Egídio Guerra is presenting youth in northeast Brazil with an alternative to unemployment, poverty, and violence: small businesses with a competitive edge. He is creating channels for young people to enter the job market and establish their own businesses, organized into economically viable clusters.
The New Idea
Egídio is creating networks of youth-run small businesses to combat the poverty, unemployment, and income disparity facing young people in the Brazilian Northeast. He is pairing disadvantaged youth and university students to solve a problem both groups face–namely, difficulty in securing their first jobs. His idea is to transform civil society organizations serving at-risk youth into management training centers and small business incubators. Each one of these new centers specializes in a sector of the economy that resonates with its community. The network of small businesses is organized into Social Clusters, thereby enabling them to use resources more efficiently. Reinforcing each other, the small businesses share technology, increase bargaining power with suppliers, access credit, and achieve economies of scale. Thus, they can compete with larger companies in the broader marketplace. This idea creates jobs and income for marginalized young people who might otherwise be prime targets and players in crime, prostitution, and drugs. With increased spending power and a deeper understanding of the social problems they face, these new entrepreneurs and employees become socially responsible consumers and active citizens. Their positive and productive role in society revitalizes the economy, reduces income disparities, and creates solutions for social change.
Brazil as a whole has the second highest level of income disparity in the world, according to the United Nations. The Northeast, plagued by urban migration and drought, is home to half of the country's poor. Here, the average income is less than 50 percent of that in the wealthier Southeast, according to the Gini coefficient.In Egídio's state of Ceará, real salaries dropped 22 percent between 1997 and 1998, and the average salary of people over ten years old fell to less than one-half the national minimum wage. Within Ceará, income is distributed quite unequally: 4 percent of the state's population controls the majority of the wealth.Unemployment is both a cause and result of this unequal concentration of wealth. Because the level of income is increasingly concentrated in the hands of a few, the consumer market shrinks, damaging existing industry and inhibiting the creation of new businesses. Decreasing consumption leads to cutbacks, layoffs and an environment which inhibits new job creation.Unemployment particularly affects youth. Those seeking their first job face a typical catch-22: without experience, they can't get a job, yet without a job, they can't gain experience. In Ceará's capital city of Fortaleza, ninety-five thousand people are looking for work, and young people represent 66 percent of the unemployed. Furthermore, fifteen thousand of these are between sixteen and twenty-one years old and have never held a job. For both the public and private sectors, the social costs of maintaining young people in a state of social and economic exclusion is high. Youth vulnerable to involvement in crime and drugs lead government and business to spend more on security, police, and drug treatment. In addition to income disparity and unemployment, the local economy is characterized by a high failure rate of small businesses, due in large part to a lack of management experience, technical know-how, access to credit, and markets for products. In Fortaleza, the number of microenterprise start-ups fell from 2,380 in 1999 to 1,645 in 2000, further reducing opportunities for job creation and income redistribution.
Egídio's strategy develops working relationships among a series of organizations: civil society organizations, universities, businesses, and public institutions. He is a businessperson with strong ties to the nonprofit sector: in 1996, he founded the Global Executive Society to foster socially responsible young business executives. He also helped found the Network for Professional Education to develop efficient training programs and to integrate adolescents into the job market.Egídio asks youth-focused citizen groups to nominate young people to start businesses, helps the selected young people obtain training and advice, and networks the small businesses into Social Clusters. In the initial training phase, young people take part in a year-long series of workshops to prepare them for the job market. The training includes discussions on citizenship, sexuality, violence, and leadership. At the year's end, a psychologist evaluates the participants' professional and psychological profiles. According to a young person's skills and interests, he or she is referred to a professional training program in one of the member civil society organizations.From this point on, the Global Executive Society manages the adolescent's integration into the workplace. The young person either goes directly to the job market (telemarketing, secretarial work, etc.) or becomes part of a Social Cluster, each of which is a network of small businesses that share resources. To establish the first Cluster, Egídio and his team conducted a study of member organizations and their capacity to serve as incubators for small businesses. Egídio looked at how geared the organizations were toward expanding sectors of the economy that resonated with their home communities. They selected seven organizations to be incubators during this first year and launched eleven small businesses, involving one hundred twenty adolescents. Each organization works in a different community, and each focuses on a different sector of the economy: textiles, food production, recycling, art and culture, and computer technology. The youth receive training in business administration and area-specific skills. They collaborate with volunteer university students to develop their business plans. Egídio has organized these university students into a complementary program in order to reduce costs and speed the implementation of the incubator project. This partnership meets both the demand of university students to gain practical "field" experience, as well as the need