The Future of Philanthropy in Brazil: Creating a More Diverse Sector
By Candace A. Lessa and Fernando Rossetti
December 2005

 


This article was first published in the December 2005 issue of Alliance.

Fernando Rossetti is Secretary General of the Group of Institutes, Foundations and Enterprises (GIFE) in Brazil and a Synergos Senior Fellow.
 
Candace "Cindy" Lessa is Country Director, Brazil, of The Synergos Institute.

Great changes have taken place in Brazilian philanthropy -- or private social investment, as it has recently come to be called in Brazil -- since the establishment of democracy in the mid 1980s. It may be that we are on the road to the kind of philanthropy -- one that has the capacity to promote transformative change -- that we would like to see in 2025, but it is still some way off. On the way, we will need to move beyond the present corporate dominance of Brazilian philanthropy and create a more favorable legal and fiscal environment. Unleashing the potential of individual and family philanthropy will be crucial if the new resources that are needed are to be found.

The challenges faced by Brazil mean that there is an overwhelming need to strengthen the transformative capacity of the nonprofit sector, and specifically the philanthropic sector. Brazil is the largest, richest, and most populous country in Latin America, with a population of 175 million people and a gross national product of US$452.4 billion. But it is also a place of supremely unequal wealth distribution, where 10% of the population possesses 50 per cent of the country's revenue and the 50% poorest possesses only 10%. This central challenge makes demands on all of society today, but perhaps most of all on the philanthropic sector because of its capacity to convene actors of change and sponsor change.

The History of Brazilian Philanthropy

The history of Brazilian philanthropy is very closely linked with the Catholic Church. It dates from the colonial period when lay Catholic societies, confrarias (brotherhoods), established voluntary organizations such as hospitals, orphanages and asylums, supported by endowments and donations. Around the time of Brazilian independence from Portugal in the late nineteenth century, new types of volunteer, service-providing, mutual aid organizations emerged. Some of these were professional, scientific associations as well as labor organizations and networks.


Looking Forward to 2025

Looking forward to 2025, we see several types of philanthropic organization, operating and grantmaking, coexisting, learning from each other in national and international sector networks and participating in public debates and social forums. Philanthropic/private social investment organizations have foreseeable long-term resources to sustain them. They have increased capacity to mobilize and disburse local resources. There is a predominance of grantmakers investing in strategic social change organizations as opposed to the present dominance of organizations that operate their own social programs. Philanthropic/private social investment organizations and networks keep their ear to the ground, listening to key actors of social change. Their sensitivity derives from the diverse set of stakeholders involved in philanthropic practice: donors, practitioners, grantees (grassroots organizations, social entrepreneurs), social movements and partners in multi-sector alliances and pacts.

The concept of philanthropy/private social investment has lost the negative image it once had. It is clearly understood as a specific sector within civil society, different from corporate social responsibility and from social movement NGOs. There are many different types of organization, reflecting their different genesis, stakeholders and values. The increased stability and longevity of social investment organizations allow for more flexibility, risk-taking and innovation in investment as well as greater investment capacity. Finally, the engagement of philanthropic organizations in national partnerships, alliances and pacts gives them a more elevated view of their role in society as well as more effectively securing their commitment to address the challenges facing the country.
 

 

The increased political nature and power of these organizations led to increased state control. In the 1930s, state control and state involvement with the activities of nonprofits increased through labor laws, regulation and subsidies, and their independence was further curtailed by the military dictatorship that was installed in 1964. The ensuing abuse of power and violation of human rights by the military prompted reaction on the part of the Catholic Church. Both the National Council of Bishops and the more radical liberation theologians created a network of support for citizens and promoted citizen associations. It is this phenomenon that created the base both for the democratic state and for the development of the modern so-called third sector, including philanthropic organizations.1

Several events in the 1990s contributed to the development of the sector. In 1992, the United Nations Conference on Sustainable Development and the Environment in Rio acted as a catalyst for the consolidation of networks such as ABONG (Associação Brasileira de Organizações Não Governamentais. -- Brazilian Association of NGOs), while the National Hunger Alleviation Campaign marked the first effort to coordinate and integrate efforts by civil society for a public cause. The opening of the economy to the global market created a more dynamic business sector, and the founding of Ethos was crucial in changing the sector's role in the new democratic order. Brazil has one of the most dynamic corporate social responsibility movements in the world, and it is its rapid spread in Brazil that has most influenced the philanthropic environment in the last decade.

Another important factor in the "third sector boom" was the control of inflation. For almost two decades, high levels of inflation had hindered economic development and with it the means for giving. When inflation dropped to less than 10% a year, planning in business became more feasible, and philanthropy, as well as other nonprofit activity, thrived. The nonprofit sector in Brazil grew to two and a half times its previous size between 1996 and 2002, with 275,000 organizations accounting for approximately 1.5 million jobs.2 While this number includes all types of nonprofit, GIFE estimates that there are today approximately 300 organizations engaged in private social investment.

Dominance of the Business Sector

One of the crucial features of the present philanthropic sector in Brazil -- and one of the barriers to its development -- is the very strong influence of organizations of business origin, the majority of which have been founded since 1990. They channel most of their resources to programs designed and operated in-house. The resources for philanthropic activity are derived from the parent company, and depend on its annual profits. Often, these business-origin organizations seek resources from other businesses and international foundations for their programs and activities so they are in fact competing for existing resources. Very few organizations have endowments and few make grants.3


While philanthropy/private social investment has overcome its traditional, state-related identity, its nature and culture are still not fully defined or understood.
 

