Private Social Investment in Brazil: Mobilizing Resources to Promote Citizenship

JPMorgan & IDIS – Institute for the Development of Social Investment

1

Dear Friends,

On May 7, 2002, JPMorgan hosted a groundbreaking event that brought together prominent advocates and experts in individual and corporate social responsibility. We met in São Paulo to share ideas and to discuss innovative solutions for improving distressed communities, advancing education and enriching the lives of those in need.

At JPMorgan, we feel that as part of our own corporate social responsibility, it is important to highlight and learn more about these exciting initiatives. We applaud the individuals and organizations that are doing so much to build a better world in Brazil.

We would like to note that this event would not have been possible without the dedication and commitment of Marcos Kisil, president of IDIS (Institute for the Development of Social Investment). We are delighted to have been his partner.

We are happy to provide you with this booklet, which is a compilation of the event’s presentations and discussions. We hope you find this publication as inspirational and helpful as we do. We are proud to have been a part of such an important day.

Rosario Perez Fabio W. Vidigal Latin America Market Executive Head of Local Brazil Private Bank JPMorgan JPMorgan

2

CONTENTS

I. FOREWORD

May 7, 2002: The Day We Sowed Another Seed Patrick Morin, Senior Country Officer, JPMorgan Brazil, & Rosario Perez, Latin America Market Executive, JP Morgan

Brazil in the Forefront of Philanthropy Marlene Hess, Global Philanthropic Services Executive, JPMorgan

II. INTRODUCTORY NOTE

The Private Social Investor: An Emerging Agent of Development Marcos Kisil, President, IDIS (Instituto para o Desenvolvimento do Investimento Social)

III. SOCIAL INVESTMENT IN BRAZIL TODAY

The Transforming Role of Private Social Investment Marcos Kisil, President, IDIS (Instituto para o Desenvolvimento do Investimento Social)

Development Transcends Economic Indicators Cláudio Haddad, President, Instituto Brasileiro de Mercado de Capitais

The Forgotten Country Comes to our Door Evelyn Iochpe, President, Fundação Iochpe

IV. CORPORATE SOCIAL RESPONSIBILITY & INVESTMENT

Vision, Values and Strategy: The Backbone of a Social Project Celso Varga, President, Varga Participações Ltda.; Board Member of Instituto de Desenvolvimento de Limeira (IDELI)

Partnerships: The Key to Making a Difference Renata Camargo Nascimento, Shareholder, Camargo Corrêa; CEO, Instituto de Cidadania Empresarial; Managing Director, Projeto Social Obra do Berço

Social Responsibility is Part of Management’s Responsibility Jayme Sirotsky, President, RBS; President, Fundação Maurício Sirotsky Sobrinho

3

V. BUILDING A PHILANTHROPIC LEGACY FOR FUTURE GENERATIONS

The Multiplier Effect of Organized Volunteerism Maria Elena Pereira Johannpeter, President, Parceiros Voluntários

Alliance Among Three Sectors Gets Better Results Viviane Senna, President, Instituto Ayrton Senna

The Inheritance our Children Offer Us Victor Siaulys, President Laboratórios Aché; Chairman, Associação Laramara

4

I. FOREWORD

May 7, 2002: The Day We Sowed Another Seed

Patrick Morin, Senior Country Officer, JPMorgan Brazil

Today, May 7, 2002, JP Morgan has brought together here in Brazil a group of 70 social activists. The goal of this meeting is to discuss how the Bank and its many partners and friends can effectively foster societal participation in the development of the community.

It will be a day of intense debate during which we will strive to encourage our partners to work toward the most important thing for this country: quality of life in all strata of society, especially the poor and underprivileged.

We are all aware that the Government alone will not solve all the community’s problems. We are aware of the importance of investment and mobilizing the private sector to meet this challenge.

Philanthropy and social responsibility have been very important issues for JPMorgan Chase throughout its history. The organization has worked hard at being a responsible corporate citizen ever since it was founded in 1799.

Under the leadership and inspiration of David Rockefeller, social responsibility and philanthropy became an important part of the Bank. In 2001 our commitment to philanthropy entailed investments totaling more than 91 million dollars in community activities, art, culture and university education. Today David is almost 90 years old and remains one of the most actively engaged social leaders in the world.

JPMorgan has a tradition of carrying out social work through its foundations in the countries where it operates. This tradition extends to employees, who take part every year in what we call Global Days of Service. One weekend every year, all our employees and their families are involved in community work. What matters most is the personal involvement of each individual in the work we do throughout the year.

We are confident that the discussions we have here will not only help socially aware people to think more deeply about these issues but will also sow the seed of further meetings that will bring additional benefits to the community to which we all belong.

5

Brazil in the Forefront on Philanthropy

Marlene Hess, Global Philanthropic Services Executive, JPMorgan

Good morning. Before we start our discussions on philanthropy and giving, I want to recognize that this audience has many people who are leaders in individual and corporate social responsibility – and, in fact, many of you could have been on these panels yourselves. I am hoping that you all will join in during the question and answer period, and share your own experiences and insights with the rest of us up here.

As Director of JPMorgan Private Bank’s Global Philanthropic Services, I work with many clients who have the burning desire to really make a difference with their giving. And as you know, giving is deeply personal. It can and should reflect an individual’s or a family’s innermost values and purpose.

Your philanthropy and social investments are an expression of who you are, and what you are about. They establish your personal and family legacy for the generations that follow.

Seven years ago, when Maria Elena Lagomasino asked me to help some of her clients, I was head of Not-for-Profit Relations for the Chase Manhattan Corporation, making its corporate philanthropy more effective and targeted. We realized we could become a resource to clients to help design and implement their strategies, build programs, make their social investments more effective and meaningful, and facilitate their philanthropic dreams and activities.

Since then, we have worked with over 250 families and individuals. They come from different cities, states, and nations, and vary in age from late twenties to early nineties. Some have inherited their wealth; others have created it. Some are fifth- generation wealth, and others are brand new to their fortunes.

Some clients are “old hands” at giving away money. For others, it is a completely new and daunting experience. Some of our clients want to use their philanthropy as a way to unite their family, others want their giving to be their own individual project.

Although the methods may vary, what all our clients share is the desire to go beyond reactive giving. They want their social investments to be as strategic and effective as their financial investments. They worked hard to make their money, and they don’t want to throw it away. And many of our clients have moved beyond traditional grantmaking. They are effecting real change to better the world. They are creating non-governmental organizations to address needs they recognize that have not been met in their own communities, or sometimes even in their countries.

Our clients have created museums, centers for performing arts, best-in-class institutes for medical research, programs that provide daycare and educate young children, train playwrights, protect abused youngsters and battered women, and others that protect our environment. And our clients have done this in Asia, Latin America, Europe, and all across the US.

Many people in the US world of philanthropy have been hearing about the exciting philanthropic work going on here in Brazil. 6

In fact, for several years, I have known of the good works of Marco Kisil and IDIS, GIFE and Ethos, and of many of those here today. It occurred to us that, as part of our own corporate social responsibility, we should put together a conference to highlight and learn more about some of these exciting Brazilian initiatives.

Since there are so many ways out there to do good, what are the most important trends in Brazil today? How do you raise people’s awareness? How do you define your legacy? How do you measure success? Today, we will have three panel discussions to examine these issues.

We are fortunate to have with us today Marcos Kisil. Marcos is the President of IDIS - Institute for the Development of Social Investment, a nonprofit organization located in São Paulo. It was created to promote and disseminate concepts and best practices of private social investment and to foster community philanthropy initiatives in Latin America. He will moderate the first panel which will focus on the key trends in Brazilian social investment today. Claudio Haddad and Elena Iochpe will be joining him on that panel, and Marcos will formally introduce them to you then.

