Market Mechanisms for Impact Inclusion in Latin America

The use of the market to build inclusive societies is becoming common in countries where governments are weak and incapable of providing social services, presenting an alternative for building a sustainable future.

FREMONT, CA: Inclusion can be viewed as a right or a result of activities that positively affect excluded communities. Nonprofit organizations (NPOs) in Latin America and around the world have mostly embraced a political role to claim the right of excluded groups to enjoy specific rights, such as social justice and living in a clean environment, to improve their quality of life directly. This essay contends, however, that the latter perspective, which we refer to as effect inclusion, has gained popularity in practice because it offers a more contextualized approach by focusing on market mechanisms to address inclusion concerns.

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THE EVOLUTION TOWARD INCLUSION OF EXCLUDED ACTORS THROUGH MARKET MECHANISMS

In the 1990s, when the bulk of authoritarian regimes in the area had fallen, the political setting of Latin America exhibited a vast array of tendencies. In 1995, at the World Summit for Social Development held in Copenhagen, attendees recommended that non-governmental organizations (NGOs) should assume state duties for meeting fundamental necessities. Numerous nonprofit organizations in Latin America have toned down their revolutionary bent to adopt an approach similar to that of the corporate sector, garnering support from across the political spectrum. As public expenditures declined, outsourcing of social program implementation to nonprofit organizations rose, and this dependence has weakened the standing of nonprofit organizations. Nonprofit organizations have worked on gender, educational, cultural, health, productive, economic, and environmental inclusion for the past three decades.

Even the ineffectiveness of Latin American governments in providing social services, such as adequate pensions and unemployment insurance, exacerbates the difficulty of embracing an impact inclusion role and abandoning the active perspective of past decades. As a result of the inefficiency of formal government institutions, social welfare provision has evolved into a combination of a security structure that provides benefits to people who engage in productive activities and a welfare structure comprised of government organizations and nonprofit organizations. In many instances, the acts of multiple regional governments have resulted in a patron-client relationship between the state and nonprofit organizations with social and economic orientations towards their social demands.

Therefore, the phrase social entrepreneurship brought a more contextualized view of a government incapable of resolving inclusion concerns in the region to the discussion of inclusion. This is referred to as "impact inclusion," and it involves the participation of the private sector in conversations and actions on well-being, public goods, and social effects. Without a legal framework, businesses are transformed into impact enterprises. Expanding into a new market by incorporating excluded actors, such as entrepreneurs living in poverty or indigenous communities, into their value chain or delivering a new product to low-income markets are typically the origins of enterprises that promote inclusion. Including informal players, tiny firms, self-employed workers, and unregistered microenterprises are one of the region's greatest concerns. Approximately 130 million Latin Americans have non-agricultural informal employment (the number would be much higher if agricultural jobs were considered).

The inclusion of informality into established frameworks could eliminate informality as an unresolved challenge in the region. For instance, in the mining industry, many actors are excluded from strategic decisions and advantages. Market collaborations assist multinational firms and the communities in which they operate transition from conflict to collaboration. Similar situations arise in the food business. Numerous international corporations, for instance, purchase organic fruits and vegetables from indigenous tribes due to their superior quality, resulting from ancestral customs that respect nature. This implies that the market could facilitate a horizontal link between the parties and that the informal and excluded actor interacts with the formal systems of society.