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Mexico: The US Neighbor Whose Door Is Locked

July 25, 2012 By

Mexico is home to danger, poverty, pollution, and agricultural degradation. These are the issues that many impact investments are designed to focus on. Yet, the impact investing flow of capital to Mexico is but a trickle compared to that of more favored nations.

Ecuador, Peru, Brazil, and Nicaragua, are south-of-the-border countries that receive a fair share of investment support from the developed world. Mexico has but a few institutionalized impact investment funds set up to help solve the rampant problems facing the country.

You would think there would be more, given Mexico’s position with the US. Stop crime and poor governance at its source, and the less infectious it becomes to the rest of the world.

Mexico is one of the world’s largest economies, ranked thirteenth by GDP and eleventh by purchasing power.

At the same time it is crime-ridden, with 30% more murders than the world average.  Fully 15% of residents have been victims of some sort of crime, only eclipsed among OECD countries by South Africa. There are more than 115 million Mexican residents.

The crime is largely due to its 100,000 members of drug cartels. Due to this, the country has, according to various reports, five of the top ten most violent cities in the world.

Still, it has an enormous number of World Heritage sites: the most in the Americas, and only four countries worldwide have more special culturally or physically significant properties.

According to the CIA World Factbook, Mexico’s ongoing economic and social concerns include low real wages, underemployment for a large segment of the population, inequitable income distribution, and few advancement opportunities for the largely Amerindian population in the impoverished southern states. Its administration continues to face many economic challenges, including improving the public education system, upgrading infrastructure, modernizing labor laws, and fostering private investment in the energy sector. President Felipe de Jesus Calderon has stated that his top economic priorities remain reducing poverty and creating jobs. Per capita income ($14,800) is roughly one-third that of the US; income distribution remains highly unequal.

The US-Mexico Foundation and the Mexican-American Leadership Initiative are major players seeking to drive change through cross-border membership.

Major impact investing vehicles operating in Mexico include Ignia, Adobe Capital, Omidyar Network, and ACCION.

Areas of impact focus are mobile phone technologies for education and awareness, youth engagement, and environmental sustainability.

 

 

 

 

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Jamaica is Gonna Be All Right

May 3, 2012 By

Jamaica’s tourism slogan may be, “everything is gonna be all right” but everything isn’t. Not by a long shot.

The beaches of Montego Bay, Negril, Ocho Rio are one thing. But the biggest concentration of  the Jamaican population lives in Kingston, the capital. There, it is anything but sunshine and roses. There are widespread “slums” and downtrodden neighborhoods. The New Kingston commercial district comprises a spruced up area of town, but it offers very little for the expectant tourist. This is important as about 50% of Jamaica’s gross domestic product of $15 billion comes from tourism.

But herein lies the opportunity.

Business are training and retaining local talent stemming the diaspora of people leaving the country for better jobs. This is instilling a new sense of pride and, in turn, stability to the island.

Outside investors are even putting capital to work on the island. Sir Richard Branson opened the Branson Centre for Social Entrepreneurship on the island. Billionaire Michael Lee-Chin is buying and holding and growing Jamaican businesses. And Prince Charles has even made a foray into businesses in Kingston through his Trust, supporting craftsmen and education facilities.

Financial services firms such as Scotiabank and Citibank have branches in Jamaica. Foreign remittances account for about 15% of GDP, so this should be no surprise.

Insurers, cable companies, and natural resource concerns are also growing.

To be sure Jamaica’s economy is in dire straits. Debt is some 130% of GDP, meaning the country is way over its head. Yet, there are some signs of inherent growth for local businesses. The unemployment rate, for one, has stabilized at just under 13%. There are signs this is lowering, meaning employment is rising. And while the average Jamaican earns about $9,000 per year, savings rates are climbing as are home sales.

This trend can be taken to mean that Jamaicans are staying put. Even though the island has been claimed by many (Christopher Columbus claimed Jamaica for Spain in 1494, and then it fell under British rule in the mid-1600s and only gained full independence in 1962.) Queen Elizabeth II is still considered the “head of state” even though Portia Simpson-Miller is the Prime Minister.

One of the most promising prospects for Jamaica is the Jamaica Debt Exchange (JDX) launched two years ago to retire high-priced domestic bonds and significantly reduce annual debt servicing. Also, the government signed a $1.27 billion, 27-month Standby Agreement with the International Monetary Fund for balance of payment support.