The next panel will explore corporate social responsibility and personal social responsibility. Our moderator will be Celso Varga. Celso is the President of the Managerial Council of Varga Participações and is an adviser to many outstanding organizations. Joining Celso will be Renata de Camargo Nascimento and Jayme Sirotsky, whom Celso will formally introduce at that time.

The final panel, moderated by Maria Elena Pereira Johannpeter, will address creating a philanthropic legacy. Maria Elena is the president of the NGO, Volunteer Partners, created by the initiative of Rio Grande do Sul enterprises to develop the culture of organized volunteer work in the State. She will be joined by Viviane Senna and Victor Siaulys, whom Maria Elena will more formally introduce to you then.

As part of each panel, there will be a period for questions and answers, and we hope you all will join in during that time to share your own experiences so that we can have some truly interesting discussions. And now I would like to turn the podium over to Marcos Kisil.

7

II. INTRODUCTORY NOTE

The Private Social Investor: An Emerging Agent of Development

Marcos Kisil, President, IDIS (Instituto para o Desenvolvimento do Investimento Social)

“Anyone can be a philanthropist. Anyone can help set up a powerful foundation and give significantly to the community.” 1 This innovative idea lay behind the thinking of Frederick Harris when he decided to set up a community foundation in Cleveland, Ohio, in 1908.

According to Harris anyone, even people with limited resources, could participate in community development provided their resources were aimed at problems and needs defined as priorities, and provided there was a system for monitoring and controlling the use of those resources.

Thus issues such as the focus of philanthropic action, how to define priorities, and the appropriate management tools were already key concerns for those who wanted to make social investment in a voluntary manner.

As we all know, although Brazil has a long history of philanthropy it is still trying to find the best way for people and companies to carry out social investment.

While traditional philanthropy is paternalistic in the sense that it aims to meet the immediate needs of the beneficiaries without any attempt to change the status quo, social investment should pursue more efficient and effective ways of using the resources involved in projects to change society.

In the 1990s a combination of three factors led to a clearer definition of the role of private social investment: • Government, especially in the Federal sphere, recognized that it cannot respond alone to social demands, many of which are constitutional, and needs active participation by society; • Civil society organized around causes and problems in pursuit of new forms of participatory democracy, generating an active community of entities that make up what is known as the Third Sector; • Business organizations and leaders discovered huge potential for converting knowledge, skills, attitudes and resources into social enterpreneurship.

JPMorgan’s response was to take the initiative, with technical support from IDIS, of organizing an event at which these developments would be described and analyzed by speakers profoundly involved in the recent history of private social investment in Brazil.

The first panel presents key facts and circumstances relating to Brazilian society and the role of private social investment. The second panel comprises testimony by social

1 Council on Foundations. Community Foundation Training Manual 1: Mission and History, p.v. 1990. 8

investors who have had to choose how to make their investments and outlines the results of their efforts. The third panel highlights the relations between generations, in which core values such as altruism and a commitment to one’s fellow human beings become family values.

The goal of this publication is to make the contributions of the various speakers available to the general public. We hope their experiences will inspire other social investors to build a more just and sustainable society.

9

III. SOCIAL INVESTMENT IN BRAZIL TODAY

We live in a country in which there is an enormous discrepancy between economic potential and poverty, and in which the vast majority of the population is socially excluded. This paradox has roots in Brazilian history and culture but it also has political and social causes.

This chapter sets out to understand the paradox and discuss the role of private and voluntary social investment.

The Transforming Role of Private Social Investment

Marcos Kisil, President, IDIS

Private social investment takes place whenever individuals, families and business organizations voluntarily offer resources for the good of society. It is important to stress this definition, because social investment is not made to comply with the law or obtain tax benefits. It is made voluntarily for the public good. It may involve gifts of property and service as well as money.

Unfortunately Brazil lacks reliable information with which to quantify private social investment and estimate its value. In the United States, all nonprofit organizations are registered with the Internal Revenue Service (IRS) and obliged to make full disclosure so that anyone can find out who donates what to whom.

This information is unavailable in Brazil. One of the reasons is the lack of tax incentives for social investment. If there are no tax incentives there is no reason why people should declare donations to the Federal Revenue. As a result, we miss the opportunity to find out how much philanthropy there is and how private social investments are being applied.

In the absence of an information-collecting center we have to try to discover something indirectly from the organizations of civil society that are the recipients of private social investment. We can ask the community where the money came from, where it goes and to what use it is put. Some statistics can be derived from this indirect information.

A study published in 1998 by Johns Hopkins University covering 22 countries showed that the economic size of the social sector worldwide was then 1.1 trillion dollars. Social investment in these 22 countries averaged 4.5% of gross domestic product (GDP). Brasil contributed 10.6 billion dollars, equivalent at that time to 1.5% of its GDP.

The study also showed that the social sector employed 5% of the workforce on average in the 22 countries covered. In Brazil the proportion was only half the average, or 2.5%. If we add in the clergy, who are very active in this sphere in Brazil, the proportion was 3.2%.

The first major survey of the third sector in Brazil was presented to ISER by Leilah Landim in 1999. At that time the third sector was growing more than any other and employed 1.1 million people. Another 330,000 people were working as volunteers. Most of them worked in four areas: education, health, culture, and recreation. It is

10

important to note that these figures date from before the International Year of Volunteers.

Individuals donate more than business

Other relevant pointers can be found in the survey. For example, social organizations in Brazil have learned that they must produce something in order to survive: according to the survey, 68% of their funding comes from services or activities performed with the specific goal of generating revenue.

The Government still plays a major role in funding these organizations: official contributions account for 14.5%, usually in the form of subsidies such as school meals or equipment.

Donations account for 17.2% of funding. Individuals donate significantly more than firms do. This is important. Brazil and the United States are the same in so far as people give more generously than business.

Another study by Leilah Landim shows that the number of people who give to charity in Brazil corresponds to about 20% of the workforce. The average donation per individual is 158 reals per year. It is difficult to arrive at estimates such as this because if you ask people how much they donated in the previous year it is unlikely that more than a very few can remember.

According to projections by Instituto para o Desenvolvimento do Investimento Social (IDIS) based on Leilah Landim’s study, individual donations total 17 million reals per year in Guarulhos, a city in metropolitan São Paulo whose Department of Social Promotion has an annual budget of 4 million reals. Almost the entire budget (3 million reals) is spent on the department’s own running costs, whereas almost all individual donations (16 million reals) are invested directly in the community. The nonprofits involved spend only 1 million reals on their own maintenance. This is irrefutable proof of the importance of individual giving and of individual social responsibility.

In another IDIS survey, this time involving small and medium food retailers in 110 cities located in four Brazilian states, 45% of the money donated came out of the owner’s personal wealth while 28% came out of his firm’s account. It is important to highlight the fact that 27.4% of respondents said they used personal and corporate funds simultaneously. It seems that in small and medium business there is a good deal of confusion as to whether the individual, family or firm is the donor.

Many people believe business organizations are responsible for most of the philanthropy in Brazil. The fact is, however, that individuals and organized families still give far more than businesses. I must stress once again, nevertheless, that we do not know exactly how much is donated or what the impact of these donations is.

Lack of information is not true only of individual donors. IDIS has found this problem with large corporations too, because in many cases their donations are allocated to several different cost centers. We performed a survey at a company that said it donated 300,000 dollars per year. We discovered that in fact its donations amounted to 1 million dollars per year. This kind of thing leads to an even more serious problem: business organizations do not know how much they donate or the social results obtained by investment of the money donated.

While on one side individuals and firms do not know how much they donate, the community also does not know how much it receives. Moreover, the idea of charitable

11

giving predominates over that of social investment. Funds are distributed on a case- by-case basis rather than being planned or prioritized in some way. The entities or organizations selected are usually those with which friends or relatives of the donors are directly involved.

As a result, donating in Brazil is short-term and charitable. It cannot yet be characterized as organized and strategic philanthropy. Amateurism and volunteerism outweigh professionalism.

