The private sector is increasing its role in Brazilian education.

BY GABRIEL SANCHEZ ZINNY 

In June of this year, Brazil’s Congress approved one of the most ambitious education reforms in the history of the country – the National Education Plan, or PNE. Among other things, the PNE mandates an increase in education expenditure to at least 10 percent of GDP, guarantees basic universal education for all, and will expand higher education access.

It is, to be sure, an ambitious agenda, and there is already spirited debate within Brazil – with some arguing that the focus on funding levels rather than indicators of quality is the wrong approach, especially with uncertainty about where the financial resources for the program will come from.

At the same time, the efforts show that Brazil is trying to prioritize its education sector after receiving  negative results in the most recent OECD Program for International Student Assessment (PISA) evaluations and long struggling with a remarkable level of inequality.

Still, while the focus on education is refreshing, the question remains – is the national government the best way to achieve better education? According to Emily Gustafsson-Wright of the Brookings Institution, “Brazil is a hotbed of education innovation at the state and municipal levels.” Given the role of both state governments and private sector involvement at the local level, would a more decentralized approach be a better formula for true reform?

Higher education, especially, is where much of the innovation is being focused, as demand continues to increase. In the past decade, the number of Brazilian students attending college has doubled to reach some seven million enrolled – although this is less than a fifth of all college-age youth (18-24) in the country.

The need is huge. And higher education is being pushed not only by the government, but also by the growth of the economy and the need for greater human capital to boost competitiveness. New companies in new industries are demanding higher levels of training and education in their workers. This includes the oil industry – with state-owned Petrobras discovering massive new fields, there are not enough engineers to meet the medium-term demand from the hydrocarbon sector.

Thus, new players including entrepreneurs, non-profit foundations, social impact investors, and private equity funds are all stepping in and seeking ways to help improve higher education. “The government has had no choice but to work with the private sector,” says Fernando Iunes, global head of investment banking for Brazil’s Itaú BBA, said in a recent interview with The New York Times. “It cannot meet the demand on its own.”

This has generated significant controversy, above all in a country where the best universities have long been public, free – and generally targeted toward the elite. Nevertheless, new private options are meeting the rising demand from the emerging middle class – precisely the type of students whom public schools have not been able to adequately provide for.

Brazil’s higher education market has, indeed, been the most active in all of Latin America. The publicly traded education companies Kroton Educacional and Anhanguera Educacional recently merged to create the world’s largest public higher education firm, valued at over $8 billion. International investors have also been active, with Laureate Education acquiring 12 universities with a total of 200,000 students since 2005, and British firm Pearson investing more than $880 million in a 2013 deal to acquire a local educational chain.

And in March 2014, the multinational media company Bertelsmann announced a partnership with Bozano investments, a Brazilian asset management group, to create the BR Education Ventures Fund. The Fund will invest $40 million in some of Brazil’s most innovative edtech companies.

But there is more to it than these investments. For instance, Juan Romero, director for Strategy at GEMS Global, argues that expanding higher education in Brazil will require more than just proliferating universities. Instead, it will require scholarships and credit transfer programs that make it more affordable for lower-income and middle class students to attend school.

Prouni is one such program that is making a difference. Launched by the government of President Lula da Silva in 2004, by 2012 Prouni had delivered 1.7 million scholarships across Brazil. Interest rates on the loans are just 3.4 percent, and students have 18 months after graduation to begin payment. Out of the 5.3 million college students attending one of Brazil’s private institutions, over 30 percent have received subsidies from Prouni or other similar government programs.

While such loans are programs of the central government, they are also incentivizing further private sector investments by generating more demand for higher education services. Private options are far from perfect – but in a region such as Latin America where public higher education is almost always some combination of expensive, exclusive, or poor quality, more options should be welcomed.

At the same time, government supervision of the sector will be key to ensuring a quality product. The sector requires greater transparency, more reliable school rankings, and strong public supervision.

Achieving this balance – between regulations that make sure that the for profit education sector is meeting basic requirements for quality, and allowing for enough freedom in the sector for expansion and experimentation – will be the primary challenge moving forward. This is definitely an issue the candidates running for president should be debating.

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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