The International Journal
of Not-for-Profit Law
Volume 2, Issue 3, March 2000
Workshop at Harvard University: “Regulatory Reform, Philanthropy and Social Change in Latin America”
A very interesting and successful workshop took place on March 13 and 14, 2000, promoted by the David Rockfeller Center for Latin America Studies (DRCLAS) and the Hauser Center for Non Profit Organizations at Harvard University. The workshop was made possible by the generous support of the Lampadia Foundation. This event was part of the DRCLAS and the Hauser efforts to seek ways to better understand and strengthen philanthropy in Latin America. The main purpose of the seminar was to identify the impact of regulatory and tax policy reforms and iniciatives on promoting philanthropy and social change in Latin America. A group of well-known experts from the region and elsewhere attended the workshop. The speakers presented the legal framework of their respective countries; made suggestions for future legislative reforms; and exchanged important experiences and information. Attending on behalf of Harvard University were: Steve Reifenberg, David Brown, Rodrigo Villar, Christine W. Letts, Magdalena López-Morton and Cristina Rojas. Robert Glynn attended the workshop as the representative of the Lampadia Foundation. Among the invited experts, we can mention: Ignacio Irarrazábal (Focus, Chile); Cynthia Sandorf (Universidad del Pacífico, Perú); Miguel Angel Itriago Machado (Law Firm of “Dr. Pedro L. Itriago P.”, Venezuela); Consuelo Castro (Centro Mexicano para la Filantropía, México); Alejandro Messineo (Universidad Austral, Argentina); Gabriel Berger (Universidad de San Andrés, Argentina); Josef Oppenheimer (Fundación Antorchas, Argentina); Juan Carlos Jaramillo (Fundación Social, Colombia); Javier de Belaúnde (Universidad Católica, Perú); José Paulo Cavalcanti Filho (Comunidade Solidaria, Brasil); Diane Fulman (FleetBoston, U.S.); John Bok (Law Firm of Foley, Hoag, Eliot, Boston, MA); and Renata Rennie (Tinker Foundation, U.S.).
In March of this year, ICNL and the Association of National Development Agencies (ANDA) sponsored an on-line discussion forum on the proposed legislative reforms that will affect NGOs in Belize. Over 15 participants participated from countries all around the world.
The complete text of the conversations can be found on ICNL’s site. The Bill is now before Parliament. ICNL will keep readers updated on the status of the legislation in future issues of IJNL.
In addition, ICNL hopes to hold more of these types of discussions. If you have a NGO related topic that you would like ICNL to host, please send an email to firstname.lastname@example.org.
The Third Sector in Brazil and the Brazilian Most Recent Law on Civil Society organizations: An Overview
By Fernando Latorre
Brazil is a developing country characterized by strong socio-economic contradictions. Throughout its re-democratization process, the main goal of the government has been to improve the economy through currency stabilization. Social problems are also a great factor in the Brazilian economy; the history of Brazil shows a long tradition of a concentration of wealth. The Federal government’s lack of structure and funds represents an obstacle to improved social programs that could lead to a considerable development of the Brazilian society. This socio-economic political situation creates room for non-governmental public interest activity.
In the past ten years the third sector in Brazil has been growing rapidly. Not-for-profit organizations such as associations, foundations, and civil society organizations are very active and quite well organized. Most of them are small organizations created without many resources by and among small communities that have been enjoyed the freedom of association as established by the 1988 Federal Constitution. Although there are a large number of organizations, the third sector in the Brazil has many institutional problems.
The Brazilian legal framework governing the third sector had developed issues in the context of freedom of association and transparency. However, it is clear that there is a large gap in the legal framework concerning basic issues such as tax benefits, incentive of endowment, and the identity of organizations.
In Brazil tax benefits for not-for-profit private legal entities, in general, are not granted according to the nature of the organization, but instead are established by the nature of the organization’s activities. Therefore, it does not matter if the organization is an association, foundation, public foundation, civil society organization on public interest (OSCIP), or social organization. What does matter is the nature of the activities these entities carry on.