From charity to social investment

Brazilians have always been philanthropists. The first Brazilian NGO was set up in 1564 — I am alluding to Santa Casa da Misericórdia in São Vicente. But we are now experiencing a transition from charity to social investment. Today the key question is this: How can we progress from individual charity and altruism to organized social investment capable of changing the status quo? How can this shift be engineered in a country with so many disadvantaged people? What leads donors to try to resolve problems here and now?

Although there are no clear answers to these questions, the fact is that donors are gradually becoming investors in Brazil. In other words, they are becoming more concerned with tackling the causes of social problems rather than just treating their symptoms. And they are seeking the best way to contribute to a solution and to a change in the status quo.

It is already possible to find social investors with a vision that reaches out to economic problems, transcending classic issues such as health, education and social promotion. Venture Philanthropy is starting to happen in Brazil, for example. This is a movement that began California and, as the name implies, combines philanthropy with the development of business ventures in disadvantaged communities. Economic development hand in hand with philanthropy.

Another interesting point is the changing profile of social investors. Purely individual social investment is giving way to philanthropy based on partnerships among businesses or groups of individuals. Suffice it to recall the example of Count Matarazzo and the philanthropic hospital he founded. When he died, the hospital’s finances collapsed and it was closed down. It was a charitable foundation and an extension of the donor himself, who never desired and never sought the support of other donors.

Compare that with Hospital Israelita Albert Einstein, funded by a large and growing number of philanthropists who actively participate in the institution’s development and sustainability. Clearly we are witnessing a change of attitude.

More recently another important element has begun to feed into the motivation of social investors: a concern with their own communities. We are finding that a focus on local action tends to take precedence over activities with a national scope. It is much easier to detect these social investors who are concerned with the community of which they are part, with the area around their factories or challenges faced by the neighborhoods they grew up in and where they can see the concrete results of their work. Change can better be monitored in a smaller community and commitment is greater because there is no anonymity. This is why a large proportion of private social investment now takes place at a local level.

As people begin thinking seriously about community they also begin thinking seriously about societal change. This gives rise to something the private sector habitually

12

avoids: contact with government. People begin to realize they have to develop partnerships with the public sector in order to guarantee the implementation of public policies.

A good example is the Municipal Funds for the Rights of Children & Adolescents that have been set up in several cities, with the support of a municipal council for children’s rights. Many businesses and business leaders now work with these entities, not just donating funds in return for tax incentives but with the aim of influencing social investment by the funds and increasing social control of their utilization.

Social investors are starting to see these possibilities and to organize their philanthropy more strategically. Today they want to understand what they are investing in and why. They are no longer mere recipients of requests for charitable giving or writers of checks. Donating is just the start of involvement in a cause or project. As with any investment, the social investor wants to know about returns and dividends and how long it will take for benefits to materialize.

Four keys to success in social projects

Social investors are also steadily learning that time to maturity is another variable to take into account. Social projects often take longer to mature than economic activities. For example, if I invest in the education of a girl I should be aware that the child mortality rate applicable when she becomes a mother will diminish in proportion to the increase in her schooling. But this will be perceived only when she becomes a mother.

It is also necessary to take investment risk into account and establish a system for permanent monitoring of results. The decision-making process in private social investment is manageable, planned, well-thought-out and professional by definition.

Social investors need to think hard about four important points or four key questions: • Can the investment function as a genuine catalyst to accelerate a process and bring social benefits closer? • Can it help leverage new partnerships and hence more funding? • Is it innovative? Does it propose new solutions to old problems? • Will it change the status quo in the community and lead to genuine social change?

Although it is not always easy to answer these questions, the simple fact that social investors have such concerns in Brazil today demonstrates a new type of civic commitment to national development.

Private investment: concern for this generation

To conclude this outline of private social investment in Brazil, let me draw your attention to the fact that investors want to see change during their own generation. In the past many were content to set up a foundation to invest for future generations. Now they want results as soon as possible.

Bill Gates may have been the prophet of this new vision. He wants to spend the money he has made to help people right now. The idea of accumulating and distributing wealth while your own generation is still around is becoming more commonplace in Brazil. Many new investors share Bill Gates’ vision on that.

13

Investors are also starting to distinguish clearly between their own money, their family’s money and the money of their firm. And they are starting to look more closely at the question of passing on values, more important than passing on material wealth. They want to leave society a genuinely valuable legacy.

Social investors are learning that they are strategic agents of development. They represent the hope of achieving a more just and sustainable society.

14

Development Transcends Economic Indicators

Cláudio Haddad, President, Instituto Brasileiro de Mercado de Capitais

Looking back at the last 20, 30 or 40 years we can see an improvement in all of Brazil’s social indicators. Sanitation, child mortality, life expectancy, years of schooling and several other indicators are evolving positively. I think these indicators tell us more about the nation’s development than certain economic indicators.

Per capita income, for example, is often influenced by the unit of measurement. If we measure it in dollars and are at a time like the present when the local currency is depreciated, we will conclude that per capita income has fallen 50%, 70%. In practice, however, this is not the case. The country is still there; the real resources are still there. Economic indicators often fail to reflect what is happening to actual people.

By contrast, biomedical statistics such as average height tell us interesting things. For centuries and centuries, the average height of the world population was more or less constant. Only in the 14th century did it begin to increase, owing to technical and scientific progress. Sanitary conditions improved; people began to have more access to medical care and better food. Thus this question of height reflects the overall effect of a number of social indicators.

When I was young I was happy to be somewhat taller than average. I’m 1.68 meters tall and at that time average height in Brazil was 1.65 m. Today it’s 1.72 m so I’m significantly shorter than average. For the sake of comparison, that’s the same as the average height of American soldiers in the first world war. Since then the average height of Americans has also increased. In 1970 it was 1.78 m. I reckon it’s now more than 1.80 m.

In 1815 the difference in height between a wealthy Englishman and a poor Englishman was 13 centimeters. Rich aristocrats stood out not just for their money or clothes but because they were taller. Today the difference between rich and poor is only 1 inch or 2.5 cm.

Human Development Index v. income concentration

Another statistic that makes better sense is the Human Development Index (HDI), calculated by the United Nations. This is a far more comprehensive indicator that reflects items such as health, education and sanitation. In the latest set of data, published in 1999, Brazil ranked 69th, far behind countries like South Korea and Argentina. That is not a good position for Brazil, of course.

However, Brazil ranks 57th by per capita income, one of the indicators to which economists tend to give a lot of weight. If per capita income correlated directly with social indicators, Brazil would rank 57th on the social scale as well. This is a paradox, which clearly shows that our social indicators should be far better than they are, given our economic potential.

There is one indicator that has been persistently negative and absolutely constant for many decades now. I am speaking of income concentration. Income concentration is practically endemic in Brazil. If it were possible to calculate this indicator for 100 years ago, we would probably find a very similar situation to today’s. Income concentration 15

is measured by the Gini coefficient, named for the Italian statistician who developed it, Corrado Gini. The Gini index can be anywhere between 0 and 1. The closer it is to 1, the greater the degree of income concentration.

The figure below shows the Gini coefficient for Brazil since 1970, when we started to have more accurate data with which to calculate it. You can clearly see that it is quite stable over time, varying insignificantly in a narrow range between 0.57 and 0.61.

Few countries have a higher Gini number than Brazil, even in Latin America. The closest in the region is Colombia, with 0.57. India’s Gini coefficient is 0.29, less than half that of Brazil.

In Brazil income is concentrated so much that the poorest 10% have roughly 1% of national income while the richest 10% have practically 50%. The poorest 40% have less than 10%; the richest 20% have about 65%.

The country you don’t see

If you ask a hall full of people in São Paulo how many consider themselves wealthy or poor, most will probably say they are middle-class. But in actual fact they are rich by Brazilian standards. The average household comprises three or four persons earning 1,172 reals per month all told. This is the real middle class: a couple with one or two children and a monthly family income of 1,172 reals.

