Brazil's Classrooms Need More Private Investment

(Bloomberg) -- Oil, soybeans, iron ore — schooling. The list of goods for which Brazilian enterprise is known has just gotten longer. Last month, the region’s educational giant Kroton Educacional S.A. bought up a local rival, Somos, in a deal that could reach $1.8 billion.

The acquisition was a boon not just to the world’s largest for-profit education company, which has been on a buying spree, but also to a region where fiscal woes have gutted public investment in schools and student performance has been lackluster, at best.

By itself, the mega-merger, representing some 1.2 million students across Brazil, won’t halt the slide of educational standards. Yet even as Latin America’s biggest economy struggles, it’s a sign that renewal is possible, and that despite all the hand-wringing over the “commodification” of learning, enterprise and education are not fated to be enemies.

Private investment in schools has soared throughout Latin America in the last two decades, first at the college level, where privately-run colleges dominate enrollment, and more recently in basic education (kindergarten through 12th grade). Driving the surge are hemispheric trends of poverty reduction, which lifted millions to the aspiring middle class, and the demands of a changing workplace, which rewards smarts over sweat. Another draw is the “graduate premium”: Led by Brazilians, Latin American professionals with a university degree famously pull down at least double the wages of those with only a high school education, more than in any other region. Moreover, only the best-prepared students can expect to pass the fiercely competitive entrance exams for tuition-free public universities — an implicit subsidy to the rich.

No wonder private university enrollment is booming: By 2010, 48.5 percent of Latin American university students were enrolled in private higher education, the largest share in the world. (In rich nations, private universities account for only 30 percent of enrollment.) In Brazil, 75 percent of all university students are in private colleges.

The notion that the Brazilian schoolroom needs capitalism is somewhat counterintuitive. Like many of its neighbors, Brazil wrote the right to free public education into the constitution and set the legal minimum for education spending at 18 percent of net federal tax revenues. Consider that Brazil is proportionately the fourth largest spender on secondary education measured against the wealthy Organization for Economic Cooperation and Development (OECD) economies, and ranks just behind the Netherlands (and ahead of the U.S.) on public university spending.

Even so, performance is woeful. Among students from 72 economies participating in the latest standardized scholastic test, known as PISA, Brazil’s 15-year-olds placed 66th in math, 63rd in science and 59th in reading. That’s slightly better than the results for 2012 (and appreciably so for math), but over the last 15 years Brazil has remained stuck among PISA’s worst performers. 

There are many reasons behind this dismal performance and the ensuing exodus from the public classroom, from gross mismanagement to budgets depleted by fiscal crisis. A recent school census showed that 10 percent of Brazilian public high schools lack running water, 12 percent have no libraries, and nearly 55 percent have no science labs. Overheated labor politics doesn’t help. At Colegio Pedro II, once a highly regarded public school in Rio de Janeiro’s upscale south zone, the 2018 school year began only in April, more than two months behind schedule, due to repeated teacher strikes to protest such polices as a government spending cap and education reforms. “When the school finally ordered the teachers back to work, the union recruited students to occupy the classrooms,” Augusto Pizarro, the father of an eighth grader, told me. His son posted a video on social media imploring for classes to restart.

The picture is no prettier on public university campuses. “Once, anyone who didn’t study in public schools was looked down upon,” said Ricardo de Hollanda, a retired professor who taught communications in both public and private universities in Rio. “Now our campuses are run-down and public education has been hollowed out.”

Critics note that private investment is no miracle maker. While enrollments have soared, educational quality has not. Like their traditional counterparts, private schools also are plagued by uneven teaching, squishy standards and high dropout rates. “People want a diploma no matter what,” Brazilian sociologist Simon Schwartzman, who specializes in education, said in an interview. “That dampens the demand for quality in the classroom.”

Can business incentives help bring balance to the educational marketplace? Claudia Costin, Rio’s former municipal education secretary, who runs the Center for Excellence and Innovation in Education Policies at the Getulio Vargas Foundation, is optimistic. As more people chase diplomas, the handsome returns for graduates will likely fall, she says. That, in turn, should push private schools to improve their curricula to attract students, both in basic education and at universities.

“We are beginning to see schools with private backers invest in quality basic education for lower-income Brazilians,” Costin said. Initiatives include a teaching institute run by construction giant Camargo Correa, and a school network sponsored by food and beverage billionaire Jorge Paulo Lemann.

Investors are also plowing money into online learning, which has the potential to reach millions of students in remote regions with scant access to traditional classrooms. One in five Latin American students resort to e-learning, and their numbers are expected to grow. Just as the mobile phone placed financial services in the hands of unbanked consumers in Africa, e-learning providers such as Coursera are reaching students far from Latin America’s traditional classrooms.

The education business is still evolving. Animal spirits alone won’t boost productivity in a region where fully half of companies cannot find candidates with the right skills, even as two of every five young people neither work nor study.

Worse, Latin Americans lag in precisely the abilities that experts say are crucial to boosting development and diversifying production — a gap arising out of the chasm between classroom learning and the demands of the workplace. The Sao Paulo-based Lemann Foundation found that recent Brazilian high school graduates often didn’t understand what they read, had difficulty writing simple texts such as emails, and struggled to express themselves orally.

Brazil and its neighbors might take a cue from parts of the world where businesses, bureaucrats and scholars have joined to craft school systems that work in tandem. That partnership has worked well for Asia, where both test scores and productivity have jumped.

To leverage the benefits of private education, Brazilian policymakers need to find a path between overregulation — which can stunt innovation and keep schools from adapting to changing circumstances — and laissez-faire, by which authorities turned a blind eye to the replication of low-end schools with shoddy courses.

First, however, Brazil’s academics will have to drop a cherished bias that permeates the classroom. Here is where for profit education, properly managed, can show the way, by giving schools greater autonomy over academic programs, allowing them to create flexible schedules and tailor teaching methods to the changing times. “Our teachers are big on theory and look askance at professionalization,” said Costin. “Practical learning is seen as something for the poor.” The result has been a surplus of eggheads, and an educational model that has flunked out. Latin America’s biggest classroom deserves better.

To contact the author of this story: Mac Margolis at mmargolis14@bloomberg.net.

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