Global Compact International Yearbook 2012

Agenda
CSR in Latin America
ducing poverty. In general, one can identify three channels
for raising people out of poverty: enterprise, distribution, and
government revenue. These channels are inter-dependent
and, as shown below, each presents important challenges
in ensuring that they yield the desired benefits in terms of
poverty reduction.
Enterprise channel: Companies create employment. A job in
the formal sector is often the passport to improve the social
lives of those in the community. It gives employees and their
families access to health services, among other benefits, and
offers training that is linked to their new jobs. At the same
time, foreign (and local) direct investment increases demand
for products and services from local suppliers. However, many
of the foreign multinationals arrived in Latin America during
the privatization program of the 1990s in the service sector.
State-owned telecom, electricity, airline, and water companies
changed ownership. As soon as the private, foreign, or local
company took over, redundant employees were fired. Since
the 1990s many of the foreign companies, in fact, destroyed
more jobs than they created.
Distribution channel: C. K. Prahalad, with his concept of the
fortune at the bottom of the pyramid, highlighted for the first
time the enormous potential of the poor as consumers. One of
the unique characteristics of emerging-market multinationals
is their ability to offer successful products and services to
those four billion people in the world who live on less than
$2 per day. Banco Bradesco launched a service in Brazil for
those without bank accounts, allowing them to make financial
transactions through their mobile phones. The Mexican-based
mobile company América Móvil has based its success on
understanding the mobile phone needs of the lower-income
population. The early expansion of prepaid cards is one of the
reasons for the higher mobile penetration in Latin America,
with respect to other emerging markets.
Government channel: Governments can act as redistributors of
wealth through the distribution of tax revenues. The government
revenue channel’s efficiency depends on the ability of
the government to collect taxes and on how they invest them.
However, global competition between different parts of the
world has obliged governments to take special measures to
attract foreign direct investment. To compete, different governments
offer a range of perks, including free import and
export of products, tax exemptions for a couple of years, and
often free land. Capital is usually allowed to move freely and
multinationals – local and foreign – have the ability to allocate
capital efficiently and minimize their tax burdens. These
mechanisms to reduce corporate taxation can be damaging
to emerging markets with small tax revenue bases. The 2007
Latin Economic Outlook of the OECD Development Centre
states that the extreme inequality in the region could also be
alleviated through the redistribution of taxes.
The moral case
Latin American multinationals from Mexico to Brazil feel the
need to engage with their communities and societies. Thus, it is
not surprising that we can find a number of local multinationals
where ethical values have been integrated into business strategies.
The Mexican company Bimbo is well known for its policy of
avoiding layoffs, even in times of crisis, and for introducing
various incentives to strengthen loyalty and build the notion
of common interest among its staff.
The same goes for the Brazilian cosmetic company Natura
Cosméticos, an ecological brand. The company is based on an
environmental concept in which its products are created through
the sustainable use of natural products sourced from the Amazon
rainforest by poor indigenous communities. Its business model
has improved the lives of about 1.1 million Brazilian women and
more than 200,000 in other countries working in direct sales.
The company, which does not do animal testing, considers that
responsible practices form a part of the company’s everyday
operations, from production to its business relationships.
The restaurant chain Astrid and Gastón represent another
example of the implementation of CSR. The founders, Astrid
and Gastón Acurio, see their chain of restaurants as being
intimately related to the improvement of Peruvian lives. They
want Peruvians to rediscover the value of their unique local
agricultural products and, through them, improve the image
of Peru, a country that has suffered a lot from bad press
internationally. They also opened the Instituto Culinario
Pachacútec, named after the shantytown where it is located.
The institute accepted 30 students from 700 applicants last
year. The school is free and financed by donations.
The business case
Many companies in the world have, at times, been accused
of using social initiatives as a public relations exercise to improve
their images. However, social programs do help to move
companies to the next stage of success and to better integrate
them with the concerns of the societies in which they operate.
Quality of education is seen as one of the main challenges
for Latin America to attain the next stage of development.