What about the bottom 10%? Their household income averages less than 162 reals per month. Where are they? We can’t see them. They aren’t in São Paulo or Rio de Janeiro. They aren’t even in the poor outlying suburbs of the big cities. They’re in the rural backlands of the Northeast: Piauí, Bahia, Maranhão... They’re invisible to us.

Where are the wealthy? If your household income averages more than 2,600 reals per month — here again we’re talking about a couple with one or two children — you are in the top 10% on the income scale. If your family income exceeds 9,000 reals per month, you’re in the top 1%. So clearly when people talk about the middle class in Brazil, what they really mean is the rich.

This becomes clearer still if we compare income taxpayers in the U.S. and Brazil. The distribution is less concentrated in the U.S. In Brazil the majority of people who pay income tax earn less than 10,000 reals per month.

In Brazil, tax revenue in all three spheres (Federal, state and municipal) accounts for 33% of GDP today, or 400 billion reals per year. Estimates by Fundação Getúlio Vargas (FGV) show that 30 billion reals per year would be enough to eliminate absolute poverty, i.e. people who earn less than 2.50 reals per day. Thirty billion reals corresponds to less than 10% of total tax revenue in all three spheres of government.

As it happens, public spending on government social programs far exceeds 30 billion reals. Thus the problem resides not in the amount but in how the money is spent. Most of the funds that should go to the poor end up with the richest 10%, whom we have just said are usually called the middle class. Even philanthropy benefits the top 10% in the income pyramid more than the bottom 40%. The latter are invisible to most people. The cost-benefit ratio of social programs is negative because inefficiency is high. Serious corruption is another factor.

16

Education will dictate our future

Education indicators are among the most important and deserve particular attention on the part of social investors. Brazil is improving in this respect from one generation to the next, but the pace of improvement is still far slower than in other countries.

A good example is that only 15% of Brazilians aged between 55 and 64 have completed their secondary schooling, while 36% have done so in the 25-34 age group. There is no doubt that the situation has improved between one generation and the next. However, South Korea has achieved much more in this regard: the proportion jumps from 25% in the 55-64 age group to 88% in the 25-34 age group.

In the case of university education, 3% of the 55-64 age group are graduates in Brazil. The proportion is 5% for the 25-34 age group. Again this contrasts with the situation in Korea, where the proportion soars from 7% to 30% respectively.

Educational attainment correlates directly with income. In 1977 those who had completed primary school earned twice as much on average as those who had not. Those who had completed secondary school earned four times as much as the uneducated, and university graduates earned six times as much.

These gaps remain significant but are narrowing as time passes. The earnings gap between those who have completed primary school and the completely uneducated is now about half the average wage and 67% for those who have completed secondary school. But the gap has widened for university graduates. In other words, the world requires more knowledge. If we lag behind, our social problems will worsen exponentially.

Brazil ranks fairly well in terms of spending on education as a percentage of GDP compared with other countries. However, because it has a relatively large population, per capita spending is still very low: 356 dollars compared with 1,000 dollars in Greece, for example. Worse, Brazil spends its money badly.

Most countries spend about the same amount on primary, secondary and higher education. The conspicuous exception is the U.S., where higher education gets far more than the rest. Brazil spends very little per child on primary and secondary education, but investment in higher education increases exponentially. Besides the obvious imbalance, we are not investing in the new generations.

But Brazil spends a great deal on crime prevention and law enforcement, for example. Today crime has more impact than most other social factors. The homicide rate is 6.5 per 100,000 inhabitants in the United States, 70 in Colombia and 46 in São Paulo or Rio de Janeiro. Murder reduces the life expectancy of a man in Rio de Janeiro by 3.4 years. Crime is estimated to account for 10% of GDP but costs society much more.

Education and the fight against crime are two areas in which the private sector has a lot to contribute. They are highly relevant areas with a very substantial social return.

17

The Forgotten Country Comes to our Door

Evelyn Iochpe, President, Fundação Iochpe

Until the end of the 19th century the vast majority of disadvantaged Brazilians obtained assistance from the Catholic Church as well as relying on what me might call “seigneurial philanthropy”. The 1930s saw the advent of industrialization and some state intervention as the Administration of President Getúlio Vargas began delivering public services directly. The state created and controlled such organizations as labor unions and welfare institutions. But because the Brazilian state had always proved notoriously inefficient and selective, the vast majority of disadvantaged persons remained excluded, as they are even today.

There persists a large sphere abandoned by government, allowing for the development of voluntary service. But this has never materialized throughout most of our history. Only in the 1960s did voluntary service begin, with the emergence of autonomous organizations from civil society. This was how Brazilians began, very late in the day, to build what might be called a civil society with the ability to act.

In the 1970s the establishment was suspicious of any organization whose origin was outside government control. Suspicion of leftwing groups was especially strong. Hence the preference for clandestine or underground organization on the part of civil society during the military regime.

Meanwhile, another country was expanding, far away and unknown. A poor country full of poor, excluded, illiterate people. If the truth be told, this other country has never been considered a problem for modern Brazil.

The left was concerned with this situation on the plane of ideas. In the sphere of action it was a concern most of all to the Catholic Church through its pastorals and charitable works. But the 1990s saw the emergence of an interesting trend: poverty and necessity began to engage hearts and minds in different ways.

The question that suggests itself at this point is this: Where is that modern Brazil now? Where do the people who have started to think about this situation stand at the present time?

Uniting behind the excluded

That we can no longer ignore the Brazil in which we are not interested is demonstrated by social movements such as the landless movement, and by the explosion of violent crime. It is outside our door, coming into our home. We must be aware of what is happening. The Catholic Church and similar charitable institutions are still active but they are absolutely insufficient to cope with such a huge social problem.

Ideology and radicalism have gone out of these issues since the fall of the Berlin wall and the end of the cold war. We have been able to start putting the pieces of the puzzle together and look at the many shades of color that make up one nation. Hence the emergence of the Third Sector, which is no more and no less than the meeting of different tendencies with an important commonality: a focus on exclusion.

The end of the centralized authoritarian state made room for the growth of civic organizations, which have increased in numbers, scope and importance. Today there

18

are some 220,000 entities that address social problems in some way: NGOs, institutions, foundations and a great many others of every variety.

NGOs and other nonprofits account for 89% of this universe. Corporate foundations and institutions account for about 6% but have a disproportionately large influence on the development of the Third Sector. This influence is not just quantitative but above all qualitative.

Grupo de Institutos, Fundações e Empresas (GIFE) defines private social investment as the planned, monitored and voluntary use, in projects of public interest, of private funds donated by individuals or legal entities. That is the difference: this kind of investment is planned, monitored and voluntary. Charitable donors and churches have discovered that they need the methods and processes of modern Brazil in order to survive. At the same time business organizations have realized that social projects are vital to the development of their core business activities because they help to drive market growth and create prosperity.

Corporate philanthropy is expanding very substantially in Brazil. According to GIFE’s data about its members, 22% were founded in the 1980s and 46% in the 1990s. Brazilian companies provide the funding for 64% of its members. Social investment by these nonprofits amount to 800 million reals per year.

While total investment has increased, business organizations indicated that their individual investments have diminished in the last three years. Some 80% systematically partner with other entities, thus multiplying the benefits of their activities.

Legislation out of touch with new reality

But it is important for the state to wake up to this new reality, too. Seventy per cent of GIFE’s members do not use tax incentives in their social investments. That means the legal framework for the Third Sector is out of touch with the new reality.

Nonprofits are regarded as credible, serious and transparent. They sit at the same table as corporate executives and government officials but the nation does not give them the legal and tax conditions to do their work to the full.

For the last five years the Comunidade Solidária program has been discussing a legal framework for the Third Sector. The results are paltry: the only new laws Congress has passed govern volunteerism and so-called OSCIPs (this is the Portuguese- language acronym for “public-interest organizations of civil society”). The underlying issues have not been addressed.

