May 21, 2013 -- Last week, Bill Gates, the co-founder of Microsoft, regained the top spot in Bloomberg's Billionaire Index for the first time since 2007. Gates, the second leading philanthropist in the world after Warren Buffett, has a current worth of $72.7 billion and he is now the richest man in the planet, surpassing Mexican billionaire Carlos Slim.
Unlike Slim, though, Gates is not only known for his money, but also for his large-scale charitable work. Gates has donated nearly 40 percent of his fortune to the private foundation he runs with his wife Melinda, and he is the co-founder, alongside with Warren Buffett, of the Giving Pledge, a worldwide campaign that invites millionaires to donate at least half of their wealth to charity or philanthropic activities. Like Buffet, Gates has rallied North America's rich to give back to society, serving as an example through his work with the Bill and Melinda Gates Foundation. Thus far, 105 millionaires have signed the pledge.
In April, Gates and Buffett announced the addition of the first 12 non-U.S. signatories. The event marked a new global dimension for the campaign with new pledgers from the U.K., Russia, Australia, India, China, Germany, South Africa and the Ukraine. Carlos Slim, the world's second richest man, and other billionaires from Latin America were conspicuously absent.
"Latin America has come to the game much later," Michael D. Layton, a professor at the Instituto Tecnológico Autónomo de México (ITAM) and the director of its Project on Philanthropy and Civil Society, told Fusion. "The United States had a tremendous head-start, dating back to the 17th and 18th century, when the decentralization of power and the creation of associations opened the road for what Rockefeller and Carnegie would do in the 19th century."
Today, 100 Latin Americans have a net worth of over a billion dollars, according to Forbes' latest list. None of them, though, have engaged in practices that are comparable to those of Gates and Buffet. Latin America trails the rest of the world in terms of charitable organizations and philanthropic endeavors. Unfortunately, the region's recent economic success has not been attended by the massive donations that other countries have seen. And though there are promissory signs of change, deep-rooted cultural and financial reasons still seem to hold back Latin America's magnates.
Despite its deeply-rooted Catholic tradition, Latin America is one of the world's least generous regions. A 2007 special edition of the Capgemini and Merril Lynch's World Wealth Report found that only 3 percent of High Net Worth Individuals (HNWI) allocated money for philanthropy in their portfolios. On average, 11 percent of HNWI from the rest of the world's regions allocated at least 7 percent of their portfolios to philanthropic endeavors.
An often-cited study from the Johns Hopkins Comparative Nonprofit Sector Project that analyzed the giving practices of 36 countries reached a similar conclusion. According to the study, Latin America dedicates an average of 0.23 percent of GDP to philanthropy, a figure well below the rest of the world, which on average dedicates 0.38 percent of GDP. Mexico with an average of 0.4 percent came last in the list, far behind countries like Kenya, Poland, Pakistan, and India (the U.S. dedicates 1.85 percent).
The numbers are extremely low, especially given high profile individuals like Carlos Slim, who has a mixed record on philanthropy. Slim, who by 2007 accounted for 40 percent of Mexico's philanthropic donations, has two foundations dedicated to combating health and poverty with a combined endowment of $8 billion. The Telmex Foundation and the Carlos Slim Foundation have given the poor hundreds of thousands of scholarships and health implements, donating directly to communities instead of offering grants, as most U.S. foundations do. This straightforward and personal style of philanthropy is characteristic of Slim, a man who has repeatedly expressed his skepticism about the benefits of charities and cash donations.
"The only way to fight poverty is with employment," Slim has said. "Trillions of dollars have been given to charity in the last 50 years, and they don't solve anything." "To give 50%, 40%, that does nothing," he added, referring to the Giving Pledge. "There is a saying that we should leave a better country to our children. But it's more important to leave better children to our country."
According to historians and researchers, Slim's attitude is in a way typical of Latin Americans and Latinos (only about 1 percent of foundation giving in the U.S. is destined for Latinos, according to the group Hispanics in Philanthropy.
For centuries, the population in the region has heavily depended on the government and the Church for assistance in health, education, and poverty-relief services. Donations from private enterprises were virtually non-existent, and in general individuals preferred to start and manage their own foundations, rather than offer up their resources to corrupt or inept government institutions.
In recent years, the number foundations in Latin America has multiplied, but the figures are still minimal when compared to the United States, where this kind of organizations have thrived since at least the 1970s. Estimates of the number of nonprofits working in Latin America vary greatly, but in Mexico, for instance, there are 6,000 tax-exempt organizations, a fraction of those found in the U.S., where there are approximately 1.1 million, according to the latest IRS data.
This huge gap is explained by various cultural and financial reasons, according to experts. On the one hand, giving back to society as a whole has never been seen as a primary duty in Latin America."They see their family obligations as their most important responsibility," Layton says. "Taking care or assisting others they don't know is often seen as a government responsibility."
On the other hand, many of the region's nations have complicated bureaucratic procedures to start foundations or other philanthropic projects. According to the Financial Times, businessmen in countries across Latin America consistently complain of red tape and the lack of tax benefits at the time of forming a foundation or making major donations. As of 2012, donors in Mexico could only write off 7 percent of their taxable income, those in Brazil 6 percent, and those in Colombia 30 percent, a number that is still small when compared to the United States' 50 percent.
There have been promising changes in the past years, though. Corporate foundations have expanded their roles and are now leading players in countries like Brazil, Mexico, and Colombia. The amount of money given by High Net Worth Individuals has increased in recent years, according to the World Wealth Report. And artists like Juanes and Shakira are paving the way for future philanthropists through their highly publicized work with Fundación Mi Sangre and Fundación ALAS.
Latin America is slowly catching up, according to Layton, but if government and individual attitudes don't change, the region will lose the opportunity of embarking on programs to address big issues like health and education in the systematic and successful way that leading philanthropists like Bill Gates and Warren Buffet are promoting.