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 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.
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.
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.
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.