This is where the business community comes in. We entrepreneurs have an important role to play. More and more of us are realizing how hard it is to increase the volume of social investment because of legal obstacles. Business people are skillful at circumventing legal obstacles when their core business activities require them to do so. They must use those skills to change social reality as well.

19

IV. CORPORATE SOCIAL RESPONSIBILITY & INVESTMENT

A phenomenon that occurred in the 1990s has had important consequences for Brazilian society: entrepreneurs and business organizations became increasingly aware of their social responsibility.

During the last decade the state acknowledged its inability to discharge its constitutional responsibilities in the social sectors — health, education, environment, culture. Faced with this reality, the business community saw its opportunity to participate in national development. Not just economic development but social and political development as well.

Citizenship was now seen as a responsibility rather than a duty. Driven by personal values, entrepreneurs and business leaders began to stake out positions and create alternatives for development.

This chapter is a clear demonstration of the perception, motivation and enthusiasm of Brazilians who have found genuine niches for participating in the social development of the nation.

Vision, values and strategy: the backbone of a social project

Celso Varga, President, Varga Participações Ltda.; Board Member of Instituto de Desenvolvimento de Limeira (IDELI)

Instituto de Desenvolvimento de Limeira (IDELI) brings together companies, nonprofits and individuals who reside in the municipality. The NGOs are members of IDELI; companies and individuals are its collaborators. The mission of the Institute is to promote sustainable development in Limeira.

Too often development is taken to be coterminous with the economic dimension of society. But development has to do with meeting each and every need of human beings. Development takes place when society evolves, not only from the economic standpoint but also from the social, human and cultural standpoint. This is the vision on which the Institute bases its work.

Our goal is to transform the city of Limeira, located in the interior of São Paulo State, into one of the best places in Brazil in terms of the quality of life. We are well aware that this is a long-term goal. We are not satisfied with the social situation in the municipality, but we are leading our fellow-citizens toward that goal.

This is the first respect in which I can use the case of IDELI as an example. Nonprofits should establish a mission. And this mission should focus on filling the gaps in people’s needs. So it is indispensable to identify needs and decide what targets to aim for before choosing a specific segment in which to work.

Values should also be part of a nonprofit’s planning process. Values are the foundation for your thinking and keep you tied to certain principles. So your values have to be clearly defined.

20

Acting on two fronts

Our work in Limeira has shown us that we must tackle causes as well as effects. I am convinced we must do both. I often say we have two types of activity in our lives: the important activities and the urgent ones. What happens normally is that we end up concentrating on the urgent activities because circumstances make us do that.

That is often the case when we set up NGOs. We do so in response to urgent needs. But that does not leave time for us to think about and act on what is important. We end up focusing on short-term activities that address the effects of problems but rarely tackle the causes.

I am not advocating that we should forget about urgent things or neglect doing what people need immediately. What I am saying is that we must make room on the agendas of our entities for doing important things — tackling the causes of problems. This is an innovative approach to work in the Third Sector, given that most nonprofits are not set up with such an approach in mind.

We have a tradition of paternalism, of addressing immediate issues. This is starting to change as people begin to comprehend the causes of problems. Of course, the effects cannot be overlooked by any means. If a child is starving we have to do something immediately. But we have to be aware that the meal we give that child will not be a solution to the problems the child will face as it grows up.

Tools help define activities

Brazil has a Human Development Index of 0.75, ranking 69th in the world on that criterion. This is unacceptable. How can we use this as a tool to plan and structure our activities, and identify niches in which to act and help improve the quality of life of our people?

The HDI is made up of three basic indicators. The first is per capita GDP, which obviously relates to economic development. The second is life expectancy, which in turn reflects several areas of people’s lives, such as health, basic sanitation and violent crime, all factors that affect longevity. The third is education. As literacy improves, so does the degree of knowledge in society. Knowledge is a key factor for the quality of life in any country.

These three indicators are closely interrelated. As GDP increases, so does life expectancy and education. As educational levels improve, so do GDP, incomes and life expectancy. And increases in longevity have a positive effect on GDP because there are more people who are fit to work and consume.

Using a tool like the HDI as a starting-point, we can begin to develop a strategy for our NGO, enabling it to decide where to focus and how to help improve the HDI of the community to which it belongs. That is what we have tried to do through IDELI.

The entities affiliated to IDELI are grouped into three categories so as to ensure that we focus on each of these three factors covered by the HDI. There are several entities that tackle issues in the areas of health and education but few that are capable of promoting economic development in Limeira. This reflects a tendency not to concern ourselves with economic issues. We believe economic issues can also be appropriately addressed by nonprofits, because by helping to promote economic development they will be contributing to progress in the other two areas.

21

Six steps in fundraising

Having defined a vision and values, the next step is to develop a strategy, in other words to work out how to get from one situation to another situation. The key difficulty is not deciding where to go but discovering the processes that will take us there.

What we have achieved at IDELI suggests a few valuable lessons about the steps by which a strategy can be developed. In what follows I set out six key steps in a process of fundraising for effective social action: 1. Leadership: Identify a leader with penetration among potential donors. 2. Reasons: Why does the entity exist? What sources of dissatisfaction does it address? 3. Strategy: Vision and mission — how will the entity produce the desired effects? 4. Programs & Processes: Detail the programs and processes that will enable the entity to carry out its mission. 5. Motives: Identify the donor’s motivation — community support, giving back, social conscience, tradition, investment, altruism. 6. Transparency: Keep accounts and report to stakeholders regularly on critical activities.

22

Partnerships: The Key to Making a Difference

Renata Camargo Nascimento, Shareholder, Camargo Corrêa; CEO, Instituto de Cidadania Empresarial; Managing Director, Projeto Social Obra do Berço

I had the opportunity to travel a great deal with my father, visiting heavy construction sites in Brazil and Argentina. These journeys made since I was a child have given me profound knowledge of Brazil, its needs, its diversity, its profound social inequality, and also its gigantic mineral and fluvial wealth. But what has always impressed me most in my travels is the inexhaustible human wealth of our country.

Visiting distant construction sites in Tocantins, Pará or Amazonas, I met people who transformed our country. They were masons, laborers, machinists, skilled factory workers, engineers, people who put their strength and knowledge together to build a new reality. Give them opportunity, training and tools: they can work as a team to make a difference to our nation.

This experience also awoke a social conscience in me. The answer was clear. What was needed was opportunity. That would make things happen. The solution in my opinion lay in a belief in the intrinsic capacity of human beings to put their trust in partnership and teamwork. This enables people to believe that even in adverse situations where resources are scarce, solutions exist and results are achieved.

Thanks to these insights of my youth, I directed my life toward making sure that people had opportunities, focusing especially on the most excluded young people in Brazil. I would like to share some of my beliefs with you. One of them was once expressed thus by marketing guru Nizan Guanaes: “Thinking about everyone else is the best way to think about yourself.”

I believe we should act out our personal values in practice. I believe individual success without any link to collective success is not sustainable success. I believe contributions and donations should not be merely financial. The most important contribution one can make is donating time, experience, knowledge. Voluntary transfer of knowledge. I believe in the importance of shared decisions. Of listening to others and learning from other people’s ways of seeing. I believe in investing in commitment and involvement.

I believe in partnering. But I am talking above all about large-scale, inter-sectoral partnerships: state, private enterprise, civil society. For me, partnering is doing things with others, not for others. So it is working with the state, not for the state. Working with the community rather than for the community. Building things with partners. Sharing results in a space where everyone stands to benefit. I also believe in diversity, in difference. And I do not believe in obstacles.

Arnaldo Jabor recently wrote this: “I believe Brazil’s social problem is us. The 500- year-old bourgeoisie. We are the ones who are excluded. It is hard to live in a country where the majority starve to death and the minority are terrified to death.”

