BUSINESSWEEK ONLINE : MAY 1, 2000 ISSUE
INTERNATIONAL -- LATIN AMERICAN COVER STORY Chile: Turning Street People into Businesspeople Cesar Palma used to spend his days pawing through a fetid, rat-infested garbage heap, collecting scraps of cardboard that he sold for 17 cents a kilo. It was dangerous, disagreeable work for Palma and the hundreds of other "cartoneros" who extracted a living from other people's rubbish. "There were a lot of accidents. That's why we began to organize," says the 60-year-old, dressed in grimy, second-hand clothes as he stands outside the ramshackle building in downtown Santiago that houses the recycling cooperative he and co-workers founded seven years ago. Today, things have improved a lot for Palma and his fellow cartoneros. Some 150 of them now cruise the streets of Santiago for cardboard on oversized tricycles. They bring back their harvest to the co-op's garage-like center, where it is baled and then sold to companies that supply pulp-and-paper producers. The cartoneros split the profits, which on a per-kilo basis are nearly double what they used to get when they operated as independents, says Palma. They also put aside some cash for an emergency fund for collectors injured on the job. The cartoneros have Chile's Fund for Solidarity & Social Investment (FOSIS) to thank for their recycling center. Launched in 1990, shortly after Chile held its first democratic election in 17 years, this government fund started out with just $10 million. Today, FOSIS has an annual budget of $50 million, which is spent on projects as diverse as the community groups that compete for its funding. Standouts include Santiago prostitutes in training to become hairdressers, women in southern Chile who run commercial greenhouses -- and the cartoneros, who received a one-time grant of $36,600 to start their collection center in 1993. DIRECT HELP. FOSIS managers figure that every dollar spent on such projects mobilizes as much as $2.80 in private credit, nongovernmental organization grants, or community support. That often leads to enterprises that are self-sustaining and even profitable over time. "The programs that work are the ones that involve the people directly," says FOSIS Deputy Director Marcelo Monsalves. FOSIS has about 5,000 projects going at one time, each receiving $2,000 to $70,000 in grants to cover startup costs. The fund also runs a program that matches small-business owners with private banks. Here, FOSIS initially subsidizes part of the financing cost of a project until the borrower has established a track record with the lender. Monsalves estimates that it takes FOSIS just $800 to create one job, something which in some industries can require an investment of as much as $1 million. FOSIS is a high-impact, low-cost program: It accounts for just 0.5% of the Chilean government's total spending on social programs. Still, it has not gone unnoticed -- countries in Asia and Eastern Europe have drawn inspiration from the fund. CHICKEN IN THE POT. That's not surprising since, within Latin America, no country did more than Chile to tackle poverty in the 1990s. The country got a jump-start on its neighbors on economic reforms, including privatization and trade liberalization. And thanks to a combination of robust economic growth and a 60% increase in public social spending, the poverty rate has been halved, to 20% of the population, over the past decade. Chileans on the whole are much better off, and not just in terms of per capita income, which doubled in just 10 years. "There's more consumption of chicken and beef, there's better housing and better health care," says Jaime Ruiz-Tagle, Chile's Planning Minister. "It's very clear we've advanced." Palma and the other cartoneros are also thinking of ways to get ahead. Recently, their cooperative began offering business-administration and computer courses. Says Palma proudly: "We started out as recyclers, but now we're branching out." By Greg Brown in Santiago _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ BACK TO TOP					RELATED ITEMS The Fight against Latin Poverty (int'l edition) LATIN AMERICA COVER IMAGE: The Fight against Poverty CHART: The Intractable Problem TABLE: Promising New Approaches to Reducing Poverty Mexico: A Powerful Incentive to Keep Kids in School (int'l edition) Peru: Fixing the World, One Roof at a Time (int'l edition) Brazil: Small Investments That Make a Big Difference (int'l edition) ONLINE ORIGINAL: Chile: Turning Street People into Businesspeople INTERACT E-Mail to Business Week Online

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