Presentation07

Capacity building for poverty reduction and environmental protection in Chile: some comments on the role of the private sectorEdmundo ClaroRIDESedmundo.claro@rides.clwww.rides.cl: 

Capacity building for poverty reduction and environmental protection in Chile: some comments on the role of the private sector Edmundo Claro RIDES edmundo.claro@rides.cl www.rides.cl Presentation given at the 11th PEP Meeting Copenhagen, 20th June 2007

Contents: 

Contents Introduction Poverty in Chile The role of the private sector in poverty reduction Private sector capacity building on poverty reduction and environmental protection Some reflections

1. Introduction: 

1. Introduction The motivation behind this brief presentation lies in a suggestion by Ring members during the last PEP meeting indicating that the role of the private sector should be given a more important role in PEP initiatives. It focuses on the current state of capacity building for poverty reduction and environmental protection in Chile, paying special attention to initiatives driven by the private sector. Whereas the more general elements of this presentation are based on internet research, the examples given are based on direct interviews with private sector and NGO actors directly involved capacity building initiatives aimed at simultaneously reducing poverty and protecting the environment.

2. Poverty in Chile: 

2. Poverty in Chile Chile in the last 20 years has averaged an annual per capita growth rate of 4.2 per cent, ranking approximately ninth among the fastest growing economies in this period. In 2005 its per capita income was US$5,729, with only Argentina and Mexico showing higher figures in Latin America. Simultaneously, between 1990 and 2006 poverty decreased substantially from 38.6% to 13.7% and extreme poverty came down from12.9% to 3.2%. In Latin America, only Chile and Brazil have already succeeded in achieving Goal One of the MDGs: halving the indigence rate from the 1990 level before 2015. However, income distribution is one of the highest in the world. According to OECD (2005), whereas in 2003 the income share of the richest 10% of the population was 41%, that of the poorest 10% was 1.2%.

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Poverty and extreme poverty in Chile and Latin America

3. The role of the private sector in poverty reduction: 

3. The role of the private sector in poverty reduction There is substantial agreement in that the private sector has played a crucial role in poverty reduction. One the one hand, economic growth, which is mainly pulled by private businesses, is supposed to be the principal cause of poverty reduction in Chile. During the 1990s about 60% of Chile’s poverty eradication can be attributed to economic growth and 40% to social policies. There is also agreement in that as the public sector has been limiting its role in the provision of social services, mainly to their design and assessment, the private sector and the market have become crucial elements for their financing, provision and execution: pensions, health, infrastructure and education. It is also the case that during the last decades the private sector has been an important actor in the reduction of poverty by being an active participant in public-private initiatives aimed at identifying social priorities and designing the correspondent policies.

4. Private sector capacity building on poverty reduction and environmental protection: 

4. Private sector capacity building on poverty reduction and environmental protection Within this context, although the role of the state in capacity building for social purposes is active in some spheres, the role being played by non-governmental actors has increased substantially. In general terms, it can be argued that private sector involvement in poverty-environment capacity building schemes in Chile is scarce and basically the product of voluntary company initiatives. They do not respond to incentives provided by governmental policies and most correspond to elements of companies’ corporate social responsibility (CSR) programmes. What follows summarises two cases of private sector initiatives in Chile that contribute both to capacity building for poverty alleviation and environmental protection. One corresponds to the support given by SQM, a mining company, to an indigenous community in the north of Chile in order to develop an eco-tourist circuit on an Andean wetland. Another one is a scheme developed by a Gerdau-Aza, a steel manufacturer that builds capacity for steel waste collectors.

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Case 1: supporting eco-tourism in an Andean wetland Los Flamencos National Reserve in the Andes of northern Chile: Lake Chaxa, a salt water body, RAMSAR site due to its relevance as habitat for flamingos and migrating bird species. In 2002 the tourism administration of Lake Chaxa was given by CONAF to the people of Toconao, a local native community of approximately 600 people, most of them making a living from handicrafts, fruit agriculture and mining activities, and generating low income levels. SQM proposed to develop a project aimed at improving the tourism services provided by the community with through upgrading the existing infrastructure and capacity building for tourism guides related to the local hydrological system, the ecosystems contained in the lake and tourism management concepts. Benefits: Increasing the income of community members through attracting more visitors to the site and charging higher entrance fees, Improving environmental protection of the wetland through better waste water management and better informed guides and visitors. Better relations between the company and the community.

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Case 2: formalising the activity of scrap iron collectors In Chile primary scrap iron collectors have an average income level a bit higher than the minimum wage and their business is highly informal. Scrap iron storage centers lack formal management systems, affecting their capacity to grow their business, to control environmental impacts, and to protect the workers. As one of the great obstacles for the establishment of secure and lasting micro businesses is the formalization of activities, Gerdau-Aza is implementing and financing a capacity building scheme for informal scrap iron collectors aimed at bringing greater levels of formalization into their business. The project will be implemented in five storage centers of the Santiago area and will build capacity for at least fifty primary collectors. The capacity building scheme is being implemented by Casa de la Paz, a local SD ONG. Benefits Giving collectors the necessary tools to enter the formal economy and therefore helping them in securing a more stable occupation. Increasing the recycling rate of scrap iron in Santiago, and thus reducing the pressure on sanitary landfills and decreasing the extraction of natural resources- As scrap iron collectors are a very important source of raw material for their production of steel, the firm expects that this initiative will be supportive of their future growth plans.

5. Some reflections: 

5. Some reflections Capacity building for poverty reduction and environmental protection is not common in Chile. Most existing initiatives are the product of individual non-governmental actors, with little participation of the state. Private sector driven initiatives are basically part of their SCR activities and contribute to the business of the firms. Technical cooperation from international donors to Chile for poverty-environment capacity building should focus at least on the following aspects: Promoting the benefits of poverty-environment initiatives to public sector actors and training them in order for the state to provide the correct incentives to promote these activities; Providing resources for the for the identification of potential opportunities for poverty-environment schemes involving the provision of environmental services by low income groups that benefit the activity of private actors, so that the latter are interested in the schemes and provide at least part of the financing.

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Thank you for your attention.