I also believe we must love what we do. We must give of our best and we must dream nonstop. The most important achievements and changes in life begin as dreams. My dream is to democratize opportunity.

23

My meeting with Obra do Berço

In 1975, when I had just graduated as an economist, I began looking for work in the social area. I wanted to do something that would give me an opportunity to focus on education and lifelong learning. The first thing I did was to find out about all the NGOs that cared for children, mothers and adolescents, and that needed more manpower.

This was how I came across Associação Obra do Berço, which at that time was interested in taking a new direction, moving away from paternalism toward promotion of human beings. I felt motivated by that goal and decided to focus my entire life on the challenge of molding an entity with years of excellent work as a charity into an organization with a new vision: the transformation of human beings.

The entity’s mission is to bring about changes in human beings. A child who learns, a young person transformed by self-respect and awareness of his or her role as a citizen. My personal motivation is the possibility of making dreams come true through concrete action. That was the reason for my choice. Besides the personal breakthroughs I have achieved through voluntary service, I have come into contact with very rare values: open-mindedness, team spirit, and strong motivation.

When I joined Obra do Berço it was managed by female volunteers who had been running the association for 30 years. They had acquired an extraordinary amount of experience in that time. I decided to hire a social worker and a qualified teacher, and to recruit more volunteers to ensure the sustainability of the entity’s activities.

I also created an advisory board and a board of directors, inviting young entrepreneurs to join these bodies. They brought a dynamic business vision, quality, and professionalism. They showed us how to measure the results of our social work and how to evaluate it. We acquired a more professional, less sentimental approach. This was unusual at the time.

Today the association is into its fourth administrative term, caring for 1,500 children in four different units in Campo Limpo, Vila Mariana and Jardim Pedreira, all poor neighborhoods of the city of São Paulo. We have 100 people working with us, 40 of them volunteers. We partner with 50 companies as well as the city government. The entrepreneurs on the advisory and audit boards are also very actively involved.

Instituto de Cidadania Empresarial (ICE) has provided a great deal of motivation. The original advisory board decided to reformulate its role in the association because its members believed private enterprise is also responsible for developing solutions to the Brazilian social crisis. Private-sector participation should go beyond paying taxes and creating jobs. We therefore launched a movement to educate the business community and gave ourselves a new challenge: multiplying the knowledge acquired, disseminating it to other companies, universalizing concepts, scenarios and needs.

At that time we had 25 entrepreneurs and business leaders working together on this mission. In 1999 we set up ICE with 42 members. We wanted to educate the business community and promote its involvement in the initiatives and projects of the Third Sector.

Our activities focused on two projects. One was a collection of books called “Management & Sustainability”, geared to promoting management skills among NGOs. The seven-volume series sold 17,000 copies. Two thousand more were donated. The other was Projeto Arrastão, a program of environmental education.

24

This year we have launched a project in a municipal housing complex at Real Parque, involving 10,000 poor families. We are working with health care, education, art, and youth entrepreneurship. Our partners are the state government and the local community.

Our approach has changed to some extent. In the past we wanted to impose our own beliefs. Today our work with adolescents, daycare centers, training programs involves offering what you might call a package to promote and democratize relations with and within the community. The community decides what it wants.

The members of ICE are our strongest partners, but we have other precious collaborators, especially Fundação Alcoa, the São Paulo Business School, CENPEC, and Instituto Camargo Correa, among others.

Instituto Camargo Corrêa

Instituto Camargo Corrêa (ICC) was founded on December 22, 2000. Like most Brazilian companies, Camargo Corrêa donated funds to the social sector without a clear focus. As a result the company was unable to obtain the expected results. With the support of its shareholders the company created ICC as a nonprofit channel for its social investments, with the mission of promoting the personal and social development of poor children and youths, and enabling them to develop their potential.

We want to invest our resources and promote the best transformation possible, as well as stimulating voluntary service by members of business organizations. We want to play a more active part in the communities where the companies operate. Our own organization is present throughout Brazil, in very distant communities where everyone is poor. So our employees play a fundamental role. It was with their help that we discovered our mission.

We asked 717 employees to complete a survey questionnaire and tell us what the focus of our social investment should be. They chose education, culture and health in the areas where Camargo Corrêa operates. Camargo Corrêa has been focusing on these issues for a year and a half. We want to make a difference for our country in the near future.

25

Social Responsibility is Part of Management’s Responsibility

Jayme Sirotsky, President, RBS; President, Fundação Maurício Sirotsky Sobrinho

Everyone has a reason for pursuing social involvement. My reasons come from my family and cultural background. In fact, I would not be here today if it were not for charity. When my parents came to Brazil in 1913, they did so through a charitable institution that helped Russian Jews to escape the Tsar.

The Hebrew word tzdakah can be translated literally as “virtue” and is normally understood simplistically as charity. But tzdakah is more than that. It means justice as well as charity. This charity and justice enabled Rush Barent, a German philanthropist, to set up a nonprofit institution that acquired land in the South of Brazil and in Argentina for donation to Russian Jews who had fled Tsarism.

Today we are a multimedia group that operates mainly in the South of Brazil, comprising broadcast and cable TV, radio, newspapers and the Internet. As a media organization we have very specific characteristics in comparison with other business organizations. We mediate relations in our community. We mediate relations among people and institutions. We mediate relations among processes, culture and the public interest.

As a result, we contribute to the creation of a collective identity. We are acutely aware of our social responsibility. For a long time we have monitored 70 indicators of social responsibility. We use information from Instituto Brasileiro de Análises Sociais e Econômicas (Ibase), Instituto Ethos de Responsabilidade Social, and city governments in our home state of Rio Grande do Sul. The RBS group has also developed some indicators itself.

As part of the management process, RBS has a number of committees that focus specifically on social responsibility. The main committees operate in the states of Santa Catarina and Rio Grande do Sul, and are known as “Social Responsibility Community” and “Quality of Life Group” respectively. Other groups are responsible for drawing up the group’s “social balance sheet” using the indicators mentioned earlier. Social responsibility is evidently an important area for our human resources department.

Social responsibility is very much part of the RBS group’s management culture. It has always been so because of our family background. We are very proud of the group’s social balance sheet, which is now into its sixth edition. We publish this document which consolidates information about everything we do as well as the activities we develop with the communities.

Strong ties to the local community

RBS has strong ties to the local community. This is one of the group’s core values. As a result, we have a community that monitors the news coverage delivered by the network’s vehicles. We often create and present targeted products in accordance with what the community wants. Examples include the Comunidade ZH supplement inserted in the Zero Hora newspaper in Rio Grande do Sul, and the Passaporte Social and Comunidade RBS programs aired in Rio Grande do Sul and Santa Catarina.

26

Last year we donated 17 million reals worth of free commercials to various social programs. We provide direct support to a number of non-governmental organizations by publishing their history. And we encourage our executives and employees to participate in several NGOs in the South region.

Of course we support Fundação Maurício Sirotsky Sobrinho, founded 20 years ago under the name Fundação RBS. After my brother died we changed the name as a tribute to him. The foundation runs a number of programs for children and adolescents.

We believe that social responsibility is part and parcel of the management of our business activities. It is part of our business culture. We also believe in the power of partnering with other companies, with government, and with the community.

A good example is the hospital under construction by Santa Casa with the support of RBS. By publishing ads and stories about the work done by the entity we helped to raise 8.4 million reals in 12 months for an investment of 5 million reals in media. Altogether the project is supported by 94 companies. Fundação Maurício Sirotsky Sobrinho has donated 350,000 reals directly.

In 2001 the RBS Group invested 19.8 million reals in social programs and projects, or 3.61% of net revenue. Investment in the Foundation totaled 2.8 million reals. Profit- sharing amounted to 7.9 million reals, 46% more than in 2000. Investment in personnel development and training rose 60% to 2.7 million reals. And we worked even harder to comply with the law on employing people with disabilities: the number increased from 11 to 97 in the year.

