Giving for beginners: real philanthropy—not simply charity—is in its infancy in Latin America. But that's changing fast

Latin Trade, Jan, 2005 by Greg Brown

Charity has always existed in Latin America, say experts in the fundraising field. What has not really existed is true philanthropy--complex, organized giving on a major scale, aimed at changing outcomes. Organizations which track giving in Latin American identify a few dozen major charities in the region, most of them tied to major national banks or traditional heavy industries or the families behind those institutions.

In comparison, U.S. charities aimed at Latin America alone fill out a list several times longer, and they give away hundreds of millions more dollars. The most comprehensive study of the subject, several years out of date, suggests that Latin America's rich give away only a fraction of 1% of their money.

That's because the financial incentive to give is limited for corporations in the region, and even more limited for wealthy individuals. The boom in corporate social responsibility--which is only in part driven by donations to charity or by grants for project financing--is very new. Another wrinkle, particularly among young donors, is the Internet, which provides a wealth of information to expatriate workers on how to reach out to charities back home.

Take the Brazil Foundation. The four-year-old New York institution channels money to projects from international donors, mostly Brazilians in the United States who have a tax incentive to give. It's first year, the foundation raised US$30,000 and took in 72 proposals from five states in Brazil. This past year it raised $220,000 from donors and got 1,078 proposals, coming from every state in the country. It has funded 49 projects since its inception and, counting donor-advised funds, has directed $2.3 million to date.

Impressive, but miniscule in comparison to the activities of a Ford or Kellogg Foundation. Nevertheless, the foundation is making a big impact, says Brazil Foundation Founder, President and CEO Leona Forman. "You won't believe how far $10,000 will go and what a difference that makes in some people's lives," says Forman.

A chemistry professor in Ceara, for example, noticed that no kids from a certain poor village ever showed up at the university. So he sat them under a tree and began teaching the entrance exam. Four kids came. Two passed the test and two failed, but four more showed up after that, and now the professor, backed by a Brazil Foundation grant, is working with 120 potential college students, while 40 more are now at the university.

Kids in Rio teach their peers about caring for the health of their blood. A wheelchair-bound woman in Minas Gerais provides job training to other disabled job seekers. And in Silo Paulo, an Afro-Brazilian lawyer trains women in poor satellite communities of the city to understand the laws that affect them, such as marriage and inheritance law. Four of the 36 graduates of the initial program later were given a chance to for really study law. "It was just extraordinary to see how a little bit opened up the lives of these women," Forman says.

The idea of philanthropy is growing, says Forman. "We get calls all the time from Venezuela, Argentina, Peru on how do you do this," she says.

So why such a lag, in dollar terms, in Latin America? In many countries, charitable giving is less understood because the institutions most likely to seek funds--cultural and social groups like orchestras or housing agencies--are government-run, say financial experts. That leads to significant skepticism among potential donors that their money will be handled correctly.

As a result, there's really no mechanism in Latin America for philanthropic giving. In addition, the relatively small number and size of personal fortunes in Latin America, so far, has meant there's not yet enough pressure in the market to change law and develop those mechanisms in the region. "Most of them haven't had enough money to figure it out," says Diane de Vries Ashley, senior vice president and market executive for the Americas at Bank of America. "It's not necessarily a negative, it's a vacuum."

As a result, many Latin Americans, if they give, end up donating to U.S. universities where they studied, says de Vries Ashley. They are fond of the institutions, of course, but it's also because the universities are very good at accepting money. "I'm on the international advisory board of the University of Miami and its comprised almost entirely of alums, most of whom are international," she says.

Where big money is being spent on social and cultural ends in the region is among the major corporations. Many have assets, business and equity in the United States, and as a result have established accounting standards to meet U.S. market requirements. In the same vein, they have set up foundations, in part for tax purposes, but also to meet corporate social responsibility goals.

Major banks in Brazil and Mexico have created foundations, and they often channel money toward specific national problems that governments seem unable to fully address: poverty, education and aid for the elderly. "Interestingly, in some respects, the medium-sized companies are apt to be the biggest givers, because there's more ownership control and it can be more directed," says de Vries Ashley.