the larger issues,
participate in policy discussions, and use our
power to vote. People in communities influence
the political and economic realities within and
across the sovereign borders in which we live
and do business.
We've used photographs in this issue to
illustrate some of the visual ways we establish
our borders. We believe that the way we define
our borders makes all the difference in the
world in how successful we are in using our
sovereignty to our advantage. D
PERSPECTIVE
Nation-Building:
Creating a Place for Business
011
ith jobs and income rather than nation~ building as the focus for economic development," said Stephen Cornell, "you may
get some quick business start-ups and some
shortwterm successes, but you're unlikely to
build a sustainable future. A tribe that wants
prosperity and sustained economic development
needs to think about nation-building."
Cornell is co-director of the Harvard Project
on American Indian Economic Development, a
long-term effort to understand what's necessary
for self-determined, successful ecouomic development in Indian Country. With economist Joe
Kalt, other colleagues and students, Cornell has
studied reservation economic development and
worked with various tribes to make develop3
Community
Re i n v e s tment
haul. It's a concept that focuses on putting in
place an environment in which people want to
invest, not just because it's right or because
they owe it to the tribe, but because they
believe their investment will pay off.
"If investors don't see a possibility of a payoff of some sort, why should they invest?" asked
Cornell. "The reward may be monetary profits,
the satisfaction of a job well done, or the rising
quality of life in the community. It may be in
reduced dependence on the feds, or in bolstering
tribal sovereignty.
"And those investors aren't just people with
dollars," he continued. "Everyone who works for
a tribal government, tribal program or tribal
enterprise is an investor. Anyone who's started
a business on a reservation or is hoping to do so
is an investor. Anybody with ideas or time or
energy or goodwill or dollars or skills, who's
willing to bet those assets on the future of the
nation, is an investor.
"Nation-building requires us to think about
economic development in new ways and to pursue it very differently. It requires us to talk
about what kinds of nations we want to build
and how we can set about doing it.
"One of this country's leading economists, a
winner of the Nobel Prize in Economics, tells an
interesting story about himself and other economists," Cornell said.
ment a reality.
"Out in the field we encounter two very different concepts of economic development," said
Cornell. "One is a 'jobs and income' approach, in
which a tribe will say, 'We've got a problem
here. The problem is not enough jobs and not
enough income, and the solution is to get some
businesses going on the reservation'.
"Usually that means calling in the tribal
planner and saying, 'go get some business
going'. The tribal planner goes off and writes
some grant proposals or looks for an investor of
some sort, and that's supposed to solve the
problem.
"In the 1950s, one of the questions economists were being asked was where the next big
burst of economic growth was likely to come.
What part of the world is going to take off?
The answer, to most economists, was easy. It
was Latin America, and the reasons were
clear: They had plenty of good natural
resources, they had none of the overpopulation
problems that Asia had to wrestle with, parts
of Latin America already had high standards
of living, they had a partly European heritage
that lent itself to entrepreneurship. Their
answer was Latin America--and the answer
was wrong.
"In fact, said this economist, we blew it.
The next burst of growth came not in Latin
America but in Asia, just where the economists thought it would not happen. It came in
places like Japan and Thiwan and Korea and
Singapore, some of which had few natural
resources. They had population problems, and
they had very different cultural heritages.
"The key to economic
growth is not resources.
It's institutions."
"There's a persuasive logic to this approach,"
Cornell said. "There aren't enough jobs on most
reservations, and there isn't enough income. Too
many people are on welfare. So yes, tribes need
jobs and income. But most businesses that get
started using this approach don't last very long.
Those big plans usually don't pan out, and last
year's sure-fire winner of a business didn't go
much of anywhere.
"The second approach we see to economic
development is 'nation-building'," said Cornell.
Nation-building puts the spotlight on building
Indian nations that can flourish over the long
4
Winter
1997
'What we missed,' he said, 'is the fact that the
key to economic growth is not resources. It's
institutions. '
"It's things like stability in government,
clear rules governing contracts and responsibilities, effective judicial sJ stems. In Latin
America we got instability, chaos, and dictatorship. In Asia, we got governing institutions
that worked. That was the difference.
1
"I like to tell this story for three reasons,"
Cornell said.
• "First, it points to the critical role
that infrastructure plays-and by
infra.structure, I don't mean roads.
We're talking about the organization
of government, the rules that people
follow.
• "Second, it's a useful reminder that a
lot of the problems that Indian Country is dealing with are not Indian
problems. These are problems that
countries around the world-from
Africa to Eastern Europe to Latin
America-are wrestling with. Some
are doing a better job of solving these
problems than others, but they are
problems of sovereign societies everywhere.
• "And third, it seems to me that this
economist could have been talking
about Indian Country. There's a similar puzzle at work here. We think of
Indian reservations as poor, and
many of them are. But there are also
major successes out there.
economists had been asked twenty years ago
where economic development was most likely to
occur in Indian Country, I'm not sure they
would have picked the Indian nations that are,
in fact, successful." □
Sovereignty, Prosperity and
Policy in Indian Country Today
The following is from Dr. Stephen Cornell's presentation tu
the Nation-Building Conference: Building Tribal Legal
Infrastructure for E conomic Prosperity, sponsored by the
Montana-~yoming Tribal Lead rs Cou ncil and the Federal
Reserve Banks of Kansas City and Minneapolis in April
1997 in Missoula, Montana. It has been edited for length.
Cornell is co-founder of the Harvard Project on American
Indian Economic Development and chair of the Department
of Sociology at the University of California, San Diego.
"nation-building" concept of economic
development has a goal of building viable,
sovereign nations. Its purpose is to build
an environment that encourages investors to
invest, that helps businesses last, and that
allows investments to flourish and pay off. Key
elements of that environment are the governing
infrastructure, the legal infrastructure, and the
rules and procedures by which the society is
run.
A ''jobs and income" approach seldom leads
to economic prosperity. We've learned through
our research that we need to think differently
about economic development. The solution has
to be much more comprehensive and ambitious
"The Mississippi Choctaws are now the
fourth or fifth largest employer in the state of
Mississippi," said Cornell. "The White Mountain Apaches' forest products, skiing, recreation,
and other enterprises have made it the economic anchor of the economy of east central Arizona, and their timber operation is one of the
most productive in the western United States.
In Montana, the Salish and Kootenai Tribes of
the Flathead Reservation have built a successful private sector economy based on tourism,
agriculture and retail services.
"There are similar stories that could be told
in much of Indian Country," said Cornell. "If
5
Community
Reinvestment
seat. In every case, the role of the Bureau of
Indian Affairs (BIA) and other outsider agencies
has shifted from decision-maker to resource,
from the controlling influence in decisions to
advisor or provider of technical assistance.
The logic of this is clear. As long as the BIA or
some other outside organization carries primary
responsibility for economic conditions on Indian
reservations, development decisions will reflect
the goals of those organizations, not the goals of
than just starting businesses. The solution is to
build a nation in which business can flourish. It
involves creating an environment in which the
governing infrastructure and the legal infrastructure-the rules and procedures by which
the society is run-support prosperity.
Sovereignty.
The first key to economic development is
sovereignty. "De facto" sovereignty, meaning
genuine decision-making control over affairs, is
a necessary prerequisite for economic development. Who is really deciding the economic
strategy? Who is deciding how many trees will
be cut? Who is deciding whether the joint venture agreement with an outside investor will go
forward? Who is deciding how the housing
money will be spent? In Indian Country, when
the answer to these questions is 'the tribe', we
have de facto sovereignty-sovereignty in fact
and in practice.
While sovereignty as a legal phenomenon
waxes and wanes with federal court decisions
and legislation, today the potential for de facto
sovereignty is substantial. An assertive and
capable tribe can take effective control of many
In virtually every case that
we have seen of sustained
economic development on
American Indian reservations,
the primary economic decisions
are being made by the tribe,
not by outsiders.
the tribe. Furthermore, when outsiders make bad
decisions, they don't pay the price, the tribe does.
As long as the decision makers don't pay the
price of bad decisions, there's no incentive for
them to make better decisions. Making the feds
bear responsibility for making things better on
Indian reservations may be good political
rhetoric but it is bad economic strategy. The
research shows that when tribes take responsibility for what happens economically, they have
started down the path to improving economic
conditions. Assertions of sovereignty can have
very concrete payoffs.
