Social Investment Funds in Latin America

By Jasmine N. Burnett

Graduate Student, Indiana University Center on Philanthropy (Fall 2005)

Definition

Social Investment Funds (SIFs) in Latin America are short-term funds that were created through private sector managers to alleviate the negative social impact on the poor. All of the funds are small, special units of the government organized to make social investments in the community (Inter-American Development Bank 1998). The goal of these funds is to provide the financial resources to tackle social problems in Latin American such as poverty, employment and sanitation.

Social Network(s) are organized to promote and develop cooperation among social investment funds and other poverty alleviation institutions in the region in order to facilitate the implementation of programs and projects that improve the efficiency and equity of social interventions (Gillings 2004). Social networks capitalize on the points of intersection between social investment funds, communities, and municipal services.

Social Infrastructure Projects are projects that are funded by the social investment funds, which generate employment to inspire long-term social benefits. A large part of the resources are assigned to the construction of social infrastructure projects executed by private contractors who must fulfill certain minimum requirements of employment generation and remuneration (Wurgaft 1995). These projects create lasting community sustainability and growth through the employment opportunities, as well as, the employees being paid a regulated compensation.

Community Development is the process whereby the efforts of the people are joined with those of governments to improve the economic, social and cultural situation of communities, so that they may be incorporated into the life of a nation and be equipped to make their full contribution to the nation’s progress (Inter-American Development Bank 1966).

Historic Roots

Social Investment Funds are funds that were created through a number of governments in Latin America, and are administered by politically neutral members of the private sector to address the unequal distribution of wealth, primarily, to the poor. The necessity for these funds began in 1980, and the intended use was as “emergency funds”; however, a series of economic recessions warranted long-term involvement in complicated social, political, and economic issues in Latin America. In fact, the United States House of Representatives was presented with a Bill, February 2005, titled Social Investment and Economic Development Fund for the Americas Act of 2005, which would authorize the establishment of a fund to assist Latin America. Although, the impact of the debt crises is a present issue, the SIFs in Latin America have been successful in providing the means for community networks to emerge. More than providing financing, these contributions aim at expanding “project ownership” by communities thus improving the effectiveness and sustainability of the projects (Siri 19). Citizens in Latin America have formed community networks, which have been necessary in identifying project areas specific to their communities. The Funds have been seen more as instruments to improve the living conditions of the poor than as generators of income for them (Morely et al, 1998).

Importance

Social Investment Funds have far reaching effects that expand beyond the current measurements of success. These funds have created a new approach to poverty in Latin America in how it engages its citizens in the direct organization and provision of programs for employment, education, and health. The funds are not only providing a solution, but are also increasing awareness of organizational development and are building networks of trust within the communities. Community trust is important when the reasons that attribute to the long-term effects of poverty are still present more than twenty years later. Hopefully, the community networks that have formed as a result of the SIFs work to maintain the success of the social infrastructure projects. Social Investment Funds provide new solutions to old problems and those solutions are determined by the people who are directly affected.

Ties to the Philanthropic Sector

Social Investment Funds are successful through philanthropy. The financial and professional contributions from the private sector have given rise to community associations and have also formed partnerships with government, private, and local Non - Governmental Associations. For example, the financing support for the projects is administered through local NGOs. The NGOs thereby, provide the infrastructure for the informed vision of the local citizens. With this model, the citizens learn through participating in the community restructuring process and have bought in to the concept of building relationships, partnerships, and community. More importantly, SIFs have provided a space for the citizens to grow through the power of shared experience and the natural camaraderie present as a result. The fund strengthens the personal, organizational, and managerial skills of poor individuals and communities by encouraging the public and private sectors and NGOs to provide opportunities for the poorer sectors to increase their social integration and to participate in the market and society as producers, workers, consumers, and citizens (Siri 1996, 8).

Key Related Ideas

Social Capital refers to the norms and networks that enable collective action. Increasing evidence shows that social cohesion — social capital — is critical for poverty alleviation and sustainable human and economic development (World Bank Group 2004).

Sustainable Development is defined as "development that meets the needs of the present generation without compromising the ability of future generations to meet their own needs" (Sharhan 2000, p. 44).

Important People Related to the Topic

Since social investment funds and the investigation of their residual benefits is in a process of development; many contributors to the subject did/are exploring this topic in its infancy; therefore, those important people related to social investment funds include but are not limited to the following:

• Gonzalo Aguirre Beltran (1908-1996): Gonzalo Aguirre Beltran was trained as both a medical doctor and an anthropologist, spent much of his career in government service in his native Mexico. As director of the National Indian Institute and as Assistant Secretary for Popular Culture and Extra Curricular Education, he was responsible for charting and implementing indigenous policy in Mexico for nearly three decades.
  