 

While the influence of these business-origin organizations has brought to the nonprofit sector in general business management dynamics, and has been key to changing the Church-state, top-down, charity-like paradigm in philanthropy, it has instilled in the philanthropic/private social investment sector a strong business ethos which has often meant that the boundary between private social investment and corporate social responsibility is ill-defined. This has led to a lack of self-awareness on the part of the philanthropy sector of itself as a sector and a lack of understanding on the part of society regarding these two concepts.

Also, despite the growing sophistication in approaches to change implemented by these organizations, very little of the resources invested by them reach key agents of change, which still have to look elsewhere for funding. According to ABONG, only 4.9% of its members have received resources from organizations of business origin.

Constraints on Individual Giving

While there are some fiscal incentives for large companies to invest in social, cultural and other areas (albeit that the corporate social responsibility ethic and practice are the principal incentives), for individual, family or community philanthropy they are practically non-existent. It is nevertheless clear from the multiplicity of organizations with significant revenue from membership programs and the percentage of the population involved in volunteer activities that individuals in Brazil do donate. It seems at least feasible, therefore, to suggest that, given tax incentives, such donations would increase.

The lack of tax incentives also means that there is no need to declare donations in income tax forms and so effectively no official way of recording individual philanthropy. So while fiscal incentives may not be the primary motivation for individual philanthropy, they could produce information that would help us to understand individual philanthropic behavior and so influence the development of the philanthropic sector.


Looking Back 20 Years

Philanthropy in Brazil has been undergoing a period of dramatic development since the end of military rule in 1985. This promoted the emergence of new social actors, including business men and women who began to engage in fields as diverse as environment and infant and adolescent rights.

But it wasn't until around 1990 that new social, cultural and environmental investing organizations began to emerge, and a group of around 20 people involved in this area began to meet regularly to exchange information and experiences -- initially with the support of the W.K. Kellogg Foundation and later the American Chamber of Commerce.

In 1991, Brazil went through a corruption scandal that led to the impeachment of the president. The First Lady was responsible for running one of the main philanthropic organizations, and it too was involved in corruption -- thus gaining for the concept of philanthropy a negative connotation in most of Brazilian society.

In 1995, the group that had begun meeting informally during the early 1990s decided to create the Group of Institutes, Foundations and Businesses (GIFE). Its first document was a code of ethics -- which revealed its need to detach itself from the negative image that classic philanthropy had acquired. By the end of the decade, "private social investment" had been identified as the central concept bringing together GIFE's members. Today it is defined as "the voluntary giving of private resources, in a planned, monitored and systematic manner, for social, educational, environmental and cultural projects of public interest."

GIFE itself is now the most important private social investment membership network in Latin America, comprising over 90 organizations that practice private social investment in Brazil. This year, its members will have invested over US$500 million, 87% of it in education programs; for more information, visit www.gife.org.br.
 

The Legal Environment

A further impediment to the development of private social investment is the fact that the fiscal and legal environment for philanthropy has not kept pace with the great changes in civil society and in the business sector in Brazil over the last two decades. There are only two types of fiscal structure possible for nonprofit organizations -- associations and foundations. Associations are governed by general assemblies that have gathered around a specific purpose; foundations are governed by a council or board whose primary mission is to perpetuate the funds or other assets that have been given to the foundation. While foundations are subject to control by government, associations must only submit an annual tax exemption declaration. For the sake of simplicity and because many businesses are not ready to immobilize assets for their private social investment activity, most of Brazil's new organizations have adopted the fiscal structure of an association. Because the associational structure is not designed for private social investment, it may not be able to accommodate specific sector needs and it may actually hinder sector growth.

Conclusion

The philanthropic environment in Brazil is still adapting to civil society's new role in shaping change. While philanthropy/private social investment has overcome its traditional, state-related identity, its nature and culture are still not fully defined or understood. Further research is needed to clarify the distinction between philanthropy/private social investment and corporate social responsibility. This will not only more clearly define the needs and direction of the sector but will give more visibility to some of the excellent social technologies that have been developed by business-origin organizations. It is also important that philanthropic/private social investment organizations develop more sustainable structures -- through endowments, trusts, etc -- to ensure long-term resources, and therefore greater impact, for their programs and activities.

It is also important to explore the potential of individual and family philanthropy. While there are clear indications that Brazilians do invest in social enterprises, further understanding of the dynamics of individual and family giving is needed as well as stimulation and modernization of the phenomenon. The recent emergence of new family-origin organizations and funds, as well as two new social justice funds that will need more than business sector support, are promising developments.

The fiscal and legal environment in Brazil needs to be developed. New types of nonprofit organizational structure that can better support the characteristics of the organizations for which they are intended -- grantmakers, community foundations, social justice funds and even operating, business-origin organizations -- need to be developed. Incentives for donations need to be created to further stimulate individual and family giving. A variety of organizations and an influx of new types of resources for the sector will provide diversity and strengthen the future of philanthropy in Brazil.

International foundations and development agencies can play a part in promoting philanthropy in Brazil as a social change strategy, both through investment and through international dialogues and exchanges. The role of GIFE as a convener, representative and catalyst of the sector has been and will continue to be key in promoting the development of the sector.



1 Leilah Landim (1993) Defining the Nonprofit Sector in Brazil. Working Paper of the Johns Hopkins Comparative Non Profit Sector Project, No 9, edited L. Salamon and H.K. Anheier. Baltimore, USA: Johns Hopkins Institute for Policy Studies.
2 As Fundações Privadas e Associações Sem Fins Lucrativos no Brasil (2002), produced by IBGE, GIFE, ABONG and IPEA.
3 Ed Peirópolis (2001) Recursos Privados para fins públicos:As grantmakers brasileiras. SãoPaulo,Brasil: GIFE.