Giving for beginners: real philanthropy--not simply charity--is in its infancy in Latin America. But that's changing fast.

Charity has always existed in Latin America, say experts in the fundraising field. What has not really existed is true philanthropy--complex, organized giving on a major scale, aimed at changing outcomes. Organizations which track giving in Latin American identify a few dozen major charities in the region, most of them tied to major national banks or traditional heavy industries or the families behind those institutions.

In comparison, U.S. charities aimed at Latin America alone fill out a list several times longer, and they give away hundreds of millions more dollars. The most comprehensive study of the subject, several years out of date, suggests that Latin America's rich give away only a fraction of 1% of their money.

That's because the financial incentive to give is limited for corporations in the region, and even more limited for wealthy individuals. The boom in corporate social responsibility--which is only in part driven by donations to charity or by grants for project financing--is very new. Another wrinkle, particularly among young donors, is the Internet, which provides a wealth of information to expatriate workers on how to reach out to charities back home.

Take the Brazil Foundation. The four-year-old New York institution channels money to projects from international donors, mostly Brazilians in the United States who have a tax incentive to give. It's first year, the foundation raised US$30,000 and took in 72 proposals from five states in Brazil. This past year it raised $220,000 from donors and got 1,078 proposals, coming from every state in the country. It has funded 49 projects since its inception and, counting donor-advised funds, has directed $2.3 million to date.

Impressive, but miniscule in comparison to the activities of a Ford or Kellogg Foundation. Nevertheless, the foundation is making a big impact, says Brazil Foundation Founder, President and CEO Leona Forman. "You won't believe how far $10,000 will go and what a difference that makes in some people's lives," says Forman.

A chemistry professor in Ceara, for example, noticed that no kids from a certain poor village ever showed up at the university. So he sat them under a tree and began teaching the entrance exam. Four kids came. Two passed the test and two failed, but four more showed up after that, and now the professor, backed by a Brazil Foundation grant, is working with 120 potential college students, while 40 more are now at the university.

Kids in Rio teach their peers about caring for the health of their blood. A wheelchair-bound woman in Minas Gerais provides job training to other disabled job seekers. And in Silo Paulo, an Afro-Brazilian lawyer trains women in poor satellite communities of the city to understand the laws that affect them, such as marriage and inheritance law. Four of the 36 graduates of the initial program later were given a chance to for really study law. "It was just extraordinary to see how a little bit opened up the lives of these women," Forman says.

The idea of philanthropy is growing, says Forman. "We get calls all the time from Venezuela, Argentina, Peru on how do you do this," she says.

So why such a lag, in dollar terms, in Latin America? In many countries, charitable giving is less understood because the institutions most likely to seek funds--cultural and social groups like orchestras or housing agencies--are government-run, say financial experts. That leads to significant skepticism among potential donors that their money will be handled correctly.

As a result, there's really no mechanism in Latin America for philanthropic giving. In addition, the relatively small number and size of personal fortunes in Latin America, so far, has meant there's not yet enough pressure in the market to change law and develop those mechanisms in the region. "Most of them haven't had enough money to figure it out," says Diane de Vries Ashley, senior vice president and market executive for the Americas at Bank of America. "It's not necessarily a negative, it's a vacuum."

As a result, many Latin Americans, if they give, end up donating to U.S. universities where they studied, says de Vries Ashley. They are fond of the institutions, of course, but it's also because the universities are very good at accepting money. "I'm on the international advisory board of the University of Miami and its comprised almost entirely of alums, most of whom are international," she says.

Where big money is being spent on social and cultural ends in the region is among the major corporations. Many have assets, business and equity in the United States, and as a result have established accounting standards to meet U.S. market requirements. In the same vein, they have set up foundations, in part for tax purposes, but also to meet corporate social responsibility goals.

Major banks in Brazil and Mexico have created foundations, and they often channel money toward specific national problems that governments seem unable to fully address: poverty, education and aid for the elderly. "Interestingly, in some respects, the medium-sized companies are apt to be the biggest givers, because there's more ownership control and it can be more directed," says de Vries Ashley.

For individuals, however, just getting started can be tricky. First and foremost, understanding the law is important, say attorneys and private bankers. In many Latin America countries, domestic law dictates what percentages of an estate must be given to which survivors, a concept known as forced heirship. For example, a widow or widower would be entitled to half--no more, no less--then the remainder is divided by the number of children.

If the law allows for a will that differs from forced heirship, then a lot of what happens after death depends on actually having a will. Dying intestate--without a will--triggers decisions that will be made by the state, not the surviving family, and almost certainly not to their benefit.

Naming a charity is key. The name must be clear. If the charity has local, national and international divisions, you must say which part gets what. It's also important to make clear if the gift has restrictions. A donation to a hospital would likely end up in the general fund unless the donor specifically directs the money is to be used for research, to build a wing or to buy equipment for a cancer ward. Naming a substitute charity is important, too, since charities, like businesses, can close their doors or be absorbed into other institutions.

Unprepared. Tax regulations is a big part of the process. Charities often must turn down big gifts from estates because as foreign charities they aren't prepared, in terms of U.S. law, to accept them. If that's the case, a donor could instead structure the gift to benefit the same class of persons: If you want to give to a homeless shelter in Chile but can't, perhaps a U.S. foundation that works in Chile can direct the gift to that end.

Increasingly, charities in the United States offer complex, tax-oriented programs to provide big givers every opportunity to maximize tax relief and the size of their gift. For instance, consider a gift of, say, $1 million. Instead of giving the money outright as cash, the charity can take securities and pay out the earnings to a surviving children during their lifetimes. Once the children die, the portfolio reverts to the charity. The donor gets an immediate tax break under U.S. law, although partial, yet the money remains useful to his or her family for a long period after death.