The nature of a particular organization‘s activities is often reflected in the special designation or designations that an organization may have been granted by the government. The types of special designations are Public Utility Status, Social Assistance Registry, and Philanthropy Aim Certificate and these designations specially benefit educational and social assistance organizations. Each level of the government (federal, state, and municipal) has the power to grant organizations one, two or all three types of special designation.
In addition, under §24, of the Federal Constitution of 1988, the federal, state, and municipal governments have overlapping power to legislate tax matters. Therefore, each level can stipulate the tax benefits granted with each different type of the special designation. However, by the end of the day there are not many substantial benefits granted. Too many laws and bureaucracy coupled with too few benefits mark the system.
Identity is another big problem for not-for-profits in Brazil. The definition of ‘not-for-profit organization’ is broad. Due to gaps in the legal framework, mutual benefit organizations such as private clubs and fraternities can compete with private not-for-profit organizations on public interest, and social assistance for government subventions, and private endowments. The lack of clear criteria in distinguishing the different nature of not-for-profit private legal entities often results in misleading application of public and private subventions and endowments.
In 1999 the Congress promulgated an important law regarding the third sector in Brazil- Law 9.790/99 on Civil Society Organization of Public Interest, later regulated by the Decree 3.100/99 promulgated in the same year.
Law 9.790/99, known as Lei das OSCIPs, brought some new issues to the Brazilian third sector legal framework. First, the Law recognized a new type of not-for-profit private legal entity: the OSCIPs. OSCIP is the acronym for Organização da Sociedade Civil de Interesse Público, which in English is Civil Society Organization on Public Interest.
According to § 1 of Law 9.790/99, an OSCIP is a not-for-profit private legal entity that can not distribute any income surplus revenues (both general and liquid), dividends, bonus, and/or assets gained through performance of their activities among any of its members or participants, advisors, directors, employees or donors. Instead, these assets and funds shall be fully used to fund organization’s activities and its purpose.
The specific activities of a civil society organization of public interest are set forth in § 3 of Law 9.790/99. Therefore to qualify as an OSCIP a not-for-profit private legal entity must perform at least one of the following activities:
- To promote social assistance programs;
- To promote cultural activities and the protection and maintenance of historic and artistic assets;
- To promote free education;
- To promote free health care;
- To carry on food aid programs and nutritional education programs;
- To promote sustainable development and environmental protection programs;
- To promote volunteerism programs;
- To promote social and economic development, and to fight poverty;
- To carry on not-for-profit experiments regarding new patterns for social production activities, different alternatives for the production, commerce, employment, and credit systems;
- To promote creation and consolidation of legal rights;
- To promote legal services;
- To promote ethics, peace, citizenship, democracy, human rights and other universal values;
- To study, research, and develop new technologies and disseminate scientific and technical knowledge regarding the activities mentioned herein.
In addition, the Law also listed requirements that an OSCIP must provide in its charter. These requirements are:
- adoption of practices preventing conflict of interest,
- creation of a financial oversight council,
- transfer of assets to a similar organization in case of liquidation,
- transfer of the assets acquired from public funds to an other OSCIP in case of the loss of the qualification of OSCIP,
- remuneration of directors on a free market basis.
- publication of financial reports
Another innovation brought by the law is the creation of the “Termo de Parceria,” which is a special contract that can only be entered into between the government and an OSCIP. This form of contract was created with intent to improve ways of cooperation among the signatory parties, to reduce bureaucracy in contracting with government, and to promote and support the performance of the public interest activities presented in the Law.
Provisions in the Law and in its regulatory Decree state important rules concerning transparency and contracting, such as: required provisions that must be included in the contract (Law 9.790/99 § 10); mechanisms of public supervision of the contract (Law 9.790/99 § 11); rules for a competitive bidding process (Decree 3.100/99 § 25) and; the criteria the government must use in deciding to enter into a contract with a specific OSCIP (Decree 3.100/99 §§ 27 and 28).
