5 takeaways from the 2018 World Economic Forum on Latin America

SÃO PAULO, Brazil — Latin America has long been considered a region on the brink of great success and prosperity, but corruption and mounting inequalities plague many of its countries, and solutions aren’t easy to come by — even if the problems are increasingly easy to identify, as they were last week at the World Economic Forum on Latin America.

Discussions at the summit, which often included the perspectives of the host country Brazil, delved into the region’s corruption problems, what can be done to address them, and what leadership is needed today. Attendees also gathered for working sessions on issues such as financing and implementing the SDGs, and to learn more about the impacts of the growing crisis in Venezuela. Now that the summit has ended, here are some of the key takeaways.

Governance and accountability

Corruption is nothing new to many countries in the region, but what has started to change in recent years is the beginnings of legal accountability for those actions.

Speaking at a session about corruption, Delia Ferreira Rubio, the chair of Transparency International, noted that increasing prosecutions are helping reduce the culture of impunity and break cycles of corruption. Countries need rule of law and independent judiciaries to allow for the prosecution of corruption and they should be empowered to crack down on conflicts of interest. Another core issue is a need to reform how politics is funded.

There were several discussions about how technology can help in that process. In Brazil, for example, technology, including blockchain has been used to allow citizens greater access to government data. It can be used for secure digital identification and to help identify corruption in tenders and track public funds, said Paula Bellizia, Microsoft’s general manager in Brazil.

A new Tech for Integrity platform, a partnership between WEF, Citi, the Inter-American Development Bank, Transparency International, and others, was launched at the meeting in an effort to accelerate anticorruption efforts and reduce the time needed to make an impact.

Mexico is one of the most corrupt countries in the world, said Denise Dresser, a  faculty member of the department of political science at the Instituto Tecnológico Autónomo de México, and it has a lot of experience with challenges of combating corruption. Part of the problem is the institutional infrastructure and a need for government accountability mechanisms, but corruption is generally the result of some collusion between public and private sector coupled with social indifference, she said.

To lessen corruption requires getting the private sector to stop engaging in corrupt practices, as well as mobilizing and educating society and encouraging them to vote out corrupt politicians. And there is a clear economic case — in Mexico, corruption accounts for 9 percent of the country’s gross domestic product, Dresser said.

Business with purpose

An interesting debate or exchange unfolded about the purpose of businesses, and how businesses need to be driven by a social or environmental purpose rather than just by financial returns. Participants discussed how companies, in particular multinational corporations, define their purpose and how some countries in Latin America are looking to incentive businesses that focus on a collective social or environmental purpose.

Part of the motivation behind having a purpose is employee retention and productivity.

Paul Bulcke, Nestlé’s chairman of the board, said that his company’s purpose has long been about enhancing quality of life through nutrition, and that the company’s overall purpose and values haven’t changed much over the company’s 150-year history.

Esteban Bullrich, a senator from Buenos Aires, pushed back against Bulcke, saying that companies, particularly multinationals, have not always lived up to a purpose and that their purpose should be reviewed for today’s needs and should align with a collective societal purpose.

In Argentina, a new bill in Congress is looking at how to provide incentives for benefit corporations, as part of a broader approach to reducing poverty. “The purpose of the law is to create a framework and incentives to have other measures of business success, not only profits,” Bullrich said.

A big part of the challenge is that companies today receive pressure from investors to maximize profit, which it seems often comes with other risks. But Karina Saade, the chief operating officer for Latin America and Iberia at BlackRock said that she doesn’t see purpose and profit as mutually exclusive and that companies with a defined sense of purpose have better success in the long term.

“If people are not getting paid for generating social or environmental impact, everything else is poetry,” said Gonzalo Munoz, the co-founder and chief executive officer of TriCiclos, a social enterprise focused on the circular economy. “People will do most of the time what they are paid to do.”

That means that people need to be compensated or paid to achieve social or environmental impact, and in order to do that well, impact has to be measured.

“We need to change the culture from a unidimensional to a multidimensional economy,” Munoz said, adding that social and environmental impact must be in a company’s bylaws, otherwise it may or may not happen over time.

Financing the SDGs

There was much discussion of business models, and current methods for engaging the private sector in development, along with what types of companies are getting funded and how that impacts future financing for the Sustainable Development Goals. In several discussions on the issue interesting conversations emerged, some around specific requirements to help boost blended finance or private investment, but others that were bolder and more disruptive.

Much of the effort today is spent on getting businesses that are profitable to also be good for people and the planet, rather than helping businesses that are good for people and planet to be profitable, noted one group in a session operating under Chatham House Rule. The challenge is that profitable businesses lack some of the fundamental incentives to do good for people and planet, which begged the question of whether today’s economic system is viable in the long term. Some suggested that instead of upgrades, the model needs a whole new operating system where incentive structures are fundamentally different and reward social performance.

“If we scale the model that led us here, we scale the same negative externalities,” one of the participants said. “You can’t get to sustainability with [the] same institutions that got us here.”

