There’s Gold in Brazilian Universities

Crowded classrooms: Brazil’s commercial universities are supplying a hungry jobs market

A US$ 6 billion mega-merger of  commercially-driven universities  in Brazil has highlighted the  expectations that US investors are putting on the higher education market in Latin America’s academic leader nation.

International attention is focusing on  a society where social ascension is determined by  quality education, and demand  hugely exceeds supply. At a time when Brazil’s  state or federally funded higher education sector is unable to accommodate the widening base of aspirational students, private enterprise is taking up the slack.

It may also be doing some good in terms of widening access to education and opportunity. The IBGE statistical agency found that more than 30 million Brazilians rose by at least one social class over the past decade, based on the agency’s definition of social class. IBGE said most of the risers moved from working-class to middle-class status. And  at the upper end, many achieved this by attending a commercial university.

Although situated in the Americas, Brazil is more like Europe in its educational outlook. Unlike the United States, the best  universities in Brazil are  non fee-paying  government-funded public institutions, while the “best of the rest” are all  fee-paying or for-profit institutions. What’s true is that  a degree from a Brazilian federal university is a ticket to a solid middle class lifestyle. What’s  also true is that many of those getting that “free ticket” are already middle class. Meanwhile,   strivers  from the emerging middle classes find themselves  working days and studying nights, paying bills at universities where a degree has less employment clout.

Nevertheless,  while federally funded universities are responsible for a stable proportion of  university entrance, the private sector is exploding. A recent blog posting the online version of Forbes Magazine  highlighted  increasing interest in Brazil’s higher education scene — not just from researchers, but from the business point of view as well.

What they lack in academic prowess, these  institutions make up for in financial clout. The biggest player, Kroton Educacional,  has one million students and a market value of around US$ 6 billion. Kroton Educacional, part-owned by US-based private equity Advent International, is paying $2.48 billion for rival Anhanguera Educacional Participacoes, part controlled by the US equity fund BlackRock.

The world’s newest and biggest education provider.

The Kroton merger  in April 2013 was described by The Wall Street Journal as a tie-up that may have just formed  the world’s largest private education company. It has around 20% of the domestic Brazilian market. And in a nation where less than 15% of  school leavers go on to university, the expansion potential is huge. Brazil’s federal government has  set a target of  33% by the year 2020.

Booming orange means private universities; static blue means state funded

An article in  the The Economist  calculated that of the 2,400 universities in Brazil,  just 10% were  truly public. While a few leading institutions (such as the  Catholic-funded Pontificate Universities) are charities, three quarters of the rest are commercial  businesses.   The Economist should know about  education: it’s part-owned by Pearson, which itself  has invested heavily in Brazilian secondary education. It owns a chain of commercial private schools or ‘Sistema’ (learning systems) which include COC, Dom Bosco, NAME and Pueri Domus.

Private or public, what’s certain is that Brazil does not perform well in rankings of educational achievement. One,  NationMaster, has it  ranked  in the low 70s for many indexes. The UNDP’s  World Development Report places Brazil in 85th position among nations. So it’s questionable whether  public budgets are well spent.  Perhaps private enterprise can show Brasilia’s policymakers a thing or two.

The positive role that  privately funded universities have in granting opportunities to  those with more humble socio-economic backgrounds is considerable — explaining why the World Bank’s IFC has been investing in  these businesses. Brazil’s boom in accessible universities may not generate Nobel prizes any time soon, but it is increasing.

Paradoxically, the reverse often holds true for  the federal government’s own  universities, which  have long been seen as bastions of privilege. Although free for students, many successful entrants  from wealthy backgrounds have paid for specialist crammer academies to get past the  dreaded “vestibular” entry  exams — sometimes after two or three tries. Despite  affirmative action policies and  attempts to flatten the social pyramid,  the tone at many federal universities resembles that of the US Ivy League.

A  detailed article in the UK’s prestigious Times Higher Education  surveyed the Brazilian higher education scene  at the end of 2012. It highlighted some key characteristics of the  publicly-funded education scene.

First, the steady rise of  Brazil’s most prestigious universities — topped by  the University of Sao Paulo — up its own growing  rankings.  USP ranks 158 in the main global  score.

The  Times Higher article also highlighted  the pilgrimage now being made  by  hundreds of university rectors and vice chancellors to Brazil — all in search of  government approval for fee-paying students from Brazilian  public universities to come and study at their institutions in the US or Europe.

Some trophy programs, such as the  federal government’s  US$ 2 billion Science Without Borders project to send  100,000  Brazilian undergraduates overseas,  have become major cash-cows for  US and European universities. As well as paying top dollar for their schooling,  it’s reported that Brazilian  undergraduates with  lower than average language skills are being charged for additional  English lessons to allow them to understand basic lectures. Educational officials privately acknowledge the first wave of this costly  program hit teething troubles.

Education or tourism? Government funded overseas study programs for lucky undergrads

What’s certain is that there will be increasing polarization between Brazil’s commercial  universities — whose function is to train  huge numbers of fee paying undergraduates for the jobs market — and the  publicly funded universities where almost all the postgraduate and postdoctoral research goes on.  Increasingly, Brazil’s public universities will need to dedicate resources to research — and  not to providing free subsidy to students who in future will be able to get acceptable undergraduate training at the commercial  universities in the stable of behemoths like Kroton.

University Challenge: The Kroton stable of university brands

So when it comes to  understanding  Brazil’s higher education goldrush,  both the social policy signals and the cashflows are contradictory.

On one side, canny US investors are financing the explosive growth of  commercial  universities in Brazil, so helping to bring opportunity to an emerging middle class. Meanwhile  on the other side, the Brazilian government  continues to  subsidize free universities  favored  by the nation’s elites; and in sending  these students on  what  some say are  little more than  “academic vacation” tours to foreign universities, with negligible value in terms of research.

It’s a confused and confusing picture: While the left-of-center Brazilian government appears to be sending money overseas and sponsoring the continuation of  institutions that promote social inequality; profit-driven  foreign investors are backing  local universities whose effect is to widen social participation in higher education.



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