Slowly, there is hope. Slowly there are prospects. Social enterprises such as “Jamrock” are fostering education and tradecraft. Business owners are stepping up community centers and schools.

Initiatives such as Mustard Seed (www.mustardseed.com) help the poorest of poor.

Net, net The Jamaican landscape is changing today for a brigher toorrow.

 

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Suriname is a country waiting to happen

March 9, 2012 By

Dr. Mark Plotkin in the forest with Trio colleagues

It is the smallest sovereign country in South America (it lies between Brazil, French Guiana, and Guyana), but Suriname has a lot to offer the impact investing community. Conservation: Wide swaths of the Amazon rainforest go untouched. 80% of the country is unspoiled. Natural resource wealth: Gold, aluminum and other metal and mineral operators have vested interests in the nation state. The Central Suriname Nature Reserve is a UNESCO World Heritage site. Poverty reduction: Per capital annual income is less than $10,000. Less than 500,000 people live in Suriname, mostly in its capital Paramaribo, and “uncontacted” tribes still roam the deep jungle.

Solutions: Land conservation programs such as those devised by The Amazon Conservation Team to stave the encroachment of mining operators. Sustainable mining facilities. More education. 94% of children are enrolled in school. University training is lacking, however. Trade. Suriname only exports $1.4 billion worth of goods. Its natural resource wealth could be a model for sustainable trade and could increase financial and natural capital reserves.

Notable Social Enterprises:  The Skoll Foundation, which funds the work of social entrepreneur The Amazon Conservation Team. Ecotourism operators that provide exposure and education—kinetic appreciation. And through a scholarship program, the Aspen Network of Development Entrepreneurs is reaching out to 15 social entrepreneurs in Brazil, China, Jamaica, Russia, and Suriname. Social entrepreneurs face two key challenges—securing capital to grow their enterprises and having access to local expertise to continually develop their businesses. The scholarships are bringing the entrepreneurs together with existing networks of entrepreneurs, entrepreneurial support organizations, and investors. The roundtables, conferences, and training will focus on business metrics and investment management, which are two key entrepreneurial skills required to seek funding from different sources for investment and demonstrate results to investors.

Ways to Invest: Direct. Although there are rumors of an impact investment fund and a pharmaceutical development program (PDP) being launched. PDPs are nonprofit organizations with scientific, technical, clinical development and policy expertise that manage and advance portfolios of global health products.

Cool Idea: Skoll Entrepreneur Dr. Mark Plotkin’s thesis that by showing the medicinal qualities of the rainforest to the world (as a base for western medicine and disease prevention) we should be compelled to preserve the rainforest. Otherwise we will destroy the natural test lab for our species and, in turn, our species.

The Social Return: Because Suriname is so tiny it could serve as a biosphere model project that incorporates trade and commerce. As well, incomes and population are low so any increase is a massive stride for health and human welfare.

The Financial Return: The Investment and Development Corporation in Suriname predicts 6% real growth rate for the next five consecutive years largely driven by the mining industry (Alcoa, IAMGOLD and Newmont).

 

Filed Under: Spotlight: Country

Indonesia is Ripe for Impact Investments

January 27, 2012 By

The Issues: Despite its financial rise, Indonesia is saddled with myriad social, environmental and poverty problems. Tens of millions live on less than $1 per day. Indonesia is widely cast as the poster country for deforestation issues and species endangerment. And education is a problem: less than half of poor Indonesian children complete secondary school.

The Solutions: Land conservation programs that pay locals NOT to chop trees; outreach facilities in Jakarta slums; leveraging the medium of radio as an education tool; and school facilities for students.

Notable Social Enterprises:  YUM (Yayasan Usaha Mulia), Green Radio, Micra-Indo.org, RUMA (“business in a box”), Sampoerna Academy.

Ways to Invest: Exchange-traded funds, impact Funds, closed-end funds, direct private equity, microcredit.

Cool Idea: A program designed by Asia Pulp & Paper to teach landowners to farm rather than chop timber.

The Social Return: For every $1,000 invested more than three families are pulled out of poverty. For every dollar invested in microcredit, nearly two jobs are created and nearly $3 dollars flow into the local economy.

The Financial Return: With an economic growth clip estimated at close to 7% (on par with South Korea), the upside is huge.

Filed Under: Spotlight: Country

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