Fundação Maurício Sirotsky Sobrinho is extremely active and its executive director, sociologist Leo Voigt, was elected president of GIFE.

In sum, social responsibility is part of our management practices and part of our corporate culture. I see this as the way forward for Brazil. We need an active Third Sector, over and above circumstances and ideological differences.

27

V. BUILDING A PHILANTHROPIC LEGACY FOR FUTURE GENERATIONS

One of the most visible results of the 1992 Earth Summit held by the United Nations in Rio de Janeiro was globalization of the expression “sustainable development”. This term explicitly states the need to conserve environmental wealth so that there are opportunities for future generations. But it is equally important to stress this generation’s responsibility toward future generations regarding the values intrinsic to human beings.

The family and its extension, the community, are key elements in the transfer of values from one generation to the next. This chapter shows the importance of these values for people who realize that the legacy they pass on to future generations must be much broader than a financial inheritance alone.

The Multiplier Effect of Organized Volunteerism

Maria Elena Pereira Johannpeter, President, Parceiros Voluntários

Parceiros Voluntários is a non-governmental organization whose work is based on a concept developed by the Colombian sociologist Bernardo Toro, according to which every social order is created by the members of that society and each citizen’s actions or inaction contribute to the formation or consolidation of that social order. For this reason, Parceiro Voluntários focuses not on a social program, a company, a school or a community but on people, on their actions or on their failure to act.

We believe social responsibility is an attribute of every human being. If each person sees himself or herself as an agent of change, we will succeed in changing the world.

When I make presentations to business leaders and entrepreneurs, I usually provoke them by asking whether we switch on our brains and our ability to develop solutions for our organizations only when we are paid to do so. At the end of the workday, do we “zip up” our brains and stop thinking altogether? Or are we citizens with a capital C, who think and act for the good of the community? This is constructive egoism: I want everyone to be OK because then I will be OK too.

I believe we have four legacies: cultural, technological, economic and holistic. None is more important than the others, but the holistic legacy synthesizes everything we aim for. We are talking about human beings here. I would like people to include participation in the community among their principles and values. I want them to stop expecting the state or private enterprise to provide everything for them. To stop expecting other people to look after them. To start expecting more of themselves.

Our most important legacy will be the consolidation of a culture of organized volunteerism in companies, schools and the community in general. Volunteerism has always existed ever since Brazil was discovered. The difference is organization: people joining forces with other people in pursuit of solutions.

Amateurism, volunteerism: these are outdated words. Volunteers must put their hearts into whatever they do, but they also need to be focused and professional.

28

A solidarity network

Parceiros Voluntários works with 600 nonprofits for the poor that are not supported by any other donors and are not self-sustaining. Our job is to strengthen them institutionally so as to become strategic actors in a consolidated Third Sector.

This solidarity network of organizations that lack funds is extremely important. We need to show society that this activity is happening and why it is so important.

Part of our mission is to locate knowledge and deliver it to these organizations. The knowledge they need can be in many places, in companies and universities as well as individuals.

We believe business organizations can play a significant role by encouraging employees to engage in voluntary service. When a company focuses exclusively on the market, it reaps benefits only for itself. It is alone. When it includes the social in its production chain, it begins to transform the world around it.

We also believe our economic legacy consists of the multiplier effect of social investment. Parceiros Voluntários aims to multiply every cent invested by its donors. According to our calculations, every real invested becomes 22 reals in hours of voluntary service.

Compare that with taxation. Only 20 cents in every real we pay in taxes comes back to the community. That is the opposite of multiplication: it is division. Each child costs 150 reals per month for a daycare center that serves five meals a day. A senior citizen living at a retirement home costs 300 reals per month in terms of accommodation, food and medical care. But every under-age boy or girl detained at the Febem unit for young offenders in Rio Grande do Sul costs 1,500 reals per month.

Peter Drucker, one of the greatest of today’s thinkers in the field of business management, likes to say that the best product for a nonprofit organization is a better human being. The vision of Parceiros Voluntários is to develop the culture of organized voluntary service in Rio Grande do Sul, expanding and qualifying the activities needed to meet social demands.

Some people see things as they are and ask why. It is a way of complaining, is it not? Why doesn’t the Government do this, why doesn’t the company do that? Why are things the way they are? Bernard Shaw said, “I dream about things that have never existed and ask ‘Why not?’” If you have never done that, now is the time to begin.

29

Alliance Among Three Sectors Gets Better Results

Viviane Senna, President, Instituto Ayrton Senna

It is a great privilege to make dreams come true. Especially when those dreams mean, as they often do, the difference between the life and death of a child or young person, snatching a child from the grasp of malnutrition and hunger and placing it in the embrace of proper nourishment, removing it from the clutches of cruelty and giving it to the embrace of education, health and dignity.

We cannot go on sitting back and watching what has been happening in this country for the last 500 years. This is our country. It is up to us to do something to change it. It was this discomfort that motivated my brother exactly eight years and two months ago to ask himself what he could do to help the country he loved.

Like all of us in this room, he too had no idea where to begin, what to do. Two months before he died, Ayrton called me and said, “Vi, I want to do something. I don’t know what. I don’t know where to begin. But I know how.” He had just launched the children’s character Senninha and now he had the idea of investing a percentage of the royalties in a social project. I am a psychologist and have always been a social worker, so he asked me how to proceed. “Think about it,” he said. “I’ll get back to you later.”

Unfortunately we never had that second conversation. He didn’t have the chance. My family and I decided to make Ayrton’s dream come true. We decided to sow the seed. To do that we set up a foundation to provide organized and systematic assistance. It was to be funded by donation of the royalties on Senninha as well as the Senna brand and Ayrton’s image worldwide. This three brand names are owned by a company called Ayrton Senna Licensing, which he set up some time before his death to provide a living when he retired from car racing.

So we are not a company that controls a foundation. We are a foundation that controls a company. All the revenue generated by the company is invested in social projects. So when someone buys a product bearing the brand name Senna or Senninha or Ayrton’s image, they buy an excellent product but they also buy education, healthcare, dignity and a future for thousands of children.

A mother who buys Senninha sneakers produced by Grendene buys an excellent product for her child. But she also buys education and healthcare for children who aren’t lucky enough to have her as a mother. This is the strategy we developed to make his idea of “doing something” financially viable.

A bridge between two “Brazils”

But there is also an intangible source of revenue: Ayrton’s image, which is enormously highly valued everywhere in the world. This too is a very valuable asset. So the Institute began with these two assets. The image has a very strong impact on children and youngsters as well as teachers, supervisors, governments and the business community. This power is placed at the service of our cause, human development for children and young people.

30

We embraced this cause because we believe it is the biggest challenge for Brazil. Brazil is at one and the same time the tenth-largest economy in the world and 69th in the Human Development Index league table. This is as if we were an economic Switzerland combined with a social Afghanistan.

The gap between what we are and what we miss out on being is the great challenge we face. So what must we do? Close the gap between 10 and 69. This is our structural challenge. We must build a bridge to close the chasm between being the tenth-largest economy and ranking 69th in human development.

The formula Brazil has adopted so far is to expand its economy and worry about social development later. The numbers clearly show this has failed. Any economist will tell you that our GDP would have to grow 5% per year for the next 20 years uninterruptedly if we were to close the gap enough to achieve a reasonable level of human development, comparable to a poor European country. That is impossible.

Three sectors united for a cause

The mission of Instituto Ayrton Senna is to lay the foundations for human development among children and young people, to enable the new generation to make a good start. We have two complementary strategies. We started with direct action, running social projects in healthcare and nutrition, education, vocational training, sport, art, and physical, moral and psychological integrity. But we soon realized that we would not be able to address all these issues satisfactorily. At the time we already cared for 40,000 children, most of them on the outside.