for young entrepreneurs to learn business, management, and social skills. The result is an effective knowledge transfer from academia to the social sector. Simultaneously, this partnership addresses the experience/first job catch-22 faced by both university students and poor, marginalized young people. The eleven small businesses currently in the incubation phase include a clothing company, a music school, a bakery, and an IT company. The one hundred twenty at-risk adolescents and the twenty university students are managed by the business executives who make up the Global Executive Society. The Social Clusters optimize resources and increase competitiveness. The small businesses in the Clusters operate under one common name and thereby benefit from brand equity. They also share purchasing power for bulk raw materials. They exchange technology and share distribution channels. The IT incubator, for example, provides computer services to the rest of the incubators. Over the next two years, this program will create two hundred fifty new positions and two hundred fifty related jobs. Egídio is in the process of setting up a separate organization to ensure the sustainability of the Social Clusters project. To avoid bureaucracy and to reduce infrastructure and transportation costs, managing the Social Clusters will be done via Internet. Thanks to hardware donations, Egídio has equipped each of the seven organizations with a computer. In addition, one of the companies formed in the computer technology incubator (the website nivelmaximo.com.br) will serve as the marketing tool for the other businesses. Currently, Egídio is collecting the resources to buy equipment and negotiating access to lines of credit with national and international funding agencies. To ensure the success and sustainability of his model, Egídio has developed a business plan which won second place in the Ashoka/McKinsey Social Entrepreneur Award competition in 2000. One component of his plan is a strategy to secure an external market for the goods and services of the Social Clusters. His idea is to transform the student ID card into a discount card for socially responsible consumption. Students receive discounts at the member organizations and stores selling Social Cluster products and services. Social Cluster members give talks at schools and universities to educate students about the program, the businesses, the products, and the power of socially responsible consumption. At these talks, young people involved in the program suggest that their peers, including the six hundred thousand students who are already registered in a database, spend 5 percent of their income on socially responsible consumption. With these returns, it would be possible to guarantee sustainability for forty functioning incubators, thereby launching an average of four hundred small businesses per year. This number of microbusinesses would generate an average of five thousand jobs for disadvantaged youth. In five years, the project could generate more than twenty thousand jobs. With McKinsey consultants, Egídio is calculating the future social impact of his expanding program. Egídio plans to spread this model throughout the Northeast and then the rest of Brazil through partnerships with the National Federation of Administration Students and the network of Junior Companies, which he co-founded. Through these channels, Egídio plans to identify more university students with the profile to replicate the idea. By creating a social franchise of the model, new Social Clusters would benefit from the initial investment in Ceará in logo development, manuals, videos, websites, product prototypes, distribution channels, and advertising. He has already identified potential partners in four Brazilian states.
In high school, Egídio was a student council leader. While promoting forums, demonstrations, and cultural and sports activities, he sought to engage his peers in the process of understanding and transforming their conditions. He and his fellow students were responsible for such achievements as student discounts for public transportation and tuition cost reductions. However, the most significant part of this experience was learning that strong leadership emerges from situations in which people foster the creative and critical abilities of the group and channel those abilities toward common goals.Egídio attended university at the State University of Ceará. In his first semester, he co-founded the organization Junior Companies, now in its tenth term. The objective of this organization is to transfer university students' knowledge to society through consultancies to small and medium-sized businesses. During this time, Egídio got his first job as the manager of public relations for the Coca-Cola division in Ceará. To obtain the position, he sent a book, a research study and a letter to the president of Coca-Cola explaining why the company needed to create a department of public relations. During the same time, the year of President Fernando Collor's impeachment, Egídio entered the political sphere and was elected as the Social Democratic Party's national youth coordinator, where he reorganized the "painted-faces" protests calling for impeachment. After seeing that political parties did not truly allow youth to implement solutions for society, he became disillusioned with politics. He also became disillusioned with the student movement and its inability to accomplish any meaningful changes. He left these movements to gain time to think, read, and develop his own solutions. Egídio continued his career as a business executive working at leading companies like Banco Real, DuPont Brazil, and Brahma, developing marketing and communications programs for various products. Meanwhile, he read, analyzed sociological trends, and developed projects to create positive youth-focused change in society. Collecting a library of more than a thousand books, Egídio built what he calls a personal "land of knowledge," or information base, in which he identified the core values he would incorporate into his proposed solutions. The first step was founding the Global Executive Society, now in its fourth year, to educate executives about social responsibility. This organization serves as the base for his idea of social and economic transformation for youth.