Public Disclosure Authorized

A VWwfivu LATHE
No 34
Public Disclosure Authorized

HGHER EDUCATON REFORM IN

CHME., BRAZIL, AND VENE

TOWARDS A REDEF1INIION OF 1IE ROLE OF THE STATE

Public Disclosure Authorized

Laumnce Wol and Dougas ATbredst

I
Public Disclosure Authorized

Bw,ax Resces DWibifOX

Tedakl Department
Lati Amra ad th Caribea Region
The Wodd Bank

Noeeaber 25, 1992

r
 'A Viewfrom LA47R' is a szes of occasionalflyersproduced by the Human Resources Division of
Latin Amenca and the Canbbean TedumcalDepanrmcntof the World Bankfor the purpose of
nimulating disacssion oong stffon key issfacing the ector. The views epassed here arwthose
of the authors and should not be atibuted to the World Bank
 HIGHER EDUCATION REFORM IN
CHILE, BRAZIL, AND VENEZUELA

TOWARDS A REDEFINITION OF THE ROLE OF THE STATE

Table of Contents

Overview by Laurence Wolff and Douglas Albrecht I.1-16

Higher Education in Chile: Effects of the 1980 Reform

by Jose Joaquin Brunner and GuillermoBriones 11.1-44

Higher Education in Brazil: Isues and Efforts at Reform

by Laurence Wolff, Douglas Albrecht,
and Alcyone Saliba m. 1-40

Higher Education in Venezuela: Issues and Options for Reform

by Laurence Wolff and Jose Joaquin Brunner IV.1-18

Laurence Wolff and Alcyone Saliba ar staff members of the World Bank; Douglas Albrecht is a
Consultantfor the World Bank; Jos6 Joaquin Brnner is Coordinator for Intemational Cooperation atthe Latin
AmericanFaculty for Social Sciences(FLACSO)in Santiago,Chile; and Guillermo Brionesis a Professor at the
Social Sciences Faculty of the University of Chile. The editors would like to thank Thomas Eisemon, Jamil
Salmi, and Julian Schweitzerfor their helpful commentson drafts of this report.
I
 OVERVIEW

Table of Contents

INTRODUCION ....................................... -1

HIGHER EDUCATION REFORM EFFORTS IN CHILE, BRAZIL,

AND VENEZUELA ................................. I-1
Background ................................... -1
Chile's Reform Effort ................................ I- 2
Brazil: Starting the Reform Process ......... ............... I- 7
Venezuela: the Need for Reform ........... ............... I-10

CONCLUSIONS: THE NEW ROLE OF THE STATE ................ 1-12

I~~~~~~
 INTRODUCIlON'

This volume examinesthe issues related to higher educationreform in three Latin American
countries. The countriesstudied-Chile,Brazil, and Venezuela-canbe consideredto be at three stages
of reform: ten years after a radicalrestructuringof institutionsand finance(Chile);initiatingimportant
reforms (Brazil);and before embarkingon a reform program(Venezuela).This overviewsummarizes
the reformprocessand issuesin thesethree countries,and identifiescommonthemesapplicableto them
and to the Latin Americanregionas a whole.

H1GHEREDUCATIONREFORM EFFORTS IN CHILE, BRAZIL, AND VENEZUELA

Backgund

Higher educationenrollmentsin Chile, Brazil, and Venezuela,as in all of Latin America,have

grownenormouslyin the last thirty years. In Chile, enrollmentswent from 25,000 in 1960to 250,000
in 1990, in Brazil enrollmentsincreasedfrom 100,000to 1.6 million,and in Venezuelafrom 25,000 to
640,000over the sameperiod. In BrazilandVenezuelamost of this growthtookplace throughthe early
1980'sand has considerablyslowedin the last fiveyears.

A muchincreasedproportionof theschoolagepopulationnowattendshighereducationinstitutions.
Enrollmentin Brazil is equivalentto 12%of the 20 to 24 yearold age group, Chile enrolls 18.6%, and
Venezuela26%. It shouldbe notedthatthesefiguresare gross' enrollmentfigures. The net enrollment
figures(e.g., enrollmentless repeaters)wouldbe muchlower, especiallyin Venezuela,whichhas very
high levels of repetition and where students continue to be enrolled in higher education institutions for
manyyears.

In Brazil, more than 60% of enrollmentsare in private institutions. The growth of private
educationwasa consequenceof a governmentdecisionin the 1960'sto encourageprivateeducationwhile
at the same time preservingthe quality of public institutionsby enforcinghigh entrancestandards.
Brazil's publicsystem can be furtherdividedin federal(22% of enrollment),state (13%, mainlyin Sao
Paulo), and municipal(5%)institutions.In Chile, the 1980reformstransformedthe systemfrom a small
and exclusivelypublic system into a system in which half of enrollmentsare currently in private
institutions. Colombiais anotherLatin Americancountrywith a similarlystrongprivate sector.

In contrast to these systems where the private sector is, at least quantitatively,dominant,
Venezuela'spublic system enrolls 78% of all students. Most other Latin Americanhigher education
systemshave relied predominatelyon public provision. In Mexico,Argentina,and Peru for example,
publicinstitutionsautomaticallyreceivestudentsthat have graduatedfrom secondaryschoolsand enroll
over 80% of all higher educationstudents. Venezuelahas an entranceexaminationwhich is highly
selectiveto a few of the best institutionsbut which is in effectan open accesssystemto the weakerpublic
institutions.

With regard to financing,Venezuelarelies on public resourcesto finance 89% of the costs of

highereducation. In contrastin Chilecurrentlydirectpublicfundingof institutionsand studentaccounts
for 309%of total expenditureson highereducation;an additionalundeterminedamount(upto 34%) comes
from a variety of sourceswhich includepublicfundingthroughspecialgrants and transfers. In spiteof

Unlessotherwisenoted,theda in this Overview

comasfromtheindividual
cae sudies.
 1-2
the large enrollments in private institutions, public funding in Brazil accounts for 75% of total
expendituresin highereducation,a resultof a combinationof high unit costs in public institutionsand
a constitutionalprohibitionon chargingtuition in public institutions.

Table 1 providesa summaryof the situationin thesethree countries.

Table 1
Enroment and Financingof Higher Educationin
Chile, Venezuela,and Brzil

Chile Venezuela iail

(1990) (1990) (1989)
Enrolment as a Perctagp of
SchoolAge Population 19% 26% 12%
Percentageof Totl Enrolment
in Public Institutons 48% 78% 40%
Percentageof Higher Education
FinancingWhich is Public 30% " 89% 75%
Percentageof Total PublicEducation
BudgetGoing toHigher Educa±iom 22% 35% 23%
UnitCostsof PublicHigherEducation
Institutions USS1,700 USS1,625 USS7,930F
StudentIFTEFacultyRato (publicinst) 10.8:1 16:1 8.8:1

a Plus an additionalundeteminedamt of gnts and transferece.

b. Estim at US$6000not countingcosts of teachinghospitalsand pensi.

ChUe'sRefonr ELfor

Chile, in 1980, was a small, homogeneous and exclusively public system of higher education.
Roughly 6% of the relevant age cohort was enrolled. Vrtualy all funding came from the state and the
only institutional type was the multi-disciplinary university.

The reforms implementedin December 1980aimed at a radicaloverhaulof the higher education

system, to introduce market forces, to increase the efficiencyand responsivenessof institutionsto
economicdemands. In addition, the system was to be expandedrapidly via the harnessingof private,
rather than public resources.

Accordingto the Cerychand Sabattiermodelfor analyzinghighereducadonreforms2 , the reform

had five outstanding characteristics. The degree of system change envisaged by the reform was high,

2 See Cerych, Ladislav& Sabattier,Paul, Gret Expoctationsand MixedPerformance.The Imnlementation

of Higher EducationReformsin Eurome,EuropeanInstituteof Educationand SocialPolicy,Tradham Books, 1986
 I-3
affectingthe boundariesof the system itself as well as all institutions. Second, the scope of intended
changeswas inclusive,affectingpracticallyall individualswithin each institutionand potential actors
outsidethe system. Third, the depthof the reform itself led to the adoptionof radicalpolicies. Policy
goals stronglydivergedfrom existingvaluesand practicesof highereducation.Fourth, the goals of the
reform were clearlystated and had internalconsistency.And finally,changeswere brought about by
centraledict, from top to bottomandthrough bureaucraticenforcement.

The mainobjectivesof the 1980reformas articulatedat that time canbe summarizedas follows:

To increaseaccessto higher educaton throughexpansionof privateeducaton. To meet this goal, only

minimalrequirementswere establishedfor the creationof privateinstitutions.

To diversif the insitutions In the highereducaton system. Threevertical tiers were established, based
on a functionalhierarchyof educationalcertificates:

* Universities: expectedto focuson long cycleundergraduateprogramsleadingto licenciaturasand

to professionaltitles requiringa licenciadodegree. Only universitiescould establishgraduate
programs.

* ProfessionalInstitutes(PIs): restrictedto four year programsleadingto professionaltitles defined

as not requiring the licenciatura.

* TechnicalTraining Centers (trCs): restrictedto short circle (two year) vocationalprograms

leadingto technicalcertificates.

To reducethe instutionalpower ofthe twotrdifionalstate universities. Both the Universidad de Chile

and the UniversidadTecnicadel Estadooater Universidadde Santiagode Chile) were forcedto give up
their regionalcenters, whichled to the birth of twelve new state universitiesand to two state Pis. The
breakingup of thesetwo universitieswasjustifiedas a wayof makingtheseinstitutionsmore manageable
and as a meansof encouragingdiversity.

Topartialy trawfer the costof sate-nanced inttudonsto the students and/or their families and force
these institutionsto diversifytheir funding sources. Tuition was introducedinto all publicly funded
institutions. The promotionof privatehigher educationwas another meansof shiftingthe burden of
financeto private sources, since they are solely dependenton resourcesobtainedfrom tuition fees for
recurrent expenditures. A Governmentfinancedstudent-loanschemewas introducedto be providedto
needystudents in public institutions.

To increase competiton among nsitutions, with the aim of promoting efficiency and quality.
Institutionalsupport, which was confinedto the eight traditionaluniversitiesand the 14 new state-
institutions,was supplementedthroughinstitutionalself-financing:tuitionfees, competitionfor research
funds, and contractfunding. A small amountof publicfundingwaslinkedto a "best-studentsformula,
based on the numberof the best 20,000scorers in the lastyear's entranceexaminationsenrolledby each
institution.' The civil-servantstatus of academicpersonnelin state institutionswas eliminated,thus
enabling universitiesto differentiatesalaries and competefor faculty staff. Tbe Governmentset up a

Thisfigurewaslaterbroadenedto includethebest27,500 cors.

 I4
publiclyfinancedNationalResearchFund (FONDECYT),whichmadeawardsto researcherson the basis
of open competitionand peer reviewof proposals.

No publicfundingwas visualizedfor new privateinstitutions,but for one exception:as of 1989,

they can competefor asubsidy-carryingstudents (the 27,500 mbestand brightest"). Studentsenrolled
in privateinstitutionshaveno accessto subsidizedloans. Finally, privategrantsto both private andstate
universitieswere stimulatedthroughspecifictax deductions.

Table 2 summarizesthe major institutionalchanges:

Table2
Summaryof Higher EducationSystemBeforeand After Reform

BEFORE 1980 AFTER 1980

1. One tier, one sector. low institutional 1. Three tiers, tuo sectors: high institutional
differentiation. differentiation.

2. No tuition but aelectiveaccess accordingto 2. Tuition fewsare charged by all institutions.

school performance and achievement in Selective accem is mainaed in Ihe mib-
nationalstndlardizedacademictest sector t rcdvs institutionl public
fumding.In the private institutions: open
ace accordingto and/or familyincome.

3. State financing of HE on the basis of 3. Multiplecompetitivesourcesof funding.

icm l fimding.

4. System oordination provided by State 4. Systemcoordinationprovidedby makeu and

authorityand institutional.oligarchies, policy regulations.

Chile's higher educationsystemwas reformedunder specialand very harsh conditions,due to the

existenceof an authoritarianMilitary Govermment.B.Clark's assertionon the feasibilityof authoritarian
reforms in higher educationappliesto the Chileancase: 'Of course, in systemsunder authoritarianor
totalitarianrule, the centralizationof authorityand the centralconcentrationof administrationallowmore
manipulationfrom aboveand on a large scale'.' Institutionshad to endurethe changesenvisagedby the
reformers without having the opportunityto intervene in the process nor to negotiate its outcomes.
Authoritarianmindedreformers will probablysay that only becauseof this could system-widechanges
be brought about and that reforms need not be assessedby the context in which they took place nor by
the political conditionsthat lay behindor made thempossible. Reforms,they will argue, shouldonly be
evaluated in terms of their actual outcomesand more general effectson society. In turn, those who
experiencedthese changeswithoutanypossibilityof resistingor discussingtheir aimsand implementation
procedureswill probablyfind it more difficultto have confidencein the blessingsof supposedlyefficient-

Clark, Burton, *he OrganizationConqeion- in B.Clark (ed.), Persuctives on Higher Education.Eiabt

DisciRlinarvand ComparativeViews, Universityof CaliforniaPress, 1987,p. 125
 I-5
authoritarianrule. In short, the cost of reforms in Chile must also includethe shatteredhopes and the
repressionsufferedby those who wouldnot yield.

Tenyearslater the reformto a great extenthas achievedits goals. Thepositivequantitativeresults

are as follows:

* A unitarysystemof eightpublicuniversitieshas beenreplacedby a highlydifferentiatedone

of 310 institutions,includinguniversities,professionalinstitutes, and technical training
centers.

* The percentageof the school age populationenrolled in higher educationhas more than
doubled. All the enrolmentincreasesoccurredin the private sector, which now has 52%
of enrollment.

* Real public expendituresin higher educationbetween 1980 and 1990 decreasedby over
30%. The percentageof the publicbudgetgoing to higher educationdecreasedfrom 38%
in 1980to 22% in 1989, while the percentageof public educationexpendituresgoing to
primary educationincreased from 39% to 50%. The real amounts going to primary
education have increased by only 12%. During this period total enrollment in primary
educationdecreasedby 89%,a resultof the demographictransitionand improvedflowrates.
This means that, contraryto most other Latin American countries,unit expendituresin
primary educationwent up duringthe decadeof the 1980's. At the sametime enrollment
and fundingof pre-primaryeducationincreasedby about 70% and the percentageof the
educationbudgetdevotedto pre-schoolingincreasedfrom 4% to 7.7%. 3

* Whereasin 1980100%of supportto highereducationwasin the form of directinstitudonal

support, only 56% is now in this form. The new fundingmechanismsnow include a per
capita paymenton the basis of studentsrecruited with high entranceexaminationscores,
16%; studentloanscheme, 15%; and scienceresearchgrants, 8%.

i Studenttuitionand loan repaymentnowaccountfor 28% of overall expendituresof public

institutions. Studentson averagepay aboutUS$700per year in tuitionto publicinstitutions.

* Qualityin the public instituionshas not suffered. The percentageof teachersin the public
sector with graduate degreeshas increasedfrom 19% to 24%. The elite public sector
universitiesaccountfor 77% of scientificpublicadonsin the countryand Chilecontinuesto
lead Latin Americain per capitaproductionof scientificresearch.

The less than positiveresults of the reformincludethe following:

* Accessto highereducationcontinuesto be inequitablebut has not significantlychangedsince

1980. Currentlythe lowesttwo quintilesof the studentpopulationaccountfor no morethan
11% of highereducationenrollment. Lower incomestudentsare more likely to enroll in

systemcomesfromtheWorldBankStaffAppral Report,"Chile,Pimy
5 Dataon the overalleducation
Project,September1991.
EducationImprovement
 1-6
public than in private institutions. One reason for this is that loans are availableonly for
public institutions.

* Iternal efficiencyof the systemhas declined. It nowtakes about9.2 years to produceone

graduatefrom a public institution,comparedto 7.1 years at the end of the 1970s.

* FTE studentteacherratios in publicinstitutionsare 10.8:1 and havedecreasedslightlysince

1981.

In short publicfundingdeclineswere offsetby cost recoveryand revenuediversificationin public

institutions. The qualityof instructionand researchat public institutions,whichwas historicallyhigh by
Latin Americai standards, has not suffered. The reform measuresclearly prevented quality declines
which mighthave occurredif the publicsystemhad beenallowedto expandrapidly. Despitesignificant
cost recovery(combinedwith studentsupportschemes- scholarshipsand loans), the system as a whole
has not becomemore inequitable. A portionof the publicfundssaved havegone to primary education.'

Higher educationin Chile still faces a numberof unresolvedproblems. One problem is that of
relativelylow intermalefficiency,in terms of high dropout and repetitionrates, at many of the public
institutions. Despitecompetition,there is no evidencethat staffare better deployedin publicinstitutions.
There are high defaultrates in the studentloanschemeand it is still not availableto private institutions.
Further reform in Chile may need to focus on changingthe funding formulato explicitlyencourage
increased efficiencyin terms of graduationrates and faculty utilization,as well as to strengthenand
reformulatethe loan program.

A final issue of concern, which is currentlybeing addressed, is the low quality of many new
private institutionsand programs. In the firstplacethese insteutionsare excessivelysmall. Of 40 private
universities,only five enroUl1000 studens or more. These five accountfor 68% of the sector's total
enrollment. Most of the other private universitieshave less than 500 students. Private university
teachingbodies sufferfrom lack of objective,merit-basedcriteria for the recruitmentof academicstaff,
lack of a core group of full-timeacademicpersonnel,high turnoverrates of faculty, the absenceof an
academiccareer structuredaccordingto the needs of the institutions,inadequateworkingconditions,and
the lack of library, laboratoryfacilitiesand equipmentsupportfor academicwork. These institutionsare
also inadequatelyaccredited. The proceduresup to 1990involvedprior approvalof the new institution's
teachingprogramsby a publicsectorinstitudonfreelychosenby the privateinsttution. After satisfactory
completion of a trial period under the aegis of the public institution,the new private institudon
automaticallygained its full autonomy. However,some of the examiningpublic institutionswere weak,
there were no public assurances that academicstandards are being achieved,and the *commercial-
arrangementbetweenthe two institutionsdid not encourageobjectivity.

Under a new law passed in 1990, a public, autonomousbody-the Higher Councilof Education
(HCE)-has been set up, with two major functions: to accreditnew privateuniversitiesand PIs; and to
approve the core national curriculumfor primary and secondary education. To encourage improved

I It was never stated that an objectiveof the reformwu to shift fund to low'ereducatonal levels. In fiat
the initialproposalsaumed tat muppotfor higher duchation would sgnificantly crae in terms through
a vastly expandedloan scieme and 'bedt oh-Am formulafunding. At the same time the Governmentdid explicitly
ate tht swpportfor basic services,includingthe lower levels of education,should increase.
 1-7
quality, the accreditationproceduresset up under the 1990 law provide a licensing system for the
establishmentof new private universitiesand PIs centeredaroundthe approvalof both an institutional
project and the career-programsthat willbe offered. After a minimumperiodof six years, the HCE can
declare the full autonomyof a private institution. The long term objectiveis to encouragequality
improvementof privateinstitutionsthrougha systematic,objectivereviewprocess. A recent strategyto
increase qualityhas been to permit private instituions to competefor public funding under the wbest
students' formula. However,as yet privateinstitutionsare not eligiblefor studentloans, which,properly
maged, couldbe anotherform of indirectsubsidyencouragingimprovedquality.

BrudLStardng the Refom Process

Reformof highereducationin Brazilstartsfrom a differentpoint than in Chileand with a different

emphasis. In the first place in 1968Brazil's Governmentmade an explicitdecisionto encouragethe
growthof private educationand to restrictaccessto publicinstitutions,whichwere to be the high quality
end of the system. This decisionis reminiscentof Chile'sdecisionin 1980. Sincethat time enrollment
has increasedrapidly in private education,which now accountsfor 60% of enrollment. Like Chile,
Brazil has benefittedenormouslyfrom this decisionthrough being able to provide increasedaccess to
highereducationwithoutincreasesin public funding.

Brazil's 1968 reform, however, did not pay attentionto issues related to fnancing of public
insdtudons,and to autonomy,accountability,governance,and equity. The result is that Brazil's public
educationsystem, especiallythe federalinstitutions,is excessivelyexpensive. In fact the unit costs in
Brazil's federalhighereducationsystem,estimatedat USS7930, 7 are amongthe highestin the developing
world, a result of low studentstaff ratios and high administrativecosts. This figureis fivetimeshigher
than the costs of most private institutionsin Brazil, twice as high as the costs of the two best private
institutions,and significantlyhigherthan the two insdtutionsrun by the State of Sao Paulo, which are
arguablythe highestqualityuniversitiesin Brazil. Enrollmentin federalinstitutionshas been staticsince
1980 while faculty and non teaching staff have increased significantly,at the same time that these
institutionshave under-utilizedphysicalfacilities. The result is that, despitethe fact that only 40% of
enrollmentis in private institutionswhich receivevery little publicsubsidies,75% of the financingof
higher educationis public. Furthermorefree tuitionin all publicinstitutionshas exacerbatedthe always
troubling issuesof inequityin publicexpendituresin higher education,especiallyconsideringthat the
socio-economicstatus of students in the public institutionsis on average higher than in the private
institutions.

FinallyBrazil's highereducationsystemis still excessivelybasedon the conceptof the large multi-

purpose university linzkingteaching, research, and extension, in spite of the fact that only a few
institutionsare able to successfullymeet these objectives. Brazil has only a fledglingsystemof short
course post secondarytechniciantraining.

Brazil's publiceducationsystemhas neitherautonomy,sincethe Governmentexcessivelymanages

and mandates most higher educationundertakings,nor accountability,since, with the exceptionof
graduate education, there are no systems of financialor qualitativeassessment. Funding of federal
institutionsis on a negotiated,incrementalbasis, withno built-inincentivesfor improvedefficiency.The
federalgovernmentsets all personnelpolicy, includingrecruitment,promotion,and salarylevels, much

' About US$6000if the costs of universityhospitulsand of pensionsare excluded.

 I-8
of whichis encodedin the alawof isonomy' passedin 1987. While rectors are officiallyselectedby the
Ministerof Education,between 1985and 1991generallyonly those candidateswith the highestvotes in
an open electionwere selected. The rectorsoftenhave little power and inadequateexpertiseto manage
their institutions.

The Federal Councilof Education(CFE) establishesminimumcurriculumfor all courses, which

covers94% of the total of creditsneededto obtaina diploma. The CFE, chargedwith authorizingnew
private institutions,makes such authorizationson the basis of unclear and subjectivecriteria including
'labor market demand.' Regulationsare suchthat diplomasare the entrypointsto most professions,thus
encouragingexcessiveacredentialism.' Brazil's large private sector is of great importanceand varies
from high quality institutionsto diplomamills'. Howeverpublic policycurrently discouragesquality
improvementof private institutionsthrough tuition controls, regulationof professions,and inadequate
programs of assessmentand certification.

By 1990budgetarypressuresbrought aboutby the overall compressionin governmentspending,

an increasingpublic impressionthat large public expenditureswere not resulting in an adequatereturn
in terms of the qualityand quantityof graduates,a growingrealizationof the impossibilityof improving
qualityunder the current system,and continuousstrikes by facultyand students,had put Braziian higher
educationin crisis. A new team of reformersin the Ministryof Education(MEC)took officein late
1991. This team wasunusualin the Braziliancontextbecauseof its high degreeof technicalcompetence.
The teuambegan to put forth a comprehensivepackageof reforms, designedto make Brazil's higher
educationsystemmoreefficient,effectiveand equitable,to improvethe qualityof output, and at the same
time to reduce unit costs of federal higher education. The reform especiallysought to change the
relationshipsof Governmentto public and private institutions,through establishingnew systemsof
autonomy,accountability,evaluation,certification,and financingof both public and private institutions.
As in Chile, the reforms soughtto changethe financingrole of the state so as to increase equity and
efficiency.

With regardto the financingof federalhighereducation,the reformersin the Mimistryof Education

(MEC) had as their long term objectivethe provisionof financialautonomyto federal higher education
institutions, as a means of ensuring that institutionsoperate efficientlyand effectively. The main
instrumentof financingwouldbe a fundingformula explicitlyencouraginghigher studentteacher and
studentstaff ratios, reducedstudentdrepout, morerapid completionof degree studiesby students,more
highly qualifiedstaff, and an initial decrease in unit costs of 25% to be achievedthrough increasing
enrollment in public institutions. The funding formula, summarizedin Annex 1, Chapter m, is a
sophisticatedadaptationof the formulaused in the Netherlands.Formulafundingwouldbreakthe culture
where accountabilityis absent, since institutionsthemselves would have to make.trade-offs among
elementssuch as salaries, maintenanceand equipment. The formula would be a dynamic instrument,
changingover time. Institutionswould be subject to audits to ensure the reliabilityof the staistical
reporting which forms the basisof the formula.

Through early August, 1992, MECused its formulato allocateportionsof the discretionaryfunds
directly under its control. In 1993, it plannedto allocate all of these funds (about 10% of the higher
educationbudget) on the basis of the formula. Based on the formula, by mid 1992, a number of
institutionshad already movedto increaseenrollments(manythroughnight classesthat facilitateaccess
for lower incomestudents)and to increasestaff qualifications.
 1-9
MEC also introducedseveral laws that would make higher educationinstitutions"autonomous
public institutions'not subjectto normalcivil serviceregulations. Parallelto this, MEC was seekingto
permit all federal institutionsto establishprivatefoundationsunder their control as a means of giving
them furtherflexibilityto seek new sourcesof fundingand to provideadditionalservicesto government
and industry.

Over the long run, MEC was seekingto replacethe law of 'isonomy", which providesa single
salary and promotionpolicy for all higher educationteachingstaff, as well as civil serviceprotection,
with a new systemunder which teachingand non-teachingstaffwould be employeesof the institutions
where they work. In principle,this wouldallowinsdtudonsto developdifferentiatedprogramsand to
manage their funds more effectively. Becauseof possible oppositionfrom the key groups affected,
passageof legislationof this sort wouldbe difficultand time consuming. As an intermediatemeasure,
a law which establishesa floor for salarieswhichhighereducationinstitutionscouldsupplementwith
their own funds wassubmittedto Congress. On this basis MEC hoped to enable institutionsto be free
to establishtheir ownset of salaryincentives. Passageof laws on financialautonomyand on isonomy
wouldbe essentialfor the fundingformulato have its full effecton institutionaldecisionmaking.

MEC also initiatedwork on a long term plan for evaluationand certificationof undergraduate
higher educationinsdtutionsand programs,to be mainlycarried out by peer review committees. The
main objectivesof the programwould be to providepublicly availableinformationon the quality of
public and private institutions,so as to help inform students' decisionson attendance,as well as to
partiallytie public fundingto the resultsof these evaluations,as a meansof encouragingimprovements
in quality. MEC wouldbeginwith evaluationsof medicaleducaton followedby teachereducation.

MEC also sought to reform the studentloan program. In contrst to Chile, the loan scheme is
available solely to students attendingprivate institutions. Similar to Chile, it has sufferedfrom a
combinationof high subsidiesand defaultsand has had the effectof supportingthe lowestqualityprivate
institutions.The objectiveof the reformwas to ensurethat federalfundscouldassistthe largestnumbers
of studentsat the lowestcost to Governmentand to utilizeloans as a cost effectivemeansof encouraging
increased quality in the private sector, through setting quality-basedcriteria for loan eligibility. The
publicsubsidywouldbe reducedand repaymentwouldbe on an incomecontingentbasis. In May 1992
Congresspassed a law making MEC responsiblefor establishingthe regulationsfor the studentloan
program,and mandatinga minimumof USSS0millionper year for the program. This was a major step
forward, since it meant that the loan programcouldbe integratedinto nationalhigher educationpolicy.