So we started looking for projects with a multiplier effect so as to make better use of the funds invested. We discovered that getting others to take action is just as important as taking action yourself. Getting the First Sector (government) and the Second Sector (private enterprise) to act. Encouraging society in general to feel jointly responsible for creating opportunities.

We then embarked concurrently on another strategy involving what we call social mobilization, pedagogy and advocacy. We use Ayrton’s image here too because of its tremendous impact in the sphere of communication.

The projects include Acelera Brasil (apprentices), Se Liga Goiás (literacy), Escola Campeã (school management), and Escola 2000 por Hora (information technology in schools). They are all geared to improving the quality of public school education and altogether they involve 228,000 children.

Investment started with 1 million reals and reached 15 million reals last year. Running costs correspond to only 13% for all these projects. We have a lean structure with only 20 full-time professionals.

I believe we have built a strategic alliance that unites the three sectors — government, private enterprise and civil society — all working together for the same ideal.

31

The Inheritance Our Children Offer Us

Victor Siaulys, President, Laboratórios Aché; Chairman, Associação Laramara

This quality of being a visionary, of passing on a worldview, is part of my soul, our company, our family. We do not give money away. We do not distribute resources. We take action, participating in the day-to-day life of the community.

My wife knows by name every single one of the children assisted by Associação Laramara (the Brazilian Association for the Visually Handicapped). And every one of them knows us. Not that they can see us, but they touch us and hear our voices.

My company and my social work are indissociable. I use visiting cards printed on both sides, like the Japanese. On one side is Laboratórios Aché and my job title in the company. On the other it says Laramara.

I looked up the word herança , “inheritance”, in one of our best dictionaries, known simply by the last name of its author, Houaiss. Here is what it says: “Inheritance is one of the most highly valued institutions in capitalist societies.” Then it goes on: “The estate, assets, rights, debts bequeathed by a deceased”. The third definition is figurative: “Legacy passed on by parents”.

Viviane Senna has just enchanted and moved us precisely because she is privileged to have had a brother who was a national hero. I also had a hero: my father. I am the child of semi-literate parents. My mother could neither read nor write. They were poor Lithuanians. My father came to Brazil when he was 20. At the age of 21 he accomplished a tremendous feat which gave him great joy: he was hired as a factory worker by the Matarazzo group.

In my opinion the history of Mankind can be analyzed from the standpoint of the history of dynasties and heirs, don’t you agree? Inherited wealth, property passing from father to son. And typical of Brazilian history is the story of the Matarazzo family, the Matarazzo dynasty, owners of what at one time was the biggest fortune in South America! Matarazzo arrived in Brazil aged 27 as a poor immigrant, like my father. He left an inheritance of 180 factories and 13 children.

The Siaulys family inheritance

Count Matarazzo may not have known it but for several reasons, maybe the post-war economic depression included, old Jonas, my father, ended up being fired for just cause when he was 42. They said he was a communist. I don’t know if he was. But as a factory worker and making the wage he made on night shift, he had to be a communist because he certainly wasn’t a capitalist, I’m quite sure of that!

The fact is that my father was left without a job and without any money. Being fired for just cause means you don’t get severance pay. I was 13 at the time but I have no recollection of the crisis. It just didn’t affect our lives at home. No one realized we were living a tragedy. That was the brilliant magic of our family: we have an extraordinary ability to delude ourselves and tell ourselves everything is OK.

My father began doing odd jobs and eventually found temporary work at Fabrini. I used to love taking him his box lunch. I also made some money doing shoe repairs at home. I bought leather, cut it, got hold of those boot-trees. I helped the old man out. 32

So what was his fortune? What was the inheritance he left me? A house built of spit and clay, as he used to say. Because he worked nights, he rested during the day by carrying bricks to build his home. And he built such a big house it could have been the Matarazzo’s chateau as far as we were concerned. It was so huge that he rented the whole ground floor and the rooms at the back. The rent kept us all alive while he was unemployed.

Then something totally unexpected happened. My father and 20 other people who had been fired because they were considered subversive found a lawyer. He was a sharp attorney with the Chemical Industry Association. He had an office downtown on Rua 25 de Março. This lawyer dared to take the mighty Matarazzos to court. He had the nerve to sue the most powerful corporate legal department in the country — and he won!

Believe it or not, he won! Yessir! We became millionaires! My dad’s damages and severance pay made millionaires of our family. Now the ex-factory worker became an entrepreneur. He and my uncle set up a small business. This was the first corporate experience of the Siaulys dynasty. They bought a little truck, put up a stall at the street market, and got us all to go and sell fish. From the age of 15 to the age of 20 I sold fish at the market together with my father.

It was a wonderful experience. My dad was a lousy businessman. My uncle was a great businessman. My uncle had no money. My dad was rich. He had all that money from the lawsuit. It was a perfect partnership. Above all, they needed each other, they needed to know they weren’t alone. We all did. Each of us needed the others. This is a basic human need. The need to be together, not to be all-powerful.

The creation of Laramara

What did my dad leave me when he died? The house he built. The house where I was born. The roots of the family’s principles and values were planted there. And that was where we planted something too, represented by Lara, my blind daughter, and my wife Mara, an educator: Laramara.

We started a project that we saw as a big personal challenge. Nothing to do with the business. It happened only because of one person. A person who was born premature and hence malformed. She weighed exactly 1 kilogram at birth! My wife bought doll’s clothes to take to the hospital, Hospital Albert Einstein. That was our daughter Lara, who changed my life.

Every entrepreneur, as well as being mad, an adventurer and a visionary, is always a little bit arrogant. Ever wanted to kill an entrepreneur? Just tell him he isn’t a winner. He has to be because our civilization worships winners. Losers get no mercy. And every entrepreneur, even when he’s broke, will tell you, “I’m a winner!”

I always saw myself as a winner. Until I took my first tumble. Then I said to myself, “Kid, you’re not a winner, you’re a human being! You’re human, just like everyone else. You have all the limitations that come with being human.” Someone once told me about an Oriental proverb that says every problem is God’s work. God poses problems to test our capacity to solve them. If there’s a problem, it’s because there is a solution.

We marketing men also have to learn that problems are where the opportunities come from. An industrialist friend of mine says, “When I see there aren’t any problems in my company, I invent one.”

33

We often speak about the legacy we plan to leave to our children. So let me ask you: What do our children leave us? What have my wife and I learned from Lara? Obstinacy, courage, determination. She never gives up. She has an impressive sense of discipline. Lara travels alone. She and her white stick. She has the courage to do that. The courage to do anything.

Close your eyes for a few moments and try to find the toilet. Try to put toothpaste on your toothbrush. Try to put on the right blouse with the right skirt. Put on your stockings, spread butter on your bread. Blind people learn things with incredible ease. All the time in our house you hear things like this: “Lara, get me a napkin, please.” Beware: if you try getting the napkin for her , she’ll throw a fork at you.

Lara was brought up to be independent. She was brought up to have the only two principled things that are essential: roots and wings. Deep roots.

This dynasty was born in a home built of spit and clay bricks. Built by a stubborn, brave, poor immigrant who couldn’t speak a word of Portuguese when he came here without a penny to his name.

I would like to close by telling a story that shows how important solidarity is. And that applies to everyone.

A man dies and goes to heaven. The guy on the gate isn’t sure if he was really a good man. Should he go to Purgatory or Paradise? An angel is sent to take him down to Purgatory to test him. There he finds a table groaning with delicious food and drink, silverware, crisp linen, the works. There are beautiful women there, too, but they’re all weeping and wailing.

He takes a closer look and notices that everyone there has inturned elbows. They can’t put any of that wonderful food or drink in their mouths. Horrified, he rushes away and says to the angel, “For God’s sake, show me Paradise!”

Paradise also has a table groaning with delicious food and drink, just like Purgatory. Everyone is content. But looking closer he realizes that just like the people in Purgatory, the people in Paradise also have inturned elbows. There is one small difference, however: they’re helping each other to eat and drink.

34