For example, a Harvard Project study analyzed the performance in the marketplace of 75
tribes with significant forestry operations. In
the late 1980s, 49 of those tribes shifted some
portion of their forest product industry control
from BIA to tribal control. For every highly
skilled position transferred from BIA to tribal
A "nation-building" concept
of economic development
has a goal of building viable,
sovereign nations.
economic decisions away from other contenders
for that control, such as the Bureau of Indian
Affairs and other federal agencies.
In virtually every case that we have seen of
sustained economic development on American
Indian reservations, the primary economic decisions are being made by the tribe, not by outsiders. In every case, the tribe is in the driver's
6
Winter
1997
development resources a tribe can have. The
reinforcement of tribal sovereignty should be
the central thrust of public policy. One of the
quickest ways to bring reservation development
to a halt and prolong the impoverished condition of reservations would be to undermine tribal sovereignty. We are aware that this is a very
'pro-Indian' conclusion, but it comes from the
data. It is what the research shows.
Indian nations enjoy certain rights and powers, first by virtue of their inherent sovereignty,
and second as a result of extended negotiations
and interactions with the United States that
have led to various specifications of the substance of their sovereignty. That sovereignty is
the first key to successful reservation economic
development, but sovereignty, in and of itself, is
no guarantee of success.
control, both production and revenue to the
tribe increased, and did so on a sustained-yield
basis. Tribal control typically resulted not only
in better forest management but in better marketing as well. The bottom line was increased
prices for forest products and increased revenue
to the tribe. In other words, the effective exercise of sovereignty has concrete, bottom line
results.
This illustrates another finding that
emerges from our research. It often has been
asserted that if tribes wish to be sovereign, they
The reinforcement of tribal
sovereignty should be the central
thrust of public policy.
Institutions.
must first establish sound economies. We think
this is backwards. What the research indicates
is that if you want a sound economy, you need
first to be sovereign. There are three reasons
for this.
Institutions are the second key to economic
development. Any nation-Indian or not-that
wants to be economically successful over the
long haul must have capable institutions of selfgovernance, from commercial codes to effective
and independent judicial systems, to controls on
opportunistic politicians. Our research strongly
indicates that sovereignty without the ability to
• First, sovereignty brings with it
accountability. Those whose resources and well being are at stake
are the ones calling the shots.
• Second, the sovereign status of tribes
offers distinct legal and economic
market opportunities, from reduced
tax and regulatory burdens for
industry to unique niches for
gaming and the commercial
use of wildlife.
• And third, sovereignty secures the
bases of development itself: control of
one's own affairs and resources.
It is no coincidence that after tribal selfdetermination became federal policy in the
1970s, a significant number of tribes have
begun to break the relentless pattern of reservation poverty and dependence. Before selfdetermination, there was very little in the way
of sustained economic development on Indian
reservations.
There is a major policy lesson in this. The
lesson is that sovereignty is one of the primary
exercise it effectively is a poor basis for economic development.
We work with one tribe that is among the
wealthiest tribes in the country in terms of nat7
Community
Reinvestment
ural resources, but the reservation economy is a
shambles. Unemployment is sky high, there
are almost no viable enterprises on the reservation, and the tribe is dependent on federal
money to keep many of its activities going.
Social problems such as alcohol and suicide are
major concerns. The political struggles have at
What matters is not only
rights and powers, but the
ability to put those rights
and powers to work in effective,
productive ways.
times threatened to turn violent. This sovereign Indian nation has a long history of battling
in the courts to affirm its sovereignty. It has
won the right to control its own destiny. It is
resource-rich and people-rich, but it remains
poor.
The problem is the inability of this tribe to
exercise its power effectively. Its constitution
provides a system of government in which it is
extremely difficult to get anything done. Its
governmental system encourages recurrent factional battles that sap the energies of the tribe's
leaders and distract them from the real tasks of
government.
The instability in tribal government means
that massive personnel changes occur overnight
following the changes in administration. Few
good records are kept; skilled people get hired
and soon throw up their hands and quit. It's
difficult to keep track of the money. Tribal
plans change from one day to the next; leases
made by the last administration are canceled by
the next. Enterprises fail because of government interference.
This is hardly a promising environment for
economic development. Outside investors won't
invest-they don't like the risks such an environment creates. Equally important, inside
investors-tribal members who might not have
a lot of money but who do have ideas or energy
or skills-won't invest either. Why should they
invest their energy in the tribal future when
the environment is one of uncertainty, political
favoritism, and instability? As a result, the
tribe gets little return on its resources, development is stagnant, and its people live in poverty.
Many nations across the world have sovereignty to a much greater degree than Indian
nations do, but a lot of them have not found the
way to exercise that sovereignty effectively. As
a result they are not only often extraordinarily
poor, but they are not taken seriously in the
councils of the world.
Not only are we unlikely to invest our
money or our energy in the economy of a country with a government that is unstable, riddled
A tribe must create laws, rules,
and procedures that are
appropriate to its situation
and its heritage and that can
get things done in the real world
that tribes confront.
with conflict, that operates at the whim of its
leaders, in which my investment of time or
money or energy is not protected, in which contracts are subject to impulsive revision, etc., but
why should I even negotiate with such a government? If it cannot put its own house in
order, why should I take it seriously as a partner or as an antagonist?
8
Winter
What matters is not only rights and powers,
but the ability to put those rights and powers to
work in effective, productive ways. Sovereignty
is meaningful only when it can be exercised
effectively, and that is a matter of institutionsof the organization of government itself.
One of the unfortunate consequences of a
century of federal control of Indian nations is a
legacy of institutional dependency, a situation
in which tribes have had to rely on someone
else's institutions, someone else's rules, someone else's models, to get things done. On many
reservations, tribal government has become little more than a grants-and-programs funnel
attached to the federal apparatus. On others,
tribes have simply adopted the institutions of
the larger society without considering whether
those institutions in fact are appropriate to
their situations. Such dependency and blind
imitation are the antithesis of self-determination, and the challenge is to break these patterns.
To do so, a tribe must create laws, rules, and
procedures that are appropriate to its situation
and its heritage and that can get things done in
the real world that tribes confront. The reforms
needed vary from tribe to tribe, ranging from
complete constitutional overhauls to the establishment of sound, genuinely independent judiciaries, to the development of commercial codes
and the adoption of explicit rules of administrative procedure. Our research indicates there
are three institutional factors that are of primary importance if a tribe is going to effectively
exercise its sovereignty.
1997
However, we don't typically elect our leaders
because we think they know how to read market conditions or manage a manufacturing labor
force or negotiate purchasing agreements with
suppliers. We elect them because we trust their
vision of the future, their ability to make wise
long-term decisions, and their integrity. When
it comes to running a business, what we want
are the best business people we can find, people
who know how to make those businesses succeed so that they become lasting sources of
income, jobs, and productive livelihood for our
people.
The elected tribal leadership is responsible
for the long-term future of the nation. Among
other things, they properly consider strategic
issues: what kind of society are we trying to
build? What uses should we make of our
resources? What relationships with outsiders
Our research indicates that
chances of being profi,table rise
400 percent if the business is
isolated from political
interference in day-to-day
operations.
are appropriate? What do we need to protect
and what are we willing to give up? These are
matters of political debate.
When it comes to hiring the new foreman at
the plant, or working out the payroll at the
casino, or dealing with personnel issues, or purchasing, or operating hours, or putting together
the business plan for the next year, or deciding
how much the middle manager should be paidthese are not appropriately political matters.
They are business matters, and they should be
decided by skilled business people free of the
interference of tribal leadership. When politics
gets involved in business operations, businesses
typically fail. They cannot compete successfully
in the marketplace when the decisions are
being made according to political instead of
business criteria.
In an ongoing survey of tribally-owned businesses, our research indicates that chances of
Separation of politics and business.
The first institutional factor in the effective
exercise of tribal sovereignty is the separation
of politics from day-to-day business management. On many reservations the tribal government-typically the tribal council or the tribal
president-controls tribal businesses. Business
decisions are made by the council, administrative and personnel disputes are referred to the
council, and the council or president intervenes
in the day-to-day running of the enterprise.
At first glance, this may make sense. After
all, tribal enterprises belong to the tribe; the
government represents the tribe; therefore, the
government should run the enterprises.