Similarly, a charity can accept a portfolio and pay the donor back an annuity during his remaining years, then keep the balance upon death. Also, donors can leave their portfolios behind as a fund, the earnings from which are directed by charities to a given cause. Family foundations, too, are increasingly easy to set up under U.S. law, allowing even small estates the kind of perpetual giving, and tax advantages, once reserved for billionaires.

Better yet, find a way to begin giving early, says Darin Zenov, an attorney and partner at Steel Hector & Davis in Miami who specializes in domestic and international estate planning. Charitable gifts are deductible against current income and can be carried forward over subsequent tax years. Giving early means less is subject to estate taxes. "Historically it's better in the United States it's better to give to charities in your lifetime than at death," Zenov says.

Working out the details of how to give is only half the battle, say experts in the field. Knowing where is just as crucial. It's important to be able to separate effective groups from amateurs. Rule No. 1: Know thyself.

Consider your own values, what really matters to you: children, arts, your faith, the environment. Find out which organizations are doing the kind of work you're interested in doing, says Terry Axelrod, CEO and founder of Raising More Money in Seattle, which trains non-profit on sustainable fundraising from individual donors. "Talk to them, go see them, they'll be ecstatic to see you. Before you even talk money, see what they're doing," she says. "Be sure that whatever you choose is something very important to you, not just the issue of the day."

Also, consider what a gift would do long-term in the form of an endowment, Axelrod suggests. A series of checks over a decade could have much more impact as a single large gift in the form of securities which throws oft" money for decades to come. Consider, too, giving something that can be even more valuable than cash: knowledge and time. "What a lot of wealthy donors have to give is sometimes beyond money. It's experience, insight," she says.

Another key is to focus on how the charity or non-governmental organization works. "I think that they should work in geographic terms,' says Joao Meirelles Filho, director of Instituto Peabiru, which advises non-governmental organizations on fundraising and provides technical assistance, and who himself has two decades experience as a fundraiser in Brazil. Once a donor selects a cause--hunger, housing, education, and so forth--it helps to settle on a manageable area, he says. It can be more effective, and it fosters a connection to the people who benefit.

Of Brazil's 350,000 non-governmental groups, 10,000 work in the vast Amazon region. Nearly 100% of them focus on specific communities, according to Meirelles. "It's important to have some connection," he says. Even committing to a reduced area, many charities end up in trouble, says Meirelles, because they tackle many problems at once. "In the end, they are doing everything and nothing, he says.

Active donors can play a big role in helping groups define their mission by demanding a strict focus. In the past, many wrote checks and moved on. Recently, however, large corporations have begun to watch outcomes very carefully, a fast-moving trend, says Meirelles, and one he supports. "Donors should ask for involvement, and NGOs that receive the money should find ways to involve donors," he says.

Giving away money is emotional, but doing it well demands a certain amount of rationality, says G. Douglass Alexander, chairman of Alexander Haas Martin & Partners, an Atlanta fundraising adviser. Most philanthropists, in the end, want to know that their cash is being well-spent, and that there is a return, socially speaking, on the investment. "More wealth has been created in the last 10 or 15 years than in the history of mankind," says Alexander. "They are asking, 'I have a lot of money, now what do I do with it?'

One key is to get to know the members of the charity's board. Do they support the charity financially? If they don't support the cause from their own pockets, it's reasonable to ask why you, as an outsider, should put in money for them to control. Find out what they do for the organization, and ask for the financial statements. "I want to make sure I'm investing money with other people," says Alexander. "I want to make sure that the people running the organization have the same passion I do." Another strategy is not to provide an outright gift but ask for a project proposal. It can help rationalize the investment decisions and provides measurement abilities.

Engaged. Measurement will soon become the best bottom-line a charity could ask for. That's because giving is changing. Writing checks, while always welcome, is giving way to more involved forms of seeking change.

"Traditional philanthropy has focused on social welfare. It's important but it doesn't really get to the root causes," says Nicole Etchart, co-founder of Santiago, Chile NGO Nesst, or non-profit enterprise and sustainability team, which trains groups on how to get beyond charity by creating businesses and self-financing.

Companies have begun to look beyond that approach, she says, taking part more and more in "back-yard philanthropy," helping their employees create and carry out projects. The next step is what Etchart calls "engaged philanthropy," focused not on absorbing short-term needs like hunger or disaster relief or even medium-term projects of up to five years but on helping organizations create effective, permanent change. "That's what it takes, especially for social problems;' she says. "It's complex and there are many levels. The way philanthropy has been framed, unfortunately, relies on quick results."

Engaged philanthropy is riskier. There's usually no immediate, demonstrable results, and complex problems can lead to setbacks. But the engaged approach needs business people to succeed, often less for their monetary support and more for their brainpower when it comes to strategy. Her advice to new philanthropists: Take a risk, just like you would expect do so with your business, and really invest in something that would ultimately lead to social change. "This kind of philanthropy resonates with companies," Etchart says, "because they understand that, with companies, you need to invest time and people."

TIME AND MONEY

Latin America's non-profit workforce varies widely by country.

as % of economically active population *

Mexico            0.4%
Brazil            1.6%
Peru              2.4%
Colombia          2.4%
Argentina         4.8%
United States     9.8%

* excludes religious organizations

SOURCE: Johns Hopkins Comparative Nonprofit Sector Project

Note: Table made from bar graph.