Bill Gates and Philanthropy in Peru

Colegio Bill Gates.JPG

A comment made by billionaire Bill Gates in Spain last week has set off a lively debate in Peru about whether this country still needs foreign assistance.  Gates argued that Peru is a middle income country with the resources to address its own basic needs, and that European states should focus on the poorest nations of the world.  His words follow those of Peru´s own President, Ollanta Humala, while visiting Spain in January to encourage private investment as the best way to promote social development.

Yet Cabinet ministerspoliticians and pundits here argued that Gates was misinformed, that poverty and inequalities persist in this country, and that Peru still needs international aid.

Personally, I agree that Peru does not need basic humanitarian assistance from foreign governments.

As my colleagues Beltran y Seinfeld.pdf recently wrote, we know how much it costs to eradicate chronic infant malnutrition and we have the tax revenue to pay for it.  The same holds for malaria, early childhood education, clean water and sewage in poor communities.  It is absurd for someone like former First Lady Eliane Karp to complain that Gates refused her a grant to vaccinate 2,000 Amazonian natives, when she ran the government agency for indigenous affairs and had more than enough clout to get that done.  What is needed for addressing these issues is political will and managerial skill, not outside money.

 

Meanwhile, one issue that is missing from the local debate —  but central to Gates´ speeches and actions — is the role of private philanthropy, in addressing problems that governments cannot or will not tackle.   As John Coatsworth observes in the Introduction to a volume I co-edited on the topic, Philanthropy and Social Change in Latin America, private giving can play a strategic role in promoting social change, far beyond the actual amount of money it moves.  Private donors can support innovative research on frontier issues, sponsor experimental reforms, disseminate best practices, and promote needed policy change.   They can also support social movements and  leaders who challenge the status quo.   Through my own experiences as a foundation program officer, consultant and researcher, I have seen plenty of examples, some of which are summarized in a special edition of the Harvard ReVista on Giving and Volunteering in the Americas, and the abovementioned volume.

 

So, where are the Bill (and Melinda) Gates of Peru today?  Where are the leaders who put their own money, time and talent into changing – rather than preserving – this unequal and unjust society?

Between 1995 and 2005, Felipe Portocarrero and I addressed this question through a series of studies on philanthropy and nonprofit organizations in Peru and in comparative Latin American context.  With a team of outstanding young researchers (including Hanny Cueva, Renzo Massari, Armando Millán, James Loveday, Enrique Mendizábal and Oswaldo Molina), we undertook the first mapping and analysis of Peruvian foundations, the first quantitative study on the nonprofit sector, national surveys on giving and volunteering, and case studies of companies, foundations, NGO and community organizations.  We also examined the legal and tax frameworks for nonprofits, and the role of foreign aid in that sector.

 

What did we learn?  Since the early 1990s there has been a significant increase in nonprofit organization, and in diverse forms of private giving and volunteering.  Nearly 80% of the largest corporations operating in Peru claimed to undertake some kind of philanthropic activity, while over a third of adults in urban areas did volunteer work and nearly 35% made financial contributions to a variety of social, cultural and religious organizations.  Over 110,000 legally-registered nonprofits were identified in 1995-2000, working in such areas as education, health and community-based services, including 76,334 food assistance organizations run by low income women and serving an estimated 49,5% of Peruvian households.

 

At the same time, we found that overall levels of elite and corporate giving were low in relation to profits through the 1990s and up to 2005.  Private donor activity was also sporadic and unpredictable, with few efforts to evaluate impact, and most still went to traditional charity, or to activities benefitting upper and middle class groups themselves, such as private higher education and fine arts.  While there were 127 private foundations registered in 2000, roughly 80% of their patrimony was concentrated in just seven organizations.  Meanwhile, 68% of all nonprofit income was self-generated, through fees and charges for services, membership dues and voluntary labor.  Another 22% came from international donors, aimed primarily at a small subset of professional NGOs (1,659), 5% came from the government, and just 5% from domestic elite giving.

 

Since we published these studies, Peru has undergone accelerated economic growth, led by record mineral prices and expanded private investment.  The rich have gotten richer, new fortunes have been created, and the educated middle classes have also seen their incomes rise.  In this context, one might expect an explosion of private giving and volunteering.  As Gates puts it in his motivational tours“After a few million or something, it´s all about how you´re going to give it back”.

 

Yet the evidence is mixed.  A recent study by INEI in collaboration with our university, suggests that total nonprofit activity has indeed increased in the last decade, to over 180,000 legally registered organizations (and many more under the wire).   Peruvians organize in record numbers to educate themselves and their children, share cultural and sports affinities, confirm their faith and defend their rights.  While poverty has decreased significantly in the last decade, the number of soup kitchens and Glass of Milk committees appears to have increased.   Yet the total number of NGOs run by skilled professionals seems roughly the same (at 1,619).   And while the number of registered foundations has more than doubled (to 312), we do not have data on their total patrimony.  Evidence suggests that corporate giving has increased dramatically, especially by transnational mining firms investing in their areas of operation, while the tendency of Peruvian elites to give away relatively little of their own personal wealth, may not have changed much.

 

Why don´t the Peruvian wealthy give more, and more strategically?   This is a tough question to answer, one that involves historical distrust among different classes and ethnic groups, a weak sense of national identity, and the recent history of extreme political violence.   But it also involves lack of leadership and fundraising skills among would-be donors and beneficiaries alike.  Many nonprofits in Peru don´t even try to raise money locally, or recruit and maintain skilled volunteers.

 

Business leaders tend to complain about the lack of tax and legal incentives, but in the Peruvian case that is not very convincing.  Tax incentives are rarely if ever the primary motivation for giving, although they may influence the amount and frequency of donations.  But the wealthy in Peru don´t use the tax incentives that are already in place, which require registering with the SUNAT tax authority and opening their books and bank accounts to public scrutiny.   While the rich find that cumbersome, tax incentives without transparency is a recipe for corruption.

 

So, are foreign donors unnecessary in Peru?  Of course not.  There are many important issues and organizations that do not generate the same domestic consensus as basic health care or infant nutrition, and that neither governments nor wealthy elites are willing to support.  A free and critical press, equality for women and for people of African and indigenous descent, protection of vulnerable natural resources, and defense of religious pluralism, are among the many issues that would not be on the agenda in countries like Peru if their advocates did not have powerful international allies.  The same holds for watchdog activities on the State itself.   The Extractive Industries Transparency Initiative (EITI) and Revenue Watch International (supported by Gates himself) are examples, helping Peruvians and others keep an eye on how their governments use natural resource rents.

 

Peruvian universities also benefit greatly from external support.  International grants and fellowships help keep our faculty competitive, and support cutting edge research in such fields as tropical medicine, archeology and environmental studies.   I venture to add that the social sciences would not exist in Peru if it were not for international donors and partners, as few governments or private capitalists have considered them important.

 

When visiting campuses in the U.S., Bill Gates encourages students to focus their talents on innovative ways to solve fundamental problems facing society, instead of concentrating on the needs of the rich.  How many students at Peru´s leading universities opt to “give back” to society, through their thesis research, or after graduation?   Fortunately, we see more of them every day, including volunteers with Teach for Peru and Un Techo para mi País​, business majors with social enterprise projects, and activists who defend intellectual freedom and challenge the status quo within their own institutions.  Ultimately, they are the best evidence that those with more education and income in this country, can indeed shift from complacency to solidarity, and support positive social change.

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