A General View of the Social Economy in Mexico

Roberto Gallardo

Mexico is the 15^th largest economy in the world and the 2^nd largest in Latin America[1], every year getting closer to the 1^st, Brazil. It is also the largest Spanish speaking country in terms of population[2]. However, when it comes to the social economy, although in one of the first places in Latin America, Mexico is still in a relatively incipient stage compared to the UK, Spain, USA and Canada, to mention a few.

Social businesses, enterprises and organisations are the principal actors of the social economy, also known as the third sector; however, to understand the developing social enterprise sector in Mexico, one needs to view the whole spectrum, from first sector firms with Corporate Social Responsibility and private investors from the second sector including governmental institutions and funds to promote the social economy. Finally it is also worth noting the contribution that educational institutions play in the development of social enterprises in the country.

The First sector.

In Mexico the responsible institution for corporate social responsibility in business is the Mexican Centre for Philanthropy [3]. It defines the criteria for corporates to be entitled to use the RSE (Socially Responsible Enterprise) label. Most, or pretty much all, major companies have it. Fast food businesses like Coca-Cola^® and McDonald’s^®, and alcohol brands such as Bacardi^® and Casa Cuervo^®, are just some of those who may show off a RSE mark on their products. Corporate Social Responsibility in Mexico is used as a media strategy, and there is little evidence that it supports the social economy.

On the other hand, impact investing is almost entirely funded by private capital from large for-profit companies. Though it is relatively new and there are very few enterprises engaged in this business, it is definitely a growing subsector. Social impact investing companies do not only allocate financial resources but also advise and incubate their partners to lower the risk of the investment and ensure the social impact. Non-performing loans represent a very small percentage in this industry.

Hence, if large private companies really want to help solve social problems, the most efficient way to do it is investing in social enterprises which are already doing it. CSR should be more about encouraging business not to 'do bad' ─like selling products which are harmful to health, fraud, paying low salaries, evading taxes─ which ultimately would generate more impact than isolated CSR practices ignoring those of their core business.

The Second sector.

Very recently, in 2012, the Social and Solidarity Economy Act was passed[4], which created the National Institute of Social Economy[5], formerly known as the National Fund for the Support of Solidarity Enterprises[6]. The goal of this Act is to establish mechanisms to advance the development, strengthening and visibility of social economy activity. And defining the rules for promotion, advancement and strengthening of this sector[7].

While this effort represents the first step towards the consolidation of a legal framework which truly supports social economy actors and beneficiaries, it is still far from creating a specific legal structure for social enterprises, such as Community Interest Company in the UK, or even more importantly, establishing a fiscal policy which benefits social enterprises. The current policy in Mexico favours big companies to the extent that they practically do not pay taxes[8]. However, it is not much better at a global level, because transnationals pay 5 per cent of their revenue as tax whilst small business pay 30 per cent [9].

Third sector.

There is evidence of the existence of charities in Mexico going as far back as the colonial period. Initially, almost all of them were managed by the clergy or a catholic religious order, and later some of them by rich Spanish merchants or nobles. The sector is very small in Mexico and it is practically the same people who attend all the related events, so that almost everybody knows each other. And, just like a couple of centuries ago, it is formed mainly of foreigners or first and second generation immigrants. It is not a matter of nationalism, but locals, mestizos and indigenous people have lived for generations in Mexico ─even before it was named so─ and know much better the social problems and available resources to solve them. Hence, we should empower local people to help them find their own solutions instead of giving them external solutions.

Academic Institutions

Social economy research, teaching and popularisation have probably experienced more growth in the past few years than any of the three latter sectors. Business schools have led this process by creating academic programs, lines of research, contests and other projects approaching social entrepreneurship and innovation. In 2012, the Faculty of Accounting and Administration [10] (FCA) of the National Autonomous University of Mexico [11] (UNAM) created one of the first non-degree courses in social entrepreneurship in Mexico, the Diploma in Creation, Developing and Management of Social Enterprises[12], which led to the National Agreement for the Creation or Development of Social Entrepreneurship and Innovation Schools or Programs[13] by the National Association of Faculty and Schools of Accounting and Management [14], where 44 business schools and faculties signed.

Since then, there have been 4 Student Meetings in Academic Exchange for Social Entrepreneurship[15] and 4 social business plan contests. The first initiative product of that agreement was the School of Social Entrepreneurs[16] of the FCA-UNAM, which since its creation in 2012, formally in 2014, has taught the diploma in social enterprises to 5 cohorts; had 2 fair trade fairs, created the permanent section in social entrepreneurship within the Entrepreneurs magazine; included a social entrepreneurship line of research within the International Congress of Accounting, Management and Informatics; launched a community services for helping social enterprises and other for social entrepreneurship activities.

The social economy in Mexico represents a huge field of opportunity for those interested in CSR, public policy, social enterprises and academic research. Good practices and experiences from around the globe are very welcome.

This blog is part of the October 2016 series on Exploring the social enterprise landscape, in partnership with the World Bank Group and endeva. Read the whole series for insight and opinion on policy, business models and definitions from social entrepreneurs, policy makers and facilitators around the world.

Notes

[1] World Bank (2015) http://databank.worldbank.org/data/download/GDP.pdf

[2] Instituto Cervantes in The Guardian (2015) https://www.theguardian.com/us-news/2015/jun/29/us-second-biggest-spanish-speaking-country

[3] Centro Mexicano de la Filantropía

[4] Ley de la Economía Social y Solidaria

[5] Instituto Nacional de la Economía Social

[6] Fondo Nacional de Apoyo para las Empresas de Solidaridad

[7] Ley de la Economía Social y Solidaria , Art. 2° (2012)

[8] Emeequis in Aristegui Noticias (2013) http://aristeguinoticias.com/0910/mexico/400-grandes-empresas-casi-no-pagan-impuestos/

[9] The Organisation for Economic Co-operation and Development in Forbes (2016) http://www.forbes.com.mx/cuanto-dejan-de-pagar-en-impuestos-las-multinacionales/#gs.4y9o0BM

[10] Facultad de Contaduría y Administración

[11] Universidad Nacional Autónoma de México