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Brazil Wants to Open up Universities to Private Money

The Brazilian Report
Brazil Wants to Open up Universities to Private Money

A couple of months after announcing severe budget cuts to the federal education system, Brazil's Education Ministry announced an ambitious plan to increase sources of revenue and budget flexibility for federal universities. The project is called Future-se (Future Yourself) and provides incentives to attract private funding for the universities. In addition to government capital, which covers approximately 90 percent of the universities’ costs, private funds would be used to invest in innovation, entrepreneurship, research, and the expansion of education.

The project will remain open for public input through an online forum until August 9. After that, it will be presented to Congress for approval. The attempt to attract private investment comes amidst extensive budget cuts in education; university funding will be reduced by as much as 54 percent in some cases.

The academic community has been highly critical of the project, arguing that public universities should not be influenced by private capital. The dean of the Federal University of Ceará called the bill the “biggest attack” on public education. On the other hand, Education Minister Abraham Weintraub—known for his attacks on what he calls 'leftist indoctrination' in schools—has claimed the proposal represents the “liberation of federal universities.”

What Does the Government Propose?

The bill seeks to attract private investment through a series of initiatives similar to those adopted by major U.S. universities, such as Harvard. An endowment fund would be created, welcoming donations from both alumni and businesses. Moreover, it establishes naming-rights for properties, allowing major donors to have university buildings named after them. Separately, the Economy Ministry donated real estate worth R$50 billion ($13.3 billion) to the Education Ministry, to be used to generate revenue through leases or sales.

The bill hopes to modernize and expand libraries and museums belonging to the universities through laws that grant tax incentives to those who invest in education and cultural projects. The Ministry also seeks to attract foreign direct investment, which would be used to create study-abroad programs, start-ups, and technology parks as well as to promote the issuing of royalties and patents.

The plan also targets teachers, providing them with bonuses whenever their work gets published. This model is considered archaic since it values quantity over quality, said Nilson Machado, professor at the University of São Paulo’s School of Education in an interview to newspaper Estado de S.Paulo.

Would the Project Actually Help Universities?

Federal universities have been struggling to make ends meet amid budget cuts. With limited funding, some have reached the point of being unable to pay their water and power bills, cleaning staff, and for needed construction.

“When you create new alternatives for funding [such as receiving private investment], this is essentially something positive,” said Paulo Augusto Nascimento, a researcher at the Institute of Applied Economic Research (IPEA). “Under today’s scenario, in which we have a severe fiscal crisis, universities face serious problems [when it comes to managing bills].”

Still, the plan faces severe backlash—especially among academics, who in Brazil have a tendency to distrust private ventures.

Vera Jacob, coordinator of the post-graduate program at the Federal University of Pará, is a strong critic. In an interview to news website Nexo, she argued that the public sector should not receive investment from private individuals, as companies will always focus on profit. Therefore, she says it is likely that private investors will thrive, while universities will benefit very little. Ms. Jacob also denounced the creation of an endowment fund, mirroring universities like Harvard. She argued that Harvard is smaller than the typical Brazilian university. The Massachusetts-based school has approximately 23,000 students, while Brazilian federal universities have, on average, twice as many. Therefore, Ms. Jacob insists that the model cannot be replicated in Brazil.

“Our universities won’t become like Harvard overnight, but the idea is that some university departments will be able to attract more funds in the long-term,” Mr. Nascimento told The Brazilian Report.

He acknowledges that there is a clear resistance to the bill, especially because it was drafted by the Bolsonaro administration—which is extremely unpopular in university circles, even before the budget cuts. However, Mr. Nascimento said that the government must nevertheless define the conditions and opportunities of the project more clearly.

Private Funding of Federal Universities

Although some say that federal universities will not benefit from private funding, there is a precedent to this. In fact, there are 96 foundations in Brazil that capture private investment to aid federal universities. Some of them have been around for 25 years and have generated R$5 billion ($1.3 billion) in revenue, launching 22,000 projects that benefit research, innovation, and the expansion of tertiary education. The Future-se project would follow a similar pattern, but on a greater scale.

“[The project] will decrease [federal universities’] reliance on public funding. When public money becomes scarce, universities face many problems like the ones we see now,” said Mr. Nascimento. “I just don’t know to what extent this project will actually attract private funding to the universities.”

A New Trend in Brazilian Private Education

The past decade has also seen a sharp rise in the involvement of private education companies in higher education in Brazil. During the Workers' Party years in power, there was a push to expand mass access to college-level education through a financing program called The Fund for Students of Higher Education (FIES)—which was created in 1999 but expanded in 2010. Essentially, the government would help students pay for private education, as spots in the generally more prestigious public institutions are scarce.

In reality, though, the program had flaws. In order to have as much uptake as possible, FIES established loose credit-rating rules, allowing millions with no realistic possibility of paying back the student loans to join the program. Their debt, however, was backed by the government, which created a sort of risk-free capitalism—thousands of schools became cash cows, as public money guaranteed they would receive tuition payments, one way or another.

In 2016, the government finally decided to increase interest rates for borrowing under the program and restrict cash flows. As a result, the market value of private education companies took a major hit, and they have since turned their business model towards long-distance education.

Education sector giants Estácio, Ser and Kroton are now investing heavily in long-distance courses, some of which are exclusively online.

In three years, Estácio has opened 407 educational centers that hold courses for remote learning. Since 2017, Kroton has opened 500 centers, and plans to open 100 more by the end of the year, reaching a total of 1,510 educational hubs across Brazil. Ser also plans on opening another 100 centers this year.

Students are latching onto the trend. For example, 52 percent of Kroton’s students used to attend in-person classes. Now, only 17 percent do. With the opening of so many small centers to accommodate long-distance classes, many hubs struggle to attract enough students to sustain themselves.

For example, a hub must have between 150 to 450 students to generate revenue, but most of Ser’s hubs only have 88 students on average. Another barrier these courses might face is that many professions require in-person education, suggesting this new trend in the private sector has serious limitations, for the companies and for the students themselves.

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Image by Valter Campanato via Agência Brasil

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The Brazil Institute—the only country-specific policy institution focused on Brazil in Washington—works to foster understanding of Brazil’s complex reality and to support more consequential relations between Brazilian and U.S. institutions in all sectors.  Read more