MEC planned to introduce legislationto deregulate a large number of professions, with the
exception of the traditional areas of health services, law, structural engineering, teaching and
accountancy. Deregulationwould help to end the pervasive 'credentialism of higher education.
Professionalassociationswere expectedto opposevigorouslythese proposals. MEC was also planning
to introducelegislationleadingto indirectelectionof rectorsthrough electionby the universitycouncil.

Many of the laws and regulationsdescribedabovewouldencourageinstitutionsto diversifytheir

sources of income. For example,financialautonomywouldfree institutionsfrom excessivelystrictcivil
service regulations. Current regulations,for example,do not permit institutionsto depositfunds into
interestbearingaccounts,whichis fundamentalin a high inflationeconomy.The establishmentof private
university-associatedfoundationswouldalso encouragediversificationof income. Permittinginstitutions
to use their own funds to top off teachers' salarieswouldalso functionas an incentivefor universities
to seek additionalsources of revenue. Implementationof the fundingformulawould make institutions
 I-10

more awareof the trade-offsin expenditurecategoriesand wouldencouragethemto reducesubsidiesin

the provision of food and other ancillaryservices. The Governmentwas also consideringa matching
grants programto further encourageprivatesourcesof fundingfor public institutions.

Finally,over the period 1991-92,MEC reformersfloatednrumerousideas on waysand meansof

asking studentsin public institutionsto pay for a portionof their education,either now or in the future.
These included a 'parent' tax, a graduate income tax, and encouraginginstitutions to charge for
miscellaneousservicessuch as diplomasor parking. Anotheridea, currentlybeing implementedin one
state, wasto establisha fund whichbetter off studentswouldhave to contnbuteto, but which wouldthen
be used to support needystudentsattendingthe same institution. Given the political uncertainties,and
in order not to jeopardizethe implementationof the other reforms, the reformers at MEC were not
immediatelyseekinga constitutionalamendmentwhich would permit the chargingof tuition in public
institutions. Theyexpectedto seek such changesin a year's time, whenthe entire constitutionwouldbe
revised.

The reformprogramthus put forwardwas significant.Its focus wasto improvethe efficiencyand

effectivenessof the current public interventionin higher education. The strategy was to provide
institutionswith greaterautonomyand to introducenew mechanismof accountability,especiallythrough
implementationof a newfundingformulabut alsothroughrelatedprogramsof evaluationand assessment.
The fundingformulawouldpromoteefficiency,whilethe studentloanprogramwouldbe used to promote
equityas well as qualityin privateinstitutions.

In mid 1992, Congressas well as the informedpublic, were becomingincreasinglyconvincedof

the importanceof higher educationreform, and the prospects for implementingmany of the reform
proposalswere good. Unfortnately the resignationin early August1992of the Ministerof Education
and his team, for reasonsunrelatedto the reformeffort,temporarilystoppedthe reformprocess.

Venwla.* theNeedforRefonr

As noted above, Venezuelahas seen a vast expansionof the higher educationenrollmentsfrom

1960to 1990, and now enrolls26% of the schoolage population. 80% of its enrollmentis public,and
tuition is free. While there is a nationalentranceexamination,there is essentiallyopen access to the
lower qualitypublic institutionswhile accessto the three or four higher quality institutionsis available
only to those studentswho score higheston the examinations.

Besides this vast expansion,Venezuelahas had a numberof other successes. To a larger extent
than other systems, Venezuelahas channeledmore expansioninto lower cost, shorter length technical
institutions. 800 graduate education programs enrolling 15,000 students have been established.
CONICIT,the sciencefunding agency,appearsto be a well operatedand functioningagencyproviding
research grants on a competitivebasis and the Governmentis acting to increase its investmentin R&D
significantly.

Nonetheless,as in Brazil, there is nowa generalperceptionof decliningqualityin the publichigher

educationsystem, an apparentresult of a demoralizedacademicstaff, decliningsalaries,poor and overly
politicizedmanagement,inadequateinvestmentin libraries and equipment,and turmoil in the form of
strikes and protests by students and faculty.
 I-ll
To a great extentthe currentproblemsare a resultof decisionstakenin the 1960's, 70's, and early
80's, whenthe Governmentvastlyexpandedthe publichigher educationsystem. As the large amounts
of fundsfrom the oil boomgraduallydisappeared,theonly way Governmentcouldhope to achievethese
two goals simultaneouslywas to increase the amountof public funds going into the system to the
detrimentof lower levels of educationand other socialprograms. As a result Venezuelanow devotes
35% of its educationbudgetto higher education,a figurewhich, alongwith Costa Rica, is the highest
in Latin America. In short Venezuelatook exactlythe oppositepolicy decision,with regardto public
fundingof highereducation,that Braziltook in the late 1960'sand Chiletook in the early 1980's. The
Governmentnow finds itself unable to support a large public system, little or no tuition, and the
semblanceof quality in a few of its public institutions.

While unit costs in the public systemare comparableto public systemin other Latin American
countries,only 26% of all enteringstudentseventuallygraduate. Overallthe publicsystemrequireson
average 16 student-yearsper graduate, comparedto about six student years for private institution
graduates,and nineyears for Chileanpublicinstitutions. Thusthe costsper graduateare far higherthan
they should be becauseof the inefficiencyof the system. Low internal efficiencyis caused by two
factors: a relativelyopen admissionspolices, and weak universityadministrationwhich is unable to
establishor enforcerules on studentattendanceand failure.

The combinationof relativelyopen accessto public institutions,provisionof free tuition, and

subsidizedfoodand transportmeansthat a broadersocio-economic groupin Venezuelacomparedto Chile
or Brazilis able to attendhighereducation,especiallythe publicinstitutions.However,highereducation
continuesto serve a relativelyelitegroup, in part becauseof inadequatequalityat the lower levelsof the
educationsystem. About 30% of higher educationstudents are in the worker and marginal category,
comparedto 80% in the generalpopulation. The resultis that, in Venezuelaas in Brazil and elsewhere,
the populationas a whole is payingfor the full costs of a relativelyprivilegedclass whichwill benefit
monetarilyfrom higher education. Free public educationalso encouragesstudentsto continuetheir
studies, thus contributng to the inefficiencyof the publicsystem.

Venezuela'spublic system also suffersfrom a poor budgetingsystem which fiurtherencourages

inefficiency.Like Brazil, its budgetaryallocationsarebasedon ad-hocjudgments,proportionalincreases
and political bargaining.Other elementsin the financingsystem which are counter-productiveinclude,
as in Brazil, the requirementthat salariesare the samefor all teachersthroughoutthe system, as wellas
a system of early retirementwhich results in universitieslosing their best staff at the time of highest
productivity.

In 1991 and 1992, the Governmentbeganto discusson a tentativebasis a numberof possible

reforms. In particular, there were initial discussionson developinga formulabasis for funding which
might have a modest impacton efficiency. The proposedformulawas designedto encouragethe full
complementof studentteacher contacthours, as well as mandatespecificamountsto research and to
library and other support services. There was also a growingtendencyto restrict the intake of new
students at public institutions. There was as yet no significantpublic discussionon cost recoveryin
public institutions.

A more radicalreform agendafor Venezuela,similarto that of Chile or Brazil, shouldfocus first

and foremoston the changesin the financingof higher education. Efforts shouldbe made to increase
the private financingof higher educationand reduce the excessivelyhigh burden on public funds. The
most straightforwardreform wouldsimplybe to chargetuition fees to all studentsand then to expanda
 1-12
loanand scholarshipschemefor the needieststudents. Venezuelahas a numberof fledglingstudentloan
schemeswhich couldbe built on. However,in Venezuelaas in mostof Latin America,the long tradition
of free public educationmakes cost recovery in public institutionsdifficultin the short run although
nonethelessnecessaryin the long run. A less immediatelypainfuloptionfor increasingprivate fimancing
of higher educationwouldbe to restrict enrollmentin the publicsystem and thus encouragethe growth
of private education. This is already happeningin Venezuelabecauseof public financialconstraints.
Throughthis policythe public systemwouldincreasinglyfocus on higher quality,graduateand research
oriented education;and the current loan schemeswould be strengthenedto help support the neediest
studentsattendingprivate institutions.

The secondpart to a reform agenda,similarto that contemplatedin Brazil, wouldbe to changethe

way governmentfundspublicinstitutions,throughimplementinga fundingformuladesignedto encourage
improved quality and efficiency,enhance faculty performance and encourage self-assessment. This
formula could be based on how the Governmentestimatesthe systemshould cost rather than on how
higher educationinstitutionswould like to spend such funds. In particular, in the Venezuela case,
formulafundingshouldincludea parameterbased on the numberof graduatesof each institution,rather
than enrollment,so as to createa strong incentivefor improvedinternalefficiency. Other criteriacould
be based on performanceand efficiencyin the use of resources, and safeguardscouldhelp ensure that
institutionsdo no arbitrarily award degrees to get increased funding. In addition institutionscould
competeon an open basisfor someportionof fundingwhichcouldbe heldbackand awardedon the basis
of innovativeor particularlycost-effectiveprograms. The result of increasedinternalefficiencycould
be a muchlower cost per graduateas well as increasedsocial and private returnto investmentin higher
education. Along with fundingmechanism based on formulas,contrctual arrangements,studentfees
and other similar provisions, Venezuelawould need to expand its utilization of institutionalself-
assessmentproceduresand the use of externa evaluationsand accreditation.

CONCLUSIONS:THE NEW ROLE OF THE STATE

The reforms undertaken in Chile and under discussion in Brazil seek to increase diversity,
strengthenautonomyof public institutions,increaseaccountabilityof all higher educationinstitutions,
increase access and equity, and encouragequality improvementof all institutions. The objective is to
develophighereducationsystemsbetter able to meet the demandsof the twentyfirst century.

To meetthese goalsthe reformsradicallychangethe relationshipof the state with highereducation

institutions. The role of the state as a financingagent is reduced and additionalprivate resources are
mobilized. To mobilize private sources, tuidon charges are establishedor increasedto cover a large
portionof the teachingcostsof undergraduateeducationin publicinsdtutions,and publicenrollmentsare
restricted so as to encouragethe growth of the private sector. Increased private funding results in
incentivesfor efficiencyand helps provide labor market signals to institutionsregarding appropriate
courses and methodsof instruction. It also protectsthem from the vagariesof excessivedependenceon
the state.

The financialrelationshipbetweenthe state and higher educationinstitutionsis also changed. In

the past Governmentsdirectly funded institutionsand negotiatedincrementson the basis of political
bargaining. In the reformed system, governmentsupport of institutionsis provided on the basis of
formulas designedto encourageaction by institutionsto meet mandatedgoals of increased efficiency.
quality, or equity. Governmentsupport also increasinglyfocusseson the areas withinhigher education
such as research and graduate education,which have externalitiesin terms of encouragingeconomic
 1-13
development,and on institutionsin backwardor underdevelopedregions. Financialsupportis provided
increasinglythrough open competitionbased on peer review, especiallyfor research. In additiona
significantproportion of governmentfunds are provideddirectly to students or on a student basis.
Supportmechanismsincludescholarships(or vouchers)on the one hand, and loanprogramsto encourage
individualsto makeinvestmentsin theirhumancapitaland enablingthemto pay for that investmentwhen
they are reaping its benefits. Subsidizingstudentsthrough scholarshipsand loans rather than directly
subsidizinginstitutionsmeans that Governmentsplace greater choice of institutionsin the hands of
students,with possibleencouragementof increasedcost efficiencyof higher educationsystems.

With regard to governanceand oversight,Governmentsin the past strongly intervenedin the

operation of institutions,directlymandatingexpenditures,enrollments,courses, staffingpatterns and
salaries. The new role of the state is to operateat a distance,establishingthe rules by which a diverse
set of institutionsoperate and relateto the overallobjectivesof the higher educationsystem, including
settingclearrules governingthe establishment of new institutions,whichgivethemthe autonomyto make
judgmentsabouthow to use their resources to undertaketheir instructionaland researchtasks.
efficiently
At the sametime Governmentsdevelopindirectmechanismsto ensure accountability.Theseincludenot
only fundingmechanismswhichtie resourcesto the quantityand qualityof differentactivitiesand which
also make awardson the basis of open competition,but also strong mechanismsto openlyand publicly
assess and evaluateinstitutionsand programs.

Chart 1 summarizesprogress and proposalsin Chile, Brazil, and Venezuelain relation to the
above. Chilehas gone the farthest. It has diversifiedthe sourcesof funding,throughincreasedprivate
sourcesof financing,and has devisedfundingmechanismswhich explicitlyencouragenationalgoalsof
efficiency,quality, equity, and relevance. The Chilean Governmenthas moved away from direct
involvementin the affairsof individualinstitutions,at thesametimeprovidinga coherentframeworkwith
clear roles and responsibilitieslinkedin a systemof publicaccountabilityand with a variety of incentives
for imProvedquality and efficieny. Chile sil needs to developfunding mechansms to encourage
internalefficiencyin publiclyfunded institutionsand to improvequality in the private sector through
programs of accreditationand assessment. It also needs to strengthenand redirect the loan program.
Nonetheless,becauseof its reformprogramChile's highereducationsystemis arguablythe most stable
and effectivein the region.

Brazil's proposedreformprogramis at least as ambitiousas Chile's was. It goesfurtherthan Chile

by proposing to set up a sophisticatedfunding formula for public institutionsexplicitlydesignedto
encourageincreasedefficiencyand to lower unit costs, by proposingincomecontingentloans and to use
the loan schemeto encouragequalityin privateinstitutions,and by settingout to deregulateprofessions.
Similarlyto Chilethe Brazilianreformseeks to link financingreformto expansionof accessto higher
education(in this case, to the publicsystem). Whilethere havebeensetbacks,criticalareas of Brazilian
societyappear to be reachinga consensuson the need for reformsof this type. The key step will be to
reinforcethe technicalcapacityof MEC and to reduceits traditionalpoliticalpatronagerole.

Venezuelahas a more difficulttask ahead than Brazil in implementingreform. It begins with a

public dominant,tuition free system, enrollinga very high proportionof the school age cohort, leaving
little leewayin terms of increasingaccessas a meansof amelioratingany cost recoverymeasures.
 Chart I.
[MGHER EDUCATION REFORM IN CHILE, BRAZIL AND VENEZUELA
Summary of Polides
POLICY AREtA CMILE. :-AZIL VENEZELA
Before Reform Alter Reform BeforeReform Proposed Refonrm BeforeReform
Financing
Sour-es
Tuitionin Public None 28%of expenditure. None Proposed,
nofiguregiven None
Institutions
Enrollmentin
PrivateInstitutions None 52%of enmrment 60%of enollment No change
expected 22%of enrollment
Fnaing Meas

DirectInsdtutional Negotiated Baendqn perstudent Negotiated Ponnula-basedto encourage Negotiated

Support estimates _ efficiencyand
quality
Lan Schemes None Largeoveaxge,but lfrge In operation,
but highly Reduced subsidy,expanded Minimumcovergc,highly
deraults subsidized coverage, to beusedto subsidized
encourage qualityin privte
institutions
Research
Support Non. Opencompetition
and Directinstitutional
support Nochange Directinstitutional
supportand
peerbasedawards andaboopencompetition alsoopencompetition
Diversty LOW High Highbut few shortcoures Nochange High
in technology
Atoomy of Publi LOw High: institutionsully Low government controls High: institutions
would Someautonomy in budgeting
but
instItutions manage theirown laries,budgetkvels, and determinesalaries,working teachersalaries,
condkions
of
budgets enroUments conditionsandenrollments work,andenrollments amr
centray dctermined
Acuntabiliy of Public Little Evaluationsystemto be None Fundingformulawil reward Little
InstItutions sd up. Somcfunding cfficiencyandadditional
basedon qualiy of fundingwill bemade
enteringstudents available on thebasisof
evaluations
institutional
Qualty Improvementof None Accreditation
system None. Tuitioncontrols Loan cheme andevaluation None,exceptfor inhial
PrivateInstitutions operating
andbeing andloan cheme systemto encourage
qualiy recognition
improved discoragipr
qualiqt

Credentlas Professions
highly Somcderegulation Professions
highly Deregulation
proposed Professions
highlyregulated
regulated reported regulted
 -1-15

Nonethelessevenin Venezuelathe long term prognosisis hopeful. Leadersin Venezuela,as well as in

Chile and to some extent in Brazil have shown considerabletalents in implementingradical economic
reforms. The task now is to direct thesesame skillstowardsthe socialsectors.

The pathto highereducationreformliesthroughdialogueand negotiation,ratherthanGovernment

decreeand imposition,as wasthe casein Chilein the early 1980's. To achievereformon this basiswill
requirea firmgroundingin highereducationfactsand figures,and a nationaldebateon highereducation
reform, throughthe newspapers,radio and television,conferencesand reports,designedto mobilizekey
opinionleaders. This is alreadyhappeningon a large scale in Brazil and Chile. Internationalsupport
maywellbe helpfulhere as leadersof othereducationalinstitutionsinformand describetheir experiences.
The key stake-holders-students,teachers,businessmen,politicians,willneedto be convincedthat reform
is to their long term benefit;and importantpotentialstake-holderswho havebeensilent up to now,such
as primaryand secondaryschoolteachersand parentswhotheoreticallymight benefitfrom cost savings
in higher education,wilLneedto be broughtintothe picture.

Reform efforts will need to be structuredso that all parties feel that they gain something. For
exampletuition fee increaseswillneedto accompaniedby at leastpartiallyoffsettingprograms, suchas
well managed, expandedstudentloan and scholarshipprograms, as well as increasedaccess to high
education,and a large portionof tuition revenueat least initiallycouldremain withinhighereducation
institutions. New fundingformulaswill needto includeexplicitfinancialrewardsto the most efficient
and productive institutions.

Overallreforms in highereducationsuch as those descnrbedabovewouldresult in gains for all

elementsof society. Governmentcouldgainthroughreducingits financialburden and redirectingfunds
on the basis of equity and efficiency. The academiccommunitycould gain through improvementin
conditionsof work and throughrewardsfor quality. Studentscouldgain through increasedaccessto a
varietyof highereducationinstitutionsthroughexpandedloanschemes.Finallysocietyas a wholewould
gain throughmore agile and differentiatedinstitutionsable to respondto changingeconomicand social
needs. As keyopinionleadersbecomeincreasinglyawareof thesepotentialgains, the issuein Venezuela
and Brazil, as perhapsin all of Latin America,will no longerbe whetherreformwill come, but when.
 HIGHER EDUCATION IN CHILE

EFFECTS OF THE 1980 REFORM

Jose Joaqu(n Brunner and Guillermo Briones

Table of Contents

INTRODUCTION....................................... 11-1

THE OBJECTIVESOF THE 1980REFORM ...................... II- 1

The Scopeand Objectivesof the Refoms ..................... Il- 2

SYSTEMLEVELEFFECTSOF THE 1980REFORM ................ Il- 5

From low to high systemdifferentiation ...................... 11-5
From a state subsidized selective system to open access according to
achievementand income ........................ -6
From incrementalbudgetsto a competitivefundingmechanism .... .... I- 7
From state-corporativesystemcoordinationto market-policyregulations... 1-7

INSTITUTIONALAND OPERATIONALEFFECIS OF THE 1980REFORM . I- 8

Institutions . ....................................... 1- 8
Enrollment........................................ 1-12
Funding .......................................... 11-13
Conclusions .. 1I-16
1....................................

EFFECTS OF THE 1980 REFORM ON QUALITY, EFFICIENCY AND

EQUITY .1....................................... .- 16
Quality .......................................... II-16
Efficiency......................................... II-23
Equity . 11-28
...........................................

REMAING ISSUESAND ACTIONS.......................... II-31

Further Reform ............ ......................... H-32

APPENDIXTABLES..................................... 11-35
l~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
 E1-1
INTRODUCTION'

Arguablythe mostradicalreformof highereducationwasimplementedin Chilebeginningin 1980.

Basic featuresof ChileanHigher Education(HE) were drasticallyalteredby the 1980Reform, most
notablythat in order to rapidly expandaccess, market oriented strategieswere appliedto the higher
educationsystem. An importantfeaturewasto increasethe mobilizationof privateresourcesthroughcost
recoveryand the rapid promotionof private institutions. Giventhe pressureon manycountriesto adopt
similar reform programs, this paper examines the impact of the reforms ten years after their
implementation.

This paper is dividedas follows.In the first part, the systemprior to reformis outlined,alongwith
a synopticrecapitulationof the Reform's primaryobjectives. Second,the majorsystemlevel effectsof
the Reform wDIbe examined, particularly in terms of the distribution of: establishments, their size, tier
and sector affiliation, and regional distribution; enrollment growth and its distribution by tier, sector and
fieldof study; and finallychangesin HEfiding, publicexpenditureand institutionalfinancing. A third
sectionwill examinethe issuesof quality,efficiencyand equityas a consequenceof the 1980Reform.
In this place a more detailedanalysisof outcomesis intendedbased on two principalsources:(i) official
informationand secondarydata as wellas the analysisof resultsobtainedfrom previousstudies;and (ii)
new informationon specificquality,efficiencyand equityissuesproducedon the basis of data analysis
and a brief case studythat wasconductedfor this studyduringthe springterm of 1991. A final section
brieflyoutlinesoutstandingissuesand plannedreforms in the upcomingyears.

THE OBJECTIVES
OF THE 1980REFORM

Prior to 1980,Chile'sHigherEducationsystemwasrelativelysmall,homogeneousand exclusively

public.2 The system consistedof one tier and one sector, comprising8 universities: 2 state and 6
privateuniversities(3 Catholicand 3 non-confessional universities), all fundedby the publictreasury.
Henceforth, these 8 institutionswill be referredas the 'traditional or 'old universities,followingthe
local convention. Within each institution, the undergraduatelevel was clearlypredominant. In 1980,
only I % of total enrollmentcorrespondedto the postgraduatelevel (Table 1).

All higher education institutions were legally recognized as self-govering bodies with no
administrativedependencefrom Government. Universitieswere entitledto freely initiate schoolsand
careers and extendprofessionaltitles and academicdegrees. But in 1973,shortlyafter comingto power,
the Military Governmentdirectly intervenedin universityaffairs, imposingtight control over the
universitiesand invalidatingtheir self-governmentpowers. In addition,faculty associationsand student

a Paper prpared for the World Bank with the pl support of the RegionalProject on Higher
Education Policies in LatinAmerican which is funded by the Ford Foundation,FacultadLatinoamericanade
CienciasSociales(FLACSO),Josd JoaquinBrunnerand GuillermoBriones,Chile, January 1992.

2 For a more detailedoverviewsee Bnmner, JosEJoquin, Informo be la EducacionSuperor en

Chio. FLACSO,Santiagode Chile, 1986
 II-2
bodieswereprohibited.Universitiesunderwentwhatwaseuphemisticallylabelleda 'depuration"process.

Highereducationinstitutionsreceivedpublicsupporton the basis of incrementalfunding. That is,

the annualbudgets at institutionswere based on previousbudget allocationsand a distributionformula
looselyarrangedaccordingto institutionalsize, enrollmentsand additionalcosts originatedby research
and postgraduateprogrammes.In addition,no generalhighereducationlaw existed. But new universities
had to be establishedwith the Government'sunderstanding, thus securingpublic fundingand the legal
validityof their educationalcertificates.

Free of charge HE was the norm but selective admissionwas enforced on the basis of the
compound result of students scores in a national standardizedacademic test (Prueba de Aptud
Acadimica, P.A.A.) and their secondaryschool performance.

Table 1
SummaryStistics of HigherEducationin 1980
Numberof HE institutions 8
Enrolmat in 1980: 118,978
Stt univarsities - 63%
Privateuiiveraities 37%
(withpublicfunding
Postgradut enroment
(PhD. and MA) 1,200

The Scope and Objectivesof thc Refonns

The reforms implementedin December1980aimed at a radical overhallof the higher education

system, to introduce market forces, to increase the efficiencyand responsivenessof institutionsto
economicdemands. In addition,the system was to be expandedrapidly via the harnessingof private,
rather than public resources.

The reform was to be radicalin nature. Accordingto the Cerych& Sabattiermodel for analyzing
HE reforms', there were five outstandingcharacteristics.The degreeof systemchangeenvisagedby the
Reformwas high, affectingthe boundariesof the system itself as well as all institutions. Second,the
scope of intendedchangeswas inclusive,affectingpracticallyall individualswithineach institutionand
potentialactors outside the system. Third, the depthof the Reformitself led to the adoptionof radical
policies. Policygoals stronglydivergedfrom existingvalues and practicesof HE. Fourth, the goals of
the Reformwere clearly stated and had internal consistency.And finally, changeswere brought about
by central edict, from top to bottom and throughbureaucraticenforcement. B.Clark's assertionon the
feasibilityof authoritarianreforms in HE perfectly apply to the Chilean case: 'Of course, in systems

3 See Cerych, Iadislav & Sabattier,Paul, Great Ex2eafions andMixed EMfgn=ceT I lmetation
of Higber EducationReformsin Europe, EuropeanInstiute of Educstionand SocialPolicy, Trendam Books, 1986
 II-3
under authoritarianor totalitarianrule, the centralizationof authorityand the centralconcentrationof
administrationallowmore manipulationfrom aboveand on a large scale'.'

A brief caveatis here in order. Chile's HE systemwas reformedunder special and very harsh
conditions,due to the existenceof an authoritarianMilitaryGovernment.Institutionshad to endurethe
changesenvisagedby the reformerswithouthavingthe opportunityto intervenein the processnor to
negotiateits outcomes. Authoritarianmindedreformerswillprobablysay that only becauseof this could
system-widechangesbe broughtaboutand thatreformsneednot be assessedby the contextin whichthey
took place nor by the political conditionsthat lay behindor made them possible. Reforms, they will
argue, shouldonly be evaluatedin termsof their actualoutcomesand more general effectson society.
In turn, thosewho experiencedthesechangeswithoutanypossibilityof resistingor discussingtheir aims
and implemenmtion procedureswillprobablyfind it moredifficultto reflectuponthese changesandhave
rule. In short, one shouldnot forget
less confidencein the blessingsof supposedlyefficient-authoritarian
that under these special conditions,the cost of reforms must also includethe shatteredhopes and the
repressionsufferedby thosewould not yield.

Togetherwith the legislativeandpolicymeasuresthat were adoptedto directthe future of HE, the

Military Governmentdisclosedthe main purposesof the 1980Reform. Its primary objectivescan be
summarizedas follows:5

To open-upaccessto HE. Deregulationwas announcedas a wayof promoting'private initiative"

in the organizationof new institutions. Onlyminimli requirementswere establishedfor the creationof
privateinstitutions.It wasstatedthat, from this momenton, expansionof HE enrollmentshouldbe taken
care of by private institutions.

To dive,Yi the instiutions in the HE system. Three vertical tiers were established, based on a
functionalhierarchyof educationalcertificates:

UUniversities:expectedto focuson long cycleundergraduateprogrammesleadingto licenciaturas

and to professionaltitles requiringa licenciado degree. Onlyuniversitiescan initiatepostgraduate
programmes.

* Professional Institutes (PIs): -are restrictedto four year programs leadingto professionaltitles
definedas not requiringthe licenciatura.

* TechnicalTraining Centers (ITCs): arerestrictedto shortcircle(twoyear) vocationalprograms

leadingto technicalcertificates.

4 Clark,Burton, *The OrganiutionConception-in B.Clark(ed.), Pmrectives on HigherEducation.Eight

DisciDlinarv
and CoMparativeViews, Universityof CaliforniaPress, 1987,p. 125

f basicallyin: DocretoLeyN° 3.541de 1980;DecretosconFuerr

The 1980Reformlegislationis contained
de Ley Nes 1,2,3, de 1980;Decetos con Fuer7 de Ley N°s 4,5,22 y 24 de 1981.For a detaileddiscussionsee
Bnmner,JoseJoaquin,'La Educaci6nSuperioren Chile:1960-1990.Evoluciony Polftik* Q;LACSO,manuscript)
1990,and Cox, Cristiin & Brunmner,
Jose Joaqin, Politic Pdblicasde Educ cin Superioren CUIdumnte el!
RegimenMilitar Geneaci6n,Ejecuci6n,Resultados- n0 ) 1
 11-4
To reducethe instutionalpower ofthe two taditional state universities. Both the Universidad
de Chile and the UniversidadTecnica del Estado OaterUniversidadde Santiagode Chile) were forced
to give up their regional centerswhich -through a process of institutionalamalgamation- gave birth
to 12 new state universitiesand to two statePIs. From the Government'spoint of view, the contraction
of these two universitieswasjustified as a way of rationalizingthem and makingthem manageable.

