Subject Line: The Need for Higher Education in Brazil
This memo is divided into four sections. With the first three sections being informative regarding the current economic and educational landscape in Brazil and the opportunities for market penetration. The final section is unfortunately constrained given that Laureate is a private company, but we have included a cost analysis created by our analysts.
Section I: Introduction
Rough Roads Ahead for Brazil:
The prosperity of Brazil in the recent years has created a flourishing middle class. For an extended amount of time, Brazil was experiencing growth well above 4% (Graph 1) . However expectations of bad grades ahead (modest GDP growth) coupled with high inflation have significantly cut growth expectations. So no matter how much effort is put into reverting inflation back to normal levels, it is unreasonable to expect the government to reduce its expenditures, tax exemptions and other subsidies for education sector any time soon. Since investing more and establishing new infrastructures is timely and costly, a government with clear budget constraints won’t be able to provide much flexibility to the educational system. Providing this economical flexibility for the educational system would be like cutting to the bone when what this country really needs is its muscles and brains right now. For a country struggling to emerge from its status as a middle income country, the lack of flexibility and tremendous need for education looks to be on two different ends of the table. The question then becomes how is education going to improve if the government’s priorities are more short term than long term? Concurrent with the emergence of a strong middle class, the need for quality education at the post-secondary level is vital to allow Brazil to continue to prosper as a nation.
Brazil’s Education Lags behind
It’s no surprise that Brazil still lags behind in regards to education (Graph C1. 1a) . The government has focused more of its resources on post-secondary enrollment as opposed to primary and secondary schooling. Instead of trying to maintain and grow the educational superstructure, Brazil has decided to create a top heavy educational system and transfer the responsibility of educating people to the private sector. However, low incentives that mainly come from the underdeveloped basic education combined with high opportunity costs (most young adults work to help financially at home) has been keeping students away from school. Due to the refined mindset of the younger generation, this dynamic is changing. With Brazil full of potential, talent has emerged with education as their number one priority. Evidence of that, is the higher number of people with post-secondary education than that of people born in 40s-60s and 60s-70s. (Graph A1. 2a ) While this base is growing, it becomes increasingly important to provide students with the necessary tools for them to be part of a better – and much...