9
Community
Reinvestment
being profitable rise
400 percent if the business is isolated from
political interference in
day-to-day operations,
with management by a
board of directors and
a corporate charter
that are beyond the
direct control of council
members or the tribal
president. For sustainable enterprises on
reservations, tribal leadership needs to take the
crucial step of setting strategic direction, then
put the day-to-day decisions in the hands of
others.
Some tribes might say they are interested in
jobs, not profits. They want to employ as many
people as possible, and while it's great if it also
makes money for the tribe, the point is to give
people jobs. The problem with this is that enterprises that are run as employment services
have trouble competing. Labor costs are high,
products therefore are expensive, sales fall,
soon the tribe is subsidizing the business, and
eventually the business fails.
The lesson is that if a business is not competitive in the market, the jobs created won't
last very long. A competitive business in which
profits are reinvested into the business, on the
other hand, will grow or provide capital to
invest in new businesses, thereby eventually
employing more people. This approach may not
produce as many jobs today, but it will result in
more jobs tomorrow.
reservation-has a
complaint against the
tribal government,
then ultimately the
tribal government is
going to have the last
word. The person making the decision may
be the same one the
complaint is about.
Under those circumstances, business persons are going to be
skeptical. They're likely to take their money,
their ideas, and their time and energy and
invest them elsewhere.
Again, the data are persuasive. We have
examined 67 tribes for which comparable information is available, and have found that those
tribes that have strong, genuinely independent ,
judicial systems economically outperform those
that don't. The measure we used was unemployment, and after eliminating other factors, we
found that simply having an independent judicial system reduces unemployment, on average
5 percent. If you're a tribal council member and
you're looking for ways to reduce long-term
The legitimacy of governing
institutions depends on a match
with the values and culture
of the people they govern.
unemployment on your reservation, one of the
best things you can do is establish a strong,
genuinely independent, effective judiciary that
can fairly settle disputes and adjudicate claims.
With a jobs and income strategy, the focus is
on starting a business. With a nation-building
strategy, the focus is on creating a system that
reassures investors, levels the playing field, and
gives businesses the opportunity to flourish.
Governing power is used not to personally make
judicial decisions, but to build an institutional
foundation for real sovereignty and lasting
prosperity.
Separation of government powers.
The second institutional factor in the effective exercise of tribal sovereignty is the separation of powers. Basically, this means having a
strong and independent judiciary. It means ·
assuring people that their claims and disputes-including disputes with the tribe itselfwill be fairly adjudicated.
On many reservations, the tribal court is
controlled by the tribal council. Either the
judges serve at the council's pleasure and can
be fired by the council or president, or the decisions of the court can be appealed to the council. If an investor-for example, a tribal
member trying to start a small business on the
Effective bureaucracy.
The third institutional factor in the effective
exercise of tribal sovereignty is an effective
10
Winter
1997
Cultural match.
The legitimacy of governing institutions
depends on a match with the values and culture
of the people they govern. That doesn't necessarily mean reviving all traditional governments. We live in a very different world today,
and government has to be designed to work
within that world. But the government has to
have the support of the people if it is going to
work.
For example, two of the tribes we work with
at the Harvard Project on American Indian Economic Development are the White Mountain
Apache Tribe of the Fort Apache Reservation in
Arizona and the Oglala Sioux Tribe of the Pine
Ridge Reservation in South Dakota. Both of
these tribes have governments organized under
the provisions of the Indian Reorganization Act
(IRA) of 1934, which many tribes established in
the aftermath of that act. The two government
structures are almost identical, with boilerplate
IRA government provisions: centralized power,
strong executives, no independent judiciary,
executive oversight of business operations. But
while the institutions of governance are essentially the same, the performances of these two
tribes are radically different.
Economically, the White Mountain Apaches
are one of the most successful tribes in the
country. They run a number of economic enter-
bureaucracy. A tribe-or any other communityhas to be able to get things done, consistently,
fairly, and predictably. A civil service, established administrative procedures that are consistently observed, solid record-keeping,
independent audits, and a commercial code are
essential. They bring to tribal government and
to potential investors a set of clear, consistent
guidelines on which both can depend. They
bring certainty and stability into daily operations. They clarify the rules by which businesses and programs operate, and they specify the
appropriate relationships between businesses
and the tribe.
The business world is an uncertain world at
best. It tends to be especially uncertain on
reservations. To keep investors involved, and to
keep tribal members investing in the future of
their community, the uncertainties they deal
with need to be reduced. An effective, dependable bureaucracy is a crucial part of doing that.
Without effective institutions of self-governance, sovereignty is hollow. The question of
where to get those institutions brings us to the
last of the three keys to economic development.
When [the White Mountain
Apache Tribe] adopted the
IRA constitution ... they got a
government that in many ways
resembled their traditional
government.
prises that are consistently in the black. Their
timber company outperforms non-Indian timber
operations throughout the West. Their ski
resort is one of the economic engines of that
region of Arizona.
The Pine Ridge Reservation, on the other
hand, is possibly the poorest reservation in the
country. It has a history of repeated failure in
tribal enterprises. It has some of the highest
rates of unemployment and related social problems in Indian Count1·y.
11
Commun,ty
Reinvestment
Wearers-chief executives- for failing to
observe the law.
There was a clear separation between
strategic decisions and day-to-day business
management. The council might decide where
to move to, or when to gather for the buffalo
hunt, but when it came time to actually move,
or camp, or hunt, or go to war, the council chose
individuals known to be superbly skilled in
those activities, and those individuals took
charge of the activities themselves. Once the
hunt began, skilled and knowledgeable hunt
leaders were in charge, and you did what they
said, not what the leaders of the nation said.
This was a very sophisticated system of government, with a separation of powers, checks and
balances, and clear lines of authority. And it
worked.
Today, the IRA government is the opposite of
how the Sioux, under conditions of freedom,
chose to govern themselves. It places power in
the hands of single leaders, has no separation of
powers, muddies the lines of authority, fails to
place checks on the behavior ofleaders, and
offers no independenL, impartial means for settling disputes. As a result, few people really
believe in it, and where people don't think the
institutions are much good, they're unlikely to
invest. Those who do invest eventually get
burned, resources are squandered, and the
chances of long-term prosperity disappear.
Resource differences cannot explain the very
different record in the performance of tribal
enterprises. The Fort Apache Reservation is
blessed with a rich natural resource endowment, while Pine Ridge has comparatively little
to work with. But the difference in resources
does not explain why businesses at Fort Apache
produce and last and businesses at Pine Ridge
typically do not.
We think the difference is in the cultural fit
of the governments. If we look at both tribes in
Where people don't think the
institutions are much good,
they're unlikely to invest.
the middle of the nineteenth century, before
either tribe had come under the effective control of the United States, we see some important differences.
In the Apache tribe, enormous power was
given to single, charismatic leaders. Those leaders selected the tribal council to whom they
looked for advice. There was no independent
judiciary; the leader resolved the disputes. The
leader made most of the economic decisions as
well.
That looks a lot like the contemporary IRA
government at Fort Apache. When they adopted
the IRA constitution suggested by the United
States government, they got a government that
in many ways resembled their traditional government. As a result, people tend to believe in
and support that government. It fits with their
concept of how authority ought to be organized
and exercised.
At Pine Ridge, however, traditional Sioux
government looked radically different from
their IRA constitution. There, decisions were
traditionally made by the "Big Bellies"-all the
men over forty-with very little power in the
hands of single individuals. That council chose
four executives, called the Shirt Wearers. It also
selected a police force from among the warrior
societies, called the akicita, who enforced the
law and settled disputes. The akicita were
remarkably independent. There are cases on
record of the akicita physically beating Shirt
Tribal sovereignty has value
not only for Indian nations
but for non~Indian
communities as well.
What's at stake is the legitimacy of governing institutions with the community itself. The
institutions of governance at Fort Apache have
legitimacy with the people. The institutions of
governance at Pine Ridge, which on paper are
virtually the same as Fort Apache, have little
legitimacy with the people. They don't match
the culture.
Conclusion.
So the keys to economic development are
sovereignty, institutions, and legitimacy. In
12
Winter
other words, nation-building. Economic development is not primarily an economic problem. It
is first and foremost a political problem.
