Mexico faces a bright future: the World Bank forecasts that the recently crowned MINT country will move up the global GDP table and will have the world’s sixth largest economy by 2050, up from 14th today.
But with 75% of its total population of 120 million earning less than $3000 (£1,912) a year, Mexico is one of the world’s most unequal societies and there is a need to ensure that its future wealth benefits those at the bottom of the pyramid. Add a pressing need for development, breakdown of traditional community support networks, and rampant distrust of government and you have the makings of a perfect storm for social enterprise.
2015 is the “Dual Year” between Mexico and the UK which promotes better understanding between the two societies in the fields of culture, science and art. In that spirit, we present this primer on Mexico’s emerging social enterprise sector.
Entrepreneurship in the blood
From the taco stands on every street corner to the thriving tech start-ups, Mexico has a highly entrepreneurial culture. The 2013 Global Entrepreneurship Monitor report found that 14.8% of the adult population were running their own businesses – compared to 7.3% in the UK, 4.6% in France and 12.7% in the US – and that 23% planned to start a business in the next three years.
A fluid definition
The “social enterprise definition” debate rears its head at every sector event in the UK and it hasn’t been pinned down in Mexico either. In fact, in the absence of a legal definition, the term social enterprise or negocio social is even more ambiguous. The idea of social enterprise is being merged with varying models of social entrepreneurship, inclusive business and even corporate social responsibility, and is loosely applied to a large and fluid sector.
Few statistics
As the sector has not been defined, determining the number of social enterprises, amount invested in the sector or its rate of growth is not easy. Moreover, though academics and organisations are looking into it, there is no comprehensive sector mapping study. From the available research, estimates of the number of social enterprises range from 62 to 100 or more. In a recent study commissioned by Chivas Regal, 91 social enterprises were interviewed and the results found that 77% were start-ups, 82% had a turnover of between $0 and $250,000 (£159,300) and the top three sectors in which they operated were the environment, technology and innovation for good, and water and sanitation. Another survey estimated that social impact investment has totalled $80-90m (£51-£57m) since 2009.
An acceptance of the private sector in public services
After decades of corruption scandals at all levels of government, there is huge distrust in the public sector’s ability to run services efficiently. With so many in the country earning so little and struggling to access health, education or housing, there are gaping holes in public service delivery that the private sector is able to fill, and Mexicans are culturally far happier than Europeans for businesses to take on this role. According to Ashoka Mexico, “Society is expecting more and more that companies – rather than governments – address large pressing social and environmental issues.”
A recent example is Eco Alberto, a project led by Danone, owner of Mexico’s biggest water brand Bonafont, in partnership with the government and Porvenir Foundation. The project brings clean drinking water to communities that lack access to it. Danone helped build a central filtration plant and transports water in tanks to remote communities where it is then sold by local micro-entrepreneurs at accessible prices. This environmentally friendly project has generated a stable income for over 200 indigenous women and delivered clean water to 25,000 people. Started in 2011 the business broke even in March 2014 and is now owned by indigenous communities in the state of Hidalgo.
Solid infrastructure
Sector support infrastructure is already in place and more foundations, universities, companies and charities, both local and global, are getting in on the action. These include Ashoka, The Aspen Network for Development Entrepreneurs, over 10 other Mexican foundations and accelerators such as Endeavor, Agora Partnerships and Impact Hubs. On the finance front, investors such as Ignia, Root Capital, Green Street and Angel Ventures are establishing themselves. New Ventures Mexico has been operating for 10 years and since 2011 has run the annual Latin American Forum for Impact investment (FLII). Multinationals such as Chivas Regal, Coca-Cola, and Deloitte are also running support programmes.
Government support is limited
In 2013, the federal government implemented structural reforms to increase business productivity and competitiveness, but social enterprise was not included in a National Development Plan for 2013-18. Social entrepreneurs have a long list of measures they want the government to take, including a legal form for social enterprises, tax breaks and priority in government supply chains.
A youth-led revolution?
As in many countries, participation in political parties and traditional institutions is low amongst young people. However, Mexicans aged 15-29 make up 26.3% of the Mexican population and 70% of citizens are active in civil society. Unlocking this generation’s potential is essential to future prosperity. As more than 50% of new businesses were started by people aged 35 and younger in 2013, the key to solving many of the country’s problems will be to ensure that a growing proportion of these businesses are social.
Anne Salter is a Londoner who spent two months exploring the social enterprise sector in Mexico in January and February 2015 where she spent time with Ashoka Mexico and in Central America. She currently works with Inclusive Business Hub and previously worked at Social Enterprise UK. @AnneSalte
Content on this page is paid for and provided by the British Council, sponsor of the international social enterprise hub