However, the law on OSCIPs has not been very successful to date. By January 2000, nine months after the promulgation of the Law, only 53 not-for-profit organizations had applied to become an OSCIP. Out of the number of organizations applying, just one fulfilled the requirements of the law. Furthermore, so far not one “Termo de Parceria” has been contracted with the government.
Apart from the facilities coming with the possibility to enter into a “Termo de Parceria” contract with the government, and besides the progressive characteristics of the law, there are no other attractive incentives for an organization to become an OSCIP. Furthermore, the law on OSCIPs did not bring any consistent innovation regarding improvement of the tax benefits system, development of endowment incentives, or the creation of strong criteria to determine not-for-profits identity.
The fact remains that the law on OSCIPs did not fulfill the expectations of third sector community in Brazil. Therefore, the challenge still and Brazil has yet to find a way to put together government, private sector, and third sector priorities in order to optimize the third sector’s resources and to promote sustainable development of civil society.
On April 1, 2000, first day of validity of the a new Venezuelan organic law, it was registered FUERZA JUVENIL (JUVENILE FORCE), the first Venezuelan Juvenile NGO exclusively directed and registered by children, without adults’ intervention, aimed to collaborate in the solving of Venezuelan social problems. Its first Board of Directors is integrated by Miguel A. Itriago (President, 12 years old); John De Veer (Vice-president), Arturo E. Martínez (Vice-president), Ninoska E. Peña (Director) and Andreína Rincón (Director).
The following is an excerpt from BREWER CARÍAS, Allan R.: Comentarios a la Constitución de 1999, Editorial Arte, Caracas, enero 2000, Págs. 15 y 1
“La Constitución de 30 de diciembre de1999 fue producto de la Asamblea Nacional Constituyente convocada por el Presidente de la República, Hugo Chávez Frías, luego de que la Corte Suprema de Justicia, mediante sentencia de 19 de enero de 1999, dictada en Sala Político Administrativa, admitiera la posibilidad de que, mediante referéndum consultivo, el pueblo pudiera “crear” dicha instancia política no prevista ni regulada en la Constitución de 1961, para revisar la Constitución.
Ese proceso fue producto del momento constituyente que viene viviendo el país desde hace algunos años, con motivo de la crisis terminal del sistema político-constitucional del Estado Centralizado de Partidos que se consolidó al amparo de la Constitución del 23 de enero de 1961, sancionada con la participación de todos los partidos políticos, como consecuencia del denominado Pacto de Punto Fijo de 1958, en el cual la élite política del momento resolvió establecer en el país un régimen democrático representativo.
Dicho Pacto, firmado por los líderes políticos de los tres partidos políticos fundamentales de la época (Acción Democrática, Copei y Unión Republicana Democrática) fue producto, por una parte, del fracaso de dicha élite en haber pretendido establecer un régimen democrático a partir de 1945, sobre la hegemonía de un partido político dominante, exclusivista y exclusionista, sin tener en cuenta que toda democracia debe constituirse sobre el pluralismo partidista, donde el diálogo, la tolerancia, la negociación y la conciliación sean instrumentos de acción; y por la otra, de la consecuencial y dolorosa experiencia del régimen militar que sucedió a dicho fracaso en la década 1948-1958.
La lección aprendida condujo a la inmodificable voluntad del liderazgo político, en 1958, de implantar un régimen democrático en Venezuela, país que en esa época era de los que menos tradición y cultura democrática tenía en toda América Latina.
En esa tarea los partidos políticos asumieron el papel protagónico; por eso el Estado que comenzó a desarrollarse en 1958 fue un Estado Democrático Centralizado de Partidos; y tuvieron un extraordinario éxito: la democracia se implantó en Venezuela; pero, lamentablemente, de Estado de Partidos se pasó a Partidocracia, pues los partidos se olvidaron que eran instrumentos para la democracia y no su finalidad.