To paflaly trnsfer the cost of state-financedistitutions to the studentsand/or their families

(cost recovery)and to force these institutionsto diversifytheir funding sources. In addition to cost
recoveryat publiclyfunded institutions,the emphasison promotingprivatehigher educationalso shifted
the burden of financeto private sources.New private institutions are dependenton resourcesobtained
from tuitionfees. (in fact, incomederivedfrom tuitionfees coverspart of the capitalinvestmentin these
institutionsalso).

To increase competitionamong instdions, with the aim of promotingefficiencyand quality,

incremental budgeting to institutions was replaced by a more competitive funding mechanism.
Institutionalsupport(aportefiscal directo)was confinedto the 8 traditionaluniversitiesand the 14 new
state-institutions.In all these establishmentscore fundingwouldnow have to be supplementedthrough
institutionalself-financing:tuitionfees, competitionfor researchfunds, and contractfunding. A small
amountof public fundingwas linkedto a 'best-studentsformula (aportefiscal indirecto), based on the
number of the best 20,000 scorers in last years P.A.A. enrolled by each institution!' In addition, a
Government financed student-loan scheme (crdditofiscal unlwrsitarlo, later designatedpagaff
wwirstario) was introduced. Lastly, the civil-servantstatus of academicpersonnelpertaining to state
institutionswas eliminated,thus enablinguniversitiesto differentiatesalaries and competefor faculty
staff. In addition, a publicly financed National Research Fund (Fondo Nacdonalde Desarrollo
entfficoy Tecnol6gico,FONDECYI) was set up. Researcherswere calleduponto contendfor funds
in a yearly competitionunder peer-reviewcontrol.

No public fundingwas visualizedfor new private institutions, but for one exception:as of year
1989, they can competefor "subsidy-carryingstudents" (the 27,500 best and brightest"). Students
enrolled in (new)private institutionshaveno accessto subsidizedloans. Finally, private gra1n to both
private and state universitieswere stimulatedthrough specifictax deductions.

Table 2 provides a summaryof these changes.

Ihis figure was later broadenedto include the bea 27,500 scos.
 11-5
Table 2
Summaryof HigherEducationSystemBeforeand After Reform

BEFORE 1980 AFTER 1980

1. One tier, one sector low institutional 1. Three tiers, two sectors: high institutional
differontiation differentiation

2. No tuitionbut electiveacces accordingto 2. Tuition fees are chaged by all institutions.

school performance and achievement in Selectiveacess is maintainedin the subsector
nationalstandardizedacademictest that rceives institutionalpublic fimding. In
the private institutions:open accessaccording
to and/or familyincome

3. State financing of HE on the basis of 3. Multiplecompetitivesourcesof fimding

incrementalfimding

4. Systm coordination provided by State 4. Systemcoordinationprovidedby marketsand

authorityand institutionaloligarchies, policy regulations

SYSTiEM LEVEL EFFECTS OF THE 1980 REFORM

At the systemlevel, the main outcomesof thepolicyand legislativemeasuresadoptedcanbe seen

as a series of structuralshifts that have take place duringthe last 10 years.

Fromlow to high system differendatio

A relatively small scale 'HE system, with a total enrollmentof approximately119,000students

distnrbutedin 8 universitieswith a commonfundingmechanismand a similar developmentpattern
-modelled accordingto the ideal of all becoming'comprehensiveuniversities' coveringa wide array
of disciplineand/or profession-basedfaculties(facldrades)and both researchand teachingfunctions,has
developedinto a systemwith a total enrollmentof about 250,000 studentsdistributedin 310 different
establishments. lnstitutions wildly vary in size, function and core values, and each one adopts a
developmentpattern adjusted to its mission-definitionand market orientation. Thus institutional
homogeneityhas beenreplacedby systemheterogeneity.In 1990,Chile's HE systemincludedtwo major
sectors (i.e., a public sector of 20 universitiesand 2 PIs with public institutionalfunding and a pbia
sectorconsistingof new institutionswith no publicfunding,distnbutedalongthe threeverticaltiers).The
growth in the numberof establishmentsby tier and sector is shown in Table 3.
 111-6
Table 3
Chile:Developmentof HE institutions, 1980-1990

Institutions 1980 1985 1990

Universities 8 21 60
Withpublic fiunding 8 18 20
New private,nopublic funding - 3 40

ProfessionalInstitutes - 25 82
With public fumding - 6 2
New private, no public funding - 19 80

TechnicalTrniDngCenters - 102 168

With public funding
New private, no public funding - 102 168

Total 8 148 310

Source: Divisi6nde EducacionSuperior,MINEDUC,1991

From a ste subsidizedseledive systemto open access accordingto achievementand income

Chile is the first Latin Americancountryto have introduceda comprehensiveand stringent cost
recovery scheme for all HE students through tuition fees or the deferred payment of state subsidized
loans. Whereas before 1980 students were admittedwithout charge to one of the 8 old universities
accordingto their school performanceand achievementin the P.A.A. (nationalstandardizedacademic
test introducedin 1967), after the 1980Reformall HE establishments,both public and private, charge
fees that are expectedto cover the approximatedirect cost of the givenprogram adjustedaccordingto
market reputationof each institution. In practicalterms, the 22 publiclysupportedinstitutionscontinue
to sustain selectiveadmissionprocedures.In addition, studentsare asked to pay tuition fees but those
who can prove economicincapacityhave access to state subsidizedloans.7 Studentsenrolled in the
private sector will be admitted regardless of their school performance and achievementon the
standardizedacademic test so long as they pay the full price charged by each institution.' The
Governmentdoes not controlthe amountof fees chargedby the institutionsnor does it intervenein the
process of fixingyearly adjustments.

From incremental budgets to a competitivefunding mechanism

The total amountassignedto the 8 old universities,expressedas a share of GNP, rose from 0.72%
in 1960to 1.289%in 1970 and to 2.11% in 1972. After the adventof the Military Governmentand up

7 Only a ftaction of those studnts who request loans will get themn See Sanfuentes, Andr6s,
'Compormiento Universitarioy Polfticasde Financiamiento,in C.1 mann (ed.), Financianientode la Eductci6n
Superior Antecedentesv Deffos. Foro de la Educaci6nSuperior, CEP, Santiagode Chile, 1990.

' But a few of the new private institutionsare nowbecomingmor selectiveas a consequenceof increasing
demandand the competitionfor market reputation.
 II-7
to 1980,the same allocativemechanismwas maintained,but with decreasingamounts. In 1980, HE
fundingtotalled1.05%of GNP. Until 1980,Governmentallocationsto the eighttraditionaluniversities
were madeon the basisof incrementalfunding,that is, the previousyear's budgetplus someincrement.
Suchbudgetsdid not necessarilyrelateto the activitiesat universitiesor their costs, nor were institutions
givenincentivesfor efficiencyor quality.

Afterthe 1980Reform,Governmentallocationscontinuedto fall and were drasticallyrearranged.

Fromthat momenton institutionalcorefundingwasrestrictedto the22 publicsectorinstitutions.Overall,
incrementalfundingwas replacedby four differentfundingmechanisms:

* Publicinstitutionalfunding(aponefiscaldirecto),whichis confinedto the 8 traditionaluniversities

and the 14 newstate institutions.But incrementalfundingas a wayof allocatinginstitutionalcore-
fundingwas substitutedby a formulaconsistingin diminishingpublicresourcesduring a set period
of time and, after that, the levellingof that amountover time.

* In addition,an increasingamountof publicresourceswastied to a best-studentsformula",based

on the numberof the 27,500best scoresin lastyears P.A.A. enrolledby each institution(aprorte
fiscal indirecto).

* Publiclyfundedinstitutionswereaskedto chargetuitionfees. A Governmentfinancedstudent-loan

schemewas introducedto supportcost-recovery(criditofiscal uniwvitario).

* A separate Fund (Fondo Nadonal de Ciencia y Tecaologfa, FONDECYT)was establishedto

financeresearchprojects chosenafter a peer reviewprocess on the basisof a yearly competition
open to all researchers.

The fundingof new private institutionswas made dependenton resourcesobtainedfrom tuition

fees. HE institutionswere encouragedto seek supplementary
fundingbothfrom publicand privatesources
throughvariousmeans such as conractual funding,incomefor servicesand from privatephilanthropy.

Fromstate-orporative system coordinationto market-policyregultions

Traditionally,system coordinationwas providedby state authorityand institutionaloligarchies.

In fact, as has been statedby B.Clark, nationalsystemsnot strictlyorganizedas state systemsare likely
to dependheavilyon the manywaysthat academicoligarchycanlinkpersons, groups, and institutions.
Wheninstitutionsare fundedmainlyby Government,academicsnormallyseek the privilegedautonomy
of a direct and unfetteredlump-sumgrant from the nationaltreasuryto the individualinstitution(...)
with past commitmentsand budgets guaranteeingand adequatesum'.' This was precisely the way
ChileanHE worked and producedsystem coordinationuntil the 1980Reform. The 8 old universities
benefitedfrom privilegedautonomy - which came to an end in its self-governingfeaturesafter the
military intervention. In addition, they had receivedpermanentGovernmentsupport through yearly
lump-sumgrants, and producedtheir own self-administeredways and meansof coordination,the most
importantbeing the Consejo de Rectores de las UniversidadesChilenas (Councilof Rectors)chaired
by the Rectorof the oldestinstitution.

E Clark,Burton,p.140-41
 II-8
The 1980Reformradicallyalteredthese arrangements. Systemcoordinationwas to be provided
mainly by a social choice context 'in which there are no inclusive goals, and decisions are made
independentlyby autonomousorganizations"'°whichwere calledupon to competefor students,faculty
and resources. Market-orientation becomethe catch word that was presumedto best capture the
practical philosophyof the 1980 Reform, both for friends and foes alike. Additionally, system
coordinationwas to come from regulationsprovidedby policy orientationsand the allocationof public
money. Thus institutionalleverageand the academic-oligarchic power of professors, deans and rectors
were both curtailedby the Reform,with the expectationof changingthe system's self-centerdness(its
monopolisticfeatures,as was claimedby the MilitaryGovernment)and forcingits openingto society's
demands as expressed through markets and diversified funding opportunities. In this context,
"competitionis seen as leadingto value for moneyfor the consumerand a diversityof productsto suit
individualdemands. In broad terms, the publicsectoris seen as wasteful,inefficient,and unproductive,
whilethe privatesector is seen as efficient,effectiveand responsiveto the rapid changesthat are needed
in the modemworld'."'

INSTrITTONAL AND OPERATIONALEFFECIS OF THE 1980 REFORM

This sectionexamineschangesin the main functionalvariablesof the ChileanHE systemduring

the last decadeas a resultof the 1980Reform. Modifications,mainlyof a quantitativenature, produced
in the followingsystem componentswill be analyzed: institutions, their size, tier and sectoraffiliation,
and regionaldistribution; enrollment growth and its distributionby tier, sector and field of study; and
finally changes in HE funding, public expenditureand institonal fnding. The following section will
examinethe impacton quality(includingteachingstaff and research),efficiencyand equity.

Insitutions

As a result of the reforms, the numberof higher educationinsdtutionshas rapidlyproliferated.

Both the breaking up of the two largest public institutionsand the encouragementof new private
educationhave significantlyincreasedthe supplyof higher education. A group of 12 new public (state)
universitiesand 4 PIs was createdout of the "rationalization'imposedon the Universidad de Chile and
the UniversidadTecnica del Estado,lhe 2 old State-universities.' Most of thesenew Stateinstitutions
are locatedin major cities outsideSantiago,and their creationas autonomousinstitutionswas supported
by the local communities.

'° bid, p.l137

" Walford, Geoffrey, -ChangingReationship betweenGoverment and Higher Educationin Britain', in

G.NeaveandF.Van Vught(eds.), PrometheusBound.TheChanginzRelationshinBetwee Govemmentand Hither
Educationin WesternEurove. PergamonPre, Oxford, 1991,p.169

12 Only two state-PIsremn The other two were icoported into preexisting universities. The Insitute
Profesionalde Chilldnwas assmilae by the Univeraidaddel BEoBhoand the InstitutoProfesionl de Valdiviaby
the UniversidadAustdl de Chile.
 n1-9

The foundingof new private institutionswas encouragedthrough a permissivelicensingsystem.

In fact, private universitiescould be establishedwith the only obligationof offering at least three
professionalprogramsleadingto differentprofessionalcertificatesselectedout of twelvedefinedby law
as previouslyrequiringthe obtentionof a licenciatura.Y

To ensuresome qualitystandards,privateuniversitiesand PIs were requiredto submitto a special

examination procedure. Once officiallyauthorizedby the Ministry of Education, the new private
institutionmust sign an examinationagreementwith either one of the traditionaluniversitiesor one of
the new state institutions. This agreementtakesthe form of a private, fee-for-service,contractwithout
any interventionby any publicbodynor furtherGovernmentcontrol.In accordancewiththe examination
agreementnew privateinstitutionsmustsubmittheir teachingprogrammesfor approvalby the examining
institution. During a periodof 5 to 10 years studentsof newprivate institutionsas well as the first five
cohortsof graduatingstudentsmust take their final examinationswith a committeecomposedby faculty
members from both the new and the examininginstitution. After satisfactorycompletionof the
examinationperiod, the new privateinstitutionwill automaticallyobtainthe statusof a full autonomous
university or PI. No additionalaccreditationand/or evaluationprocedures were established,the
underlyingideabeingthat qualityand efficiencywere to followfrom competitionfor students,teachers
and researchers,and for public and privatefunds.

By Governmentaldecision,the two old state-universitiesgave birth (eventually)to 14 additional

(state) establishments.In addition, a total of 276 new private HE establishmentshave been officially
recognizedduring the years 1980-1990. In effect,the shape of ChileanHE has changeddramatically,
as shown in Diagram1. New institutionswere establishedmore rapidlyin Tiers II and HI (i.e., in the
non-universitylevels of HE), in part becausethe foundingof new privateuniversitieswas submittedup
to 1987to one additionalprerequisite,involvinga prior authorizationby the Minlsterio del Interior, that
is, the Ministryin chargeof internalaffairs and security. This restriction, and not the sociallymore
demandingexpectationsinvolvedin the settingup of this typeof institutions,explainsthe slowemergence
of privateuniversitiesduring the first half of the last decadeand the abruptinstitutionalexplosionafter
1987 (See above,Table 1).

D This specificationwas later changedto the obligationof conferringone professionalcertificateout of a

listof 15definedby law as previouslyrequiringa Ucendatura.Thelatter correspondto the followingcaree law,
economics, psychology, medicine, odontology,engineering,forestry engineering, agronomy, chemistry and
pharmacy,veterinary,biochemistry,architecture,primaryeducationteacher, secondaryeducationteacher, special
education teacher.
 II-lo
Diagram 1
ChangedConfigurationof the ChileanHE System, 1980-1990:
Tier and SectorDistributionof Establishments

YEAR1980 YEAR 1990

SECTORand SUBSECTORS SECTORSand SUBSECTORS

( ) Number of insti- ( ) Number of institutions
tutions
PUBLIC PRIVATE

1.5. (20)
1.1 11.2 11.3 1.1 11.2 11.3 1.4
(2) (3) (3) (2) (3) (3) (40)
TIER II II
Universi- (12)
ties

1.6. (22)

TIER II 2.1. 2.2.

Professional (2) (80)
Institutes

3.1.
TIER III (168)
Technical Training
Centers

1.1. Old state universities(2) and their offsprings:(12)new state universities)

1.2. Old private catholicuniversitieswith public funding (3)
1.3. Old non-confessionalprivate universitieswith public funding(3)
1.4. New private universities(40)
1.5. Sum total of universitieswith publicfunding (20)
1.6. Sum total of HE establishmentswith publicfunding(22)
2.1. PIs with public funding(2)
2.2. New private PIs (80)
3.1. New private ITCs (156)
 1-11
The rapid increasein the numberof HE institutionsover a relativelyshortperiodof time had four
major effects:

* The ChileanHE systemhas turnedprivatedominantin the non-universitylevels and now is dual

public/privateat the universitylevel. Post-secondary,non-universityHE is now a (private)market
concernwith a wide supplyof differentstudy opportunities.

* Establishmentshavegrownmore regionallydispersedthus enlargingaccessopportunitiesover the

whole of the country,particularlyin the non-universitylevels. Nonetheless,overalldistribution
of enrollmentbetweenthe MetropolitanRegionand the rest of the countryhas changedin the
directionof a still higherconcentrationin the capital city, which in 1983 accountedfor 49% of
total enrollmentand in 1990for 51.2%.

* Supply of HE is now providedby a large numberof small size private institutionsand a few
medium-sizeestablishments.AppendixTable 1 showsthe average enrollmentby establishmentin
the different tiers and sectors. In the private universitysector, the three largest of the new
establishmentsaccountfor 56.3% of total sector's enrollment.

* The rapid expansionof higher educationcapacity,however,may be exceedingthe demand. The

latter phenomenonis most intenseat the non-universitylevelsbut can also be perceivedin the
privateuniversitysector. Thus, whilein 1980the ratio of new openingsto first year enrollments
in the 8 old universitieswas 100.0%in 1990the ratio for the whole system is 59.0%. That is,
there are moreplacesavailablethanthere are first yearstudentsenterringthe system.But for each
tier and sector, ratios differ: publicuniversities97.4%; private universities 69.6%; publicPIs,
96.5%; privatePIs 50.5% and ITCs 45.6%."

Table 4
Chile: HE Supplyand Demand, 1983-1990

Variable 1983 1985 1990

Terminalenrollmn
a the secondary level 122,210 137,795 132,018
Numberof studentswho
take the PAA(1) 119,245 121,168 114,343
Newopenins suppliedby
the HE system 72,765 116,564 162,794
1st year enrollments 64,037 71,766 96,089
Ratio of 1st year enrolls./
new openings 88.0 61.6 59.0

Source: Divisi6nde Educaci6nSuperior,MlNEDUC,1991

(1) Considen both High Schoolgraduatesfrom last years cohort and schoolleavensfrom
previousyears who take the PAA .

14 SeeYanez,Jost, 'Antecedentesecon6micosy financierosdel distemade educaci6nsuperior' (manuscript,

1991), Table I
 1I-12
EnroUment

HE enrollmentshave more than doubledduring the last decade. The entire expansionhas been
provided by private sector institutions,mostly at the non-universitylevels. University enrollment
increasedby 12.6%during the decade,exclusivelyby new privateuniversities.

Table5
Chile:HE Enrolment by Tiers and Sectors

1980 1985 1990

Universities 116,962 118,079 131,702

With Public Funing 116,962 113,128 112,193
New Private, No Public Funding - 4,951 19,509

Profossinal Instiutes - 32,636 40,006

With PublicFunding - 18,071 6,472
New Private, No PublicFunding - 14,56S 33,S34

Tech Trining Centers - 50,425 77,774

With PublicFunding - - -
New Private, No PublicFunding - 50,425 77,774

Total 116,962 201,140 249,482

Source: Divisi6nde Educaci6nSuperior, MINEDUC,1991

In 1990, 52.4% of total enrollmentwas providedby private institutionswith no public funding.

But at the universitylevel, enrollmentin publiclyfunded institutionsclearly outweighsprivate sector
enrollment.

From a comparativepoint of view, the gross enrollmentratio in the ChileanHE system of 18.6%
for the correspondingage group (20-24years) is similarto other Ladn Americancountriesand as high
as some European countries. Chile's HE system is still in the process of massification,despite the
proliferationof establishmentsandthe doublingof enrollmentduringthe lastdecade.However,giventhat
demand for places is for the most part being satisfied, further massificationwill not be possible until
secondaryschool coverageis increased.

Enrollmentdistributionby fieldof studyat theundergraduatelevel greatlyvariesbetweentiersand

sectors. Table 3 presents the overall distributionat the systemlevel and for the different tiers.
 II-13
Table 6
Chile:Studentsby Field of StudyAccordingto
Tier Classificationof HE Institutions,1990

FIELD OF STUDY University PIs TTCs

Agricultue 8.5 6.3 6.5

MedicalScienceandHealth 9.7 - 3.7
Engineeringand Reltd. Tech. 28.6 16.1 29.9
NaturalSciencesand Mathematics 4.4 0.5 0.7
Social Sciences 11.3 17.3 2.8
CLommercwialand Bus. AdrnirL 7.0 24.6 46.9
LAw 6.4 - 0.9
Humanities 7.1 21.3
Educationand TeacherTraining 12.3 20.6 1.9
Arts and Architecture 4.7 11.0 5.3

Source:Divisi6nde Educaci6nSuperior,MINEDUC,1991

Publicinstitutionsenrollstudentsin all fieldsof study,but tend to concentrateon engineeringand

related technologies,educationand teacher training, the social sciences, and commercial& business
administration.During the last decade, there have been some major shifts in enrollmentdistribution
withinthis subsector.On the onehand, publicinstitutionshavewitnesseda declinein the area of teacher
training, that waspartiallyabsorbedby Tier n institutions(PIs), and in the area of medicalsciencesand
health related studies. On the other hand, these institutionshave expandedprograms in agricultural
studies, naturalsciencesand mathematics,and law.

Private HE institutionspossessa very different enrollmentdistributionprofile, specializingin

courses that are relativelylow cost In Tier I institutions,law, social sciences and commercialand
businessadministrationcareersaccountfor more than 80% of total enrollment. In the caseof PIs, the
social scienceprogramsand teachertrainingaccountfor more thanhalf total enrollment. In the case of
7rCs, almost50 per cent of enrollmentis in the socialsciencesand a third in the technologicalfield.

Funding

Probablythe singlemost far reachingeffectof the 1980Reformhas been its impacton financing.
The 1980Reformenvisagedtwo major changesrelatedto funding. First, there wouldbe an emphasis
on mobilizingnon-government,particularlystudent,resourcesto financehigher education. This was
achievedvia tuition fees at publiclyfunded institutionsand the establishmentof private institutionsto
expandaccess. Second, the allocationof publicresourceswouldbe on the basis of criteria that would
stimulatequalityand efficiency.

In accordancewith these changes,the MilitaryGovernmentmade the followingprojectionof the

percentageallocationof publicfunds to HE (Table7).
 11-14

Table 7
Chile: Projected Public Expenditurc in BE, 1980 onward

Resources 1980 1981 1982 1983 1984 1985 1986

Institutioal support 100 100 90 75 60 S0 50

Best students relatod formula - - 10 25 40 S0 S0
Student loan scheme - 7 15 23 30 40 50

Total 100 107 115 123 130 140 150

Source: Decreto con Fuemz de Lay NO 4, 1981

Thus not only a change in the funding mechanismsof the publicly supported institutionswas
envisagedbut also a net increaseof the total amountdisbursedby the public treasury, over a period of
6 years, after whichstate fundingwouldstabilizeat a level representing50% more (in real terms)of the
amount apportionedin 1980.

Althoughthe proposedchangeswere rapidlyadoptedthe budgetprojectionsdid not materalize. In

fact, Chile's economyexperienceda severe crisis in 1982,and duringthe followingyears fiscal policy
and public expenditurewere highly restrictive. As a result public expenditurein HE followeda very
differentpath than had been projectedin 1981 (Table8). On their part, public institutionshad to cope
with diminishingStateresources and with a broadeningspectrumof new financingopportunities.

Table 8
Chile: ActualPublicExpenditue in BE, 1980-1990

Resources 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990

Institutionalsupport 100.0 96.0 86.2 59.6 S8.7 53.2 47.9 43.7 41.6 37.5 33.4
Best studentsrelated formulae 0.0 0.0 11.0 11.0 9.4 8.4 7.8 7.2 7.8 11.0 10.8
Studentloan ceme 0.0 7.0 14.7 18.3 22.7 18.9 17.7 16.2 15.6 12.5 9.4
FONDECYT 0.0 0.0 0.3 0.2 0.4 0.4 1.0 1.8 3.0 5.5 5.6
Developmet funds 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 4.1 1.9 0.0

Total 100 103 112.2 89.2 91.2 80.9 74.4 68.9 72.1 68.4 59.2

Source: C.Le .a (ed.). Financiamientode ls Educaci6nSuneror Antecedentesv Datos. CoJecci6nForo

de ls Educaci6nSuperior, CEP, Santiagode Chile, 1990,p.92

Thus, while direct public allocationswere diminishing,the public-sectorestablishmentsincreased

their income from other public and private sources. The net effecs of these changesare presented in
Table 9, which shows the actual level and compositionof HE funding in Chile consideringthe whole
system (i.e., public and private) and the various fundingsources.
 11-15
Table 9
Chile:EstimatedTotal NationalExpenditurein HE by Sources, 1990

Source USS (million)

Public sources
Publictreasuryallocations
a) to publicsector institutions' 125.6
b) to new privateinstitutions2 2.6
FONDECYT(assignedto HE) 11.8

Subtotal 140.0

Private sounrcs
Privatephilanthropy
a) goingto publicinstitutions 4.9
b) goingto new privateinstitutions 1.5
Tuitionfees
a) Paid in publicinstitutions2 81.6
b) Paid in privateinstitutions" 77.4

Subtotal 165.4

Publiclmvatesources
5
Variousother incomes 159.4

Subtotal 159.4

Total 464.8

Source: Ministerio de Hacienda, Direcci6n de Prepueso, Balances

Pre-upuestarios,and
MINEDUC,Direccionde EducacionSuperior,1991

US$ 304,90 pesos.

Inludesapoiiefiscal direcao,Vonefcisal indirecto,pagari urnuario and recpraci6n de pr&stamo por
criddaoflcal. The apone directo rmpresentsaound 62%, the aporte indirecto16%, the pagar6universitario
15% and the rest is recuperacidnde prdnwno por crAdito.
2 Share of aportefiscal indirectogoingto private universities.
' Estimatebasedon AppendixTable 10.
4 Estimate based on averagecost of tuition fee for private sector institutionsaccording to tier (US$1000,
US$800,US$400).
Estimatebasedon AppendixTable 10. Includes:wnoade bienesy seriwos, renta de invetiones, yentade
acaivos,transferenciasdel sectorprivadoy de entidadespabiUcas,endedudaniento, recaperacidn de otros
prstanos, yei especiales y oowr ingresos.

In 1990, total nationalexpenditurein HE representsthe equivalentof approximately1.67% of

Chile's GNP. Around30% is directlydisbursedby thepublictreasury,36% comesdirectlyfromprivate
contributions,mainlythroughthepaymentof tuitionfees, and the rest (34%)is mixedfundingoriginating
 II-16
from services,variousspecificpublicallocations,borrowing,ventade activos,internationalcooperation
and private philantropy. Studentfees in 1990averagedaboutUSS700. AppendixTable 10 illustrates
the sourcesof funding at the universities.

Condusions

Overall,the 1980reformsenableda doublingof enrollmentsin highereducation,primarilythrough

a rapid increasein the numberof private, non-universityinstitutions.To achievethis expansion,a large
portionof the financingburden of highereducationwas shiftedfrom the state, to the students and their
families. Marketforces came into play in the allocationof state funds and competitionfor fee paying
students. The nextsectionwill attemptto addressthe impactof such marketforces and expansionof the
systemon the-quality,efficiencyand equityof the system.

