Overview of the Higher Education Industry
In 2016, Brazil was the fifth largest higher education market worldwide and the largest higher education market in Latin America, with approximately 8.0 million enrolled students, according to MEC/INEP. Higher education is comprised of sequential programs organized by field of knowledge, with different scopes and open to candidates who have a high school or equivalent certificate and meet the educational institution’s requirements. The higher education courses are divided into: (i) undergraduate programs, for students who have a high school or equivalent certificate and are approved in a selection process; (ii) graduate programs, which comprises master’s, doctorate, specialization, improvement and other programs, for students who have an undergraduate degree and meet the educational institution’s requirements; and (iii) extension courses, offered to students who meet the specific requirements the educational institution establishes for each of them.
In 2021, there were 2,574 higher education institutions in Brazil, according to the 2021 Higher Education Census published by the Ministry of Education. Approximately 23% of all enrolled students in 2021 went to public education institutions whereas 77% went to private education institutions. From 2012 to 2021, private higher education institutions had a CAGR of 3.1% in the number of students, in the on-campus and digital undergraduate segments combined, going from approximately 5.3 million students in 2012 to 6.9 million students in 2021, according to the Ministry of Education.
In the last 10 years, higher education has been consolidating itself as an attractive market for investments. Official data from the Higher Education Census, released by INEP in 2021, show that Brazil has been registering successive increases in the number of students, with an average increase of 2.8% per year from 2012 to 2021.
Number of enrollments 2012 – 2021 (in thousands)
Vocational and Professional Education Market
Vocational education prepares students with an elementary school certificate for the job market. It is an intermediate level between secondary and higher education. Alternatively, it can be a substitute for higher education for high-school graduates.
Public and private institutions that offer vocational education are classified as vocational schools, agrotechnical schools or professional education centers among others. Vocational programs differ from professional programs because their educational curriculum is regulated and accredited by the MEC. Vocational and professional programs have a typical duration of 18 to 36 months.
Technology has led to major innovations in the education industry and digital content has been increasingly facilitating the emergence of new educational methods, such as distance learning. Educational materials use multimedia resources and digital content more and more to supplement and even replace traditional printed materials. As young individuals gain access to technological resources and change their habits, these trends gain momentum in the educational industry.
Distance learning provides an opportunity for higher education to increase its penetration in Brazil due to lower tuition fees, and significantly increase in the number of students who can afford to enroll in higher education programs. The distance learning segment offers education through remote learning technologies and tools since professors and students do not engage in direct, person-to-person contact. Distance learning and vocational programs are currently better developed and regulated by the Brazilian Federal Constitution and the Brazilian National Educational Guidance Law, in addition to administrative rules, resolutions and standards issued by the MEC and State Departments of Education (SEED).
Distance learning has a high growth potential since it attracts students who have difficulty in attending on-campus classes due to lack of agenda, unable to take long commutes or who live in isolated areas. Distance learning programs tend to facilitate students’ access to education and improve the retention of students attending higher education and vocational programs, as well as preparatory courses and language courses, among others.
The chart below illustrates the degree programs that accounted for 18% of all enrollments in undergraduate programs in 2021.
Breakdown of Enrollments by Segment 2021
Higher edcucation studente base
The increase in student loans options, coupled with a rise in the number of higher education institutions and programs targeted at the middle and lower-income students provides an opportunity to increase the number of student enrollments in higher education programs in Brazil.
Breakdown of Funded Students in Brazil (in thousands)
Aiming to encourage education in the country, certain funding alternatives create fiscal and financial incentives for educational institutions that have students benefiting from government education incentive programs such as PROUNI, FIES and PRONATEC.
Due to such funding programs, the middle and lower income classes of the Brazilian population, which historically has had the greatest difficulty in accessing higher education, was largely responsible for the increase in the student base, mainly comprising by working adults in search of better salaries and job opportunities.
University for All Program (“PROUNI”)
Created in 2005, PROUNI provides higher education institutions exemption from certain federal taxes on revenue according to scholarships to undergraduate programs and related courses to low-income students. By granteeing tax exemption to for-profit institutions, PROUNI also played a major role in boosting the growth and private investment in the higher education industry, which enabled for-profit institutions to offer courses at competitive tuition fees in comparison to philanthropic and not-for-profit institutions.
The chart below illustrates the increase in the number of scholarships granted by the PROUNI program from 2012 to 2021, in addition to the program’s growth and the increase in tax incentives granted by the government.
ProUni (Number of scholarships – in thousands)
For further information on PROUNI, please refer to the section “1.6 Describe the relevant effects of state regulation on the Issuer‘s activities, specifically commenting on: – a. The need for governmental permits for the performance of activities and the history of the relationships with the public authorities granting such permits – University for all Program – PROUNI” of the 2023 Reference Form.
Financing Fund for Higher Education Students (FIES)
FIES was created in 1999 and offers financial aid of up to 100% of monthly tuition fees charged by private higher education institutions participating in the program and who have been positively ranked by the Ministry of Education.
The chart below illustrates the number of loans granted through FIES, from 2012 to 2021, which shows a decrease as of 2016, when there was a reduction in the program by the government.
FIES Student Base Evolution (in thousands)
For further information on FIES, please refer to the section “1.6 Describe the relevant effects of state regulation on the Issuer‘s activities, specifically commenting on: – a. The need for governmental permits for the performance of activities and the history of the relationships with the public authorities granting such permits – Financing Fund for Higher Education Students – FIES” of the 2023 Reference Form.
Breakdown of higher graduation student base by region (in thousands)
The data above illustrates that, while the higher education sector has greatly expanded over the past decades, a promising growth potential still exists in the country, especially in the Northeast and North regions. This is because this sector can benefit from the current public financing policies, the increase in the number of young individuals completing their high school education and the expected economic growth scenario which will require qualified individuals for the job market in the coming years.
Participation and competition in the higher education market in Brazil
The higher education sector in Brazil is very fragmented and has many competitors in all locations. We believe that factors influencing competition in the higher education market include price, educational experience, institution tradition, faculty, facilities, location and mix of courses, among other factors.
Due to the fragmentation of the sector, we face different levels of competition, depending on the location of our units. According to MEC, in 2021, there were 2,261 private higher education institutions in Brazil. We compete directly with for-profit and non-profit higher education institutions and with alternatives to higher education, such as vocational courses. Smaller private institutions, typically with only one unit, are less able to attract and retain experienced administration and faculty. They also have limited resources to open new units, develop and provide quality education services, and set up courses of interest to students.