Is poverty a business issue?

“Crises have devastating social effects and the number of poor people in Latin America is higher today than in 1980 while worldwide have decreased. Poverty is an ethical problem and also delays economic growth.”

In my book, Global Latinas*, published in 2009, I asked the following question: should poverty alleviation be part of the Corporate Social Responsibility programs of Latin American multinationals?

Almost ten years later, poverty continues to be a major issue in Latin America. At the same time, many Latin American firms continue to succeed globally with strong leadership. Their founders’ visions often included a social dimension by engaging with employees and local communities to improve their social conditions through housing, education, and special health benefits. However, this vision is often forgotten.

If we look at numbers and in spite of the improvements during the Latin America’s Golden Decade, the 2017 Social Panorama of Latin America by ECLAC (United Nations Economic Commission for Latin America and the Caribbean) states that poverty levels have increased from 168 million in 2014 to 186 million in 2016 (30.7% of the region’s total population) and, within those figures, people living in extreme poverty rose from 48 million to 61 million (10% of the total population) over the same period of time.

The different economic crises, including the recent one, have devastating social effects, and the total number of poor people is higher today than in 1980 while the total numbers of poor worldwide have decreased. Many of those who work have no choice but to work in the informal economy with no rights; their work is essential to provide food and a precarious shelter (often in a shantytown) for the family. Poverty is an ethical problem and also delays economic growth. In our service-based economies, countries need citizens who purchase cars, mortgages, holidays.

Their consumption works as a domestic engine for growth and as ‘shock absorbers’ in times of crisis.

On the other hand, we look back at the corruption scandals that have engulfed not only the reputation of many companies but also that of governments in 2017. Currently, 87 companies of those traded in the US are under investigation under the Foreign Corrupt Practices Act (FCPA). Twenty-six, or 30% of them, are from Latin America. Brazil alone accounts for 20% of the total list. The scandal around the Brazilian construction company Odebrecht has been shaking governments and business leaders in Mexico, the Dominican Republic, Venezuela, Colombia, Ecuador, Argentina, and Peru.

Hence, reputation is at an all-time low and trust is a scarce commodity while it is the most needed because it ‘allows’ companies to operate. In this context, Corporate Social Responsibility programs need to take into account their social impact and how they contribute directly to the reduction of poverty. Examples abound on how to do it, either through training, microfinance, secure employment, good environmental policies, or local and fair sourcing from indigenous populations, among many other initiatives.

It is time to act because the future of a cohesive and thriving region depends on governments, civil society, and on what their business leaders will do. It is urgent that business leaders become part of the solution to the social problems in the region.

LOURDES CASANOVA, Senior Lecturer and Director Emerging Markets
Institute, S.C. Johnson Cornell College of Business, Cornell University.
[email protected]

This article was published in WEF 2018 edition of Latin Trade

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