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Fundacion Arcor has invested almost $8 million that has benefited over 453,000 children in Argentina and Brazil. (Photo: Fundacion Arcor)
Wednesday, November 27, 2013
Perspectives

Latin America: Private Investment in Education

Latin American policymakers must pursue an ongoing dialogue with the private sector over its needs, while providing incentives for investments.

BY GABRIEL SANCHEZ ZINNY 

The province of Entre Ríos in Argentina has recently been host to a new education success story. There, a program focusing on early childhood education has enabled over 20,000 kindergarteners to double their vocabulary skills in one year. What may be surprising is that this program was not launched by the government, the traditional provider of education, but by a large multinational corporation, Arcor Group, that, through their 20 year old Foundation, the company has invested almost $8 million that has benefited over 453,000 children in Argentina and Brazil.

 

In Brazil, there is also the example of O Globo, the largest mass media group in Latin America. TV Globo’s Criança Esperança program, which has recently partnered with UNESCO in a six year agreement, funds education, capacity building, and other social programs with a focus on low income families and other vulnerable groups. Last year alone, the program funded 86 projects throughout Brazil for the benefit of more than 30,000 youth.

 

Both Arcor and O Globo are examples of how private companies are getting more involved in efforts to improve education, stepping in to a sector that has long suffered from a lack of innovation. But it is still small change compared with the immense challenges that education systems face in emerging markets, and especially in Latin America. Other areas of development still receive the vast majority of attention, with companies giving sixteen times as much to the global health sector as it does to education.

 

That eye-opening statistic comes from a new report from the Brookings Institution, Investment in Global Education: a Strategic Imperative for Business. In it, Brookings scholars make a powerful case that business should be a primary investor in human capital, which brings both social and direct economic impacts.  

 

To illustrate its point, the Brookings report rightly points to health as an area where the private sector plays an important role in both financing and directly providing a critical public service. The Gates Foundation, for instance, has spent over $10 billion on projects to develop vaccines, test for HIV/AIDS, and to fund research to find cures for pneumonia and other ailments. This has allowed for major progress in medicine by providing scientists with the funding to research without worrying about finances, even in the case of obscure or difficult diseases.

 

The improvement of human capital that accompanies such health advances is extremely relevant for international business, and the same holds equally true for education. Current demographic shifts show that as the populations of the developed world age, emerging nations in Asia, Africa, the Middle East and Latin America will supply more of the work force and account for more of the demand as their purchasing power grows together with expanding middle classes. As we have already seen, multinationals will increasingly start relocating to developing nations to take advantage of these growing markets and lower costs.  

 

But education systems that are not up to these challenges will put the brakes on this economic development. As Brookings points out, “It is the children born today whom companies will be recruiting to their ranks in 2030, and the vast majority of these new employees will have been educated in weak education systems in Asia, Africa or Latin America.” Making matters worse, the United Nations projects a $38 billion financing gap for basic and lower secondary education in these emerging countries.

 

The authors pose a strong return-on-investment argument for why the private sector should step in to help close this gap. And unlike most other scholarship on this issue, they take a broader view as well, recognizing the value that companies can bring in terms of innovation, particularly regarding ways to improve education delivery. However, what they don’t cover is equally important: the obstacles that make these potential partnerships more unlikely. This includes sometimes unwelcoming government policies and resistance from other stakeholders.

 

Indeed, policymakers who are happy to work with private companies in areas such as health or security are still reticent when it comes to education. As John Bailey, co-founder of Whiteboard Advisors and a former appointee at the US Education and Commerce Departments, argues, “when it comes to other crucial challenges our country faces – creating a more reliable healthcare system, finding efficient sources of clean energy, or improving space exploration – policymakers to not ask whether they should engage for-profit companies, but how. It’s time for education policymakers to follow suit.” And Bailey was speaking of the US, which is more investment-friendly than most emerging economies.

 

There are a number of avenues to accomplish this. First, Latin American policymakers must pursue an ongoing dialogue with the private sector over its needs. At the end of the day, most graduates will be working at private firms, whether small, medium, or large. Getting the private sector involved will prepare students for the workforce to the benefit of their careers and the economy as a whole.

 

In addition, government can mobilize an array of other instruments to incentivize participation as they do in other sectors. These can include grants, tax credits, or awards, or other motivational mechanisms.

 

Brookings concludes that education is both fundamental for human development and a “strategic imperative” for the private sector. For this reason, both public and private stakeholders must get better at working together towards these common goals. The future of education requires it.

Gabriel Sanchez Zinny is president of Kuepa.com, a Latin American Blended Learning company, working in incorporating technologies to reduce drop out rates. Follow him on Twitter at @gzinny. He wrote this column for Latinvex.


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