Tribal sovereignty has value not only for
Indian nations but for non-Indian communities
as well. Around the country, economically successful Indian nations are beginning to become
major players in local and regional non-Indian
economies.
The roost abundant evidence of this comes
from gaming tribes, whose operations are having major economic impacts not only on Indian
communities but on non-Indian ones: creating
jobs, providing new business to non-Indian vendors of various kinds, attracting increased
tourism, expanding sales by local retailers,
moving people off state welfare rolls, and
increasing state income and sales tax receipts.
That doesn't begin to include the major investments in non-Indian enterprises some gaming
tribes are making with their profits.
Gaming is an easy example to point to. The
money involved is substantial, it makes a big
splash, and it gets roost of the attention. But
other tribes with successful economieswhether gaming is involved or not-also become
net contributors to the larger economies around
them.
1997
The Choctaws in Mississippi, for example,
have built a highly diversified economy and in
the process have become one of the biggest
employers of non-Indians in their region.
They're importing non-Indians because there
aren't enough Choctaws to fill all the jobs
they've created, and some non-Indians now look
to the Choctaws for a secm·e economic future.
The research is clear. What's good for Indian
nations is sovereignty. That means tribal sovereignty is good for non-Indians, too, because it
leads to the sort of activity on reservations that
benefits the entire country. Sovereignty and the
ability to exercise it effectively-that's where
the value lies for everybody.
Overcoming reservation poverty has enormous benefits for Indians and non-Indians
alike. The federal government, the courts, and
the states all need to know that the best way to
perpetuate reservation poverty is to undermine
ti·ibal sovereignty. The best way to overcome
reservation poverty is to support tribal sovereignty, and support for tribal sovereignty has
benefits well beyond the reservations.
The research is equally clear on another
point. Indian nations need to know that the
connection between sovereignty and economic
development runs through institutions of selfgovernance. Those tribes that build governing
institutions capable of the effective exercise of
sovereignty are the ones that are most likely to
achieve long-term, self-determined economic
prosperity. The name of the game, in other
words, is nation-building. □
SOMEONE SAID ...
"It is true that around every man a fatal circle
is traced beyond which he cannot pass; but within
the wide verge of that circle he is powerful and
free; as it is with man, so with communities."
- Alexis de Tocqueville
1805-1859
13
Community
Reinvestment
At that time, the pueblos held communal fee
simple ownership of their land, which was later
confirmed by Congress. Their land was not
given federal protection or reservation status
until 1913, by which time many non-Indians
had been allowed to settle on pueblo land.
Today, the pueblo ownership is recognized, but
at the same time the land is treated like other
reservation land that is held in trust for tribes
by the federal government.
The form of government today for many
pueblos is a theocracy, with leaders appointed
by church officials. Some pueblos have adopted
PROFILES
Practical Sovereignty
Ii
he principles of effective sovereignty that
Stephen Cornell talked about made sense
to us, but we wanted to see and hear
first-hand how sovereignty worked. We asked
around for suggestions about whom to talk
with, then headed to New Mexico, where we
talked with representatives from three pueblos
with successful businesses and the owner of a
business located on the U.S.-Mexico border.
These four settings gave us new insights into
the practical application of the principles of sovereignty.
The key characteristic
the tribes we visited have
in common is an ability to
successfully meld their
tribal values, personal values,
and sovereign concerns.
The Pueblos.
The character of the pueblos we visited has
been shaped by their history. All of the more
than 550 federally recognized tribes in the
United States are unique, but the pueblos in
the Southwest have an additional character of
their own.
Pueblo Indian lands were under Spanish
rule ("pueblo" is Spanish for village) in the 16 th
and 17'1, centuries, after Spanish conquistadors
came looking for gold, followed by Roman
Catholic missionaries looking for converts to the
church. The pueblos were then under Mexican
domination until after the Mexican-American
War in 1848, when they came under United
States sovereignty.
a constitution and others have implemented
contemporary administrative policies, but the
church often remains a strong institutional
influence.
"Some of our 'traditional' ways were decreed
by Spain in 1620," said one tribal leader. "It no
longer makes sense to have a majordomo whose
responsibility is overseeing everyone's participation in cleaning ditches. Our theocracy, with
the church as the primary decision-making
institution, was designed for an agricultural
community in which everyone was involved in
14
Winter
the church. That no longer fits for us."
"Religion" is not a separate word in any of
the pueblo tribes' languages. It is a way of life
1997
firmation that sovereignty comes in many
forms, and that it can be shaped and applied to
fit values and goals both within a community's
boundaries and in interaction with those on the
other side of a community's borders.
"[Tribal] theocracy,
with the church as the
primary decision~making
institution, was designed for
an agricultural community....
That no longer fits for us."
Laguna: Partnerships for Business.
The Laguna Pueblo consists of six villages in
the Rio San Jose River valley in west central
New Mexico, about 45 miles west of Albuquerque. The reservation is 533,000 acres of
buttes, mountains, and high desert terrain, and
it is crossed by Interstate Highway 40. Tribal
membership is about 7,300 and reservation population is almost 4,000,
The Laguna adopted a constitution in 1906,
amended it to conform to Indian Reorganization
Act guidelines in 1949, and amended it again
in 1958 and 1982. Tribally owned businesses
include Laguna Industries, Laguna Construction, and a convenience store I gas station.
The Tribal Council is composed of two village
representatives elected by each village, six staff
officers, and a pueblo secretary, treasurer and
interpreter.
and part of all life. In the same way, economic
development is in some ways not a separate
issue, but simply one part of an ongoing effort
to ensure a high quality of life for tribal members.
The pueblos we visited had different
histories, different circumstances, different
approaches and different reasons for their business development initiatives. One has a constitution, the other two don't. One deals primarily
with large businesses, the other two mostly
with small businesses. Two have casinos that
provide substantial income, another doesn't.
One has only tribally owned businesses, others
have formed partnerships or leased businesses
to outside companies.
One tribe wishes it had a bank on the
pueblo to more conveniently handle its substantial volume of financial transactions. Another
tribe is creating its own entity to make loans on
the reservation. And another, which replaced
one bank in their shopping center with another
that was more willing to make loans to them,
wishes it had several banks or ATMs to choose
from instead of just one.
These three pueblos have the luck of being
in attractive locations near urban centers, with
good roads and access to transportation. The
research indicates, however, that more important than the resources is how tribes build on
what is available. The key characteristic the
tribes we visited have in common is an ability
to successful meld their tribal values, personal
values, and sovereign concerns.
We found what we were looking for at the
Laguna, Pojoaque and Santa Ana Pueblos: con-
"We've always had sovereign authority within our communities," said Roland Johnson, governor of the Laguna Pueblo. "Not so much
authority that has control over everything, but
authority shared by different societies within
the community.
"One of the lessons
we learned was not to have
all our jobs in one industry."
"Pueblos don't have treaties with the United
States," said Johnson, "because our people were
organized into communities that were permanently located when Americans first came here.
Our way of life didn't require us to be nomadic or
to make war, and there was no reason for the federal government to enter into treaties with us.
"We were always sovereign tribes, and the
lack of treaties between the pueblos and the
federal government doesn't make us any less
sovereign," said Johnson. "We've always had the
power of government and the power to deter-
15
Community
Reinvestment
sion and consensus building led to strong support for the proposal to develop Laguna lndustl;es. We could offer a manufacturing facility, a
good work force, and strong motivation to work.
With clear ideas about what they wanted
a11d what they could offer, Laguna leaders went
to a national manufacturer's convent-ion, where
they talked with people about possibilities of
becoming a manufacturer for national. defense
products. The response was positive, and further discussion 1ed to a consulting relationship
with the Raytheon Corporation. "It .bad to be a
win-win proposition," said Soliman. "They're not
a philanthropic organization although for some
key individuals I think there was an inherent
sense that this was the right thing to do. But
the contract was a bottom-line, win-win deal.
"I think every tribally owned business that
is still in existence today has had a partner at
some point in time who has been willing to
share tbeiT expertise," said Soliman. "We've had
severa) very good experiences like t hat, with
companies like Raytheon, Motorola and GTE.
They have provided guidance in a teaming
arrangement1 and we've developed unique relationships over the years.
"In addition to teaming, we've worked out
subcontractor-contractor relationships with
large companies, to capture some more complex
mine who would be a member of our community. We've always considered ourselves to have
the 1·ight to self-government."
