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Cablegate: Corporate Social Responsibility in Colombia

This record is a partial extract of the original cable. The full text of the original cable is not available.

UNCLAS SECTION 01 OF 02 BOGOTA 012953

SIPDIS

STATE FOR EB/TPP
STATE PLEASE PASS TO USTR
USAID FOR LAC/SAM DJOHNSON

E.O. 12958: N/A
TAGS: EAID ELAB PGOV CO
SUBJECT: CORPORATE SOCIAL RESPONSIBILITY IN COLOMBIA

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Summary
--------

1. Leading companies are implementing strategically-focused
corporate social responsibility programs in Colombia. Each year,
private companies donate millions of dollars to fund education,
health, and recreational initiatives throughout the country. The
private sector is also providing management consultancy services
to civil-society organizations and is leading efforts to raise
and channel international donations to support Colombian
development organizations. Many Colombian companies also provide
a variety of employee benefits and social services -- including
housing subsidies -- through innovative cost-sharing programs.
Although the long-term impact of such programs in Colombia has
not been rigorously analyzed, top Colombian companies are
demonstrating significant potential to promote and support the
country's most critical development needs. End summary.

2. The Catholic Church has greatly influenced the development of
philanthropy in Colombia. Corporate foundations support social,
economic, and humanitarian assistance efforts nationwide.
Prominent young Colombian professionals and entrepreneurs are
spearheading creative and high-impact initiatives. This new
generation of business and social leaders is developing a culture
of corporate social responsibility within Colombia's private
sector and involving their own companies.

--------------------------------
Profile of Corporate Foundations
--------------------------------

3. Over the past three years, the Colombian private sector has
increasingly realized its stake in improving socio-economic
conditions. In 2002, Colombian companies donated at least 140
billion Colombian pesos (CPS) (approximately USD 52 million) to
various social development initiatives. The most recent records
indicate that in 1997 there were 94 corporate foundations
formally operating in Colombia, with assets approximating one
billion dollars, equivalent to 1 percent of Colombia's GDP and 5
percent of total public sector expenditures. Since then, several
new corporate foundations have been created and we expect this
trend to continue.

4. Some foundations leverage third party resources, mostly using
donations and matching grants from international foundations
(primarily from the U.S.). Several prominent corporate
foundations, such as Corona and Carvajal, are actively involved
in supporting institutional development and strengthening through
management consulting and other services. This type of
assistance is provided directly through specialized NGOs such as
"Corporacin Calidad," "Corpoeducacion," "Gestion Hospitalaria,"
and "Compartamos Con Colombia," among others.

-------------------------------------
CSR Investment Mechanisms and Targets
-------------------------------------

5. According to a recent study of the top fifty companies in
Colombia carried out by Compartamos Con Colombia (CCC), 52
percent of the companies it surveyed make direct donations, 28
percent contribute to corporate foundations, and a small number
have grant programs. The CCC study demonstrates a focus on
education, employment generation, and health, followed by sports,
cultural activities, and other forms of recreation. Smaller
contributions are earmarked to promote civic values.
Additionally, the private sector is supporting micro-businesses
and small enterprises in Colombia through micro-credit and direct
investments. Twenty-six companies in CCC's sample include micro-
enterprise development as part of their CSR strategies, and most
support small business ventures in marginal and underserved
areas. Companies that operate production facilities, however,
generally concentrate their activities in nearby communities.

--------------------------------
"Cajas de Compensacion Familiar"
--------------------------------

6. Many Colombian companies make sizeable contributions to social
programs through family subsidy and benefit compensation
entities, or "Cajas de Compensacion Familiar" (CCFs). Unique to
Colombia, the 54 Cajas are key players in the implementation of
wide-ranging social programs that directly benefit almost 10
million Colombians, or 23 percent of Colombia's total population.
Obligatory employee payroll contributions channeled through
affiliated private sector companies fund the Cajas. This
"forced" contribution by employees through CCFs constitutes a
critical delivery channel for a broad range of social programs.

7. The number of affiliated companies has grown 18 percent since
1994, helping to increase the resources available to undertake
critical social programs. As a result, there is a sizeable
increase in the number of affiliated workers and family members
eligible for the social services that CCFs provide. The total
number of affiliated persons increased from 8,641,384 in 1994 to
9,846,031 in 2003.

8. Taken as a whole, 83,676 private sector companies are
currently affiliated with the 54 Cajas, which are financed by
means of a 4 percent payroll tax and paid by these companies. As
a result, the CCFs enjoy a sizeable budget which they invest in a
variety of social programs. In 2003, CCF expenditures reached
CPS 1.4 trillion (approximately USD 519 million), and for 2004
the proposed budget is CPS 1.5 trillion (approximately USD 555
million). CCF programs cover education, health, housing,
tourism, and recreation, as well as unemployment and housing
loans. The subsidies provided through the CCFs are divided into
two main categories:
-- Monetary subsidies, in which the CCFs typically spend CPS
511.4 billion (approximately USD 189 million) benefiting an
estimated three million members; and

-- Housing subsidies, in which the CCFs typically spend CPS 158.2
billion pesos (approximately USD 59 million), benefiting some
25,000 member families annually.

In 2004, housing subsidies are expected to increase to CPS 170
billion (approximately USD 62 million), and will benefit 34,200
members.

9. The CCFs operate 31 percent of Colombia's health system. In
2003, these entities operated 224 health centers, including basic
health clinics, hospitals, dental centers, and comprehensive
medical service units.

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Leading Companies
------------------

10. According to CCC, the 20 leading private sector Colombian
companies with advanced social responsibility practices are:
Bellsouth (now owned by Telefnica of Spain), El Tiempo, Bavaria,
Corona, Carvajal, Hocol (a petroleum producer), Promigas,
Almacenes Exito, Sociedad Portuaria De Buenaventura, Ingenio
Riopaila, Emgesa, Grupo Mac, Smurfit Carton De Colombia, Noel,
Empresa De Energia De Bogota, Carbones Del Cerrejon, Isa,
Coomeva, Colsubsidio, and Indupalma.

11. Leading Colombian companies increasingly create local
development organizations in which a large number of national and
international companies unite to support a specific social cause
or goal, in contrast with more traditional models in which
companies work independently and in an oftentimes paternalistic
manner. For example, the recently created "Empresarios por la
Educacion" (Entrepreneurs for Education) foundation resulted from
the combined efforts of more than 60 companies working in
alliance to improve educational standards in Colombia.
Regionally focused activities include marketing, internet-based
fundraising and business consulting services focused on NGOs and
foundations.

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General Conclusions
-------------------

12. Colombia has a long tradition of corporate giving and is a
leader in this area in the Andean region. While they are not yet
a common business practice and not widely integrated into
corporate strategies and values, more companies are beginning to
develop community-oriented policies and programs. Additionally,
very few companies currently measure the results and impact of
their strategic and targeted social and economic investments as
well as charitable contributions, making evaluation difficult and
inadequate information systems often limit the efficacy of the
evaluations that are undertaken.

WOOD

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