EFFECTS OF THE 1980 REFORM ON QUALITY, EFFICIENCY AND EQUlTY

QU4aty

Quality assessmentsin HE are difficultto come by in general. It is still harder to evaluatethe

impact on quality of broad and in-depthchangesas those brought aboutby the 1980 Reform. In the
absence of reliable quality measures, analysismust rest on circumstantialevidence and on indirect
assessments.In the subsequentsectionsthe followingquality-relatedaspectswillbe analyzed:

* ImPactof enrollmentextensionon public sectorinstitutions

* Student's institutionand career choices

3 Faculty staff

- Institutionalresearchcapacities

* Provisionof postgraduatestudies

* Institutionalreputationof establishmentsin the various sectors and sub-sectors

On the whole, the 1980Reformdoes not seem to have negativelyaffected public institutions in
terms of the qualitativeaspectsof their performance. Moreover, it might be arguedthat the policies
adoptedpreventedthese institutionsfrom experiencingthe more commonnegativeeffectsof enrollment
massification. On the other hand, nothing seems to indicate that dramatic improvementsin quality
resultedfrom the 1980Reform.

Using studentchoiceas a proxyfor quality, one can beginto makejudgementsabout 'perceived'

qualityshifts withinthe systemas a whole. While such indicatorsmay reflecthow one institutionstands
relativeto another, such informationrevealslittle abouthow the qualityof the systemas a whole has been
affectedby the reforms. The demandfor accessto the elite, selective,universityportion of the system
has remainedfairly constantsince the reforms. Whereasin 1980the ratio of new openingsto effective
demand was 0.54%, it was 0.64% in 1990. The relative stabilityof demandover time suggeststhat
 II-17
potentialcandidateswith less than fair chancesto be admittedin the moreselectivelevel of institutions
are now optingfor private universitiesand institutions.Moreover,candidateswhoused to select second
choiceprogramsin the old and more prestigiousuniversitiesbecausethey were not admittedto one of
the moreselectivecareers,nowhavethe optionof stilltakingtheirpreferredcourseof studyin a private
university.In short, nothingseems to warrantthe contentionthat public institutionsare perceivedby
students as havingdeterioratedin quality and would thereforebe redirectingtheir demandto private
sectorinstitutions.It is muchmore likelythat demandis steadyin the more selectiveinstitutionalsector
becausesupply of openingsis not changingin this sector whileat the same time selectiveadmission
procedureshavebeen maintained,whereasnew privateinstitutionshavegenerateda significantamount
of new HE opportunities,particularlyin those professionalcoursesof study that commandthe highest
prestigeand expectationsof private returns. On the other hand, an importantnumberof young adults-
with non-elitesecondarytrainingor comingfrom the vocationalbranch of secondaryschools-are now
choosingto enter PIs and TTCs.Y

An importantindicatorof quality withinthe new system is the institutionalchoice by the best

students. In fact, the new fundingsystem rewardsthose institutionsable to attract the best students.
Indirectly,quality can be associatedwith the enrollmentdistributionof these 27,500 subsidy-carrying
students. In the years 1990 and 1991,public institutionscaptured87,8% and 88,9% of the total sum
allotted for this purpose. Appendixtable 2 presents the distributionof these funds betweenpublic
institutionsand comparestheir respectiveshare withtheir participationin total first year enrollment.

The only conclusionto be drawnup to here is that after 10 years of the launchingof the Reform,
public institutions,particularlythe 8 traditionaluniversitiesand a group withinthose derivedfrom the
reorganizationof the 2 traditionalstateuniversitiestendto fare betterthanprivate institutionson selected
items that can be used to indirectlyassessquality of undergraduateteaching. This can not come as a
surprise, consideringthe very recent creationof privateuniversitiesand the well establishedreputation
of the older and publiclysupportedinstitutions.Moresurprising- at leastby Latin Americanstandards-
- is that a system-wideReformset in motionand implementedin a period duringwhich state spending
on HE was decliningdid not demolishthe public sectorinstitutions,which in generalhave managedto
maintaintheir standingand reputation.

One indicatorof quality of the system as a whole is the level of staff professionalization.The
percentageof faculty holdinggraduatedegrees(PH.D and MA degrees)increasedin the public sector
institutionsfrom 19.3% to 23.3% during the period 1981-1988,which again can be taken as indirect
evidenceof qualityimprovement,particularlyif one considersthat student/teacherratios, alreadylow,
were at the same time further decreasing(Table 10).

" For a detailedanalysis, see Muga Alfonso and Rojas, Fenando. 'Andlisis dcl Prooeso Regular de
Admisi6na las UniversidadesChilenas, Perfodo 1982 a 1989', in Lmnitre, Maria Jose (ed.), IA Educacion
Superioren Chile: Un Sistemaen Transici6n. Colecci6nForo de la EducacidnSuperior,CPU, Santiagode Chile,
1990
 11-18
Table 10
Chile:Public SectorInstitutions,Total Numberof Academic
Staff, Percentageof Postgrduate DegreeHoldersand
Student/TeacherRatios, 1981-1987

TotalNOof S of Postgrad
Year acadenic staff degree holders SrI ratio

1981 12,833 19.6 8.01

1985 16,683 22.8 7.64
1987 17,655 24.0 7.10

-Source: Consejode Rectores,AnuariosEstadfsticos,

Santiagode Chile, 1982a 1987

In public sector institutions,about half of the academicstaff is employedon a full time basis,
while in the private sector universitiesno more than an estimatedaverage of 3% to 5% of the total
academicstaff is hired in the same condition,the latterfrequentlybeing engagedin authoritypositions
withinthe institution.Estimatedstudent/teacherratiosin the leadingnew privateuniversitiesarenot very
different from those found in the public universities,with an average of 11/1 in the two major private
universities.16 Appendix tables 5 and 6 examine in more detail staff professionalizationat different
institutions.

Another indicator of quality is the research output of the higher educationsystem. Such an
indicator,however, only reflects what is happeningat the elite institutionsin which research activities
are concentrated. In terms of internationallyregisteredscientificpublications,the majorstate university
(Universidadde Chile) producesaround50% of thetotaluniversityoutput,followedby the Universidad
Cat6lica de Chile (25%), and thetwo leadingpublicregionaluniversities(UniversidadAustral de Chile
and Universidad de Concepci6n)eachwith around 8% of the total output."' Amongstthose researchers
actively engaged in the presentationof proposals to the yearly competitionof FONDECYT (2,137
researchers), during the period 1982-1989,42% belong to the Universidad de Chile, 24% to the
Universidad Cat61icade Chile and around6%, in each case, to the Universidad Austral de Chlle and
the Universidad de Concepci6n. The other four old universitiesaccountfor an additional11% of the
active researchers. The remaining 10% is distributed between researchers of the 14 new state
institutions." Table II shows the percentage participationof the various HE institutions in the
distributionof projects and resourcesassignedby FONDECYTover the 1982-1990period.

t In these two universities, full time teachers are 5% and 10% of total faculty staff, respecively.
Administrativepersonnelstands in a ratio of around0,25 to one faculty,and there are around 45 studentsper one
administrtive staff member,without consideringjunior staff (auxiliares).

17 See Krmuskopf,Manuel,op it.

" See Saavedm,Francisoy Vergar, Patricio,RecursosHumanosea Lvestig&ci6n

Cientflicav Tecnol6ica.
Sggirtici;scifn en FONDECYT,CONICYT,SantiaSode Chile, 1989
 1-19

Table 11
Chile: Percentage Participation of the HE Institutions in the
Distribution of Projects and Resources Assigned by FONDECYT,
over the 1982-1990 Period

Approved % of allocated
Institution projects resourca Number%

U.de Chile 1,038 40.1 40.2

U.Cat6lica de Chile 635 24.5 23.0
U.de Concepcidn 156 6.0 6.9
U.Austral de Chile 139 5.4 6.8
U.de Santiago de Chile 106 4.1 4.3
U.Cat6lica de Valparaso 90 3.5 3.6
UTFederico Sta.Mada 79 3.1 2.9
U.Cat6lica del Norte 16 0.6 0.5
New state universities 161 6.2 5.9
Other HE instiutions 17 0.7 0.8
Other institutions and
individual researchers 152 5.8 5.1

TOTAL 2,589 100.0 100.0

del FondoNacionalde DesarrolloCientlficoy TOcnolItico.Peifodo

Source: BsD n F.Saavedr, EEstadsticas
1982-1991-,CONICYT,Santiagode Chile, 1991

Considersyears 1982to 1991,raourc alrady allocatedor set aside for approvedprojects.

Researchproductivitymeassuredin accordancewith the science-publication dataprovidedby the

Institutefor ScientificInformationshowsa regularincreaseduring the latest comparableyears and puts
Chile steadilyamongstthe 5 most productiveLatin Americancountries(Table 12).

Table U
Chile and Selected Latin American Countries: Number of Scientific Publications, 1986-1989

Country 1986 1987 1988 1989

Argentina 1,674 1,688 1,648 1,718

Brzil 2,001 2,083 2,193 2,556
Chile 815 799 841 901
Mexico 1,022 1,139 1,061 1,270
Venezuela 382 375 362 412

Source: CONICYT,Op.cit.

In 1988,82.3% of Chileaninternationalyregisteredscientificpublicationsoriginatedwithinthe HE
system. The 2 oldest universities,that is, the Universidad de Chile and the Pontificia Universidad
 11-20
Catolica de Chile, contributedrespectivelywith 45.6% and 24.4% of all HE institutionsoriginated
publications.In turn, the 8 traditionalstate supporteduniversitiesaccount in 1988 for 94.2% of the
scientificpublicationsproducedby the HE system."

Althoughthe Chilean researchcommunityis small and beavily concentratedin a few of the old
universities,and public expenditureon R & D is just about average in the Latin American region, its
performanceand comparativequality have been assessedpositively. A 1988 report prepared for the
NationalScienceFoundation,the NationalAeronauticsand SpaceAdministrationand the Departmentof
Energyof the UnitedStates,declaresthat althoughChile is the leastpopulousof the five major scientific
countries in Latin America, it had twice as many papers as fourth-rankedVenezuelain 1985. 'On a
population-weighted basis, Chilewasmuchthemost productiveof the five, evendiscountinginternational
activity in astronomy.In astronomy,the geosciences,and agronomy,Chile was active in a higher
proportionof rapidlydevelopingareas than average'. The report concludesthat Chile's profile in the
internationalliterature is more like that of a small developednation than one that is attemptingnew
industrializationefforts'. Appendixtable 4 illustratesthat this scientificoutput has occurred with a
decliningpublic expenditurefor R&D.

These and other favourableassessmentsof Chile's university-basedscientific performanceare

challengedby some recent evaluativestudies. For example,Zanelliand GarcIa argue that a country's
positionwithinthe Latin Americanscientificcontextis not relevant, due to the meager overall regional
scienceand technologyproductivity,which is 20 to 60 timeslower thanthat of developedcountriessuch
as Belgium,Australiaor the Scandinaviancountries. Moreover, Zanelliand Garcfashow that Chile is
losing positioncomparedto more dynamicdevelopingcountriessuch as Nigeria,which already in 1985
was more productivethan Chile in termsof main streamscienceproduction,and other countriessuch as
Taiwan, HongKong, SaudiArabia and Korea, which are rapidlyincreasingscientificoutput.'

'he provision of graduate studies can also be taken as an indirect indicator of university
developmentand insdtutionalcapacity. Accordingto Chileanlaw, only universitiescan conferdoctoral
and masters' degrees.Presently,thesedegreesare grantedsolelyby publicsectorinstitutions,whilemost
of 4th level enrollmentcan be found in the old universities.Total postgraduateenrollmenthas increased
by 83.1% during the last decade, but still representsonly above2% of undergraduateenrollment. 123
master's programs and 21 doctoralprogramswere registeredin 1988(Table 13).

t See Kmuskopf, Manuel, *Viaionde la Investigaci6nen Chile a travds de algunos Indicado

Epistemomdtricos'(manuscript,n/d)

D ScienceandTechnology PolicyProgram,SRIIntentionallWashington,
'NewDiectionsforU.S.A-.a
AmericanCooperation
in Scienceand Technology',FinalReport,1988
23 See Zaneali,Jorge y Garcia,MarthaC., IACiencia.la Tocnoloefav la Universidad,FIACSO, Santiao
de Chile,Contribuciones
N.66, 1990
 II-21
Table [3
Chile: GraduateEnrollmentin PublicSectorUniversities,1981-1990
Year Number % of undergraduate
enrollment
1981 1,432 1.4
1985 2,835 2.2
1990 2,622 2.2
Source: Consejode RectoresUniversidadesChiles, Boletfn
Estadfstico, 1990.

As can be expected,almostall graduateenrollmentis in the group of old universitiesthat possess

at least some researchcapacities.

During the last ten years (1981-1991),a total of 3,231 peopleobtainedtheir degreesat the fourth
level, over a total of 23,500studentsenrolledoverthe sameperiod. Computedon a yearlybasis, it took
an average2350studentsto graduate323; a ratio of 7.2 studentsenrolledper graduate. Doctoraldegrees
conferredduringtheperiodamountto around5% of thetotal degreesawarded. Newprivateuniversities
have recentlyestablishedtheir first few MA programmes,up to now only in the social sciencesand
education.

The figures thus far analyzedmostlyrefer to publicsectoruniversities. Overallthey indicatethe

existenceof a core group of "qualityuniversities', with a more or less developedresearch base and
teachingprogrammesdistributedacrossvariousfieldsboth at the undergraduateand postgraduatelevels.
Theseuniversities-amongstwhichthe Universidadesde Chile, Cat6lica de Chile, de Concepci6nand
Austral de Chile preeminentlyqualify-alsopossessa well establishedreputationbasedon their capacity
to attractthe best students, successfullycompetefor researchfunds and producemost part of nationally
originatedscientific publications,grant most of the more prestigiousprofessionaland postgraduate
degrees, and on their abilityto maintainand increaseover time the numberof graduateholders within
a predominantlytull-timebodyof faculty. Appendixtable 3 presentsa summaryof some quality-related
data for the 22 publicsectorinstitutions. The remaininggroupof publicinstitutions,involving14 (new)
state establishmentsand 4 old universities(one state universityand 3 private state-fundeduniversities)
are more heterogeneous.
Private sectorHE institutions,whichin 1990comprise40 universities,82 PIs and 168 ITCs can
not be assessedthrough indirectquality indicatorsbecauseof the unavailabilityof public information.
No systematicevaluationstudieshave been carried out on these institutions. Furthermore,their short
periodof existencealso inhibitsqualityassessments.In the caseof newprivateuniversitiesthe following
argumentsreferring to academic-qualityissueshavebeen debated.'

n SeeApablaza,V. andLavados,H., La Educaci6nSuocriorPrivadaen Chile. Antecedentesv Persoectivas.

CPU, Santiagode Chile, 1988.Also, Lemaitre,MariaJosd (coord.),Informesobrela Educaci6nSuperioren Chile.
198. CPU, Santiao de Chile, 1988. AndBrunner,Jos6Joaqufn,InformesobreIs EducacifnSunerioren Chile.
FLACSO, Santiagode Chile, 1986
 11-22
Privateuniversitiesare said to be queuingbehindmost publicuniversitieshavingto acceptsecond-
best students. The stereotypeis that new private universitieswould be restrictedonly to studentswho
do not performwell in the P.A.A. but have sufficientmoneyto pay their way into HE. In fact, as was
shown earlier,the best performersin the P.A.A. tend to go to traditionalpublic sectoruniversities;only
a small fractiongo to privatesectorestablishments.Studentswantingto enterthe privatesectormust pay
the full amountof the demandedfees since state fundedstudent-loansand scholarshipsare restrictedto
public-sectorstudents. In short, up to now private universities-withthe exceptionof a few programs-
only attractsecond-beststudentswho can pay the full cost of their studies. This distribution,as will be
shownlater, reflectsthemore intensesocioeconomicselectivityof privateuniversities.On the otherhand,
it mightalso contributeto explainthehigh dropout rates of theseuniversities. Accordingto the available
information,inter-annualdrop out rates in the three oldestprivate universitiesvary over 1984 to 1987
between 20.6% and 19.5% in the case of the UniversidadDiego Portales,between 36.7% and 30.9%
in the caseof the UniversidadCentral,and between28.59%and 30.2% (onlyyears 1984and 1985)in the
case of the UniversidadGabrielaMistral.

On the whole, then, the 1980 reform does not seem to have negativelyaffected the qualitative
aspectsof the performanceof publicinstitutions. Moreover,it mightbe arguedthat the policiesadopted
that year preventedthat these institutionsexperiencedthe more commonnegativeeffects of enrollment
massification.A coregroupof four publicuniversities-thosethat originatemost research- canprobably
be consideredas reasonablygood institutionswithin the Latin American context. A more detailed
analysisof these institutionswouldprobablyshow a very unequaldevelopmentof its differentsections
and levels. For example,in most of them the socialsciences-bothin terms of researchand teaching-
tend to be below level. In all of them, also, graduate studiesare still an area in need of development,
both quantitativelyand qualitatively.It is muchharderto assessthe quality of theremaininguniversities.
With the informationat hand it is not possibleto draw qualitativedistinctionsbetweenthese different
groupsof institutions,althoughthereseemsto exist,on the whole, somecorrelationbetweenthe sizeand
complexityof these institutionsand their perceivedquality. Newprivate universitieshave adopted, up
to now, a very differentdevelopmentpattern comparedto state-supportedinstitutions,in part precisely
becauseof this differencein funding. Newprivate universitiesare solely teachingestablishments,with
a high enrollmentconcentrationin a few low costprograms,practicallyno full-timeteachers,with open
access" of studentstied to their familyincome,and only minimalregulationsin terms of publicassurance
of their qualityperformance,thoughthe lattertrait has been partiallycorrectedthroughthe introduction,
in 1990,of a publicaccreditationsystem. Withregard to qualityevaluationof PIs and TrCs nothingcan
be said at this stage due to a completelack of information.

Efficiency

Efficiency can be broken down into intermaland external efficiency. The study of internal
efficiency in turn has two distinct but closely related aspects. Intra-system(and sectoral) efficiency
considersdecision-makingat the system level and allocationof resources amongthe various sectors and
institutions. The second aspect of internal efficiencyis intra-institutionalefficiency, which considers

D See Sanfientes, Andrds, PolfticasEcon6micasan ls Universidad.ILADES-GeorgetownUniversity,

Santiagode Cbile, 1990, p.16 9
 II-23
decision-makingat the institutionallevel and the allocationof resourceswithinthe institutions.' The
followinganalysisfocuseson internalefficiency.

Intra-systemefficiencyis said to be lowin mostLatin AmericanHE systemsdue to the widespread

employmentof publicincrementalfundingprocedures,' whichdo not provide incentivesfor improving
quality and performanceon the part of institutions.On the contrary, it induces counter-productive
organizationalbehaviors which result in over-dependenceon the state and lack of institutional
accountability.

As part of the reform,the governmentradicallyalteredthe meansof allocatingstate resourcesto

institutions. Enrollmentdoubledwhilepubic allocationdecreased. The entire cost of HE expansion
during the 80's was carried by the students enteringthe private sector institutionsand their families.
Moreover,studentsenteringpublicsectorinstitutionsalso sharedthe cost of their training, contributing
in 1990 with US$32for each US$100awardedby the Governmentto supportteachingin the various
public sector establishments.21 Overall efficiencyin the use of public resources allocated to HE
thereforedramaticallyimproved,withoutseverelyaffectingthe qualityof public sectorinstitutions.

Studentteacherand studentadministrativepersonnelratiosgreatlydifferbetweenpublicsectorHE
institutions. Consideringnominalratiosfirst, differencesamountingto almostfive times existbetween
the two universitieswith the lower (Universidadde Chile) and the highest (Universidaddel Bio Bio)
studentteacherratios. Not countingthe Universidadde Chile, the averagenominalstudentteacherratio
in public institutionsis 9:1. If the Universidadde Chile is included,the averageratio dropsto around
7:1, sinceits ratio is 5:1. In termsof FTE teachers,ratiosdifferby a factorof four betweenthe lowest
and highest, with an averageof 11:1 (see appendixtable 7).

Overstaffingthereforeexiststo a similardegreein otherLatin Americanuniversities.For example,

in Brazil, FTE student/facultyratios both for Federal and Stateuniversities(1988)is 9:1, whichstill is
about two times higher than the Universidadde Chile. lhe state universityof Sao Paulo (USP), the
largest and consideredto be the best institutionof HE in Brazil and one of the moreprestigiousin the
Latin Americanregion, has a studentteacherratio of 10:1. UNICAMP,with the highestpercentageof
enrollmentat graduate level (319%)has a studentteacherratio of 7:1. Also, Chile's average ratio for
public sector institutionscomparesunfavorablywith other country's public sector ratios. Thus for
example,in the USApublic 4 year institutionsshow a studentteacherratio of 17:1 in 1988. In brief,
althoughsimilarto the nominalratiosfound in otherLatin Americancountries, Chile's averageratio is
significantlylower than ratios found in North American,European,Asian and Oceaniccountries,with
the exceptionof Norway, Portugaland Japan. The numberof studentsto administrativepersonnel' is

> For these standarddistinctionsand theirapplication

to IAtinAmericanHE, sec Winkler,Donald,Hiibhe
Educationin LatinAmerica.Issuesof Efficiency
andEauitv,WorldBankDiscussion
Paper77,Washingtom,
1990
Z See Brunner,Jost Joaquin,Evaluaci6nv Financiiamiento
de la EducacionSugneor en AmericaLatina.
Basesyara un Nuevo Contrato,CPU, Documentode Trabajo62/91, Santiagode Chile, 1991

X In fact, the actual figure of student'scontributionshould be stil higher if the sum assignedto loan is
discountedfrom the overallpublic allocaton and computedas deferrodexpenditureby the individuals.

27 Paradocentes,administrativosand auxiliares
 nI-24
also low, with an averageof 6.1:1, a figurethat is better than the very low ratios in FederalBrazilian
universities(3.1 and 4.1 in the UFMGand UFSC) and lower than the ratiosof two BrazilianCatholic
universities(11.1 and 14.1 in PUC-Rioand PUC-SP,respectively).

Internal efficiencyof publicsector institutionsneedsto be assessedalso in terms of productivity.

A study carried out in 1984 shows that on-time graduationrates in 12 university-onlybased career
programsfluctuatebetween23% and 74% percent. Nine out of the 12 programshad less that 50% on
time graduationrate (Table 14).3

Table 14
On-TimeGraduationRates by Field circa 1985

- Careea

LAW 34
Agronomy 29
Architecture 47
Biochemistry 43
Dentstry 74
Enginering 28
Economics 39
Forstry 23
Vebeinary 47
Medicine 71
Puychology 73
Phamacy 30

Taking year 1985 (or around) as base, a comparativeefficiencyindexfor 8 Latin AmericanHE

systemshas been computedso as to allowfor cross nationalcomparisonsinsideLatin Americaand with
EuropeanHE systms. As shown in Table 15, total enrollmentsacross a selectionof 8 Latin American
systems were 4,218,769 and the graduateoutput497,621. In effect, these 8 systemsgraduate 11.8 per
cent of their total enrollments.If, all other things being equal, this average output is taken to be the
norm and that it constitutesan actual-rather than desirable-measureof efficiency,it is then possible
to see how far effectiveoutputfor 1985compareswith what might be expectedif all HE systemshad an
outputof 11.8%.1 In the case of Chile, the efficiencyindexis below the norm.

Surprisinglyenough, the Latin Americansituationdoes not differ substantiallyfrom the situation

of the nine university systems that were analyzedby G.Neave.In fact, expectedoutput in Europewas
slightlybelow the LatinAmericannorm, at 11.3%. Andthe efficiencyindexvariedfrom 51.2 in Austria
to 204.4 in the case of Great Britain.

SeeJ.Ruz, I.Navarro & C.Aguilar, Cuademnos

Conseiode Rectores.NO22, 1984

' The efficiencyindex representsgraduateoutputx 100dividedby expeted output.The me formulaha

been used by G.Neavefor 9 Europeanuniversitysystems.See Noeve, Guy. 'Editorial', G. Neave (ad.) Eurpa
UniversitvSystems,Part I, CRE-Information,3rd Quarter, 1986,p. 18
 11-25
Table 15
Selected Latin American countries: Efficiency levels in graduate output, around 1985

Country Total enrollments Gmduate output Expected output Efficiency index

Bnzil 1,479,397 2S3,553 174,495 145.3

Colombia 391,490 56,052 46,172 121.4
Costa Rica 63,771 4,908 7,522 65.2
Chile 197,437 20,256 23,288 87.0
Mexico 1,207,709 120,829 142,449 84.8
Peru 443,640 9,706 52,327 18.5
Uruguay 87,707 3,488 10,345 33.7
Venezuela 347,618 29,402 41,002 71.7

Source: Based on UNESCOF Statistical Yearbook, 1988

International comparisons only give very gross relative efficiency measurements because of the
differences in systems, their internal differentiation and the length of studies in the various tiers and
sectors. The above contrast, for example, could be disputed because it does not take into account the
different mix of graduate output of the various systems according to levels (and therefore length) of
careers.

Using the same efficiency index to compare institutions within Chile yields results that are listed
in Appendix Table 8. Total enrollments across the 22 establishments were 121,876 and graduate output
12,624. Overall, the public sector institutions graduate 10.4 per cent of their total enrollments. Graduate
output is lower than expected in the case of 13 institutions, 5 of which belong to the group of the 8 old
universities. The Universidad Catolica de Chile has the highest efficiency index across the old universities
and the Universidad de Talca in the case of the new regional state-universides. Allowing for differences
in the duration of the various careers, on time graduation for the whole sector is on average 38.8 per cent.

The high input-output ratios in the public sector confirm the low levels of internal efficiency
amongst these institutions. In theory, most university based programs take 5 years. But computed input-
output ratios show that on average th figure per graduate is 9.2 years. Although this figure indicates
a reatively high level of inefficiency, when compared to the still higher input-output ratios in other Latin
American countries, as Venezuela for example, the Chilean public sector institutions stand out -in
comparative terms- as 'fair performers'. In Venezuela only the Universidad Sim6n Bolivar, which has
by far the best input-output ratio, favorably compares with the average ratio of the Chilean public sector
institutions .°

Over time, there has been a noticeable rise in input-output ratios over the last two decades (see
Appendix Table 9 for the ratios for 24 institutions). At the end of the 1970's, the average input-output
ratio for the 8 existing HE institutions was 7.1 years. Today, this figure is 9.2 student-years per graduate
at system level and it stands at 10.1 years for the old universities (Table 16).

3° In the case of Univeradad Sim6n Bolivarthis figure is 9.13 years. See Reum, Feando, Mg
Feasibility of Introducine Loan Scbemes to Finance Higher Education in Latin America. 'Me case of Venezuela'.
Paper prpared for the IBRD, November 1990
 II-26

Table 16
Chile: Old Universities, Input-Output Ratios in 1980 and in 1990

Institution(l) Average Avenge 110 Averge Avenge I/O

enrollment Graduates ratio enrollment Graduates rtio
(1986-1990) (1988-1990) 1990 (1976-1980) (1978-1980) 1980

U. de Chile 16,888 1,734 9.74 52,280 7,208 7.2

U. Cat6licade Chile 14,817 2,497 5.93 13,845 2,293 6.0
U. de Concepci6n 11,419 1,088 10.53 12,536 2,282 5.5
U. CatdlicaValprulo 6,932 878 7.90 6,832 759 9.0
U. T6cnicaF. SantaMara 5,653 547 10.33 3,537 326 10.8
U. Santiago de Chile 12,261 1,153 10.63 28,840 3,867 7.5
U. Austral de Chile 5,596 657 8.48 4,540 683 6.6
U. Cat6lica del Norte 2,969 149* 19.92 5,882 548 10.1

Total 76,535 17,966 10.05 128,307 17,966 7.1

Source: Consejode Rectores, Anuario 1980 and IM

' This figure needsto be checked.