The Laguna were traditionally farmers and
herders, but over the last 100 years the tribe
has evolved from being agrarian to having a
wage economy. In 1883 the Laguna negotiated
for jobs and transportation when the Atlantic
and Pacific Railroad wanted to build tracks
across the reservation. Eventually, communities
of Laguna were establis hed at Gallup, New
Mexico; Winslow, Arizona; and Barstow and
"I think every tribally owned
business that is still in
existence today has had a
partner... who has been willing
to share their expertise."
Richmond, California. They also used their
access to free transportation to send students to
boarding schools such as the Haskell Institute
in Lawrence, Kansas.
"Our ancestors had a lot of foresight," said
Johnson. "They established a scholarship program that provides opportunities for tribal
members to attend colleges and universities.
Now we're getting a second generation of people
applying that learning in the community, with
mentors who can help people develop experience to go with their educatjon."
The largest employer on the reservation
today is the tribally-owned Laguna 1ndustries,
which manufactures sheet metal components,
electrical cables and harnesses, electrical
mechanical assemblies, mini-intercom compo•
nents, and other high.technology and communications products contracted for by the U. S.
Department of Defense. The business was started in the early 1980s, after uranium mjnes on
the pueblo, which had employed up to 800 people for 30 years, were closed.
"One of the lessons we learned was not to
have all our jobs in one industry,'1 said Ron
Solimon, president of Laguna Industries. "When
the mines were closed, we knew we had to find
a way to create new jobs. We went thrnugh a
strategic planning process with the six villages
on the Laguna Pueblo. That process of discus-
"We've learned the value of
having continued outside
experience and perspective."
business. For example, we used the DVM Corporation in Albuquerque as a maj01· subcontractor for an Intercontinental Ballistic Missile
(ICBM) testing system.
"The kinds of opportunities that are available when 1arge American corporations are will•
ing to assist tribally owned entities is
significant," said Soliman. "We knew we needed
a partnernhip initially, when we were new at
this and needed expertise to get started. Laguna Industries has since developed its own
expertise, and our managers and employees are
consulted, borrowed-and sometimes wooed
away-by other manufacturers.
"But even now, when we have our own
16
Winter
expertise," said Soliman, "we've learned the
value of having continued outside experience
and perspective. We have some positions opening on the Laguna Industries Board of Directors, and we'll select people with experiencebased leadership ability, not only in manufacturing but also on the management and finance
side."
"We have created corporations to run our
business enterprises that are separate from the
tribal council," said Governor Johnson. "They
1997
composed of enrolled members and a Regular
Council, made up of elected officials.
The tribe was almost wiped out by smallpox
near the turn of the century, and the pueblo was
abandoned until 1932, when a few people
returned and began rebuilding their culture.
Today, tribally-owned businesses include the
Cities of Gold Casino, a convenience store and gas
station, restaurant, shopping center, a horse racing track, and a hotel that is under construction.
The tribe also has a museum and cultural center.
"The goal of the Pojoaque Tribe is to become
completely independent of direct federal funding within the next few years," said tribal attorney Joe Little. "We plan to do this by building a
community that includes both Indian and nonIndian residents and businesses.
"We'll still go after grants and special funding for projects," said Little. "We recently
received a grant from the Commerce Department for construction of an industrial park. We
consider that to be infrastructure money that
will help us establish a tax base to produce
future revenue, but we want to get away from
direct daily federal money. We only receive
about $200,000 through the Bureau of Indian
"It's no different from the U.S.
doing business with a
foreign country."
are independently operated by boards of directors, and we've authorized them to exercise limited waivers of sovereignty so that someone can
have legal recourse against the company without impacting the pueblo. This allows financial
institutions and others to feel comfortable in
doing business with us.
"Too often, non-Indians lump all Indians
together," said Johnson. "We're separate sovereign nations, and we're different from one
another. We're sometimes asked to explain the
actions of another tribe that has nothing to do
with us or the way we do business.
"Financial institutions need to recognize
that we are unique sovereign entities," Johnson
continued. 'We have rules, processes and traditions appropriate to the communities in which
we live. Our practices may not conform to those
of the dominant society, but it's no different
from the U.S. doing business with a foreign
country. We need to look at ways of becoming
true partners, and find ways to look at one
another across the table as equals."
"The goal of the Pojoaque Tribe
is to become completely
independent of direct
federal funding within
the next few years."
Affairs, which is used to support the police
force-which costs about $900,000 a year to
maintain.
"Every tribal member who wants a job has
one," said Little, "and in addition, tribal enterprises employ between 1,100 and 1,400 nonIndians. We want businesses now with a high
profit margin that will produce income we can
invest in more business and infrastructure. The
tribe owns most of the businesses on the reservation and hires management, but we do lease
space to some outside businesses, such as the
Dairy Queen and the bank.
''We're not real hot on partnership arrangements," said Little. 'We'd rather be in charge.
PoJoaque: Investing in Independence.
The Pojoaque Pueblo is approximately 16
miles north of Santa Fe, New Mexico, on the
main highway between Santa Fe and Thos
between the Sangre de Cristo and Jemez Mountains. With 11,600 acres, a population of about
2,500, and tribal membership of 280, it is the
smallest of the New Mexico pueblos. The government conforms to the provisions of the 1934 Indian Reorganization Act, with a General Council
17
Community
Reinvestment
In our tribe, everybody over age 18 is eligible to
be on the council. You have to have been at two
successive meetings to vote, so we don't have a
lengthy process of explaining what we want to
do to the community-everybody pretty much
knows what's going on. That's given us the ability to make quick business decisions, We can
close on a deal in 60 days or less. And we have
no qualms about going into a situation, checking it out, and dropping it if we don't like it."
"We don't want to take out as many loans as
we have in the past, and we're generally trying
to move away from using credit," said Little.
''We want businesses now
with a high profit margin
that will produce income we can
invest in more business and
infrastructure."
shopping center, and a construction company
that's sanctioned by the tribe but also registered as a foreign corporation with the state of
New Mexico.
"We have provided limited waivers of sovereign immunity. Our court system has a good
reputation-there aren't many people who are
afraid to come into our courts. We've hired a
judge who is an attorney. The court system is
not completely separate from the tribal council,
but that isn't a problem.
"I formerly headed the Judicial Services
Division for the Bureau of Indian Affairs," said
"During the last recession, the tribe came close
to losing the property our shopping center is on,
and we don't want to take that risk again. Furthermore, going through the process of getting a
loan is time consuming and expensive for us,
and if a project is one we can afford, we'll do it
on our own.
"It's not so much a sovereignty issue," said
Little, "but with the type of land we have, it
just takes a lot to get a deal done. We want to
get away from dependency, and we've learned
that when you do business a long time with one
bank, or one construction company, or one of
anything, you can end up as a captive business
partner in a lop-sided arrangement. I'd like to
see more competition from the outside-bidding
a construction job with three or four companies
rather than just one or two, and having several
ATMs rather than just one bank.
"We initially had trouble getting credit with
a bank, for the same reasons other tribes had,"
said Little. ''You can't alienate the land, you
have questions about what happens if somebody
gets sued. You have to deal with those things.
"We have created several different levels of
corporations, including Pojoaque Gaming Industries, the Pojoaque Pueblo Economic Corporation, which is in charge of the businesses at the
"If a tribe has any
business dealings at all,
they definitely have
separation of powers
in practice."
Little, "which oversaw all the tribal courts in
the country. I know there was a policy push to
make the separation of powers of government a
reality in Indian Country. From the outside
community, there was a view that you only get
18
Winte r
fairness by having the court completely separate from the tribal council.
"I think that separation was made too much
of an issue," Little said. "What matters is the
kind of staff you hire and what they do. Most of
the pueblos don't have a constitution, so we
don't have a direct separation of powers on
paper. But most of us do have it in practice. If a
tribe has any business dealings at all, they definitely have separation of powers in practice.
"Judicial decisions can be appealed to our
tribal council, but the council doesn't intervene
1997
also serve as chief judges in the traditional court
system,
Businesses owned by the Santa Ana include a
27-hole golf course that is rated one of the top
three in New Mexico, the Prairie Star Restaurant,
the Santa Ana Star Casino, the Warrior Apparel
Company, a nursery that features native Ne_w
Mexican plants, and a xeriscaping business.
