Over the last 200 years, Latin America, like most other regions, has seen a dramatic improvement in its economic and social indicators. As you can see in this short video I’ve made, in 1800 most countries in the region had a life expectancy of about 30 years and a GDP per capita of only $750.
Today, most countries in Latin America have a life expectancy of 75 years, a dramatic 150% increase, heavily influenced by improvements in child mortality. From an economic perspective, most countries today have a GDP per capita of over $5,000 and many have already surpassed the $10,000 threshold (PPP inflation-adjusted).
Despite this progress, our region still faces serious social issues. Today, 220 million people live on a daily per capita income of just $4 a day. Out of the 15 most unequal countries in the world, 10 are from Latin America, according to a UNDP study. From the 130 million families living in urban areas, 34 million live in inadequate housing, a problem that would cost over $300 billion, or 8% of the region’s GDP, to solve.
At the same time, the region’s government spending has reached historical peaks and its expansion faces serious political limitations. Latin America has seen its total public spending rise from 25% to 29.2% of GDP and the share of social spending compared to total public spending rise from 50% to a staggering 65.9% between 1992 and 2011, as seen in the chart below.
Thus, increasingly constrained, governments alone cannot solve these challenges, such as sustaining long-term inclusive growth and developing the region’s future jobs and talents, two of the World Economic Forum’s Global Challenges. Given their budgetary limitations and political constraints, governments need support from the private sector to overcome these problems.
But traditional, profit-maximizing businesses will not be able to solve the region’s biggest problems. A new approach is needed. The model of capitalism we have chosen has created a world where the richest 85 people in the world have as much wealth as the bottom 3.5 billion. Many of these poor live in Latin America.
The trials of creating a more inclusive and sustainable capitalism has led to the development of social innovation, backed by so-called impact investing; investments characterized by the pursuit of social and/or environmental impact beyond financial returns. Although sometimes referred to as a new asset class, impact investing is, truly, a new approach to doing business: one that inserts a third dimension, social impact, to the traditional risk-return model.
Latin America has produced important social innovations in recent years, developed by creative entrepreneurs and backed by impact investing funds. From the 50 showcased funds in the Impact Assets 50 ranking, 13 have a geographic focus on Latin America and are investing in areas such as affordable housing, education, healthcare, financial services and small business development.
A great example of an innovative technology that could produce a huge social impact is the company Miroculus, which is developing a technology for very early-detection of cancer that can potentially be cheaper, better and smarter than existing methods. Co-founder Jorge Soto was inspired by his aunt, who was diagnosed with advanced lung cancer. But Jorge and his colleagues believe they have developed a technology that can detect very specific types of cancer in only 60 minutes, using a smartphone. Watch Jorge’s inspiring TED Talk here.
Another Latin American start-up, Semtive, is reimagining the ways in which the population consumes and generates energy, having developed a micro Vertical Wind Turbine for rural and urban populations in emerging markets. Semtive envisions a world with decentralized energy, and their micro-turbine enables families to reduce their spending while using a renewable source. Although a startup “Latina”, Semtive already exports to India, Bangladesh, Pakistan, UAE and Israel, besides many countries in Latin America.
Another story that inspires me is the health-technology company MagnaMed, whose mission is to save lives through innovative medical devices. Their critical care devices are radically more accessible (40% cheaper) have more features, durability and three-times more battery time than the best American and European technologies. Dreaming of a global impact, the entrepreneurs - Brazilian sons of poor Japanese immigrants - now export to 35 countries and have an outreach of 1 million people every year.
Just these few examples make us believe Latin America has the power and the people to solve its own problems. A key lesson I have learned being an impact investor in innovative and impactful business like those I’ve described is that the most powerful impact comes when you align your deepest passion, your best talent and a scalable business model that can solve some of the world’s biggest problems.
It is inspiring to think what a population of 525 million people in Latin America could do if we are able to align our capabilities and passion to create solutions to overcome the world’s biggest challenges.
This blog is part of a series of articles published ahead of the World Economic Forum on Latin America 2016, taking place from 16 to 17 June in Medellin, Colombia.