High input-outputratiosnot only reflectlevelsof inefficiencybut also translateinto higherpublic

expenditureper graduate. High public expenditureper studentand per graduate will also translateinto
high unit costsper studentand per graduate.Computationof studentunitcosts andper graduate costmust
include, in the Chilean case, both public and private expendituredirectlyrelated to teaching." Table
17 shows averagecostsper studentand per graduatein the publicsectorinstitutions. Leavingasidethe
two PIs, studentunitcost arehighestin the UniversidadCat6lica de Chile and the Universidad de Chile
and lowest in the Universidad de la Serena. Averageunit cost for the whole public sector is USS
1.700, well below the figures for equivalentinstitutionsin other countriesof the world.

3 Cost of teaching will be estimatedas the sum of expendituresincured by the public trey (port
directo, indirecto, pagard universitario and recuperaci6ude crEdito fiscal universitario)and the expenditurm
equivalentto the incomeoriginatedby paymentof tuitionfees. Unit costs will thus be computedas the averageof
public and private expenditureper stdet anrolled at the undergraduatelevel. Unit costs of graduateswill be
computedas sudent unit cost times the input-outputratiofor eachestablishment
 1-27

Table 17
Chile: Average Estimated Unit Costs per Student and per Graduate
in the Public Sector Institutions in US dollars, 1990.

Institution Student Graduate

unit cost unit cost

U. de Chile 2,435.6 23,722.8

U. Cat6lica de Chile 2,582.4 15,313.6
U. de Concepci6n 1,613.1 16,985.9
U. Cat6lica Valpam{so 1,787.8 14,123.6
U. T. F. Santa Maria 1,400.5 14,467.2
U. de Santiago 1,454.6 15,462.4
U. Austml Chile 1,520.7 12,895.5
U. Cat6lica Norte 1,623.8 32,346.1
U. de Valpamaso 1,828.8 11,704.3
U. de Antofagasta 1,505.4 17,823.9
U. de la Seren 1,027.8 7,677.7
U. del Blo Blo 1,271.1 18,641.7
U. la Frontem 1,375.9 11,241.1
U. de Magallanes 1,994.6 13,423.7
U. de Talca 1,894.8 11,937.2
U. de Atacama 1,631.7 16,512.8
U. de Tampad 1,255.1 11,797.9
U. Aruro Pt 1,158.7 15,144.2
U. Mebopol.Cs.Ed. 1,431.7 15,147.4
U. Playa Ancha 1,192.3
I.P. de Santiago 877.2 16,465.0
I.P. Osorno 513.1 7,947.9

Average 1,699.7 15,637.2

Unit costsfor graduatesdiffermore widelyas they reflectthe computedinput-outputratiosfor the

different institutions.The highestper graduateunit costs are found in two of the old universities,the
Universidad del Norte and the Universidad de Chile. The lowest unit costs per graduateare to be
foundin someof the newregionaluniversities(Universidadde la Serena, Universidadde la Frontera,
Universidad de Valparaiso, Universidad de Tarapac and Universidad de Talca). But also one of
the old universities(theUniversidadAustral de Chile)showsa graduateunit cost that is wellbelowthe
sector's average.

Equity

The followingsectionexaminesavailabledata on to the socioeconomicstatus of studentsin higher

education. The results of the various studies cannotbe comparedto make any judgementsabout the
impactof reformsover time becauseof the differingmethodologiesand disparatesourcesof information
they use.
 II-28
A study carried out in 1966 examinedthe socioeconomicprofile of students in the 8 old
universities.' In general, 40.4% of students came from high and middle high socioeconomic
backgrounds.

A secondstudy, performedby G. Briones, comparesthe socioeconomiccompositionof students

enteringthe 8 old universitiesin 1976and 1981.3 A reductionin the representationof studentscoming
from familieswith low educationalattainmentcan be discerned(Table 18). Brionescontendsthat ther
has been an elitizationof accessto the 11 only-universitybased coursesof study in the 8 old universities.

Table 18
Chile:-Socioeconomic
Background
of University
StudlntsEnteringintothe 8 OldUniversities,
in Years 1976and 1981Accordingto Father's Education.(percetage)

Father'seducaion 1976 1981

Illiterate 0.8 0.5
lncompleteprmay 11.9 12.6
Completeprimary 17.0 13.0
Incomplete eondoay 21.9 17.7
Complete eondary 2S.0 28.7
Incompleteuniversity S.9 5.8
Completeunivercity 14.S 18.1
Militarystdie 2.9 3.S

Source: G.Briones,*LAeducaci6nsuperioren el modelode la economfa

nooibeosi' in PIlE, Las Inadrmaiones Educaconslesbpi
elRimenMilitsr. PUE, Santiao de Chile, Vol.2, chapter 11.

A further study by Gonzalez, Latorre & Magendzoshows the socioeconomicbackgroundof

students enrolled in first year classified by tier and sector, according to father's educationin year
1984.' Table 19presents a summaryof the findings. A clear differenceof studentsbackgroundexists
between public sector institutions,both universitiesand Pls, and new private institutions. While in the
fist type of institutionsstudents comingfrom familieswhere father's educationis below the complete
secondarylevel representmore than 40% of total first year enrollment,in the private sector institutions
the samegroup is less than 15% in the case of universitiesand less than one third in the case of Pls.
Moreover,the socioeconomicprofileof studentsin the TTCs is on the whole not very differentfrom the
profile of studentsin the publicuniversities. Thesefindingsconfirmthe overallstrong selectivecharacter

32 SeeE.Schiefelbeiny otros, Up Intentode Artlisis Globalde la UniversidadChilens.PLANDES,Boletfn

Informntivo,NO28-29, 1968, p.40

D See Briones,Guillermo,'La educacionsuperioren el modelo de la economlanooliberal'. En PHE, Iu

TransformacionesEducacionalesbaio el RemimenMilitar. PIIE, Santiagode Chile, Vol.2, cap. 11

34 See Gonzalez,Luis Enrique, Latorre, CarmenLuz and Magendzo,Abraham, Anilisis de ls incidenca

sobre la educacidnpostsecundariachilenade los cambiosproducidospor Is reestructuracionuniversitarisdel afo
1981-. PIIE, Santiagode Chile, 1987 (mimeo),Table 3.2
 I1-29
of the Chilean HE system. Appendix Table 11 confirms some of these findings for first year students
using a different classification of SES.

Table 19
Chile: Socioeconomic Backgroundof StudentsEnrolledin First Year
Classifiedby Tier and Sector,Accordingto Father's Education,1984

Institution Diterate Primary Secdary Unversity

Incomp. CompL Incomp. Compl. Incomp. Compi.

Universities
With public funtds 0.6 9.9 15.9 18.5 30.8 5.4 18.8
No public funds 0.1 0.9 1.9 7.6 31.9 19.5 38.2
Total 0.6 9.2 14.8 17.6 30.9 6.5 20.4

P. Institutes
With public funds 3.0 26.4 20.6 12.5 20.8 5.8 11.1
No public funds 0.4 3.9 5.5 13.6 35.8 9.9 31.0
Total 0.9 8.6 8.7 13.3 32.6 9.1 26.7

TT Centers 0.6 11.4 15.4 17.4 35.3 5.1 14.8

Tota Population
40 yr. and more 14.0 42.0 10.7 23.8 5.5 2.2 1.8

Source: L. E. Gonalez, C. L Latorre,A. Magendzo,AnLliside la incidenciasobrela educaci6nposodcundaria

chilena de los cambiosproducidospor la reestnrcturaci6nunversitaria del aDo 1981. PIIE, Santiago,
Chile, 1987(mimeo),Table3.2

J. Castafeda has analyzed the redistributive impact of public educational expenditure for year
198 5 .M This study demonstrates that only 25% of direct institutional allocations benefit the poorer 60%
within society. If one looks more specifically at the beneficiaries of student loan funds, 51,4% of the
funding benefits these groups. Two additional studies reviewed by A. Sanfuentes - one based on the
same 1985 figures and the second based on a special household survey carried out by J. Rodriguez-
corroborate these results. In effect, they show that the top 20% income distribution group obtains around
53% of public expenditure allocated to HE, while the bottom 20% group only captures 6%MI These

M See Castafieda,Tarsicio,Pac Combatirla Pobrezn.PolfticaSocialv Descentralizaciften Chiledurante

los'80CEP, Santiagode Chile, 1990, Chapter2, sectionIV. This analysisis basedon data providedby the
CASENsurvey(1987). Althoughtheseresultsare very muchunderdispute,theyprovidegross estimationsthat can
be used when interpretedcarefully.

Y Sanfuentes,AndrEs, Antecedenteas
sobrela distribuci6ndel ingresoy gastosgubernamentales
par atenuar
la extrm pobren'. In RevistaEstudiosSociales,NO60, 1989,p.29
 II-30
figures compareunfavorablywith the informationavailablefor other Latin Americancountries,with the
exceptionof DominicanRepublic.'

More recent household-surveydata from the PlanningMinistry, can be used to construct ' an
inequalityindexof the ratio of HE share to populationshare for each quintile(Table20). The value 1.0
shows equalitybetweenpopulationshare and enrollmentshare for a given group. Values below 1.0
suggest discrimination against the group. Values above 1.0 over-representationof the group in
enrollments.Thus, youngadultsin the poorestgrouprepresentone fifthof the total 18-24age population
but only less than 5 per cent of HE enrollments.At the other end, young adults in the upper income
group represent a mere 13.5 per cent of the age populationand approximatelyone third of total
enrollments.These figuresare similarto those of Latin America,but with a more pronouncedinequality
indexin the case of the low status group and a mDlderindexwith respectto the high statusgroup.

The socioeconomicbackgroundof HE studentsenrolled in private institutionscan be estimated,

althoughonly in very gross terms. While only 1.3% of the bottomquintileage-groupenrolls in private
sector institutions,13.2% of the top group does. Thus an importantresult revealedby these surveysis
that lower incomegroups are far less likely to enroll in private institutionsthan in public institutions.
That is, poorer studentswho accessthe systemgo to publicinstitutions. Privateuniversitieshave a much
more unequalrepresentationof the variousstatus groups withinsociety, as presentedin Tables 19 and
21.

Table 20
Chile:Distnbutionof Enrollmentsby IncomeGroups,1990

Quintile Percentof total Percentof Inequality

18-24popuation enrollmts Index

1 20.9 4.2 0.2

2 23.5 6.6 0.3
3 23.0 9.4 0.4
4 19.1 15.9 0.8
5 13.5 32.0 2.4

'7 See Winkler,Donald, gyci, Table IV.6, p.62

X MIDEPLAN, 'AnOliais preliminarde la informaci6nde la encuestaCASEN1990: mddulo educacidn,

(mimeo, 1991). As will be noticed, HE enrollment figure obtained by way of the CASE N survey do not
correspondto the officialfigures providedby the Ministryof Education.In fact, theyare producedon the basisof
a survey with only a very limited number of HE students acting as respondents. Nonetheless, they can be
consideredas a gross approximationto student's socio-economicbackgroundclassfied acoordingto per capita
incomeof their families.
 II-31
Table 21
Chile:Percentageof 18-24Years per CapitaIncomeQuintilesEnrolledin HE
and PercentageEnrolledin PrivateInstitutions,1990.

Quintile Enrolled Enrolled

in HE in privateinsts.

1 4.2 1.3
2 6.6 3.0
3 9.4 4.2
4 15.9 7.0
5 32.0 13.2

TOTAL 12.0 5.1

Access opportunities to HE have been improving during the last decades, in parallel to the
enlargementof secondaryeducation.Moreover,as notedearlier,the ratio of new openingsto first year
enrollmentshas steadilyincreased,to a pointwhere in 1990the wholesystemsupplied1.7 openingsfor
eachone studentenrolledin first year. Butthis latteroccurrencehas moreto do withprivate institution's
supplyside strategiesthan with the actuallevelsof equalityof the system.In fact, over-supplygrows in
inverse proportionto the reputationand tier affiliationof establishments,thus allowingthe ratios of
applicationsto admissionsto remain stable at the universitylevel whilethey decrease at the level of
privatePls and TrCs.

REMANING ISSUESAND ACIIONS

In sum, the reformsof 1980havedramaticallyrestructuredhighereducationin Chile. Enrollments

havedoubledduringthe decadechieflythrougha proliferationof private,non-universityinstitutions.The
doublingof enrollmenthas been achievedat the sametime as public fundingfor higher educationhas
been reduced.

Theintroductionof marketforces-competitionfor students,and significantcostrecoverymeasures-

-does not seemto haveharmedqualityin the publicuniversities,the elitepart of the system. In fact, the
measurestaken may be seen as havingpreventeddeteriorationthat has elsewherebeen associatedwith
rapid expansion. On the whole, Chileboastssomeof the highestqualityuniversitiesin Latin America.
There is concern,however,aboutthe qualityof the new privateinstitutions.

A more puzzling aspectof the system is the apparentfailure to improvethe efficiencyof the
system, especiallythe low outputof graduatesrelativeto the numberof students. Despitecompetition,
there is no evidencethat staff are beingmore efficientlydeployedin public institutions. The relatively
low student teacher and student staff ratios may be explained,in part, by the utilizationof staff for
income generatingactivitiesand secondemploymentin private institutions.

In terms of equity, the reforms have expandedaccessoverall, but highereducationcontinuesto

serve mainlymiddleand upper middleincomegroups. The lower incomegroupsdo not appearto have
benefitedfrom the rapid expansionof private institutionswhich mostlyserve upper incomegroupsthat
 II-32
are unable to find places at the elite institutions. On the other hand, the moves towards cost recovery
havelimitedthe extent of public subsidiesbenefitingupper incomegroups.

FwrlherRcfonn

A centralissue of concernthat remainsafter the reform, and is currentlybeing addressedunder

furtherreforms in 1990and 1991, is the overall developmentof new institutionsand the mechanismfor
ensuringqualityin new programs. Three issuesstand out:

Nwnber and size of inswtutions. Out of 40 private universities,only 2 enroll 3000 studentsor
more; the next3 enroll 1000studentsor more. These5 universitiesaccountfor 68% of the sector's total
enrollment. Most of the other private universitieshave less than 500 students. (AppendixTable 1).

Inadequateaccrediation of these insittions. Up to 1990, all new private universities,once

officiallyauthorizedby the Ministryof Education,were accreditedthrough the examinationprocedure
introducedin 1981. Theprocedureinvolvesprior approbationof thenew institution'steachingprograms
by a freely chosen public sector instittion. In each program, students and academic degrees or
professionalcertificatescandidatesbelongingto an examineduniversitymust taketheir final examsunder
a commissioncomposed by faculty members of both interveninguniversities. After satisfactory
completionof the examinationperiod, the new private institutionautomaticallygains its full autonomy.
The examiination proceduresintroducedby the 1980Reformhavebeen criticizedmainlybecause:

* they do not provideinstitutionalsupervision,

* the relativeacademicweaknessof some of the examiningpublic institutions,

* they do not providepublic assurancethat academicstandardsare beingachievedby the new

institution,

- they are based on a commercialarrangement betweenthe two interveninginstitutionsthus

being liableto extra-academicarrangements,

* there is a lack of public controlover the wholeprocess.

Standards and professional status of academic stff. A HE Commissionset up by the

Governmentin 1990voicedthe more commonapprehensionsaboutthe qualityof theprivate universities
teaching bodies: 'absence of objective,merit-basedcriteria for the recruitmentof academicstaff; lack
of a core group of full-timeacademicpersonnel;high turnoverrates of faculty;multipleemploymentby
the part of faculty members thus preventing the maturing of a sense of institutionalidentity and
belonging;the fact thatnumerousprivateuniversityfacultymemberscomefrom the old public institutions
which have to bear the cost of supportinga full time academicbody withoutobtainingvalue for money;
the absence of an academic career structuredaccording to the needs of the new institutions;scarce
attentiongivento academicpersonneldevelopment;the inadequateworkingconditionsprevailingin some
 II-33
of the new institutions,and the lack of library, laboratoryfacilitiesand equipmentsupportfor academic
work'.'

Recentdevelopmentsin the accreditationofprivate institutions. In March 1990,four days before

the installationof the democraticallyelectedGovernmenta ConstitutionalLaw (i.e., a law that requires
a special quorum for its reform) for the whole educationalsystem was passed by the Military
Government. The larger part of the law refers to the HE system. Under the new law, a public,
autonomousbody -the Higher Council of Education (HCE)- was set up, with two major functions:

(1) to accreditnew privateuniversitiesand PIs,

Cii)to approvethe core nationalcurriculumfor

primary and secondaryeducation.

The HCEhas ninemembers:the Ministerof Education,whochairsthe Council;3 memberselected

one by the state universities,one by the old and new fullyautonomousprivate universities,and one by
the fully autonomousPls; 3 memberselectedby the scientificcommunity;and two memberselected,
respectively,one by the SupremeCourt and one by the Chiefs of Staff of the Armed Forces and the
DirectorGeneralof the NationalPolice. The Councildesignatesan ExecutiveSecretarywhois in charge
of day to day operationsand directsthe Council'sstaff. The HCE is financedthrougha specificannual
National Budget allocationand is legally entitled to charge fees for its accreditationservices. The
Council'sstaff is composedof 8 professionalsand 3 administrativeemployees. During its first year of
operation,approximately70 consultantswere engagedin assessmentactivities. The operationalcost of
the Council'sfirst year was US$ 85,000.

The accreditation proceduresset up under the 1990ConstitutionalLaw havethe followingmajor

characteristics:

* They providea licensingsystem for the establishmentof new private universitiesand PIs
centered-aroundthe approvalof both an institutionalproposaland the programsthat will be
offered. Oncethesehavebeenapprovedby the HCE, the institutionis officiallyrecognized
by the Stateand can initiateits activities.

- They also providea temporary Institutional assessmentsystemwherebythe development

of each approvedinstitutionalprogramis periodicallyreviewed(once a year) and closely
monitored,during a minimumperiodof six years, after whichthe HCE candeclarethe full
autonomy of a private institution.

* Under the regulationsof the 1990law, all universitiesand PIs that were createdafter 1981
and have not been grantedfull autonomyare free to choose betweenremainingwithinthe
examinationsystemor submittingto the newlyestablishedaccreditationprocedures. These
proceduresare thereforeoptional for alreadyexistingprivate HE institutions.

" Comisi6nde Estudiode la Educaci6nSuperior,Una Poiftica2ar el Desarrollode la Educaci6nSunerior

en la D6cadade los Noventa', Santiagode Chile, 1991,p. 27
 11-34
* Institutionsthat might be createdbeforeMarch 1992can decide betweenbeing accredited
by the HCE or use the 1980examinationprocedures. After March 1992,new universities
and PIs will have to be accreditedby the HCE.

Out of the 40 existingprivate universities,21 have chosento be accreditedby the HCE. They
comprise71% of all studentsenrolledin theprivate universitysector. Of the 80 existingprivatePls, 15
of which have alreadygainedtheir full autonomyunder the examinationregime, and 18 have chosento
be accreditedby the HCE. They comprise33% of all studentsenrolledin private PIs.

Z See, ConsejoSuperiorde Edu-cci6n,Un Aiiode TTabaio,

Santiagode Chile,1991
 Il-35
APPENDIX TABLES

Appendix Table 1
Chile: Average HE Enrollment by Establishments

Establishments Number Average

enrollment

Universities
W.p.f 20 5,610
New private 40 488

Private Institutes
W.p.f. 2 3,236
New private 80 419

T. T. Centers
W.p.f. _
New private 168 463

Source: Divisi6n de Educaci6n Superior, MINEDUC,

1991.
 n-36
AppendixTable 2
Chile: PublicSectorInstitutions,Their Share in First Year Enrollment
and the Proportionof Student-QualitySubsidiesThey Obtain*, 1990

Institution % of 1st year % of participation

enrollment in student-quality
subsidy

U. de Chile 10.25 19.26

P. U. Cat6licade Chile 11.67 15.30
U. de Concepci6n 9.66 11.29
U. CatdlicaValparaiso 7.24 8.31
U. TecnicaF. SantaMaria 5.40 5.03
U. Santiagode Chile 8.26 9.28
U. Australde Chile 5.05 4.75
U. Catolicadel Norte 3.53 2.21
U. de Valparalso 3.41 3.48
U. de Antofagasta 2.19 1.49
U. de la Serena -3.11 0.93
U. del BfoBfo 5.06 3.32
U. de la Frontera 3.27 2.78
U. de Magallanes 1.19 0.31
U. deTalca 1.91 1.94
U. de Atacama 1.25 0.40
U. de Tarapca 4.02 1.53
U. Arturo Prat 1.73 0.85
U. MetropolitanaCs.Ed. 4.48 2.46
U. de Playa Ancha Cs.Ed. 2.17 0.84
I.P. de Santiago 3.19 3.66
I.P. Osorno 1.95 0.59

Source: Consejode-Rectores,AnuarioEstadfstico,1990and Division

de EducacidnSuperior, MINEDUC,1991.

Only considersthe amountobtainedby publicinstitutions.

 n-37
Appendix Table 3
Chile: Selected Quality-Related Indicators
for Public Sector HE Institutions, 1989-1990

Institution A B C D E F G H I J

U. de Chile 16,926 14.7 19.3 3229 5.2 0.17 39.7 41.0 46.3 9.74
P. U. Cat6licade Chile 14,399 12.4 15.3 1166 12.3 0.43 22.1 24.5 22.2 5.93
U. de Concepci6n 11,192 9.6 11.3 1104 10.3 0.34 6.7 5.9 7.4 10.53
U. Cat6licaValparamso 6,737 5.8 8.3 479 14.1 0.46 3.8 3.6 3.3 7.90
U.T.F. SantaMa 5,486 4.7 5.0 255 21.5 0.25 2.9 2.9 2.2 10.33
U. Santiagode Chile 11,324 9.7 9.3 739 17.1 0.18 4.0 4.2 5.3 10.63
U. Austral de Chile 6,863 5.9 4.8 601 11.4 0.35 5.9 5.3 7.8 8.48
U. Cat6licadel Norte 3,013 2.6 2.2 218 13.8 0.40 1.0 0.6 0.3 19.92
U. de Valparaiso 3,001 2.6 3.5 324 9.3 0.11 1.0 0.5 0.9 6.40
U. de Antofagasta 2,757 2.4 1.5 202 13.6 0.34 1.1 0.9 0.7 11.84
U. de la Serena 3,017 2.6 0.9 203 14.9 0.25 1.0 0.7 0.9 7.47
U. del Bio Bfo 4,958 4.3 3.3 276 18.0 0.20 0.2 0.2 0.2 14.66
U. de la Frontem 4,360 3.8 2.8 362 12.0 0.18 1.0 0.8 1.1 8.17
U. de MaguLAnes 1,036 0.9 0.3 90 11.5 0.20 0.6 0.5 0.1 6.73
U. de Talca 2,933 2.5 1.9 14I- 19.8 0.39 0.3 0.3 0.5 6.30
U. de Atacama 1,436 1.2 0.4 97 14.8 0.36 0.4 0.3 0.0 10.12
U. de Tarapaci 3,894 3.3 1.5 307 12.7 0.30 0.9 0.6 0.3 9.40
U. Arturo Pnat 988 0.9 0.9 113 8.7 0.11 0.1 0.1 0.0 13.07
U. MetropolitanaCs. Ed. 4,158 3.6 2.5 366 11.4 0.23 0.5 0.6 0.0 10.58
U. de Plays AnchaCs. Ed.* 2,203 1.9 0.8 181 12.2 0.47 0.1 0.2 0.1 -
I.P. de Santiago 3,399 2.9 3.7 236 14.4 0.06 0.2 0.1 0.0 18.77
I.P. Osorno 2,074 1.8 0.6 144 14.4 0.15 0.6 0.4 0.2 15.49

A: Enrollment,1989. Consejode Rectores.AnuarioEstadfstico.1989(*) 1988enrollmentfigures.

B: % of total enrollment.
C: X of participationin 1990best students-subsidy.SeeTable 18.
D: Numberof FTE faculty. 1989.MINEDUC.Divisi6nde Educaci6nSupenor.
E: Student/FTEteacherratio. 1989.
F: Ph.D & MA/FTE teacher. 1989.
0: % of active reseahers in PONDECYTduring period 1982-1989.Definedas those who participatedat leat onceas
'investigador responsable' or two timesas 'co-investigador'in approvedprojects. Percentageover total of active
researchers.5.8% of these come from outsidethe consideredHE establishments.CONICYT.RecursosHumanosen
Investieaci6nCientfficav Tecnol6oica.op.cit.
H: % of researchprojectsapprovedduringthe period.Percentageover total of approvedprojectsduringthe period.5.6%
of approvedprojects como from outsidethe consideredHE establiments. Sourcesme as in G.
1 S of publicationsover total originiutdedwithinHE institutions(85.0% of nationaltotal)for 1989registeredby the I.S.S.
M. Krauskopf.gpRjj. Table V.
J: Grmduates/enrollment ratio. 1986-1990.See below, Table9.
 11-38

Appendix Table 4
Chile: R & D PublicExpenditureand Percentagein HE System,
1980-1988

Year USS (million) % GNP % to HE

1980 104.4 0.37 47.0

1984 87.0 0.45 44.6
1988 90.6 0.46 32.5

Source:Basedon CONICYT,Op. Cit.

Table S
Chile: Faculty Staff, NominalTime and FormalTrainingby Tiers and Sectors, 1986

%FT %HT SPT %PHD %MA %PT %NT

IIniversities
W.p.f. 59.1 7.3 33.6 7.6 12.5 78.9 1.0
private,n.p.f. 5.5 1.5 93.0 8.5 15.1 72.4 4.0

Prfessional institutes
W.p.f. 50.3 12.3 37.4 0.5 9.0 84.3 6.1
Private,n.p.f. 9.7 7.0 83.3 2.2 9.3 80.2 8.3

Source: C. Cox and C. Jara, Datos BasicosDarala Discusi6nde Poifticasen Educacion(1970-

I.2=, CIDE-FLACSO,Santiagode Chile, 1989.
FT: full time
HT: half time
PT: part time
PT: professionaltitle and/or licencatura
NT: no professionaltitle
 11-39
Appendix Table 6
Chile: Institutional Profile of the New State Universities, 1990
Institution Number Facultystaff Number
of approved Major fieldsof
stildO Number %of % of research enrollmentconcentration
(1986) FT post- projects
grads. (1988- 1st. 9 2nd. %
holders 1990)

U. de Vparaso 3,391 639 36,3 7,7 5 Medic./health 34,5 Social Scs. 24,2
U. de Antofagasta 2,825 373 61,1 17,2 10 Technologies 43,2 Health 31,7
U. de la Seren 3,066 304 67,8 13,2 9 Technologies 42,1 Education 35,9
U. del Bfo Bfo 5,806 -495* 21,2 25,1 4 Technologies 46,0 SocialScs. 15,7
U. do la Frontera 4,487 573 50,3 10,1 11 Technologies 33,2 Mod./Health22,6
U. de Magallanes 1,100 192 44,8 0,8 9 Technologies 38,5 SocialScs. 28,3
U. de Talca 2,328 326 54,6 17,2 9 SocialScs. 37,6 Agriculture 22,7
U. do Atscams 1,458 144 54,9 13,2 3 Technologies 81,0 Education 16,9
U. de Tanpcd 4,274 468 58,3 22,9 14 Education 31,5 Tochnologs. 29,9
U. Arturo Pmt 1,206 164 62,8 0,9 - SocialScs. 52,0 Education 14,5
U.M. Cs. Ed. 4,462 485 71,8 11,3 10 Education 100,,0 -
U.P.A. Cs. Ed. 2,071 357 58,3 11,2 2 Education 81,7 Humaities 15,1
I.P. de Santiago 4,221 414 29,0 13,0 - Technologies 49,4 SocialScs. 26,7
I.P. Osomo 4,217 202 63,4 12,4 10 Education 51,7 Agficulture 26,1

Souce: Based on Consejode RnctoresUniversidadesChiles, Anuanos Estadfsicos, 1986 and 1990 and F.
Saavedra,op ct
Does not considerfacultystaff of IP de Chillanwhichwas later aborbed by the U.del Bio Bio
 I1-40
Appendix Table 7

Institution s/r FrE/S S/AP

Ratio Ratto Ratio

UCH 3.1 5.3 2.7

PUC 6.7 9.8 6.5
UC 9.1 10.3 5.9
UCV 7.7 12.3 8.3
UTFSM 13.7 20.1 7.6
USACH 9.3 17.2 8.4
UACH 7.7 9.0 4.7
UCN 13.6 14.0 4.9
UV 4.3 7.7 5.4
UANTO 10.4 12.0 7.6
ULS 13.2 17.7 10.6
UBB 14.5 25.2 17.7
UFRO 8.2 12.4 9.4
UMA 6.2 10.2 9.4
UTAL 11.9 17.0 11.8
UATA 14.0 19.8 10.6
UTAR 9.6 13.4 7.5
UAP 6.8 11.5 8.1
UMCE 8.9 11.9 8.5
UPACE n.i n.i n.i
IPS 9.2 18.2 15.4
IM 12.8 16.7 8.3
IPV 16.0 20.8 9.9
IPO 13.6 18.0 13.5

Average 7.1 10.8 6.1

Source: Consejo de Rectores. Anuario Estad(stico, 1987.