Santa Ana Agricultural Enterprises sells blue
corn to The Body Shop, Ltd., a London-based
producer of natural-ingredient cosmetics.
"We haven't had difficulties with our traditional judicial system because in the past we
didn't have economic development," said Santa
Ana tribal member Bruce Sanchez. "Some
things never occurred on the reservation until
this century, but now we're moving into the 21st
century, and we need new ways to take care of
things, What we're doing is building a community-a community that's been here for thousands of years-and making it better through
economic development."
Sanchez is chair of the Southern Sandoval
Investments Board of Directors, which is one of
the business corporations of the Santa Ana
Tribe. He is also chairman of the board of the
Pueblo of Santa Ana Gaming Regulatory Commission, and serves as vice-chair of the Indian
Pueblos Federal Development Corporation, the
business arm for a coalition of the 19 pueblos in
New Mexico.
''We've looked for ways to
form partnerships when we
haven't had the money
or the expertise
to do what we wanted to
by ourselves."
in legal matters unless it's a bad situation. This
isn't so much for philosophical or political reasons, it's more just a practical matter. Fifteen or
twenty years ago it wasn't unusual for the
council to get involved, and we learned from
experience that it was just bad business.
"The negative stories from the past keep
echoing, and that's a shame." Little said. "There
are a lot of stories, but the reality is that we
wouldn't be surviving if we weren't doing business on pretty much the same basis as the outside world."
''What we're doing is building a
community... and making it
better through economic
development."
Santa Ana: Wh_y change?
The Santa Ana Pueblo is located 18 miles
north of Albuquerque in Sandoval County. The
pueblo is 85,000+ acres of rolling plains near the
edge of the Sandia Mountains. It includes the
1,400-acre Jemez Reservoir, and the Rio Grande
River runs through the reservation. Between 620
and 680 members live on the pueblo. The government is a traditional tribal theocracy with a contemporary administrative structure. The Tribal
Council, composed of the approximately 168
adult male head-of-household members of the
tribe, handles internal and external affairs of the
tribe. A governor and other officers are appointed
for one-year terms by the Cacique, or religious
holy man. The governor and lieutenant governor
Sanchez is proud of both the historic traditions and the more recent business success of
the Santa Ana Tribe. He doesn't want to change
the basic elements of the tribe's traditional
ways, but he does believe some adjustments
need to be made to the administrative structure
to enable the pueblo to compete in a contemporary business environment. With the tribal
council, he has been working to develop bylaws
and operating procedures that will clarify the
process for decision-making and define lines of
19
Community
Reinvestment
responsibility and accountab ility.
"I hope we can make changes in our judicial
system," Sanchez said. "Now that we have business and economic development opportunities,
we need to have a judicial system that lets people feel confident in investing. Our traditional
tribal court has dealt well with internal issues,
but we need to look at a contemporary court
system with rules that are fair to Indians and
non-Indians alike.
The Santa Ana do not have a constitution,
and have no plans to adopt one. "We take action
through resolutions-which can be changed if
necessary, although that hardly ever happensrather than locking ourselves in with a constitution," Sanchez said. The separate
corporations established in the last 15 years to
manage tribally owned business enterprises
have worked well. The trjbe recently zoned a
district for business, and is considering potential leases with businesses that are compatible
with the tribe's long range plans.
who does. The general managers of our businesses are not tribal members, but they have
the needed business experience. We do have
some tribal members in key positions, and we
hope to eventually have more, but what we
want first is qualified people. It doesn't matter
if they're Indian or not, it matters that they can
take care of the business."
Income from leases for gas and utility rightof-ways and mineral rights for gravel provided
capital to sustain tribal government and undertake initial business enterprises. When gaming
became an option, that income was used to
build and then to expand the casino. Although
the casino is very profitable, there is no
assumption that gaming income will be permanent. Casino profits and other business income
are invested for future returns-back into business, into scholarships for education, or in
building tribal infrastructure that benefits
everyone.
"One of our goals has been for tribal members to be able to come home and work," said
Sanchez. "But we're not saying we'll create a
job for everyone. What we are saying is we11
create businesses to take care of the needs of
the tribe. If tribal members are qualified for
jobs, they will get them-although we don't
intend for employees to be 100 percent Santa
Ana, either. We can't close businesses for our
religious holidays, which could happen if all
''We haven't hidden behind
sovereignty. We've created
businesses and agreed to limited
waivers of sovereignty rights
for them because we know that
in order to conduct business
with other private and public
entities, we have to give
some things up."
"Our first innovative approach to doing business was back in 1709," said Sanchez. "The
Spaniards had taken our land away, and the
Santa Ana people got together their beads,
blankets, pottery-whatever they owned-and
collectively bought it back. More recently, we've
looked for ways to form partnerships when we
haven't had the money or the expertise to do
what we wanted to by ourselves. We've formed
joint ventures, and then have looked for ways to
buy out our partners so that it's a win-win deal
for everybody.
"When we don't have the expertise for a
job," Sanchez continued, "we'll find someone
20
Winter
1997
trator, and with the tribal council, I'm working
to provide a blueprint that others can use in the
future. Whether that blueprint is followed or
changed is irrelevant-it will give people a
place to start."
Sanchez also knows that no matter who is
serving in tribal leadership positions, h will
take time to bring about change. "We may· not
accomplish what we want right away," he said,
"but if we throw seeds in the ground, some will
take root. Our tribal council will discuss the
issues and look at them from every perspective
before they make a decision and that takes
time. A business decision that might take six
months elsewhere may take two years herebut it will be a decision that we believe is most
fair and equitable for everybody.
"Sovereignty is a big issue," said Sanchez.
"It's a word that has different definitions for
many different people, but realistically speaking, tribes only have limited sovereignty. We're
at the mercy of federal legislation. We're
blessed to have people in that forum who are
sympathetic to Native Americans, who have
been able to protect our sovereignty. The Santa
Ana have been politically active, and we use
employees are tribal members. We need diversity.
"Another goal is for everyone to be educated-not necessarily to have a bachelor's or master's degree or Ph.D., but to have qualifications
to do something," said Sanchez. "We want our
businesses to have programs that will help our
people learn whatever needs to be learned.
"Our strategic goal is economic self sufficiency and independence. Partnerships with
outside businesses and people are important,
but they must be entered into from a position of
strength and equality. We want to accumulate
enough capital-our goal is currently $50
"What we want first is qualified
people. It doesn't matter if
they're Indian or not."
million-to generate income that will keep the
tribe from having to depend on non-Indians for
jobs or financing. We want diverse businesses
that will generate that capital.
"One of our strategies is to create a way to
make it easier to get non-tribal financial participation in future projects," Sanchez said. "We're
working with Bill Haltom, an attorney with the
Nordhaus Haltom Taylor Taradash & Frye firm
in Albuquerque, to structure an innovative capital corporation to facilitate investment in tribal
businesses."
Bruce Sanchez grew up on the Santa Ana
pueblo. He earned college degrees in education
and business, then spent 14 years teaching
kindergarten through eighth grade at schools in
Albuquerque, Bernalillo and Los Lunas. When
he was asked if he would be willing to come
work as the aide for the Santa Ana Tribal Government Coordinator "for a couple of years", he
said yes. That was six years ago, and he has
remained since. His personal goal is to help lay
a strong foundation for the tribe's future. 'We
won't know for 10 or 15 years if we've succeeded
in what we're trying to do," he said. "It's like
teaching-you don't see the finished product
until later.
"Two years from now, six months from now,
I may not be the one who's here," said Sanchez.
"I'm building on the legacy of a former adminis-
21
Community
Reinvestment
some of our funds to pay lobbyists who will
make sure our positions are known. We support
candidates for office who will listen to us and
fairly represent not just Santa Ana but a whole
population of Native American people.
"Sovereignty is an every day-and an every
year-fight, but we've played by the rules the
federal government has set. We've done that
with gaming, and we've done it with our other
businesses. We haven't hidden behind sovereignty. We've created businesses and agreed to
limited waivers of sovereignty rights for them
because we know that in order to conduct business with other private and public entities, we
''We're changing because
we see the value of determining
how we're going to move
from here forward."
have to give some things up. We don't impose
our will on others, and we don't want others'
wills simply imposed on us. What we want is to
work in partnership with others.
