The current relative stability, the growing importance in the region for the world economy, along with the wealth of opportunities for impact make LatAm an intriguing and attractive region for philanthropic investments.
Once virtually non-existent, LatAm’s philanthropic infrastructure is emerging with a lot of possibilities for growth. In Mexico, 19 community foundations or very similar organizations have been founded in recent decades (Hispanics in Philanthropy).
In Brazil, quite possibly the most innovative country in LatAm in terms of socially responsible corporate organizations, the number of foundations grew by 157% among 1996 and 2002. The quantity of institutions is established to steadily expand all over LatAm because the social focus results in being increasingly crucial with the large business sector (Fernando Rossetti, secretary of Grupo de Institutos, Fundaciones y Empresas Brasil – GIFE).
Profile in the UHNWI philanthropist in LA
There are an estimated 300,000 HNwIs in Latin America with a total fiscal asset wealth of USD6.2 billion as of 2007 – a staggering 20.4% leap from a total of USD4.2 billion in 2005. The surge in unexpected wealth is mainly linked to higher world wide commodity and oil charges. (Capgemini-Merrill Lynch 2008 World Wealth Report)
However, with philanthropic giving by wealthy Latin Americans well beneath their counterparts in other regions on the world – just 3% of fiscal assets donated compared to 12% by Asian HNWIs, 8% by Middle Eastern HNWIs; 8% by US HNWIs; and 5% European HNWIs. (Capgemini-Merrill Lynch 2007 World Wealth Report)
Interestingly enough, LatAm was also the region with the highest global concentration of Ultra-HNWIs previous calendar year. All around 2.5% (9,600) of HNWIs during the region ended up ultra-rich in 2007, compared to 2% in Africa and one.1% within the Middle East. (C-ML WW Report 2007) Several of those consist of “first generation revenue clients” with much larger portfolios than in established markets – a new segment for which competence is highly significant. *
The countries that generated by far the most HNWI wealth in the region last yr were Brazil, Venezuela and Chile. (Ileana Van Der Linde for Capgemini in an interview with Andres Oppenheimer, El Nuevo Herald 18/08/08)
Although these figures stage to an alarming socio-economic trend of severe economic disparity in LatAm, local analysts have cast doubt upon their accuracy. The rich in LatAm are known to create donations confidentially, in a very bid to steer clear of excessive publicity that may expose themselves or their loved ones to kidnapping and/or extorsion schemes which are popular in LatAm, they may have pointed out. (Oppenheimer, El Nuevo Herald 18/08/08)
Education, Public Health and Food Distribution tend to be the areas that receive one of the most backing by both equally philanthropic individuals and institutions in LatAm. (Anne Veneman Unicef executive director, La Nacion, 19/04/08)
The UHNWI Philanthropist on the whole
UHNWIs across the world account for 1% with the total HNWI population (about 95,000 people today total) and about a third of its fiscal wealth, and are generally better informed, extra sophisticated and aggressive than other HNWI investors in relation to managing their assets. A segment produced up of “thought leaders,” their behaviors and attitudes about wealth management established trends for HNWIs and financial institutions everywhere. (C-ML WW Report 2006)
In regards to philanthropic supplying, they generally donate nearly twice as a great deal of their wealth to charitable causes than HNWIs and take up an extremely active role in managing and monitoring for optimal social results. For an UHNWI, they strategy their philanthropic investments in substantially a similar way as their conventional investments.
In recent several years as well as in regards to LatAm specifically, UHNWI are aggressively directing a higher share of its assets into a greater variety of emerging markets, such as LatAm, absent from North America. This trend among UHNWIs indicates HNWIs for a whole are relocating funds outside of mature economies, such as the United States, and into attractive growth economies in other pieces in the world. (C-ML WW Report 2006)
Structural Challenges in Providing
What is holding LatAm back again in terms of UHNWI-based Philanthropic Giving is definitely the absence of the well-developed culture of charitable providing, say the experts.