 11-41
AppendixTable 8
Chile:PublicSectorHE Institutions
EfficiencyLevels in GraduateOutput, 1990

Country Total Graduate Expected Efficiency

enrollments output(2) output(3) index
Total 121,876 12,624 10,358 100.0

U. de Chile 16,478 1,793 1,707 105.0

P. U. Catolicade Chile 14,566 2,243 1,509 148.6
U. de Concepcidn 11,692 995 1,211 82.2
U. Cat6licaValparalso 6,976 732 723 101.2
U. T6cnicaF. SantaMarfa 6,145 539 636 84.7
U. Santiagode Chile 11,251 1,111 1,165 95.4
U. Australde Chile 6,562 537 680 79.0
U. Catdlicadel Norte 3,291 140 341 41.1
U. de Valparaiso 3,391 275 351 78.3
U. de Antofagasta 2,825 208 293 71.0
U. de la Serena 3,066 347 216 109.8
U. del BfoBfo 5,806 680 601 113.1
U. de la Frontera 4,487 594 465 127.7
U. de Magallanes 1,100 133 114 116.7
U. de Talca 2,328 442 241 183.4
U. de Atacama 1,458 152 151 100.7
U. de Tarapaci 4,274 360 443 81.3
U. Arturo Prat 1,206 122 125 97.6
U. MetropolitanaCs, Ed. 4,462 358 462 77.5
U. de Playa Ancha Cs. Ed. 2,071 340 215 158.1
I.P. de Santiago 4,221 332 437 76.0
I.P. Osorno 4,217 191 437 43.7

Source: Consejo de Rectores. Anuario Estadfstico, 1990 and Divisidn de Educacidn Superior,
MINEDUC.1991
 n-42
Appendix Table 9
Chile: PublicSectorHE Institutions,Input-OutputRatios, 1990

Institution(1) Average Average 1/0

enrollment Graduates ratio
(1986-1990) (1988-1990)

U. de Chile 16,888 1,734 9.74

U. Cat6licade Chile 14,817 2,497 5.93
U. de Concepcion 11,419 1,088 10.53
U. Cat6licaValparafso 6,932 878 7.90
U. TecnicaF. SantaMarfa 5,653 547 10.33
U. Santiagode Chile 12,261 1,153 10.63
U. Austral de Chile 5,596 657 8.48
U. Cat6licadel Norte 2,969 149 19.92
U. de Valpara(so 2,986 471 6.40
U. de Antofagasta 2,813 239 11.84
U. de la Serena 3,510 470 7.47
U. del Blo Bfo(2) 3,576 244 14.66
U. de la Frontera 4,415 540 8.17
U. de Magallanes 1,137 169 6.73
U. de Talca 3,252 516 6.30
U. de Atacama 1,639 162 10.12
U. de Tarapaca 3,929 418 9.40
U. Arturo Prat(3) 1,281 98 13.07
U. MetropolitanaCs. Ed. 4,423 418 10.58
U. de Playa AnchaCs. Ed. n.i n.i
I.P. de Santiago 3,698 197 18.77
I.P. Osorno 2,820 182 15.49

Source: Consejode Rectores. AnuaroEstadfstco, 1990.

(1) I.P. de Chilln and I.P. de Valdiviaare not considered.
(2) Enrollment,years 1983-1987;graduates,years 1985-1987.
(3) Output figures presentsteep fluctuations.
 1-43
Appendix Table 10
Chile: Income Composition of Public Sector HE Institutions, 1990
(in million pesos)

Institution Total Income PublicTuition Fees

Treasury Paymentsby Other Sources(3)
Disbursements(l) Students(2)

SS $ 5 $ S 9

U. de Chile 27,363.1 100 8,381.1 30.6 3,856.2 14.1 15,125.8 55.3

U. Cat6l. de Chile 28,175.9 100 5,676.0 20.1 5,792.9 20.6 16,707.0 59.3
U. de Concepci6n 8,252.0 100 3,954.0 47.9 1,861.0 22.6 2,437.0 29.5
U. Cat6l. Valpar. 5,378.6 100 2,164.2 40.2 1,638.4 30.5 1,576.0 29.3
U.T.F. SantaMarfa 2,812.6 100 1,918.2 68.2 705.8 25.1 188.6 6.7
U. de Santiago 6,732.9 100 3,047.5 45.3 1,924.5 28.6 1,760.9 26.1
U. Austral Chile 3,647.9 100 1,917.6 52.6 1,125.0 30.8 605.3 16.6
U. CatolicaNorte 3,616.2 100 1,172.4 32.4 457.0 12.6 1,986.8 54.9
U. de Valpamfso 2,351.1 100 1,079.8 45.9 811.1 34.5 460.2 19.6
U. de Antofagast 3,372.3 100 758.7 22.5 538.0 16.0 2,075.6 61.5
U. de la Serena 1,298.6 100 797.7- 61.4 163.2 12.6 337.7 26.0
U. del BfoBfo 2,737.4 100 1,128.9 41.2 1,121.4 41.0 487.1 17.8
U. a Frontera 2,755.4 100 1,014.6 36.8 867.8 31.5 873.0 31.7
U. de Magallanes 943.4 100 333.8 35.4 335.2 35.5 274.4 29.1
U. de Talca 1,620.3 100 728.1 44.9 616.9 38.1 275.3 17.0
U. de Atacama 1,136.6 100 450.3 39.6 275.1 24.2 411.2 36.2
U. de Tarapcd 2,167.7 100 1,084.0 50.0 551.6 25.4 532.1 24.5
U. AituroPrat(4) 1,114.7 100 211.4 19.0 214.7 19.2 688.6 61.8
U. Metropol.Cs. Ed. 2,712.7 100 1,127.5 41.6 820.3 30.2 764.9 28.2
U. Playa Ancha 1,016.0 100 396.7 39.0 356.2 35.1 262.2 25.8
I.P. de Santiago 1,653.8 100 563.1 34.0 565.9 34.2 542.8 31.7
I.P. Osomo 902.2 100 377.9 41.9 281.9 31.2 242.4 26.9

Total 111,761.4 100 38,283.5 34.3 24,880.1 22.2 48,614.9 43.5

USS 366.5 125.6 81.6 159.4

Source: Basedon Ministeriode Hacienda,Direccionde Presupuesto,BalancesPresupuestarios,1990.

(1) Considers aporte fiscaldirectow,*aportefiscal indirecto', *Pagareuniversitario and *recuperaci6nde

credito fiscaluniversitario-.
(2) Includesdirect paymentof tuitionfeesboth at the undergraduateand postgraduatelevel.
(3) Includes service contractingwith public and private bodies, research funds, venta de activos, renta de
inversiones,recuperacionde prdstamos,endeudamiento,donaciones,otros ingresosy disponibilidadesan
caja.
(4) Incomefor tuitionfeeshas been estimated.
 11-44
Appendix Table 11
Chile:SocioeconomicBackgroundof StudentsEntering1st Year in Public and Private Universities,1990

Father's Occupaton PublicUniversities Private Universities

Mgers, entrepneurs, administrators,professionals 16.6 33.4

Specized employees,tchnicia, niddle-size entrepreneurs 24.2 23.5

Clericaland saleswoikers 25.0 18.3

Smallproprietorsand self-employedatisans 15.0 14.6

Skilledvanual workers 9.8 5.1

Semi and umskilledmanualworkes 5.8 2.8

Personal(domestic)srvices and housewifes 3.6 2.3

Total 100.0 100.0

Source: Uznivesdads Chilenas,Procesode Admisi6n.1989-1990.

 HIGHEREDUCATION IN BRAZIL: ISSUES AND
EFFORTS AT REFORM

Laurence Wolff, Douglas Albrecht and Alcyone Saliba

Table of Contents

OVERVIEWOF THE HIGHEREDUCATIONSYSTEMIN BRAZIL .... m1-1

1.....
Structureand History ............. ...................... 1-l
Equityand ExternalEfficiency......... ..................... m-5
GraduateEducationand Research ............................ 11-7
PrivateHigher Education ................................. E-8
ISSUESIN HIGHEREDUCATON .............................. M-l1
Costs of Federaly FundedHigher Education ..... I................
M-l
Govermnceand Managementof Federl Institutions ................ M-14
Financingof Higher Education.............................. M-17
Relationshipsbetweenthe Federal Governmentand
Private HigherEducation............................. m-21
HIGHEREDUCATIONREFORM ............................... 1-24
The Need For Higher EducationReformin Bra2 .................. M-24
The Government's Higher EducationReform Program, September 1991-
August 1992 .................................... m-25

REFERENCES ............ ............................... IH-28

ANNEX 1. PROPOSEDFUNDINGFORMULAFOR
BRAZILIAN FEDERAL HIGHEREDUCATION INSTlTUTIONS ... m-33

ANNEX2. LIST OF CONSULTANTREPORTS ...................... m-38

I
 OVERVIEW OF THE HIGHER EDUCATION SYSTEM IN BRAZIL

Stnrcuure and History

Higher education in Brazil currently enrolls about 1.6 million students, 97% of which attend
undergraduateprograms. As Chart 1 shows,enrollmentshave grownduring the last thirty years from
less than 100,000 in 1960 to 1.6 million by 1989, which is equivalentto 12% of the school age
populationand about 58% of secondaryschool enrollment. First-year undergraduateenrollmentis
equivalentto 74% of secondaryschoolgraduatesin the previousyear. About60% of total enrollments
are in private institutions,of whichone third are in private universities. Federal institutions,most of
which are universities,accountfor 22% of enrollments. State institutionsenroll 13%, with the vast
majorityin Sao Pauloand ParanA.Municipalinstitutions,also mainlyin the Southeastand South, enroll
5% of students.

BRAZIL:Undergraduate
Enrollrent 1960-89 univBities, of which 35 are
hooTou"M federal, enrolling over 300,000
-6- _ students, 39 are private, enrolling
1400 ._ over 300,00 students, and 19 are
state or municipal, enrolling about
150,000. In addition to
10s. universities, the Brazilian higher
/oo education system includes
multiple-faculty institutions that
offer program in more than one
knowledge area (such as social
400 --- -- 7 --------------- ___ sciences and technology) and
200 single-facultyinstitudonsthat offer
programs in only one knowledge
o . . . . . . . . . . . . . . . . . . . . . . . . .. . area (such as social sciences).
SO
A70 11-4 o Over 80% of the higher educadon
________________________________ rinstitutions' are of the single-
Chart 1 faculty type. Within these two
egories, most of the single-
facultyinstitutionsand nearlyall of
the multiple-facultyinstitutionsare private. Chart 2 summarizesthe current enrollmentbreakdownby
governingauthorityand institutionaltype.

'TheMinistryof Education(MEC) atisticscountseach isolated-facultyas an institution,although,in the

private sector,sevenl *isolated'facultiesmaybe under the controlof a singlegovening boardand, thus, actly
constitutea single institution. It is esfimatedthat the total numberof private non-universityinstitutionswould
decreaseby as muchas 50% if the governingboardwere the inclusioncriterion.
 m-2
Programs of study range from
Total Higher Education Enrollrnent by GovernmentAuthority 4 semesters, such as in pedagogical
and Institutional Type, 1989 programs that prepare elementary
T1,0uandM schoolteachers,to 12 semesters,such
as in professional programs that
ao. preparemedicalphysicians. Degrees
____00__________ are offered in teaching, vocational
areas, by discipline, by profession,
_o- for example), and for military or
religiouscareers.
100< - .

Almost two thirds of students

Fdisrl |tain Munlidpl P to are emolled in the broad field of arts,
Nen-Unhnraltlz IF5"I
t.Is- 53M1 5 79 social sciences and humanities. Exact
Univoaltl_ 323.76 u4me 3SD 36l5 sciences (11%), engineering and
technology (10%), and health
-u~uZ
Unlwrnlilm msciences (12%) enroll about one third,
u-a T.bb
Urn with agriculture holding only 2-3% of
the enrollment. In 1989 the system
Chart 2 produced over 220,000 graduates,
about half from universities.
Assuminga five-yearaveragefor completionof a programby students,and giventhat the 1985freshman
enrollmentwas around 400,000, 50% is a rough estimateof the graduationefficiencyrate in BrazDlian
higher education. This rate is relatively low consideringthat Brazil requires competitiveentrance
examinations(vestibular) for all highereducationinstitutions.

In the mid-1960sthe BrazilianGovernmentdecidedto meet the socialdemandfor highereducation

by encouragingthe establishmentof more private institutions,mostly of the non-universitytype, and
openingnew federal universities,mostlyin the capitalsof the poorer states, where none existedbefore.
The implicit policy goal was to consolidatea relatively elite public university system, offering
undergraduateand graduate instructionfree-of-chargeto the country's best students and emphaszing
research, whilecreatinga private sectorprovidingmass education. However, whilefederal institutions
generally offer better instruction than private institutions,only a few of them undertake significant
amounts of research. While Brazil was pursuing this model, other Latin Americancountries, such as
Argentinaand Mexico,were openingthe doorsof publichighereducationto nearly all secondaryschool
graduatesand creatingmass public educationsystemspaired with small private systems.

Betweenthe mid-1960sandmid-1970s,Brazilianhighereducationexhibitedcontinuedfast growth,

averagingaround20% per year. Althoughall sub-systemsgrew in studentenrollment,privateenrollment
increasedmost rapidly. In 1965, 38% of total enrollmentwas in federal institutions,17% in state, 1%
in municipal,and 44% in private; by 1983, theseproportionshad changedto, respectively,24%, 10%,
6%, and 60%. By 1989,federal and municipalenrollmentshareshad decreasedto 21% and 5%, while
the state and private shares had slightlyincreasedto 13% and 62%. Since 1983enrollmentin federal
institutionshas declinedslightly, whilestate and private institutionshavegrown steadily.

Brazil's educationsystem is highlydifferentiatedby region. In the poorest region, the Northeast,

roughly 4% of the age cohortattend highereducation,comparedwith 10% do in the richest region, the
Southeast. The public sectorpredominatesin the Northand Northeast,whilethe private sectorholdsthe
 mn-3
majorityof the enrollmentin the other regions,especiallyin the Southeast,where it has more than two
thirds of thestudents. There is littlefederalandvery strongprivate(90% of enrollment)presencein Sao
Paulo, where nearly all of publichighereducationenrollmentis in state schools.

Althoughfederal and state institutionscharge small fees for studentservices,and also contract
specializedservices (research,training, technical assistance,and health care) to public and private
agencies,the constitutionspecificallyprohibitsthe chargingof tuition. Thereforepublicuniversitiesare
mainly financeddirectly with governmentfunds. In contrast,private institutionsare financed mainly
through tuition and fees, although some private universitiesreceive government funds (mostly for
graduateprogramsand research)and contractservicesto publicand privateagencies. Studentsattending
private institutions can also benefit from public funds by applying for educationalloans and/or
scholarships.
2 in 1988 averagedUS$7,930per student, about fifty
Federal expenditureon federal universities
timesmore than expenditureat the primaryand secondarylevels (roughlyUS$150per student). This
level of spendingis higherthan that of otherLatin Americancountriesand it is similar to that of many
developedcountries. The average for Chilean public instititionsis US$1,700 and for Venezuela is
US$1,625. Unit expendituresin private institutionsrange from about US$4,500 in the best Catholic
universitiesto a low of US$500in some non-universityprivate institutions.Table 1, whichsu
enrollmentsand estimatescosts by sector, shows that total public spending in higher educationis
equivalentto 1.3% of GDP and accountsfor approximately80% of total spendingin higher education
in Brazil. These figures do not includespendingon research in universitiesby agenciesoutsidethe
Ministryof Education,which is equivalentto another10-15%.

In Brazil a large share of total public spendingon educationgoes to highereducation. Only2%

of total publiceducationenrollmentis in highereducation,but an estimated23% of totalpublic (federal,
state and municipal)educationspendingis directedto this level. The Ministryof Educationalone spends
about60% of its budget in its federalinstitutions,which serve only 22% of higher educationstudents.

Assumingthat enrollmentin graduate educationas well as percentageof faculty with advanced

degrees are proxies for output quality, it is possibleto differentiateseveral tiers of higher education
institutionsin Brazil. On this basis, as wellas on the basisof informedjudgmentsby relevantobservers,
the two state universities of Sao Paulo (USP) and Campinas (UNICAMP)are in a category by
themselves. These are by far the highestquality institutionsin Brazil and boast significantgraduate
programs (26% of the enrollmentin graduateeducationin Brazil is in these two institutions). Under-
graduateeducationis also consideredby far thebest in Brazil. Scienceand engineeringconstitutemajor
portions of enrollment. Total enrollmentin thesetwo institutionsis around50,000.

2 Figuresare basodon officialexchangerates. Excludinguniversityhospitaland pensioncosts,the unit costs

would be about US$6,000. Seepage M-11 for a moredetaileddiscussionof unit costs.
 m-4

Enrolient andEstimatedCostb Hrither EducationSector.1989

Ated : JE.-:-ed
:::0-UntCostan: Total Cost in ..-
Toual Cou i
fSecor :;E;; :Enrollmemnt. - USS USSbionian E %ofGDP;;
s .

f;St- i- i,- (13 f0 4,0 ,ii 3AT- 03-

t. U...a, S6 (,) .. K.. .......
1
. .-. .. ...-...'"".....:
(''. X

. . .. ;..E .. .. . ..-.... ...-

::-~~~~~~~~. E-.
E.
..E.
..-.- .-.
f- --
....E. D!i-
i.E
Total ~~~~~~~.i:
A;; i.. C;.i.
. 1,570,.E. .-- . E 3 2. E......-
--.:- 4.9 1.

.- :-:::-..-.......-:.:.....:::
... . . . ..:-:--:::
:::- -:-:f . -. -.::-:.
: i: :.E 7E::.:--:- !A.f

-- :Sa
:i:gt::-.:Paul: and:Wolynsoado:cs tdoniesu idabke byRoge Vai.IJniip
;o icostae estimate

:~ ~~b
: -:::::gEdon Nim e. ca.Euse of voaie bosi; zes. asuSdl:ipie~
ela th **

sh ; 0ould
beconiderd indicatv onl.Th o fincud exedlwe o stwkrsip mearcb
:- :a:: f: t:s-.
i:- :-:.---:n:: fogM-e::.hers, .fli of wicl sue:tmtd a USSSSlmi:mllon,: an -hh go:
i!~t invusi | , , X , , ,, in ei-
*E-iba,

Table 1

Aother tier is formedby a rdeltvey large numberof public and private universitiesthat provide
:undergraduateeducationof varying quality. Only a few of these institutionshave significantgraduate
programs: the federal universitiesof Rio, MiDasGerais, SantaCatarina,Sao Carlos,Rio Grandedo Sul,
and Pernambuco, as well as the CatholicUniversitiesof Rio and Sao Paulo (PUC-Rioand PUC-SP)
enroll 7% or more of their studentsmngraduateprograms. Total enrollmentin these somewhatresearch
oriented institutions is around 92,000 in the federal univerities and around 45,000 in the private
institutions. Enrollmentin the remainingfederal univerities, several of which are reported to be of
reasonablequality (that is, those withoutsignificantgraduateeducation)is around215,000. Other state
institutionsof similar qualityenroll 140,000. The remainingprivateinstitutionscanbe dividedbetween
universities(enrollment310,000),which generallyoffer undergraduateeducationof reasonablequality,
and facultieswhich offer low quality,mostlyevening,coursesin the socialsciencesand law, mainlyfor
a lowermiddle class clientele(enrollment580,000). Table2 is a breakzdown of enrollmentsby thesetiers
of higher educationin Brazil.
 m-5
Equity and External Efficiency
romUment
by Tvpe of Istitution 1989i'
Several studies have documentedthat
.... the vast majority of students in all higher
Two High QuitY st univerhie -50,000 educationinstitutions,both publicandprivate,
- - and UNICAMP) - .
(USP . . -- are from the middleor upper classes. Public
SaxPedael Univ;es 9wilb}te#uch - - -- - institutions have students of the highest
-- d Gdsuaozdmtatios -- :-socioeconomic
A- status. A recent survey of
income of parents of federal university
T.o High Quai Calho Us_-ver:ties 45,0w0 students shows the following breakdowns
(1989) in terms of minimum salaries: 0-3
minimum salaries, 18% of students; 4-10,
- Other
Swecand MwdCIDh Z18,000 37%; and 11 and above44%. This compares
with an estimated 10% of the general
OdherPrivate Univerities- populationearning more than ten minimum
Conf,ssiorul and Communiy 191,000- salaries.' Socio-economic class within higher
. . - -:-Cunl
155,000- education varies by subject studied. A study
Private-Non-Umveauy52a±matzoea(Paul, 1991) shows that over 30% of
enrollees in day engineering, biomedical
Total: -- - , studies,and law in a private institutionin Sao
-___-_- Paulo had fathers with higher education,
comparedto 13%in teachertrainingand 16%
!t -Dd53O5flUflfl5
OfDS?Of
Perf',,~~ in night courses in law and social sciences.
j''.OII~ . __' Fully 61% of students in the federal
univerity in Cearastudyingcivil engineering
had fathers with at least an undergraduate
Table 2 degree. This compareswith 20% or less for
areas such as literature, nursing,geography,
and pedagogy. For Brazil as a whole about8% of the adult populationhas attendedhigher education
institutions. The studentprofileof the moreprestigiousprivateinstitutions(someCatholicuniversities)
is similar to that of the public institutions. Table 3 providesa summaryof recent studieson the socio-
economicstatus of highereducationstudents.

As can be expectedthe earningsof those withpost secondaryeducationof any sort are high. Data
from the 1980 census shows that the incomeof those with 13 or more years of schools is more than
fifteen times those with five years of schoolingand more than 180 times the incomeof those with less
than three years of schooling.

Meyer(1982),Farret (1985),Salih (1990),Gomes(1990),andPaul (1991)havedocumentedthese income

inequalities. Estimates of income distribution in the generl population are from Camargo, et al. (1990). he lop
docileof the labor force earned an average of 17.1 mininmu wages in 1989. The second docile earned an averge
of 5.6 minimum wages.
 m-6

Backgroundof Entcrds~gSucZ
-forSeven]Bnzian Institutions
: :: : - : :: :;i-E
i.:-7E-,#-g
E
.........
70
i!~~~~~~~~~~~~~~.
:. . .... . .

Attemded
Father wit -Pit..lic.
...... -~~~~~~~HghrSecondary
' " ..'-.-
.... ... ..
i,.-.,..,..,.',-',..,,,
.. .
i;0: . ... .. .;. -.... .-. . . .

:;i.:i:-.:.
E . -!
:::;:
:E:. :: - ;. i-EA-
-:: -:t..: . :.; . .: ::: ::: : : : :-:E
::: ....
-f:.....:. : ............................ ......
-,. . ~ ~~~~
..... .. ~ ..~ ~ ~~~ .. .:.:.:.. ... .-

.t:: 2::-:: 7ERE!

:-: .i - :: ::W!------!----:
- - :{- . - - ! :~~~~~~~~~~~~~~~~~~~~~~~~~:-:-
: :: X ............
:Day-yc lai in Teaher:raining. . 13% : 62%: :: i--

AU nightdaijb
ses ;~~~~~~~~~~~~~~~~~~~~~~~-
-. :-:-:
":% : ': -':F -' -:0 : ::...... : -:-:::-
""- ':.' .. .. . .. 17%
.... . :62% ::- .. :0

.. .. ..: ..: :. .: ... .. .. . ... .. .. .. . . .. ..... ... .... .. ... .. . .. ... .. .... .

.. . . . S.t : S :''., ','''' '0. '!' -'- . ., ' : :- S'-.-: S ''iE,' i , i- .: . .. . ..... ..... ... .. . ..

-:toiUnieriy
Feea of Ce-r
n E--f - 331%: 20% - i

Stuginesn
showdiffernes DaeaPrning
ind betee grdae1rmlw n ibpetgecusso%td

onteeaionishaips, betweeny therlibg, man5tractu

and dctonotu.Oerl hr 31e
s ninfcn
Staemplnimenst
ao eng
al ihreuato rdae. oee,ol netidt n-fut fbge

edcatioUniveradutesoCareyuhn h aenvrwrcd hs enrlyatn h etisiuin n

Studienes
thihowsdifferenession.earing boetweenagraduates
fromaly lowadhgrsier
n h coursesty srvtud

onsthetetionshipes betwee
Sothealaborsmarket and higherelducatione
foutut Oeverallyar
athere isauainsgnifican

secondaryschool, and then decidedto go to school in thieevenings. Most of these graduatescontinue

4 Reporte in Claudia de MournCato (1990).

 m-7
in the samejob theyhad whilestudying,possiblywith some salaryincrementor some modestincreased
aspirationsbecauseof their degree. Thesepeople are payingfor low-costcourses and getting modest
perceivedbenefitsfrom them.

There is little informationon privateand socialrates of returnto educationin Brazil. One study
(Psacharopoulos,1985)reports private rates of return of 25% for secondaryeducationand 14% for
highereducationand socialrates of return of 24% and 13%. A more recent study (Leal and Werlang,
1989)reports private rates of return of 16% for both higher and secondaryeducation,12% for full
primaryeducation,and 16%for four years of primaryeducationduringthe periodof 1982-86.

GraduateEducationand Research

Graduate educationis a small but importantpart of the higher educationsystem. Current

enrollmentis estimatedatkbout 50,000, the bulk of whichis in master's programs. Roughlyone third
of the graduatestudentsare pursuinga degreein the 'hard' sciences(includingtechnology). Abouthalf
of the graduateenrollmentis in federalinstitutionsand one third is in state institutions,nearlyall (97%)
in the state of Sao Paulo. There are morethan 1,300 master's and doctoralcourses, or an averageof
40 studentsin eachdegreeprogram. Graduateeducationhas recentlygrownrapidly, and is of relatively
high quality comparedto undergraduateeducation,to a great extent becauseof a relativelyeffective
competitivefundingsystemoperatingoutsideMEC's regularfundingof higher educationinstitutions.

The fundingmechanismfor graduateeducationand researchin boththe publicand private sectors

is basedto a great extenton open competitionand peerreview. Publicand privateuniversitiesand non-
profit researchinstitutesget funds for graduateeducationand research. Thesefundsmay not appearin
their budget if they are received through foundations'. The most importantGovernmentagency
financing(and undertaking)scienceresearchis the Councilfor ScientificandTechnologicalDevelopment
(CNPq). The CNPq providesfundsfor researchersin the form of salaryincrementsand also provides
supportin the form of researchgrants,usuallyto individualresearchersand for relativelysmallamounts.
Along with its grant program, CNPq administerseleven separate research institutes and a large
scholarshipprogram(at present,there are 30,000scholarshipsinsideBrazil and 3,500 overseas).