'We need to create an administrative structure that supports strength," said Sanchez,
"and we have to continue to have leadership
that is competent and able and willing to learn.
However we are structured, we need to be able
to address the concerns of the tribe, whether
they are related to business, government, or
social services to the people.
"We have a history of thousands of years,"
said Sanchez, "and we have been able to sustain
ourselves because the whole tribe works together to accomplish our goals. As we plan for the
next 20 or 30 or 50 years, we're looking at how
we can continue to build our community. We're
changing because we see the value of determining how we're going to move from here forward."
family-owned picture frame and molding company.
The business operated in the Mexican town
of Palomas, just south of the U.S. New Mexico
border, from 1976 to early 1997. The business
was initially located in Palomas in response to
Palomas ... badly needs
economic development, but
. .. an array of barriers
makes development difficult.
incentives offered by the government-but
many of those incentives failed to materialize.
Gonzalez believes that policies that may have
been intended to help workers have instead
hamstrung both workers and employers.
The Gonzalez family scaled back operations
in Palomas in 1992 in response to market
changes, and opened a second plant one-fourth
mile north in Columbus, New Mexico. Then in
January of this year, the plant in Palomas was
closed. "Our competitors in Taiwan and China
could produce similar products at a lower cost,"
Gonzalez said. 'We need raw materials at a
Business on the Border.
Less than 300 miles south of the Laguna,
Pojoaque and Santa Ana Pueblos of New Mexico, business owner Lourdes Gonzalez contends
with some sovereignty issues that are similar to
those the tribes face. Both sides of the Mexican.American border are familiar territory for the
22
Winter
good price, reasonable labor costs, and satisfactory access to markets for our finished products.
Mexican laws were making that difficult.
1997
population of 10,000 people, badly needs economic development, but that an array of barriers makes development difficult. In the Mexican
Revolution of 1910-20, land was taken from rich
property owners in an effort to more equally
distribute wealth, and most of that land continues to be held by the government. Requirements to ensure that dollars from export
businesses remain in the country added to the
difficulty of doing business in Palomas.
The lack of individual ownership of the land,
as in lndian Coru1try, makes busiuess financing
more difficult. "Working capHal is especially
hard to find," said Gonzalez, "and banks want
90 or 100 percent government guarantees on
the loans they do make."
The Gonzalez business in Columbus, New
Mexico continues to do well. However, most
employees of Concepts in Wood live across the
''Doing business in Mexico
can be difficult, but there are
also advantages ....
In the United States, the rules
and regulations are more
consistent....you know what
you can expect."
"We could no longer make a profit with the
business," said Gonzalez, "but we also couldn't
afford to shut down. Labor laws in the United
States are nothing in comparison to labor laws
in Mexico. There, a worker is like your adopted
child. The law requires that when a business in
Mexico closes, we pay all employees three
months' wages, plus twenty days severance pay
and twelve days' wages for every year they have
worked for the company. We couldn't do it."
Instead, employees were given ownership of
the building. They subsequently sold it at a discount to a potential chili processing business
that promised jobs, but the owner had inadequate capital and the business never opened.
"Everybody lost," said Gonzalez.
Gonzalez said the town of Palomas, with its
"I can tell you from experience
that the kinds of laws
different countries have
certainly have an impact on
people's businesses and jobs!"
border in Mexico and commute daily to their
jobs in New Mexico.
"New U.S. immigration laws will make it
difficult for many people to continue to work in
23
Comm u ni t y
Rei n ves t ment
works better for us to have a separate business
on each side of the border. I can tell you from
experience that the kinds of laws different
countries have certainly have an impact on people's businesses and jobs!" □
the United States while living in Mexico," said
Gonzalez.
"Doing business in either Columbus or Palomas can be difficult, but there are advantages
to the locations," she said. Both are designated
ports of entry, which gives us easy access to
markets. "They don't have the traffic congestion
of other ports, yet they have convenient access
to interstate highways in the U.S. and Mexico.
"In the United States, the rules and regulations are more consistent," said Gonzalez. "I
think the state of New Mexico should provide
more support and incentives for entrepreneurs,
but at least there is some stability and you
know what you can expect."
The residents of Palomas are not in a position to assume responsibilities and make some
of the kinds of decisions for their community
that Stephen Cornell's research has indicated
are essential to being able to use sovereignty as
a tool for economic development.
"Having one business, either in the United
States cir in Mexico, would be easier," said Gonzalez. "But with the laws the way they are, it
AFTERWORD
Sovereignty
and Nation-building
f} e were struck by both the similarities and
O
~ the differences posed by the nature of
sovereignty in the four places we visited
for this issue of Community Reinvestment.
We found people with different perspectives and
different situations who have all found ways to
overcome the barriers and build on the opportunities of sovereignty.
On the Laguna, Pojoaque and Santa Ana
Pueblos, tribal members are making decisions
about how business will be done within their
boundaries. They define their goals in terms of
building capital, providing jobs, or establishing
independence, with a shared assumption that
they can and should determine their own
futures.
They have all negotiated legal solutions for
the barriers non-Indians may perceive with
their sovereign status. They've worked out leases on lands held in trust and granted limited
waivers of sovereign immunity for business.
They have all established corporations to handle business matters separately from political
matters. They have judicial systems that are
functionally separate from politics, or they are
working on ways to formalize that separation so
that businesses will be reassured about a fair
judicial process. Their governmental organization is consistent with the beliefs of tribal members about leadership.
The tribes have all worked with partnersto learn from people with expertise, to expand
their options for the kinds of business they can
do, and to give them diversity in viewpoint and
in their workforce. All encourage education. All
24
Winte r
reinvest most of their income, rather than disbursing it to individual tribal members.
The tribes all have a tradition of community
ownership and community benefit, rather than
individual business or profit. Except for arts and
crafts businesses, the pueblos had few
businesses owned by individual Indians. While
there was some support of the idea of more individually owned businesses, it isn't a priority, and
most individuals do not have start-up money or
property that can be used as collateral.
The story we heard about doing business on
both sides of the U.S.-Mexico border reflected
concerns similar to those of the pueblos. In
Mexico, too, the government's ownership of land
makes it difficult for businesses to borrow
1997
RESOURCES
Easing the Way
for Doing Business:
A Model Tribal Code
~ Jommercial codes simplify and clarify how
W business will be done inside the bound-
aries of a reservation or a state. They promote expansion of commercial practices. They
specify how routine business matters will be
handled, saving time and energy that can be
used to focus on working out unique aspects of
a business transaction. They reassure people
that a system is in place to address business
issues or problems that may come up.
Codes are a tool that sovereign nations and
states can use to encourage economic development. In the United States, state codes do not
apply in Indian Country unless tribes adopt
them. Tribes may do that, they may develop
and adopt codes of their own, or they may work
out agreements each time they enter into a
business transaction.
Until recently, since little business was done
on reservations, there was little need for commercial codes. Some tribes have adopted some
Nation-building is a process
of creating the future [ tribes]
want for their people.
money, and the uncertainty about the rules and
their enforcement impair investment and add to
the cost of doing business. Unpredictability is
frustrating. Incentives are an attraction-but
leave a bitter taste when promises are not fulfilled.
Although communities such as Palomas in
Mexico can often find ways to incorporate mandated policies into their own approach to doing
business, contending with policies that do not
fit local culture and customs is a barrier to
doing business for people and communities
around the globe.
At the Laguna, Pojoaque and Santa Ana
Pueblos the tribes are, in Stephen Cornell's
words, in the process of nation-building. A
strong sense of personal and tribal values has
allowed them to leverage their strengths and
their sovereignty to their economic advantage.
They don't have a formula for doing it and
they're not all doing it the same way. For all of
them, however, sovereignty is a tool they are
using to do business, and nation-building is a
process of creating the future they want for
their people. □
Codes are a tool that
sovereign nations and states
can use to encourage
economic development.
types of commercial codes, but most do not have
a comprehensive set of codes. Business activity
in Indian Country has been increasing, however,
and with different rules applying to each of the
more than 550 federally recognized tribes in the
United States, both individuals and companies
can find the cultural and legal barriers to doing
business in Indian Country daunting.