Wojtek Sokolowski, a researcher from your Johns Hopkins University Center for Civil Culture Studies in charge of compiling a comparative list of donations in 36 countries, said perceived social status is what differs among LatAm and first-world countries with higher philanthropic offering percentages.
“In the US, the additional a millionaire donates, the greater social status they receive. Inside of a good deal of Latin American countries, donations usually are not a symbol of social status,” he said.
As a final result, institutionalised charitable giving in LatAm is restricted only to individuals who are bold, daring and/or with the wealthiest UHNWI-and-above bracket.
Billionaire Mexican businessman Carlos Slim, for instance, has drawn unprecedented media attention on the role of philanthropy with his massive contributions while in the final two years but it truly is free-thinking UHNWIs like Mexico’s leading social entrepreneur and cosmetics business magnate Jose Ignacio Avalos Hernandez, who has founded several well-developed charitable business-managed institutions within the previous 25 yrs, that LatAm requirements more of to ensure the rich may perhaps abide by, note observers.
A most important obstacle for the correct development of charitable family foundations plus the like has been a basic historical monetary instability from the region which has both prevented the UHNWI segment from building philanthropic plans in the long-run and from recognising that these institutions can contribute to success for an UHNWI’s other business ventures. (Mario Kreutzberger, president of Chile’s Teleton Foundation)
Observers also cite blatantly unsupportive tax and inheritance laws compared for the US and Europe as well as the fact which the families of rich Latin Americans are typically a lot more various – a fact that often persuades fortune holders to donate less to charity. (Oppenheimer)
Estate laws in LatAm reflect this reality in effectively restricting the flexibility of the wealthy to allocate revenue other than to heirs. However, tax laws usually are slowly modifying throughout the region to provide incentives for philanthropy. (Susan Raymond, Ph.D., a Senior Managing Director of Modifying Our World, Inc. a leading philanthropic consulting company – “Philanthropy in Latin America”)
“As an incentive, we are exempt from capital gains taxes and from social security matching with the 2,600 employees on the foundation,” said Jefferson Romon, administrative and fiscal manager for Brazil’s Fundacion Bradesco, who added that there are actually bills in Congress to increase them.
According to Eduardo Pannunzio, a legal advisor to Brazil’s Grupo de Institutos, Fundaciones y Empresas (GIFE), charitable entities can deduct 100% of their donations to cultural projects, approximately 4% of taxes on earnings owed to the government. Exactly the same incentives, on the other hand, usually are not out there for donations to educational or environmental projects.
“In Argentina, charitable entities can only deduct approximately 5% of earnings in just 4 spots, amongst which is to again political foundations,” commented Enrique Valiente Noailles, president of Grupo de Fundaciones de la Argentina (GDF). “We estimate that the annual volume of donations while in the place is USD10 million. It is a drop within the bucket, but if there were extra incentives it would increase appreciably.”(“The new philanthropy: Latin America Inc. turns to foundations being a strategy for serving social ends” Latin Trade. January 2007)
Other challenges include the region’s governmental penchant for bureaucracy and the deficiency of regulation for family offices that would assure potential philanthropic investors the long-term security of their investments. (Mariano Sardás, president of FDI – Monetary Layout Intercontinental, in INFOBAE short article “Cada vez hay más “family offices” 07/04/08)
The increase in philanthropic institutions in Brazil, particularly, has inspired the government to phase up controls on the sector. Organisations you’ll find newly required to disclose their sources of financing, list executives, and provide a breakdown of their plans and areas of operations in addition to be a host of supporting documentation on pain of closure or, if foreign, of expulsion from Brazil.
While campaigners criticise the move as one that discourages and burdens the mushrooming movement with additional bureaucracy, the fact that the government is pushing for legitimacy and fiscal accountability has been applauded by a quantity of stakeholders. (“Brazil increases scrutiny of NGOs” Alliance Magazine. 15/08/08)
The Alternative Latin Investor staff is comprised of finance and journalism professionals who develop articles through a system of investigate, info gathering, and industry interviews in an effort to supply unique content regarding alternative asset investment within the Latin American region.