Corporate Giving Trends in the U.S.-Mexico Border Region Presentation by: Richard Kiy International Community Foundation & Kenn Morris Crossborder Business Associates Border Philanthropy Partnership February 28, 2006

Study Objectives

1.Raise awareness and provide insights about corporate giving trends in the border region; 2.Encourage more active engagement and collaboration between border area community foundations, nonprofit organizations in the region, and major corporate givers; 3.Promote legal reforms to encourage, not discourage, the development of civil society and maquiladora charitable contributions; and 4.Expand the overall level of corporate giving by both major maquiladora employers, industry service providers, and businesses in general. Study Objectives

Study Partners

Funding was made possible through the support of:

Key Findings

1.Maquiladora giving is proportionally lower in Mexico border communities compared to contributions made in the U.S. –Two-thirds of maquiladoras gave $10,000 or less in cash donations; –Less than 10% gave over $10,000 annually; –25.5% gave nothing ($0); 2.Maquila’s giving is due to several factors: –Mexico’s tax rules for maquiladoras creates disincentive for companies to give — legislative change is necessary; –Need to expand charitable giving linkages between HQ and maquiladoras; –Border NGOs need to tell their story better, and better respond to corporate giving objectives.

Key Findings (continued) 3.Corporate giving in the border region takes many forms: financial support, in-kind gifts of products and services, employee volunteerism, employee matching gifts; 4.Companies committed to staying in border region are more inclined to give; 5.Corporations give for a variety of reasons: corporate citizenship-CSR; employee morale; good general business practice; image or brand; 6.Most important factor for charitable giving is presence of a strong local champion (plant manager).

Key Findings (continued) 8.Proximity of Corporate HQ to border matters; 9.Some maquiladoras collaborating with United Way and/or local service clubs; 10.Preference to give to more established nonprofits as well as those with tax deductibility (also, those with a 501c3 designation or connections in the U.S.); 11.Exists a widening gap between the “haves’ and ‘have nots” among nonprofit organizations; 12.Opportunities exist to expand giving in border region – but requires changes in policy, attitudes and perceptions by the Mexican Government, U.S. companies (HQ & Maquilas) and NGOs.

Expanding Border Corporate Giving Recommendations What the Mexican Government can do: Mexico’s tax code (Ley del Impuesto Sobre la Renta - LISR) should not penalize maquiladoras for charitable contributions made to Mexican nonprofits; Create more efficient and encompassing procedure for NGOs to receive charitable deductibility status; Create a formal procedure within the Finance Ministry (Secretaría de Hacienda y Crédito Público) that allows a provisional registration status for nonprofits while they collect all the necessary information.

Expanding Border Corporate Giving Recommendations What Maquiladora Parent Companies & their Plants Can Do: Consider raising their level of corporate giving commensurate with proportion of Mexico border operations compared to global operations; Expand cross-border giving options by working through U.S. intermediary organizations that are capable of granting into Mexico; –U.S. and Mexican community foundations have an important role to play in serving as trusted partners to border area NGOs. In addition to cash and in-kind contributions, provide technical and training support to local nonprofits; Create incentives for local plant managers to become more actively engaged in their local communities.

Expanding Border Corporate Giving Recommendations What NGOs can do: Beyond financial support, consider seeking technical and capacity training assistance from companies; Better inform companies of how their work benefits the community, and better describe the value-added benefits they can provide to corporate supporters; Promote greater transparency and accountability within the nonprofit sector; Assist companies to identify ways to align their corporate goals and objectives with programs of border NGOs; Facilitate greater corporate participation in the boards of worthy border area nonprofits; and When good corporate citizenship is exhibited, publicly recognize it!

Next Steps

BPP Next Steps In partnership with CEMEFI, advocate for change in Mexico’s tax code to create incentives for expanded corporate giving in the border area; Expand outreach to companies, maquiladoras and their suppliers to increase corporate giving in communities along the border; Increase linkages with maquiladora sector and BPP; Promote expanded involvement of maquiladora senior management in the boards of Border area NGOs; Consider border corporate philanthropy conference (2007)

The Border Philanthropy Partnership believes that strategic collaboration and a passionate commitment to the border region in partnership with the maquiladora sector and their suppliers can go a long way towards effectively addressing the region’s persistent social, economic and environmental challenges.

Survey Highlights Profile of Respondents –Developed randomized listing of firms in border states, participation voluntary –Over 800 maquiladoras contacted –110 maquiladoras participated –46% from Baja California Slight overrepresentation of Baja CA, Coahuila, and Tamaulipas firms –Nearly 70% had US-based headquarters –85% had 100 or more employees Highest response from largest firms

Survey Highlights Levels of Giving –Over 75% of maquiladoras provided some degree of charitable contributions to their local community Two-thirds gave less than $10,000 in 2004 About one-fifth did not give charitably Despite tax implications, over 9% gave more than $10,000 in 2004 –Nearly 70% gave some level of in-kind contributions to local NGOs Nearly 60% gave $10,000 or less of in-kind contributions (usually products) Appears to be slightly more common to give contributions in the $25,001- $50,000 range in form of in-kind instead of cash

Survey Highlights Broad range of charitable activities, but cash contributions, community events, and supporting local schools were top activities in 2004

Survey Highlights Authority & NGO Preferences –Authority for cash donations of up to $1,000 is primarily held at local level (62% of maquiladoras) Sizable proportion (25%) of maquiladoras also able to make decisions of $1-$10K, and nearly 10% can make local decision for cash donations of more than $10K. –Maquiladora charitable giving most focused on education (75% rated high/very high), health (71% rated high/very high), environment (61%), and supporting civic groups (35%). –31% reported providing support to 4 or more NGOs