Giving Compass' Take:

• Paula Fabiani and Rhodri Davies explain how Brazil's new endowment law introduces new guidelines for governance and transparency of philanthropic endowment funds to build public trust for institutions. 

• What are the advantages of laws like this? How can other countries learn from Brazil's policy shift? 

• Learn about engaging the Brazilian social private sector in the SDGs. 

The election of right-wing firebrand Jair Bolsonaro as Brazil's president last year shocked the world as yet another populist politician tapped into a nation's deep-seated divisions and the public's mistrust of elites to win an election. Given Bolsonaro’s past statements, many people had real concerns about what his victory might mean for Brazil's environmental protections and civil society freedoms.

Amidst all the political turmoil and worries, a good-news story may have been missed. On January 4, 2019, Brazil's government passed Law No. 13,800. This introduces, for the first time in the nation, a framework to govern the creation and management of philanthropic endowment funds. It includes rules around the governance and transparency of these new structures to ensure that they are used in the right way and can command public trust. Funds focused on topics of public interest—such as education, science, health, or the environment— now fall under the jurisdiction of Law No. 13,800, with the aim of using the funds in a more stable and transparent manner. However, endowments that target cultural institutions, which receive special consideration in the new law, enjoy additional benefits, including tax breaks on donations.

It has long been possible to create endowments in Brazil, but without proper legal structures and regulatory controls, the process proved problematic and damaging to public trust of the nation's philanthropic sector. For example, no rules existed to prevent funds from being spent on activities unrelated to an organization's mission. The results were unsurprising; there was widespread suspicion that wealthy families, board members, or executives would use endowments for personal gain. Other times, funds of public interest were mismanaged, leading to unexpected liabilities. Numerous corruption scandals in the country’s wider NGO sector have also undermined trust in the nation's philanthropic community, particularly when the transgressions, which included money laundering, involved suspicious government contracts or funding. Why? Brazilians already deeply distrust their government—the nation ranked toward the bottom of the 2019 Edelman Trust Barometer—so NGOs that work with the state may become guilty by association.

The new law attempts to solve some of these problems. Endowment funds will be established as separate entities and governed by more stringent rules than ever before, with specific rules to limit spending on anything unrelated to the mission.

Read the full article about Brazil’s New Endowment Law by Paula Fabiani and Rhodri Davies at Stanford Social Innovation Review.