  
• Philip J. Glaessner (birth not available): Glaessner is the Deputy Assistant Administrator for Capital Development of the Bureau for Latin America, an Agency for International Development; from March 12, 1964. He is also Director of the Office of Capital Development and Bureau of Inter-American Affairs of the Department of State.
  
  
• Scarlette Gillings (birth not available): Gillings is the managing director of the Jamaica Social Investment Fund and speaks regularly on the impact of social networks and its measurable impact on social investment funds. Mrs. Gillings is also a founding member of the Caribbean Association for Feminist Research and Action.
  
  
• Gabriel Siri (birth not available): Siri is a social fund specialist, international development expert and consultant based in El Salvador. Mr. Siri has done extensive research on the social investment funds model and has provided comprehensive research on the impact these funds have on the communities.

Related Nonprofit Organizations

• ACCION is an international organization that provides business training and “micro” loans to women and men who start their own businesses in Latin, Caribbean, and African countries. The provision of these resources is fundamental in building and restructuring communities. This website provides access to the entrepreneurs who actually own businesses in developing countries (www.accion.org).
  
  
• Caribbean Association for Feminist Research and Action (CAFRA) is a regional network of feminists, individual researchers, activists and women’s organisations that define feminist politics as a matter of both consciousness and action. This website provides articles and access to information on issues surrounding women’s health, history, and livlihood in Caribbean countries (www.cafra.org).
  
  
• Indigenous People Survival Foundation (IPSF) is a non-profit organization that helps indigenous peoples around the world, regardless of origin, race, religion, nationality, or gender. IPSF provide resources for social justice issues that affect the indigenous people in Latin America (www.indigenouspeople.org).
  
  
• Third World Network is an independent non-profit international network of organizations and individuals involved in issues relating to development. This network provides access to up to date papers and reports on the development of Latin American and other developing countries. (www.twnside.org.sg/).

Related Web Sites

Inter-American Development Bank Web site, at www.iadb.org/ provides research and publications on programs and tools that work collectively to fight poverty. This website is the main source of multilateral financing for economic, social and institutional development projects as well as trade and regional integration programs in Latin America and the Caribbean.

The United Nations Web site, at www.un.org/ is an international resource for countries across the world. This site provides information on economic and social affairs related to Social Investment Funds. The research on this website is helpful in providing information on key issues surrounding social investment funds and projects.

The World Development Bank Web site, at www.worldbank.org/ contains information on projects that are being implemented in developing countries. This site also includes detailed project profiles and an extensive research database of projects financed by the World Development Bank.

Bibliography and Internet Sources

Beltran, Aguirre Gonzalo. “Community Development,” Inter-American Development Bank, Community Development: Theory and Practice (1966): Inter-American Development Bank Roundtable, 1-9. ISBN: 39000010703663.

Gillings, Scarlette. “The Social Network of Latin America and the Caribbean: Actual and Potential Benefits for the Caribbean Region, 1st Meeting of the Inter-American Commission for Social Development, 2004. www.oas.org/udse/cides/espanol/
web_cic/SGillingsCIDESSocialNetworkCaribbean.ppt.

Glaessner, Philip J. “Poverty Alleviation and Social Investment Funds: The Latin American Experience.” World Bank Discussion Papers, 0259-210X; 261. Accessed 14 November 2005 IUCAT Net Library online database.

Morely, Samuel et al. “A Strategy for Poverty Reduction,” Social Programs Division International American Development Bank, 1998. www.iadb.org/sds/doc/956eng.pdf.

Sharhan, Alaa. “What will it take to develop sustainable information societies in the Third World?” In Report of the Conference on 21-22 February 2000: Towards a Sustainable Information Society by Peter Johnson, Erik Bohlin & Bernard Clements. Göteborg: Chalmers University. www.cbdd.wsu.edu/kewlcontent/cdoutput/TR501/page59.htm.

Siri, Gabriel. “Employment and Social Investment Funds in Latin America.” International Labor Organization, 2000. www.ilo.org/public/english/employment/recon/eiip/download/
setp/setp07.pdf.

Social Investment and Economic Development Fund for the Americas Act of 2005, www.thomas.loc.gov/cgi-bin/bdquery/D?d109:953:./list/bss/d109HR.lst:@@@L&summ2=m.

Wurgaft, Jose. “Social Investment Funds and Programs in Latin America: Their Effects on Employment and Income” 1995. www.ifpri.org/pubs/books/vonBraun95/vonBraun95ch09.pdf.