The Montana-Wyoming Tribal Leaders
Council and Gerald Sherman, an Oglala Lakota
banker with First Interstate BancSystem of
25
Community
Reinvestment
Montana and Wyoming, discussed this problem
and decided to do something about it. With the
support and involvement of the Federal Reserve
Banks of Kansas City and Minneapolis, the
University of Montana Indian Law Clinic, and
many others, they initiated a process to develop
a model tribal code. A conference was held in
April, 1997 to discuss the code and tribal-bank
relationships and sovereignty issues, with a
diverse mixture of tribal leaders, lenders and
resource people participating.
Model Tribal Code: Secured Transactions was developed by the Indian Law Clinic
at the University of Montana-Missoula School
of Law, with participation by Montana and
Wyoming tribes, lenders and others. It is available for tribal governments to use as they
develop their own commercial codes. The Model
Tribal Code is consistent with the new format
for secured transactions that has been proposed
by the National Conference of Commissioners
on Uniform State Laws, and includes cross references to that format.
Copies of the model code are available from
the Indian Law Clinic at the University of Montana-Missoula (see resource listing following). □
Codes are especially
useful when people from
different cultures ...
do business with one another.
RESOURCE MATERIALS
The code is designed to be used as a model
by tribal governments in developing their own
commercial codes, with modifications to fit their
own tradition and culture. Once adopted, a code
can provide shortcuts for doing business by
establishing "boilerplate" ways to deal with situations that often arise in business transactions. The model includes definitions of terms,
and outlines procedures for doing business
within a jurisdiction. It establishes guidelines
for extending credit, clarifying the extent of liability, and establishing jurisdiction. It specifies
what to do if there is a dispute.
Codes are especially useful when people
from different cultures-who are likely to make
different assumptions about common issues-do
business with one another. Rather than working out the specific details for every transaction,
or figuring out what to do when what was
expected doesn't happen, codes provide a previously agreed upon, legally enforceable way to
proceed.
Separate business contracts can further
specify additions or changes appropriate for a
particular deal. With clear, enforceable commercial codes in place, tribal members and nonIndians alike can more easily do business on a
reservation. Standard codes that have core similarities to the codes used by other tribes and by
state governments can make it even simpler to
do business on reservations.
A Guide to Mortgage Lending in Indian
Country. A booklet with sections on operating in Indian Country, the residential
mortgage lending process, types of mortgage loan programs and compliance
issues. July 1997, 4 7 pages. Available
on the Internet at http://www.occ.
treas.gov/events/indian.htm or by
sending a written request with a check
for $15 to: Comptroller of the Currency,
P.O. Box 70004, Chicago, IL 60673-0004.
"Banking in Indian Country-Expanding
the Horizons." Summary of presentations
from joint conference sponsored by the
U.S. Department of Justice's Office of
Tribal Justice and the Office of the Comptroller of the Currency (OCC), held in
Washington, D.C. in July, 1997.
Topics include bankers' perspective,
community issues, home mortgage lending, acquiring/chartering tribally owned
financial institutions, legislative perspective, and reaching the nonbanked in
Indian Country. Available on the Internet
at http://www.occ.treas.gov/events
/indian.htm. Handout materials from the
Banking in Indian Country conference are
available by contacting the OCC's Public
Reading Room at (202) 874-5043.
26
Winter
Capital Decisions: Native America and the
Community Reinvestment Act. A manual
providing information about banking, the
Community Reinvestment Act, Indian
Country experiences with CRA, and
resources. June 1997, 76 pages.
Available for $10 from the First Nations
Development Institute, The Stores
Building, 11917 Main Street, Fredericksburg, VA 22408, (540) 371-5615,
fndi@firstnations.org.
1997
video and accompanying manual are
available for $135 from the Federal
Reserve Bank of Minneapolis, 90 East
Hennepin, P. 0. Box 291, Minneapolis,
MN 55480-0291, (612) 204-5060.
Model Tribal Code: Secured Transactions.
(third draft)-A model tribal code including security agreements, perfection of
security interests, rights of third parties,
filing, default, and judicial procedure.
Also includes a cross reference guide to
the new format for Article 9-Secured
Transactions as proposed by the National
Conference of Commissioners on Uniform
State Laws. Prepared by the Indian Law
Clinic of the University of Montana. April
1997, 61 pages. Available for $10 from
the Indian Law Clinic, School of Law,
University of Montana-Missoula,
Missoula, MT 59812, or on the Internet
at http://www.umt.edu/law/library/
lawbysub/nativeam.htm.
Doing the Undoable Deal: A Resource
Guide to Financing Housing and Economic
Development. Selected federal enhancement
programs to help find resources for business and housing without having to memorize all of the programs. Summer 1996,
80 pages. Available on the Internet at
http://www.kc.frb.org/publicat/
commrein/s96main.htm or contact the
Federal Reserve Bank of Kansas City,
(800) 333-1010 ext. 2687.
Harvard Project on American Indian
Economic Development. A list of working
papers on research and economic development in Indian Country, by Stephen Cornell and Joseph P. Kalt. Available through
the Malcom Wiener Center for Social Policy, John F. Kennedy School of Government, Harvard University, 79 JFK Street,
Cambridge, MA 02138, (617) 495-1338, or
on the Internet at http://ksgwww.harvard.edu/socpol/wpamind.htm.
Tribal Sovereignty Handbook. Provides
information about the current scope of
tribal sovereignty. Topics include
self-governance, regulatory and adjudicatory jurisdiction, taxation, natural
resource development, and doing business
in Indian Country, with relevant case law
and statutory citations. Winter 1997, 108
pages. Available as a work in progress
from the Indian Law Clinic, School of
Law, The University ofMontana-Missonla, Missoula, MT 59812. Contact
Maylinn Smith, Director, at (406) 243-6480
regarding cost and further information.
Lending in Indian Country: Cultural,
Legal and Business Issues. Explores issues
related to doing business in Indian Country, with sections on economic development, banking, successful projects and
communication. Winter 1994, 28 pages.
Contact Federal Reserve Bank of Kansas
City, (800) 333-1010, ext. 2687.
What Can Tribes Do? Strategies and
Institutions in American Indian Economic
Development, edited by Stephen Cornell
and Joseph Kalt. Examines different economic strategies and outcomes designed
to promote self-determined economic
development based on tribes' own criteria.
Available for $15 plus shipping from the
Publications Unit, American Indian Studies Center, University of California-Los
Angeles, 405 Hilgard Avenue, Los Angeles, CA 90024-1548, Fax (310) 206-7060,
Lending in Indian Country: Cultural
and Legal Issues. A five-part video series of
a seminar that explOl'es cultural differences, land and title issues, tribal powers,
sovereign immunity, tribal courts, collateral, remedies, and other issues relevant
to doing business in Indian Country. The
27
Winter
1997
f
•• ••
-'••
"Sovereignty and freedom have no meaning
apart from the ability to make informed choices."
twice a year by the Community .Affairs
Deparlmen t of the }'eden] Heaerve Bonk of
John A. Wood
Kansas City, 925 Grand Boulevard, Kansas
City, Missouo-i 64I9S-0001, (800) 333-1010
Comnmnity Affairs Officer
(website), sharon.m.blevins@ko.frb.org (comments 1(1 the edi t.or ).
l"ree subscriptions and additional copies are
available upon reque,l, Material may be
i-eprin ted or abstracted provided
Comm:u.n.ify Ju.in.vll!'a-tnM!'nt is cr-edli2d.
Plea.:!!ie provid~ the Community Affairs
Department with a cupy of any publira!ion
in which mal<rial is reprinted. The views
expre-1u;ed ATe not nE!C'=!ssarily thOEiB of the
Federal Reserve Bank al' Kansas City or the
Federal lleserve System.
28
••
Co.,,munily Re;n~e.,nwnt is published
Ext. 2867 (phone), 8!6-881-2135 (fax),
h ttpJ/www.kc .frb, or,:/com affi-,,/ca main.h tm
- Frank Pommersheim
Braid of Feathers, 1995
'
Larry G. Meeker
Vice President and
Direc!.or of Community Affa.ira
Volume 5 Number Z-Win te:r 1997
SOMEONE SAID ...
•
• •
~ ~is L..tmt
Vice President and
S harnn M Blevins
Editor and
Community Affairs Coordinator
Phologr~ phs:
Larry Me-ekE!T' an<l Sharon Blevins
@FedFRASER