The Agency for FinancingStudiesand Projects(FINEP) is a public corporationwhich acts both

as a conventionalresearch foundationand as a developmentbank lending funds for technological
innovationin Brazilianindustry. FINEP was set up in 1967to developBrazil's engineeringindustry.
FINEP has 700 staff, more than 100 with doctoralor masters' degrees, and in 1988supported 1,840
projects split almost equallybetweenscientificresearch and technologicaldevelopment. FINEP also
functionsas the ExecutiveSecretariatfor the NationalScientificand TechnologicalDevelopmentFund
(FNDCT), a major governmentsource of grant funding for infrastructure,new buildings and new
equipmentin universitybasedscienceand technologyresearch. Fundingfor FNDCT in 1992as well as
for CNPq was severelyreducedbecauseof Brazil's ongoingeconomicdifficulties.

The Agency for Training of High Level Personnel (CAPES)of the Ministryof Educationand
Culture (MEC)coordinatesgraduateeducationin Brazil. CAPES'sprincipalinstrumentsof supporthave
been grants and fellowshipsfor study in Brazil and abroad for individualspreparing for careers in
university teaching and research (in 1989, CAPES supported around 14,000 students at Brazilian
universitiesand 2,000 studentsin NorthAmericaand Europe). CAPEScertifiesand rates all graduate
programs in terms of overall qualityand providessupportto 700 graduatecourses(two-thirdsof all the
 m-8
courses in the country). It also runs a programto help build up institutionsso that they can offer new
courses. In 1989CAPES' total budgetwas equivalentto US$200million.

Private Higher Education

Private higher educationhas existed for over a hundredyears in Brazil. Its participationin the
overall system increasedduring the late 1960's and 1970's, when the militaryregime, confrontedwith
strong pressuresfor increasedenrollmentin public institutions,as well as political oppositioncentered
in the public insttutions, resolvedto permit the openingof large numbers of new private institutions.
Duringthat time higher education,both public and private, increasedrapidly, but the greatest increases
were in private non-universityinstitutions.

Since the 1970's, a majorityof studentshave enrolledin private institutions. In the 1960's and
1970'sprivate higher educationgrew at 15%per year, muchfasterthan the secondarysystem, with the
resultthat a moreheterogenousclientele,includingstudentswith deficientpreparation,nowattendprivate
institutions. Growthover the past six years has only been 2% per annumas a result of the economic
downturnas well as continuingrestrictionsby CFE on openingof new programs.

The private sector in 1987 comprised72% of the institutions,offering 67% of the first year
openings, enrolling 60% of the students, and supplying 67% of graduates. Compared to public
institutions,the private sectoremphasizesundergraduateeducationand humanities,social services,and
teaching. It has 75% of the studentenrollmentin humanities,66% of languages,57% of exact sciences
and technology, 14% of agriculturalsciences,43% of health sciences, and 51% of arts. For teacher
training the private sector has 67% of teachingprograms, with 69% of studentsand 75% of graduates.

Althoughthe privatesectorconcenrateson undergraduateeducation,it is also an importantpartner

in graduateeducation: 11% of programs, and almost20% of students. However60% of private sector
graduate enrollmentis concentratedin two universities,the CatholicUniversitiesof Rio and Sao Paulo
(PUC-RJ and PUC-SP). In comparison,about one third of the federal universitieshave no graduate
education,and 50% of graduate enrollmentin federal institutionsis concentratedin three universities,
in Rio, Minas Gerais, and Rio Grande do Sul. CAPES' program of peer evaluation and rating of
graduate programs shows that graduate educationin the private institutionsis of quality comparableto
that of many federal universities. Private graduate educationreceives more than 10% of the funds
allocated by the government agencies CAPES, FINEP, and CNPq and supplies 15% of theses and
dissertations.

Private Univenties. PUC-Rioand PUC-Sao Paulo enroll 25,000 students, offer high quality
undergraduateand graduate education,and produceresearch. PUC-Rio has a studentteacher ratio of
10:1, which is similar to that of federal universities;17% of its enrollmentis in graduate education.
PUC-Sao Paulo has 15% in graduateeducationand a 16:1 ratio. Thesetwo institutionswere founded
many decadesago, have large numbersof graduatestudents, student-teacherratios lower than in many
other private but higher than in public, some full-timefaculty, and costs higherthan manyother private
but lower than public ones.

' Mhissectiondraws (thoughnotexclusively)on comprtive casestudies,undertkn by VabI(1990), of four

commumityuniversities,including2 Catholicuniversities(PUCs).
 m-9
In privateuniversitiesotherthan PUC-Rioand PUC-SP,80-90%of teachersdo not havegraduate
degrees;only about 15-20%are fulltime;63% are hired on hourlybases for teachingonly (no research
expectation)and receivesalariesof aboutUSS200 per month. In contrast,in public universities55%
of teachers did not have a graduatedegree in 1988; and 77% were full time. With regard to student
flow, the ratioof 1985first yearopeningsover 1989graduateswas 789%,comparedto a publicuniversity
ratio of 63%. Privateuniversitiesuse facilities,libraries,and laboratories,and use themmorethan twice
as intensivelyas public institutions. FiE student/teacherratios are 24:1 and unit costs average about
US$1,000comparedto 8.8:1 and aroundUS$8000,respectively,in federalinstitutions.

PrivateNon-UniversityInstiutions.' A large numberof the non-universityinstitutionsoffer all

levelsof schooling,frompre-schoolto tertiaryeducation,thusmaximizingthe utilizationof their facilities
and direct administrationsystems. They usually do not have campuses,simply occupy buildings,
sometimes in more than one location,often offering night courses only in buildings operating as
secondaryschoolsduring the day. Somehave good facilitiesbut the majoritydo not. Many single-
faculty and multiple-facultyinstitutionsaspire to university status, because of higher prestige and
relativelymore autonomy. The vast majorityof these institutionsare locatedin Sao Paulo and Rio.

Incomefrom tuition accountsfor 50% to 96% of an institution'sbudget, with an average of

approximately80%. Thefederally-fundedstudentloan-programbrings in 5-30%of the budget,with an
averageof about 13%. Other sources of incomeare provisionof services,such as health servicesin
hospital-schoolsand at-largeeducationprogramscontrcted by local corporationsfor thetrainingof their
employees,as well as the investmentof tuitionmoneyin the capitalmarket. Sincethese institutionsdo
not keepdetailedaccountsit is difficultto reconcileincomeand expenditure. Many institutionsaward
partialor full tuition waiversto studentsin financialdifficulty. Waiver levelsvary from 5% to 45%,
averaging10%. Abouta third of the scholarshipsprovide 100%discounts,the rest vary from 15%to
90%, with about a third falling at the 30% discount rate level.

One groupof privateinstitutionsis that of wcommunity'institutions,whichsee themselvesas non-

govermmental public entitiesprovidingsocial services. This group actuallyconsistsof two types of
institutions,both sharingthe samemission,but with distinctaffiliations.The most traditionalsub-group
is that of the confessionalinstitutions,founded and administeredby consortia of religious orders,
generallyin existencemanyyears prior to the 1968reforms and consequentexpansion;manyof them
are university,but not all. A smaller and newer sub-groupof communityinstitutionsis that of secular
institutions,all universitiesfounded and administeredby community-basedgroups with no religious
affiliation. Total enrollmentin confessionalinstitutionswasaround225,000in 1989(25% of totalprivate
enrollment).

A second group, the majority of private institutions, can be defined as 'entrepreneurial"

institutions,which considerthemselvesas educationalenterprisesseeking a profit to all intents and
purposes. Manygeneraldirectorsof theseschoolsare their ownfounders. Theirbackgroundis diverse,
from teachers to retired army generalsto lawyers. Some were establishedby elite families(such as
UNIFORin Ceara, Mackenziein Sao Paulo, and SBIin Rio de Janeiro),others are ownedby business
partnershipscapableof cost-effectivelydeliveringlow-costprograms (such as UPIS in Brasilia and
Objetivoin Sao Paulo). Total enrollmentin 1989in entrepreneurialinstitutionswas around 700,000

' This section draws on case studies of 16 higher educationinstitutionsof the state of Rio de Janeiro
undertakenby a team of researchersled by Laura Dantasof SBI.
 m-10
(about75% of total private enrollment). However, unlike in the primary and secondary education
sectors, the law governingprivate higher educationdoes not allow institutionsto be profit-making.
Nevertheless,ownersfigure out creativewaysto captureprofit.

Demandfor PrivateHigher Education. Consideringthat publicinstitutionshave higherprestige

and charge no tuition, they are almostinvariablythe first choiceof students. Private highereducation
becomesthe choice when: (i) the student is unable to gain admissionto a public institution;(ii) the
studentis a full participantin the labor force and, thus, cannotafford to attend daytimeclasses;(iii) the
local publicinstitutiondoes not offer the courseof study desiredby the student;and, in some cases, (iv)
the studentsees the privateinstitutionas better qualityin selectedcoursesof study. Once the first-order
decision is made to seek admissionin the private sector, a second-orderdecision is often required,
becausemostlocationshave morethanone privateinstitution.Theprofileof studentsin thebest Catholic
universitiesis similar to that of public institutions. However, most of the low quality, non-university
institutionsare attendedby older, less preparedstudents,most of them workingfull time, and staffedby
less prepared teachers, sharing low intellectualdemandson each other the ("pacto currupto'). The
widespreadperception(largely unmeasured)is that the majorityof these schools are 'diploma mlsW
offeringformal credentialsbut very little content. Hard data on this overallimpression,throughstudies
of learningor income after attendingthese institutions,is not available.

Severa factors account for the phenomenonof people paying for low-qualityprivate higher
education. First, there is demandoverflow;demandfor higher educationoutweighssupply by at least
2:1, but the ratio of applicantsby opening is as high as 60:1 in high prestige programs, such as
engineering,dentistry, and medicine,at some institutions. Second, where higher education(and even
educationin genera) has a high scarcityvalue, acquiringevenlow-qualityhighereducationis betterthan
acquiringno highereducation,especiallyin a labor marketwhere the majorityhave a less than primary
level educadonalattainment. Third, the publicsector of the labor marketis dominatedby crentiaism,
in which career ladders for civil servantsare definedby credentialsand seniority(as well as patronage).
Hence,the Governmentactuallyencourageslow qualityprivatehighereducationby assigningan intrinsic
value to the diploma. Althoughthe private sector of the labor market is generallymore interestedin
skills than in credentials,it still has to complywith regulationswhich are createdby trade associations
and mandatedby the publicsector. For example:the law regulatingthe professionof journalism states
that corporationsproducingany form of publication(such as client newsletters)must employcertified
Brazilianjournalists, whetherthey needthem or not, an artificeof thejourmalistsunion to guaranteejobs
for its members; companiesoften work around the legislationby hiring a card-caringjournalist who
receivestokencompensationfor agreeingto havehis/her nameon the company'smasthead,but who does
not do the work. Similar legislationexists for manyother professions. Such labor market regulation
guaranteesthat investmentin any privatehigher educationpays off, giventhat studentsattendingprivate
institutionsreceivediplomaswith the samenominalcertifyingvalue as one obtainedfrom a high quality
(publicor private) institution.
 ISSUESIN HGHER EDUCATION

This sectionseeksto documentthemainissuesandproblemsof the currenthighereducationsystem

in Brazil. It coversthe key areasof the costs,governance,and managementof federalhighereducation,
the relationshipsbetweenthe federalgovermmentand privatehighereducation,and overallfinancingof
the higher educationsystem.

Costsof FederallyFunded HigherEducation

There is much controversywithin Brazil on whether or not the costs of higher educationare
excessive. Based on comparisonswith state and private institutionsin Brazil as well as through some
internationalcomparisons,it can be concludedthat, while federal institutionsemphasizehigher cost
programs in science and technology,and some of these institutionsprovide significantprograms of
graduate education,overall the unit costs of these institutionsare significantlyhigher than private
institutionsin Brazil providingsimilarprograms. The main factorsaccountingfor such high unit costs
are the low student/teacherand student/non-teaching staff ratios. There are only minor differencesin
expendituresbetween research and graduate oriented federal universitiesand purely undergraduate
institutions;nor arethere any economiesof scaleamongfederalinstitutions.In additionphysicalfacilities
in the federal institutionssurveyedare grosslyunder-utilized.

International Comparisons. Becauseof Brazil's rapid inflationand extremelyvariableexchange

rates, it is difficultto arrive at reliable dollar estimatesof unit costs. In the years 1988and 1989, in
particular, the differencebetweenthe officialexchangerate and the parallelexchangerate (morethan
40% in 1988)makesreliableinternationalcomparisonsdifficult. Estimatedaverageunitcosts in federal
institutionsin 1988are US$7,930per student,basedon workundertakenby Jean JacquesPaul and Elisa
Wolyneck (1990), which simplydivides MEC's budgetper institutionby the number of students and
which uses official exchangerates prorated on a monthlybasis during 1988.7 FranciscoGaetaniand
JacquesSchwartman (1991)arguethat theseunit costs wouldbe about40% lower if the parallelrather
than the officialexchangerate were used, which wouldput the federalinstitutionsin a more favorable
light in internationalcomparisons.Gaetaniand Schwartman also arguethatunit costswouldbe reduced
by an additional25%, to about US$6,000 if the costs of universityhospitals (about 10% in many
institutions)as well as the costs of payments to retired teachers (15% for some institutions)were
discountedfrom the overall budget. However, retirement costs may be considereda part of wages.
However, even makingthe exchangerate adjustmentsuggestedby Gaetaniand Schwartzman,Brazil's
unit costs are equal to abouthalf of those in the USA, Japan, and Australia,and are significantlyhigher
than those of its Latin Americanneighbors.

Becausethe main determinantof costsin highereducationworld-wideis teaching,whichnormally

accountsfor 70% of higher educationcosts, the use of student-teacherratios, which are not subjectto
problemsof exchangerates correctionsand are relativelystableover time, provideanotherway of doing
cross-country comparisons. Full-time equivalent (FIE) student-teacherratios in Brazil's federal

7 Unlessotherwisenoted,thisreportrelieson theofficiaexchn ate.

 M-12
institutionsaverage8.8:1, comparedwith 12.1 studentsper teacherin US private institutions,and 17.4
studentsper teacher in US public 4 year institutions'.

Another element of importance is the ratio of students to non-teachingpersonnel. While no

internationalcomparisonsare available,the current studentsto non-teachingstaff ratio in Brazilianfederal
institutionsis 3.9:1 (it was 5.1:1 in 1980). In short, despitethe usual caution attachedto international
comparisons,Brazil's federalsystemis undoubtedlyone of thehigh cost systemsin the world, onceone takes
into considerationBrazil's salary levels. The main determinantof these high costs is the large numbersof
teachingand non-teachingstaff comparedto students.

Compaisons within Broi. The overall FTE studentteacher ratio in federal institutionsis 8.8:1,
comparedto 10:1 in state universitiesand 29:1 in private universities. A review of the data showsthe
following:

* Federal institutionsvary greatly in studentteacherratios, from about4:1 to about 12:1. A few

small specializedinstitutionsin agricultureand medicinehave around 4:1 ratios.

* In terms of student-teacherratio, there are no economiesof scale amongthe 23 universities. In

fact several of the largest institutions,such as the Federal Universitiesof Pernambucoand
Paraiba, have studentteacher ratios ef less than 7:1, and the largest institution,the Federal
Universityof Rio, has a studentteacherratio of 8:1.

* the higheststudentteacherratiosin federalinstitutionsappearamongthe youngestinstitutions.

While this may in part be a resultof a lack of graduate education,it may also be a result of an
inaequate abilityto lobby MEC to authorizenew positions.

* The state universityof Sao Paulo (USP),the largest and best institutionof higher educationin
Brazil, has a student teacher ratio of 10:1. UNICAMP, with the highest percentage of
enrollmentat graduate level (31%) has a studentteacher ratio of 7:1, and UNESP also 7:1.
Most of the other state institutionshave studentteacherratios of 10:1 or above.

- Graduateeducation,which requireslower studentteacherratios than undergraduateeducation,

affectsthe studentteacherratio in UNICAMP,with 31% of enrollmentat the graduatelevel, and
USP, with 259%of enrollmentat the graduatelevel. Amongfederal institutionsonly the federal
universitiesof Rio and Minashavemorethan 9% of their enrollmentin graduateeducation(18%
and 9%).

* The highestunit costs are in the FederalUniversityof Vivosa,whichis a specializedagricultural

institution. The three universitiesin Rio also have amongthe highestunit costs. The lowest
unit costs are in institutionsin the North and Northeastwith little graduate education.

Paul and Wolyneck(1990)estimatedthat unit costsin federalinstitutionsare 60% higherthan the unit
costs of the Universityof Sao Paulo (USP), in spiteof the fact that 25% of USP's enrollmentis in graduate

' Te argument made by Francio Gaetai and Jacques Schwartzmantha comparsons with Americn
insttutions are inapproprite, becu much teacig in the US is done by teaching assstants, results in only
marginaladjustmentswhen student-teache rtios are baed an FTE ither ta headoounL
 M-13
education,and USP is consideredthehighestqualityinstitutionin Brazil. But Gaetaniand Schwartzmanhave
arguedthat more than 9,000 studentsin USP reportedas full time graduatestudentsare in fact not engaged
in fulltime studyor research. After eliminatingthesestudentsand takingout funds for retirees, he argues
that the differenceis only about 13%. However,in a separatepaper, Paul (1989)has notedthat there are
also significantnumbersof *ghost"studentsin federal institutions. The conclusion,even after accepting
Gaetaniand Schwartznan's revisions,is that the highestqualitypublic institutionin Brazil, USP, does not
appearto be particularlycost efficientbut neverthelesshas lowerunit coststhan the majorfederalinstitutions
with which it is compared.

Institutionalcasestudies undertakenby RogerioVahlbreak down expendituresin 1989by budgeting

categories,by faculties,and by departmentsfor two federaluniversities,Minas Gerais (UFMG)and Santa
Catarina(UFMG). The averageunit cost of the two federaluniversitiesstudiedis US$10,000(1989data).
The nominalstudentteacherratio is 6:1. Full-timeteachersare requiredto teach 8-14 hours (comparedto
24 hours in the privateinstitutions)per week and are expectedto prepare classes and undertakeresearch
during the rest of the time. The top salaryfor a fullprofessoris aroundUS$2,300per monthin the federal
institutions(comparedto US$1,600per month in the private universitiessurveyed). The numberof non-
teachingstaff in the two federal institutionsis equivalentto about25% of studentenrollment(comparedto
5% of enrollmentin the private institutions). The average salary of the non-teachingstaff is roughly
US$1,000per monthin the two federalinstitutions(comparedto S300in the private institutions).

Vahl sought to break down costs by program of study. Sinceuniversitiesdo not keep systematic
recordsof this sort, only rough estimates,coveringteachingcostsonly (but not maintenanceand materials),
are possible. lhe followingare the average cost breakdownsin the two federal insdtutions:science and
technology, $9,447; biomedicalsciences, USS11,985(e.g., medicineUS$11,844, dentistry US$13,059,
nursing US$11,755);and humanitiesand social sciences, US$6,854 (e.g., law US$6,681, mathematics
US$7,290,pedagogyUS$9,863). The costdifferentialbetweenthe hard sciencesand the socialsciencesand
law, is about 1.5:1, comparedwith a USA differentialrangingfrom 2 to as much as 5:1. It suggeststhat
the incentivesystem is such that there are no rewardsfor makingsavingsin potentiallylow cost programs.
In fact federaluniversitiesrarely use the combinationof very large lecturesaccompaniedby smallerclasses
commonto the USA.

Anotherelementof interestis that of spaceutilization. The two federaluniversitiessurveyedby Vahl

provide28 squaremetersper studenh comparedto 6 squaremetersin the four private universitiessurveyed.
Moreimportantly,the formerhas an averageof 1.6 seats for everystudentenrolledin the systemcompared
to 0.8 in the private institutions. Assumingthat classes can take place eight hours in a day (a reasonable
expectation,with classesrunning8-12a.m. and 2-6 p.m.), and studentsattendaboutfour classesof one hour
per day, on averageseats in the two federalinstitutionsare utilizedabout30% of the time, comparedto 85%
utilizationin the comparableprivate institutions.Based on this analysis,the physicalfacilitiesin the two
federaluniversitiessurveyedare adequateto serve abouttwicethe numberof studentscurrentlybeingserved
withoutinitiatingany night classes.

The argumenthas been madethat the higherunit costsof the federal institutionsare a resultof higher
quality staff, manyof whom undertakeresearch, of programsin science and engineering,and of graduate
programs. It is certainlytrue that the two federal institutionssurveyeddo undertakeresearchand extension
and do havemanyprogramsin highercost areassuchas medicineand engineering.On theotherhand, PUC-
Rio and PUC-SPwhich are the two private insdtutionswhich are acknowledgedto be amongthe highest
quality institutionsin Brazil, with high percentagesof graduatestudents,and with input and output quality
 M-14
measuressimilarto the two federal institutionssurveyedhave muchlower unit costs. Availabledata (from
Tramontinand Braga, Vahland Paul) are shown in Table 49:

... ;.-E
.f:. . . ;:W ..... . f-: C . ;:-:::
... .. f ,: . 0 2 D t., i 7:7 T: ft t:'.;f;Sf:F-;i
.. .:ogts md O i Two Fdedi and Two Pa
jml6v; Univen :-: -

UEMQ :UFSC PU-ioB PUC-E

Perc'i Graduate Studet 11 10 717 1 S
Peret Staff wifi Doctorate- 20 i 18 .. 30 S: .1.5....... . .. . ...
FM Se Ratos:: -Tecer 1 -: ::-10:1 .....:-6 . .:1. . ..
S- ace-teachingSi-:-ai 3:1-: 11:1-.-;:g:
- - 14..:-1
.ntCasin -S-- P 5 . .53.......
.'L.
-!' M.
,,,,,,,
,E,,
S.
4A1
,,. . .. .. .......

.o.rce: ,V.a. i, !al T , (1990)- '...

-' a

Table 4

Unit costsin the two fedeal universitiesare twiceas high as PUC-Rioand aboutfour times as high
as PUC-SP,which haveequaly high qualitystaff and majorgraduateprograms. It shouldbe notedthat
PUC-SP focusseson the social sciences and has very little enrollmentin medical or hard sciences.
Thereforeits unit costsshouldbe comparedwith estimatedunitcostsof ova US$6000for the two federal
universitiesin humanitiesand the socialsciences(Vahl). PUC-Rio's enrollmentprofUeis similarto the
two federal instiutions surveyed, since it has a very strong science and engineeringprogram (but no
medicalschool), muchof it supportedby grants from FINEP. In short the two best private institutions
in Brazil offer programs similarto those of the two federal institutionsat less than half their costs.

It shouldbe notedthat the two federalinstitutionssurveyedare amongthe oldestand best federal

institutions. In contrast,the FederalUniversitiesof OuroPreto, Mato Grosso,Juiz de Fora and Espirito
Santo have negligiblegraduate enrollmentand are reportedto undertakelittle or no research but have
FrE studentteacher ratios of 9:1 or less and unit costs rangingfrom US$6500to US$9000.

Governanceand Managementof FederniInslttow

The system of governanceand managementof federalhigher educationencourageshigh costs and
discouragesefficiency,quality, and diversity. Under the current system federal institutionshave little
autonomyof decisionmaking and the federal governmenthas inadequateknowledgeof the performance
of these institutions.

9 For purposes of com4ability, data from Paul for 1988 on student teacber rasios and unit cost is used for
the four insttutions. Data On the other item ar, for the fedal institions, from Vahl, and for the privae
institutions, from Tramontin and Baga
 M-15
Personnd PoUicy.The federaluniversitiesthemselveshave no policy with regard to personnel.
All permanentstaff are contractedby the universitiesbut paid by the federal governmentthrough the
Civil ServiceSystem accordingto civil service rules. Howeveruniversitiesare permittedto contract
personnelon a temporarynon-civilservantbasis. No universityis permittedto establishits own plan
of positionsand salaries, nor to establishits own criteria for promotion,nor to establishsalaries for
administradve/technical personnelon the basis of marketfactorsor productivity. Withouta doubt this
lack of flexibilityleadsto low motivationon the part of faculty. Universitiesare not permittedto hire
staff, sincethe federalgovermment setsoverallhiringpolicy,and recentlyhas enforcedfreezeson hiring.
Furthermorethe universitiescannotfire staff exceptunder the strict limitationsof federal law for civil
servants.

The 'Law of Isonomy of 1987regularizesemploymentof all teachingand non-teachingstaff in

federaluniversitieson a nationalbasis. The law establishes354 non-teaching(technical/administrative)
categoriesas well as the regulationsfor teachingstaff advancementin the career ladder (that is, being
promotedfrom auxiliary,assistant,andassociateto fullprofessor). Thelaw includessalaryrelationships
for all positions. It requirespaymentof the samesalaryfor eachcategorythroughoutBrazil. Underthe
law promotionmay be gainedthroughgettinghigherdegrees(mastersor doctorates)or throughtime of
service. A teachercan reachthe associaterank solelyon the basisof time of service. The law requires
evaluationof professionaloutputonly for enteringthe professionand for becominga full professor. In
no case are advanceddegreesrequired (advanceddegreeswere requiredbefore 1987). Amongthose
currentlyat the associatelevel, 23% havedoctoraldegreesand 53% havemaster degrees. Withoutthe
requirementfor advanceddegrees,these percentageswill fall and many full professorswill not have
advanceddegrees.Legallya teachercannotbe fired becausehis academicwork is deemedmediocreor
weak. Furthermore,if a teacher were fired, there wouldbe no assurancethat a replacementcouldbe
hired, since such decisionsare subjectto the ongoingfederalhiring regulations.

Acadekic Decision Making. While the law states that federal universitieshave *didactic,
administrative,financialand disciplinaryautonomy,'in practicethere aremanyrestrictions.The internal
statutesof each universitymust be approvedby the FederalCouncilof Education(CFE). The area of
greatest autonomy is in the area of teaching and research, where, since the end of the military
dictatorship,the universitieshave been quite free. The CFE, besides accreditingall universitiesand
faculties, establishesthe minimumcurriculumfor each course in all public and private institutionsin
accordancewith nationalstandards. Onaveragethe minimumcurriculumcovers 94% of the total of the
creditsneededto obtain a diploma. WithinBrazil scoresof professionsrequire a valid highereducation
diplomato operate eitherpubliclyor privately. Withthe exceptionof law, there are no objectivenational
examinationsfor entranceto a profession,which is solelydeterminedby the holdingof a validdipioma.
Sao Paulo is currently experimentingwith a professionalexaminationfor medicine. Universitiesare
highly constrainedwhenmakinginnovationsin courses,sincethey must obey the federal guidelineson
minimumcurriculum. Furthermore,while the universitiesare permittedto increase or decrease the
number of students per course, they are presentlyprohibited from contractingnew professors and
generallythey are prohibitedfrom firing any teachers,nearlyall of whomare civil servantswith tenure.
Finally the Universitylevel Councilof Teaching,Researchand Extension,composedof representatives
of all teachinglevels, must approvethe closingdownor extinctionof any course. This practicehelps
explain the existenceof facultiesand/or departmentswith a large numberof teachers and a very small
numberof studentsin areaswhere demandis down.

Internal Management. The federal universitiesare formallymanagedby a university council,

consistingof the rector and his staff, representativesof the main academicbodies, and representatives
 M-16
of studentsand society as a whole. A council of overseers includesrepresentativesof academia,the
overall community(includingthe private productivesector), and MEC. Other councilsare relatedto
teachingand research. There are also councilson teachingand for each departmentand faculty.

The rector of the university is selectedby the President of the Republic from a list of three
presentedby the universityand can be rector for only one term. Since the end of military rule, most
universitieshave a popular eection in which all students, teachers, and administrativepersonnelvote.
The candidatewith the highestvotetotal is sent up to the Presidentas the first on the list. Until recently,
with few exceptions,the Presidentselectedthe first nameon the list. Studentsand facultyhave gone on
strikewhen the second or third on the list has beenselected. The democraticelectionof rectorshas in
some campusesresultedin the electionof highly qualifiedand dynamic rectors. However, there is a
strong tendencyfor the process to becomehighly politicized,with resultingpolitical battles between
various parties. In addition many candidates find it necessary to make commitmentsto their
constituencieswhich at a later time make it very difficultto introducetough requirementsor measures
to increase cost-effectiveness,such as requiring students to attend classes or eliminatingexcessive
numbers of non-teachingstaff'.