While perhaps not radically changing the world’s economic systems, some countries in Latin America are beginning to experiment with legislation or public programs targeted at defining and incentivizing social business and helping to improve impact investing ecosystems in their countries. One example is Argentina, where a new capital markets law is being considered in congress that would provide incentives for for-profit B corps with certified social and environmental goals, Bullrich said at the conference.

As the world moves forward to catalyze more private finance and create more blended finance deals, there are several key factors that are needed: Impact needs to have a monetary value, rules standardization and predictability are key, regulation needs to be adaptable as technologies change, and there need to be more trusted brokers for those deals.

To tackle one of those issues, a group of partners have created the World Benchmarking Alliance, which aims to develop, fund, house, and safeguard publicly available corporate sustainability benchmarks aligned with the SDGs.

And in the region the United Nations Economic Commission for Latin America and the Caribbean, or ECLAC, is working to help countries figure out their existing resources and systems. Alicia Bárcena, the executive director of ECLAC said that the organization is focused on helping countries incorporate and integrates the SDGs into their national plan, connecting that to national budgets, helping countries identify what indicators they have and what they may need to start collecting, as well as helping countries evaluate partnerships and mobilize domestic resources.

Migration and refugees

As the region looks to find ways for equitable growth, it is also grappling with a growing humanitarian crisis. More than a million Venezuelans have left the country in recent years — the largest displacement of people in Latin American history, according to the United Nations.

Brazil is no stranger to the impacts — tens of thousands, potentially up to 100,000 Venezuelans — are now within its borders, and the state of Roraima, which borders Venezuela has absorbed the most refugees. While it doesn’t have the more than 600,000 Venezuelan refugees and migrants that Colombia does, the country is trying to put in place programs to help. The situation is also a test for Brazil’s new law on refugees and migrants, which passed last year.

The Brazilian government has provided funds to the Ministry of Defense and is working to provide the migrants with access to food, health care, education, and job training, Brazil’s Minister of Industry, Foreign Trade and Services Marcos Jorge de Lima, said at the forum. The government also announced a partnership with Ericsson and Vivo to set up 100 computers to provide access to internet and provide education opportunities to children in the Roraima region and create a lab to train people for jobs.

One of the key problems in Brazil is that there is a fragmentation and a lack of integration of public policy when it comes to refugees, said Sergio Andrade, the founder and executive director of Agenda Publica, a Brazilian organization working to promote cooperation between governments, businesses, and civil society to solve public problems.

The government, across different departments, and at the state and local level, must have a concerted and coordinated action, said Andrade, who is helping the state of São Paulo to develop a new strategy for refugees and migrants.

While the government of Brazil seems to be making some of the right moves by having both a humanitarian response and an integration response, there are a lot of lessons from other parts of the world that all point to the importance of dealing with root causes, said Marcela Escobari, a fellow at the Brookings Institution and a senior adviser to the MasterCard Center for Inclusive Growth.

“I don’t think the fact it’s a politics question means we can’t influence it as a region,” she said, adding that the situation is a failure of political action in Venezuela and in the region. She urged a regional response so that the burdens doesn’t fall only on a few countries, which could close borders and exacerbate the problem. Data and research can help make that argument, Escobari said.

Data gathered on programs meant to counter violence in El Salvador, for example, showed that as the number of murders in a place drops, there will be less migration, she said.

Future of work

While the drumbeat about the Fourth Industrial Revolution continued at the WEF Latin America meeting, questions remained about how the economy can create enough jobs for future populations and what skills they will need to get there.

As work continues to evolve, it will be critical that skills training programs are connected with employers in the private sector, said Lourdes Maria Argueta Vides, a social entrepreneur from El Salvador, who works for Joven360, an organization that trains youth for jobs. The social enterprise, which grew out of a United States Agency for International Development-funded project, has found that  a key problem with other skills training programs is that they lack a critical link to the private sector. Often, youth were trained with skills that didn’t match what employers were looking for.

“It’s a question of how do we transition for institutions, governments, to pinpoint actual gaps they can fill out,” she said.

Increasingly, it’s not just about training for a specific task or machine, but other types of skills, particularly soft skills, that employers are looking for, said Monica Flores, the president for Latin America of the Manpower Group.

“To be competitive, talent need new skills, different than what’s been needed in the past in emerging markets,” she said.

Increasingly, good employees will be able to think innovatively, solve problems, and collaborate as a team. Emotional intelligence, creativity, and the ability to learn are all increasingly important to employers, who are having a hard time finding employees with the skills they need.

About 40 percent of companies globally and 44 percent in Latin America say that it is difficult to find the right talent, Flores said.

Part of this may necessitate changing the education system, but that could take a decade or more.

“Many countries, specifically in Latin America lack modern sophisticated education systems,” she said, and they need opportunities to solve problems, play sports, try theater, and music and other art that can teach them to be creative.  

And while there seemed to be an inevitability to the discussions around innovation and technology, one attendee said that it doesn’t have to be so. If companies were truly about improving the world, and creating new jobs, they might think twice about continuing to build robots that will replace human jobs, and generally have stronger ethical evaluations before giving a new innovation the go ahead.