Companies that help to improve the level of education of their
employees, as well as their employability, provide long-term
benefits to those who set up specific programs. For example,
the biggest Brazilian private bank, Banco Itaú-Unibanco, has
made education projects the priority of its social policies.
Through their educational program Raizes e Asas (Roots
and Wings), the bank invests $12,000 per student. The Inter-
American Development Bank has launched an employability
program Entra 21 with the International Youth Foundation
and partners from the private sector. Enova in México designs,
builds, and operates more than 42 small educational centers
(Red de Innovación y Aprendizaje, Learning and Education
Network) for low-income urban communities.
Some companies such as the Mexican building materials company
Cemex are able to address the moral concerns and help the
entrepreneurship spirit of the poorest segments of the population.
In 2000 Cemex launched Patrimonio Hoy (Patrimony Today).
The initiative offers microcredit to help low-income families to
improve their houses; Cemex employees offer free advice; and
the company provides fixed-price building materials. Almost
265,000 families have received a total of $135 million in loans
in Mexico, Colombia, and other Latin American countries.
Brazilian oil producer Petrobras has committed to a wide
variety of development schemes, showing that long-term
involvement in CSR can also lead to long-term benefits. The
company states that they have to create a policy “which brings
socio-environmental results to society, aggregating social
technologies. ”Petrobras adds, “in developing countries, if we
want to make a difference we must go further from what the
law demands.” The company collaborates with UNICEF and
22 companies in Latin America and the Caribbean to focus
on children’s education. Petrobras has been a participant of
the Global Compact since 2003 and is part of the Dow Jones
Sustainability initiative and the Brazilian Business Council for
Sustainable Development. As one of the 10 biggest companies
in the world by market capitalization, Petrobras has adopted
CSR as an integral part of its mission and business strategy.
A “New Deal” against poverty?
A number of Latin American governments have launched
public policy programs to tackle poverty. These programs have
also served as catalysts to involve firms from the private sector.
A good example is Fome Zero (Zero Hunger), which includes
various programs such as Bolsa Família (Family Allowance),
which was launched in 2003 and reaches about 12.7 million
families with incomes of $70 per month. Each family receives
about $17 a month per child attending school. According to
the World Bank, 75 percent of Brazilian families in the bottom
20 percent income group are receiving Bolsa transfers. Brazil
is exporting its know-how to other developing countries such
as India and even New York, which copied its conditional cash
transfer program. In 2010, the total budget of the program
reached $6 billion. The program, the biggest of its kind in
the world, also encourages the participation of civil society
for monitoring and evaluating the efficiency of the programs.
The private sector is also supporting this initiative. Mexico has
a similar (and older) program, called Oportunidades.
However, poverty reduction has not been part of the traditional
commitments of multinationals to the society in which
they operate. Even the Global Compact – which was created
in 2000 by the United Nations and has 8,000 participating
companies, unions, NGOs, and governments from all over
the world – does not consider the social concerns of emerging
markets such as poverty alleviation and social inclusion.
Moving forward to a better society
Corporate scandals in the United States and Europe and the
economic crisis have put companies under increasing media
scrutiny and resulted in public distrust.
Various countries have widely benefited from consensus-based
reform initiatives. In Europe, the 1978 Moncloa Pact was
a turning-point in the history of post-Franco Spain. It was
prompted by the country’s economic turmoil after the 1974
oil crisis. The government, unions, political parties, businesses,
and civil society came to a consensus on the way forward for
the country’s transition toward democracy and prosperity.
There needs to be a broad Moncloa-style consensus on the
future of social responsibility in Latin America. Business and
the private sector should endeavor to make growth more equitable.
The need for the private and public sectors as well as
civil society to work together in Latin America is more urgent
than ever. The Rio+20 meeting provides an excellent occasion
for this commitment for a better society.
Dr. Lourdes Casanova is specialized in
international business with a focus on
Latin America and emerging market
multinationals. She is responsible at
INSEAD of the Goldman Sachs 10,000
women initiative and co-leading InnovaLatino,
an OECD/INSEAD research
project funded by Fundación Telefónica.
She is member of the task force “ICT &
Innovation” for the B20 summit.
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