The rector of the universityseects his technicaladministave staff from amongexistingfaculty

and staff. These staff do not act as managersbut rather as interlocutorsbetween faculty, students,
technical personnel, the rector, and the governient. There is no permanent planning staff in the
university. The staff who work with the rector generallyhandle only short term budgetingproblems.
There is no institutionalplanningmechanism.Thereforeinstitonal planningoccursby accretionbased
on the interests and strengthsof the various departmentsand faculties. The office of the rector has no
authority or capacityto make difficultdecisionsin resourceallocationsbetweenprograms. To a great
extent this lack of centralplanningis a result of history. Universitieshave neverhad a strong centralist
tradition and they have grown as accretionsof independentfaculties 11 . In additionthe proliferationof
large numbersof committeeswith overlappingjurisdictionshas made it difficultfor universityleadership
to take any controversialdecision.

Effects on Quality. The lackof evaluationof teachersand subsequentawardsor punishmentbased

on such evaluation,as well as the "credendalism*in the system brought about by the requirementfor
diplomas,leads in both publicand private institutionsto what has been describedas the 'pacto corrupto'
betweenstudentsand teachers. For manystudents,obtaininga degree is more importantthan learning.
For the teacher, the pacto means he does not have to prepare challenginglectures, carefullycorrect
tests and examsand/or spendhis timeworkingwith and advisingstudents. The pacto is most common
in programs of lower social prestigeas well as in night classes. In fact, giventhe nature of the system,

The most flagat exampleof politicizd electionof a rector was reportedby variousBrzilian newspaper.
In this casethe rector of the Federal Univasity of Rio de Janeiro(UFRJ)hired, throughtemporarycontrats, Iarge
numbersof administative personnelwho supportedhim and helped to ens his e-election-in spite of the fact
that universityby-lawsdid not permita secol tm After a year of turnoil the rector resid and the situation
was normalized.

" The case of the rector of the Universityof Juiz de Fora, also reportedin the newspapen, illustates the
lack of power of the rector. This rector resigned after the UniversityCouncilpae a resolutionto incre the
restaurant subsidy from 30% to 70%. With the pasing of this resolution, the subsidy for the resturat wu
equivalentto 82% of the university's discretionaryfimds for non-salry operting costs.
 M-17
it is surprisingthat manyteachers(to some extentin all areasbut especiallyin the sciences,engineering,
and graduateeducation)are dedicatedand that qualityis adequate.

Financing of Higher Educalion'2

PublicFinancingof FederalInstitutions. MEC isthe mainfundingsourcefor federaluniversities,

providingapproximately85% of the incomeof the federaluniversities. MEC's total budgetfor higher
educationin 1989was around US$3 billion,of whichUS$2.5millionwent to federaluniversities. The
way MEC determineseach institution's budget has an importantimpact on the behavior in each
institution.Additionalfunding, especiallyfor graduate educationand research, is provided by other
governmentagencies,as wellas by privateindustryand by localgovernment. A few federaluniversities
(e.g. Brasilia,MinasGerais)havetheir own endowment(patrimonia),usuallyin the form of real estate
which can be sold or developed.

The budgetof federalinstitutionscanbe brokenup intotwo basic components,salariesfor staff,

who are civil servants,and muchsmallerdiscretionarybudgetswhichinstitutionsuse to fund everything
else. Personnelpaymentsare made directlythrougb the NationalTreasuryand do not enter the budget
of the institution,sinceMEC has completecontrolover them. Overall94% of paymentsfrom MECgo
to personneland 6% financeother costsand to capital. Theuniversityhas no controlover the 94% since
they are simplybased on paymentto staff. The 6% of budgets which institutionscan control covers
utilities, travel, materialsand equipment,maintenance,restaurant,and library. Ordinarymaintenance
generallyaccountsfor 70% of thesefunds.

At the beginningof each fiscal year, each institutionis budgetedonly a portion of its expected
requirements. Each institutionreceives these funds on the basis of historical criteria, e.g., the
percentageof the total budgetit receivedthe previousyear. Thefirst paymentis madeon March 1, with
inflationcorrections. After six months, MEC provides a supplementalbudget. Universitiesare not
permittedto spend funds which have not been budgeted,so it is very difficultto plan the purchaseof
materialson a yearly basis. Furthermore,the universitiesare not allowedto keep funds in interest
bearing accounts,so in a high inflationperiodthe real valueof their fundsis rapidlyeroded. Purchases
must thereforebe made on an emergencybasis. While universitieshave a fair amountof flexibilityin
determininghow to applynon-salaryfinds, they appearto exerciselittle or no controlson use of these
funds by staff. For exampleuniversitieshave no internalcontrolon use of energy, telephones,copy
machines,etc.

The budget negotiationsbetweenthe federal universitiesand MEC generallyresult in budget

increases.But the numberof staff and faculty members,the physical capacityof institutionsand the
allocationsfor non-salaryexpendituresare made without any reference to what is expectedof the
institutions.The five year periodbetween 1983and 1988exemplifiesthe problem. During this period,
budgets rose while enrollmentsfell an average of 7%. Institutionsreceivedextra funds but decidedto
maintaintheir elite status. The extra per studentfundingcouldhave been used to improveteachingor
researchquality, but there is no indicationthat this has been accomplished.Furthermore,a significant
part of the non-salarybudgetis used to provideextra studentsubsidies,such as discountedmeals, health
servicesand other welfareservices.

12 This a descriptionof the financingsystema of January 1991.

 The determinationof budgets without any considerationof cost or of output results in waste.
Publicmoneyhas beenused to purchaseteachingand physicalcapacitythat is not beingused. Sincethe
budgetingis done withoutany attentionto outputs or costs, the funding increaseshave not resulted in
perceivedqualityimprovements.

Sources of Fundsfor Fedeial Institutions, Induding Cost Recovery. Publichigher education

institutionsare legallyprohibitedfrom chargingtuition. They do, however, chargea variety of small
fees for servicesto studentsas wellas to thecommunityand industry. Overallthe two federalinstitutions
surveyedin depth get 80-85%of their fundsfrom MEC. The remaining15% comesfrom servicefees
chargedto students (graduationfees, restaurant charges, etc.), contractingagencies (e.g., in-service
training programs, technical assistance and studies provided to government and industry), health
authorities(reimbursementsfor health servicesprovidedby universityhospitals), and research donors
(CNPq, FINEP). Becausethey are subjectto complexcivil service regulationsregardinguse of funds,
many universitieshave establishedindependent'foundations' to managemore efficientlymanagenon-
MEC funds, especiallythose coming from FINEP, CNPq, CAPES, and PADCT for research and
graduate education. The budgets of these foundationshave been growing and they are providingan
importantelementof flexibility.

Traditionallypublicinstitutionssubsidizemedicaland restaurantservicesprovidedto students. The

averagerestaurantsubsidyin UFMG was 48% and in UFSC was 70%. The average yearly subsidyin
the two institutionsper studentwas US$31. It has beenreportedthat the subsidyat the Universityof Juiz
de Fora was 70% in 1989.

The legal prohibitionagainstchargingtuitionreducesboth the efficiencyand equity of the higher

educationsystem. Since studentsdo not pay for their education,they have little incentiveto complete
their course-work in a timely manner. Because students in Brazil's public institutions are
disproportionatelyfrom the upper economicclasses, the governmentspendsfar more of its moneyfor
the benefit of the rich rather than the poor. Sincethe provisionof basicsocial servicessuch as primary
educationand health care are not effectivelyreachingthe poor, fundinghigher educationonly from the
broad tax base results in a regressivetransferof fundsfrom poor to the rich.

Public Financial Suppot of the Private Sector. Until the end of the 1960s, the federal
government provided a significantVmountof direct public support to private, especially Catholic
institutions,coveringas muchas 50% of the costsof these institutionsin some years. ln the period 1970-
1980 this amount changed to around 10% of expenditures. In the early 1980s, the Government
effectivelyended all direct support of private institutions. However, in the period 1986-1989,the
Governmentagain indicatedits willingnessto support'community' institutions,increasingto 7% of the
total expendituresof about20 communityinstitutionsin 1987. In 1989-90such direct supporthas again
fallen to almost nothing. The Governmentcontinuesto support graduate educationin a few private
institutionsthrough FINEP, CAPES, and CNPQ. Of particularnote is FINEP's long term support of
science and engineeringin the PUC-Rio,whichhas helpedmake it the best private institutionin Brazil.

The Student Loan Program. Recentlythe main source of public financial support to private
institutionshas been the provision of subsidizedstudent loans. In 1976, the Brazilian government
implementedthe first student loan program to provide financialsupport for students to pay fees and
maintenancecosts in privateand publicinstitutions. Establishedby the Ministryof Education, executed
by the Caixa EconomicaFederal (CFE, or FederalSavingsBank),the Programa de Credito Educativo
(PCE, or EducationCredit Program)has sinceprovidedloans to 712,688students. Althoughpresently
 M-19
PCE fundsare availablefor the paymentof tuition by (undergraduateonly) studentsattendingprivate
institutions,duringthe first phase (1976-83)of PCE funds were also directedto stipends, so students
attendingprivate as well as public institutionsbenefittedfrom the credit line. The program has
experiencedseverefinancialproblemssinceearly 1980sand it has been reformulatedtwice.

Eligibilitywas prioritizedaccordingto a householdincomeformula adjustedfor the numberof

dependents. Loan money was intended to meet tuition costs at private institutions, and the
accommodation,food and book expenses for the most needy students in both public and private
institutions. Becauseresources were plentifulin 1976, loans were granted to almost everyonewho
applied. Once studentswere awardeda loan in a givenyear, they were automaticallyeligiblefor loan
renewal for a period equivalentto the average length of course-work,with a one year automatic
extension,if necessary. The repaymentterms includeda fixednominalinterest chargeof 15% (while
the annualinflationrate averagedalmost100%duringthe period 1976-83). Studentswere granted a 1
year grace period and repaymentwasto be no longerthan the periodof the loan itself.

The studentloanprogramwasadministeredby the CaixaEconomicaFederal, and losseswere to

be paid to the Caixa by the Ministry of Education.The Caixa, a banking structure with branches
throughoutthe country,wasregardedas the mostappropriatebodyto administerthe programsinceit had
extensiveexperiencewith private lending. Furthermore,it was believedthat the Caixa's controlover
credit ratingswouldbe a significantdeterrentagainstdefault.

By 1983,the programwas essentiallybankrupt. As inflationexceeded100%,the nominalinterest

rate of 15% on the loans impliedthat the loans had a subsidyof around 90%. This was so high that
studentsfound themselvesobligedto pay only nominalamountsper month. The amountswere so low
that many did not bother paying back their loans, nor did the Caixa pursue them since the costs of
recoveryoutweighedthe value of outstandingdebt. When administrativecosts and default lossesare
includedin the financialassessmentof the program,it is clear that the loans were more expensivethan
outrightgrants.

Despite the collapse in 1983, a strong demand remained for educationalcredit. The PCE's
effectivenessas a meansto bring relativelypoorer studentsinto the educationsystem,particularlythe
privatesector, led the governmentto reformulateit. The first task was to securea financingsource for
the program. The governmentdedicateda fixedpercentageof annualincomefrom the federallottery to
the new loanprogram. In an attemptto makethe programself financing,both the eligibilitycriteriaand
the terms of repaymentwere altered. Supportwas restrictedto needystudentsin the private sector, for
the purposeof payingfees only, and credit was limitedto the maximumofficiallengthof course-work
Between 1987 and 1989, PCE granted approximately40,000 loans to new students each semester.
Table 5 summarizesthe experienceof those three years.

During the secondphase of PCE, the termsof repaymentwere tightenedsomewhat,but a large

subsidyremained. Consideringthe high inflationrate of the periodand the (modified)repaymentterms,
the interest subsidy on the program amountedto over 55%. This subsidy level was a substantial
reductionover the previousone, but not enoughto makethe programfinanciallyviable.

A few other reforms were introducedin the secondphase of PCE, includingthe requirementfor
a loanguarantorand the paymentof an up-frontinsurancefee. Both these changeswere believedto be
importantsteps to minimizelossesthrough default and evasion. Nevertheless,the program continued
beingfinanciallyunsustainablebecauseof the high interestsubsidy. Hyperinflationexacerbatedprogram
 m-20
losses and the insufficiencyof dedicatedlottery income again brought the program to the verge of
bankruptcyin 1989, when the programwas again reformed.

Two importantchangeshave been madeto reducethe interestsubsidy. First, the interest charge
willbe 6% abovethe BTN (a new indicatorof inflation). Second,the periodof repaymenthas been cut
in half, to equalthe periodof borrowing.

IneetSubsidieg
on the PCE LonProirmm by hs

i-~~~~~~~~~~~~
, . AX-
Phase .~ i - S\ = 9I_-
%
- :. :7% i 5----
-C5%-;-
fX000--.
'' - '"''
...."'...
. . ... ... ........''''
'''
;:0S!
-::,
; ,;iS ..i:. S-. . ,i .... ':;
. ti-'- i, , ,, f: ,,., : : , ,...,. . ....

; E i SS .i. i: i i i;S;j: . ....... ~~~~~............................

:; . . 9, 9................
S.-999.-
-S.-g-
i;:02-e::i:_
"-0o")S9g5 9~~. i9....... .......... . i S 9 9 S : aN9
Szg9'
A:l
lo4ns ar asuoedto beS1,000peryear, u5 forinhdon. Subsid.esa.c alad by g areadiount Ale:;:
of 3% ad ahd.ayEs ypesdnfli y. PorIbseUadI ons, e E:>YN andT>BTNa<ustieUusd by the
ui vvrment
to oalulte intaut uaesaasumed to be 96% oldfieinflaion rabt Iaion nraesuo mseda avsenea:ovws9
the:*
period of di loan o. S PhaseID be*giiitd w inflto: gas s asue Thee Figure icud
iNOoaderainof lase du to-d&u, or f th - dmiirtv cs iole 9h 9he . -9S

Table S

The current PCE structure has an estimatedinterest subsidy of 8%. There are other more
significantsubsidies covering default and administaive costs. Therefore, the program will require
continuedinfusionof publicfunds. In addition,it remainsto be seenhow effectivethe CaixaEconomica
will be at collectingthe loans from graduates. lhe requirementof a loan guarantor,the controlthat CFE
has over other accessto credit, and CFE's experiencein educationlendingsuggeststhat defaultproblems
may be containable. The essentialproblem now confrontingthe PCE is that it has no moneyto makce
initial loans. The current allocationsfrom lottery incomeare insufficient,either for start up loans, or
to repay the losses that will result from the remainingsubsidy,default and administrativecosts.

The centralproblemof the first two stagesof PCE werehuge subsidiesbecausethe interestcharges
on debt was far below the rate of inflation.The interestsubsidieson the loans havebeen 89.7%E,55.4%
and 8.0% of the three loan programs respectivelyCIable5). Thus, the most serious problem seems to
have been corrected. In order for the programto continueas planned,however, it will be necessaryfor
the governmentto provide access to initial capitalfunds and a commitmentto provide funds for about
2S% of the annual lending.
 M-21
The PCE has facilitatedaccess to higher educationfor many students from lower income
backgrounds.However,two importantfactorshavereducedaccessto loansamongthe needieststudents:
(i) the lack of funds availableto sustain the losses of the program has meant that there has been less
overall credit available,and (ii) poorly conceivedtarget restrictions,particularlythe absenceof a firm
limiton who is eligiblefor a loanhas meant that the programhas not been as effectivein reachingthe
needieststudentsas it couldhave been. Duringthe first few years of PCE, many loans were made to
wealthierstudentsin thepublicsectorto supporttheir livingexpenses. Theeligibilityrestrictionon loans
to studentsin private institutionswas certainlya targetingimprovement,but it is not yet clear that the
targetingis as effectiveas it couldbe.

A third factor that will becomeincreasinglyimportantis existenceof adequatemechanismsto

minimizelossesdue to default. The Caixa's requirementof a guarantorand its abilityto bar accessto
other creditare powerfultoolsthat willcertainlyminimizethe problem. Thereare still severalimportant
details,however,that needto be addressed.Requiringa guarantormay implythat those who needloans
the most will be unable to receive them. The repaymentpolicy may force too many graduatesinto
defaultunnecessarily,as a result of the rigid policy of categorizinganyone60 days late in paymentas
in default. Studieshaveconsistentlyshownthat the inabilityto pay due to temporaryshortfallsin income
has been one of the major causesof high defaultrates in the US loanprograms. It has also been shown
in other countries, particularlyin Sweden,that allowingany graduate whose income falls below a
thresholdto deferpayments(whilestillaccruinginterestcharges)is an effectiveway to minimizedefault.

A fourth issue petains to the qualityof educationthat public credit is supporting. While some
private institutionsare of high standards,a wide rangeof instituions are beingsubsidized(and indeed
survive) through the loan scheme. The PCE has enabledsome of Brazil's worst institutionsto have
access to public subsidiesthat were necessaryto their survival. Other institutionshave used the loan
fundsto increasetheir hiddenprofitsratherthanimprovingthe qualityof education.Ensuringthatpublic
subsidiesare used by institutionsto promotequality improvementsshouldbe a major task of reforms,
as discussedlater. Anotherissuewouldbe the extentto whichthe publicis adequatelyinformedof PCE.

betwen the FederalGovernmentand Priwet Higher Education"'

Rekationships

The various arms of the Governmentregulateprivate institutionsthrough a multiplicityof often

conflictingrules, regulations,and instniments,especiallythoserelatedto establishingnew programsand
to regulatingtuition, which are, in theory, supposedto ensure minimumlevels of quality and public
accountabilitybut which generally have had the effect of discouragingpublic accountabilityand
encouraginglow quality. Nunesand others havedocumentedtheseproblems. This sectionsummarizes
the legal backgroundas well as actualpractice.

Legal Background. By law the CFE establishesthe conditionsand limits for the existenceof
Brazilianinstitutionsof highereducation,bothpublicandprivate. The CFE authorizesprogramsof study
and sets first year enrollmentsin all institutionsof highereducation.Two years aftersuch authorization,
the CFE accredits' them, that is, gives thema more or less permanentright to exist. Legallythe CFE
provides greater autonomyto universitiesthan for isolatedfaculties,althoughin practicethe difference
is minimal in authorizationof new programs and increasingenrollmens. The CFE authorizesthe

U The followingdiscussionis based on a consultantreport prepared by Edson de Oliveim Nunes, I.ar

Dantas, andViolets Maria Monteiro.
 m-22
establishmentof universitieswhichmust fulfill more rigorouscriteria than isolatedfaculties. The CFE
authorizesthe minimumcurriculumnecessaryfor all 'recognized' courses,whichnormallyaccountsfor
95% of all course work. The CFE also has the obligationto review the quality of higher education
institutionsand to require their disbandingif necessary,and is supposedto review all institutionsafter
ten years. The Governmenthas the right to regulatetuition at all private institutionsand has exercised
this right throughthe CFE, MEC, the Ministryof Financeand other Governmentagencies. By law all
private higher educationinstitutionsmust be non-profit,with ultimateauthorityin each institutionsheld
by a wMaintaining Authority or 'Council". In fact, manyhighereducationinstitutionsare profitmaking
in all but name and many are run by individualwentrepreneurs'with a councilunder the direct control
of theentrepreneur. The constitutionof 1988permitsdirect publicsupportof 'community,philanthropic,
and confessional'institutions. This possibilityis providedfor in all the constitutionssince 1946. Tax
laws exempt private institutionsfrom paying certain social costs of employmentand also permit tax
deductionsfor tuition payments.

Actual Prfctice. A review by Nunes et al. (1990)of legislationissuedsince 1960showsthat the

various laws and decreesregularlyrequire that new programsof study should be createdonly in areas
where there are identified 'shortages' in the labor market in relationshipto national or regional
developmentneeds, althoughthese are never systematicallydefined. Other laws and decrees since the
1960shave at times emphasized'social needs', 'non-proliferation'of professions,emphasison quality,
and emphasison research and extension. In reality,formal and systematiccriteria for establishmentof
new institutionshave neverbeen establishedand the CFE's authorizationof private institutionshas been
based on ad-hoccriteria. As one memberof the CFE has stated, the CFE basicallylegitimizesexisting
courses. However the delays and uncerinties are such that private institutionshire 'despachantes'
whosejob is to ensure that their requests for approvalare reviewedfavorablyand in a timely manner.
The CFE has also never terminatedany course for cause and has never reviewedany institutionsafter
ten years as mandatedby law. A reviewof the data on the percentageof requestsapprovedby the CFE
shows a wide variationin the percentageof approvals. In the period 1971-1974,for examplethe CFE
approvedon average 85% of more than 1000requestsfor new courses. During the period 1978-1981,
the CFE approvedonly 20% of morethan 1000requests. After 1982the CFE againreturnedto a policy
of approvingover 80% of such requests. In January 1991, the Ministerof Educationannouncedhe
wouldnot approverequestsfor 3000newprogramsof studybecausethe Governmentneededto put more
'rigor' into its criteria for accreditation. The CFE's owndata confusesthe numberof 'authorized' and
'recognized' courses and also contradictsthe data on courses prepared by MEC's statistical office
(accordingto the CFE there are 6,435 programs of study, while MEC statisticsreport only 4,288 such
programs).

The history of federal regulationof tuition in privateinstitutionis also one of lack of transparency
and changingregulationswhichhavemade it difficultfor these institutionsto plan. Nonethelessover the
long run Governmentcontrolof tuitionhas not discouragedentrepreneursfrom continuingto expandtheir
offeringsand from all evidencehighereducationin the lower qualityinsdtutionsis a lucrativeoperation.
In 1989 a report by IPEA stated that the use by the Governmentof homogenouscriteria for tuition
increaseshad particularlyput the confessionalinstitutionsin a dilemmasince they were unableto keep
quality up. The system therefore expressly encourages expansion of lower quality institutions.
Historicallythe CFE has been responsiblefor establishingthe 'formulas' for tuition increases. An
expectedtuition level is specifiedon the requestthat is submittedto CFE, based on numberof openings,
number of teachers, teachingload, etc. Once CFE approvesthis price level, changescannot be made
withoutCFE's approval(inflationadjustmentsare also subjectto Governmentapproval).
 m-23
In the period1987-89a varietyof contradictorydecreeswere issuedunder the Cruzadoand Bresser
plans. In the lasttwo years responsibilitieshavebecomeblurred,with the CFE, MEC, and the Ministry
of Economyplayingmajorbut unclearroles. In 1990there were twelveGovernmentdecreeson tuition.
Most recentlythe Governmenthas requiredprivate institutionsto negotiateand reach agreementwith
students and staff on the amountof tuition increases. If agreementis not reached then the federal
govermmentdecideson such increases. Privateinstitutionshavehad to hire lawyerssolelyto deal with
the federalgovermnenton gettingpermissionfor such increases.

New Proposals. Recent proposalsfor a new 'Basic EducationLaw' may worsen a difficult
situationwithregardto federalregulationof privateeducation. Thedraftlaw proposesto establisha new
NationalEducationCouncil(CNE)with 28 memberseach of them specificallyrepresentinga segment
of society,as well as a NationalForumof 60 memberswhichwouldprovideadviceon nationalpolicy.
The CNE's structure would make it very difficultto act decisively,since it would need to balance
politicallythe concernsof each pressuregrouprepresentedon it. The new draft law proposesthat the
CNE woulddeterminemcriteriafor allocationof federalfundsamonghighereducationinstitutions'-but
it does not providea mechanismfor the CNE to implementsuch criteria and budgetarycontrol would
still remain with MEC.

PrivateSector Reachons. A lobbyingorganizationfor the privatesectorof highereducationwas

formed in 1982. The BrazilianAssociationof MaintainingBodies(ABM)has over 140mantoras
representingover 200 institutions(or aboutone third of the privatesector). It defendsthe principlethat
educationis neithera pure enterpriseactivitynor a purelysocialserviceactivity. It lobbiesgovernment
for reformin publicpolicytowardsthe privatesector, withthe followingagenda:(a) less regulation:let
(publicand private) prices be definedby market;give institutionsfreedomto create/closeprograms,
increase/decreasefirst yearopenings(m one caseof a Rio-basedmedicalschool,MEC wantsto decrease
numberof openingsfrom 150to 50, due to pressurefrom the MedicalAssociation),to changecurriculum
timely; (b) publicfundsfor researchand communityservices;(c) profitprovision. The presentsituation
is hypocritical:the school is treated as an industrialenterprise, in terms of duties-for example-it gets
no specialfinancialcredittermsfrom banks;but whentheschoolsetsprices, thenit is treatedas a special
enterprise;(d) changethe publicrole from that of econcessionaire"of privilegesto that of gauger' of
qualityand "guardian"of publicinterest(makesure that there is 'truth in advertisement");(e) explicit,
consistentand transparentpublicpolicies;and (flexpediencyin processingrequests:3 years turn around
time from CEE is commonplacel
 m-24

HIGHER EDUCATION REFORM

1TeNeed For Higher Education Reform in Brad!

Increasingly,worldwide economicsuccessis based on abilityto incorporatenew technologiesinto

industrialprocessesrather thanon the simpleexploitationof naturalresources. The increasingInowledge
contentof productionmeansthat humanresourcedevelopmentat all levelswill becomethe fundamental
source of economicdevelopment. Brazil is far behind in its investmentand output in primary and
secondaryeducation. Innovationand disciplineon the factoryfloor will come from workers, not just
from managers. Not only is Brazil's current public investmentin primary and secondary education
inadequatean- inefficient,but there is a lack of public awarenessof the importanceof a cost-efficient
primary and secondarysector.

Inequitiesof incomebetweenthe rich and poor are higher in Brazil than in most other countries
at its incomelevel. Braziliansocietywill needto bridge this gap, not only for social and humanitarian
reasons, but also becausea moderneconomyrequires a broad base of educatedmanpower. A social
developmentpolicy shouldtherefore be a fundamentalelementof the Government'seconomicreform
program,with its strongestfocuson providinga qualityprimaryand secondaryeducationto the majority
of Brazil's citizensas well as on expandingbasichealth services. A broad base of an educatedcitizenry
will be essentialfor Brazil's internaltranquilityas well as to ensure internationalcompetitiveness.

The fundamentaldefinitionof quality in educationshould be that of 'value added'-in the sense

that an educationalinstitutiontakesthe raw materiali receives-the student,whateverhis or her native
ability or prior knowledge-andprovidesa productin the form of a graduatewhoseabDlitiesto reason,
solve problems, and communicatehave been increasedto the maximumextent possible. As more and
more economic developmentbecomes knowledge-based,it becomes fundamentalto ensure that the
populationincreasesits stock of knowledge. A high value added institutionin higher educationcould
well be one which acceptsvery poor students, or those with inadequatepreparation,and educatesand
developstheir capacity so that they become productivemembersof society. Many U.S. community
collegesshouldthereforebe consideredof high quality,sincetheyprovidegood remedialand/ortechnical
educationto young men and womenwith inadequatepreparation. Institutionssuch as the Universityof
Ijui in southernBrazil appearto be providingthis kind of education. But, in general, the current system
in Brazil encourages excessivecredentialismas well as what is called the 'pacto corrupto,' where
students and staff may havean unwrittenagreementto demandlittle in the way of teachingand learning.

Brazil also needs to strive to establish institutionswhich add directly to the stock of human
knowledgeof the world, similar to the great research universitiesof the United States and Europe.
Developingcountriesmust strive for similar excellencein those areas where their resourceendowments
are such that they couldbenefit from increasedlnowledge. For example,Brazil especiallyneedsmiddle
and high level expertiseto enable it to exploit in a sustainablemanner its rich endowmentof physical
resources and its diversified flora and fauna. Brazil also needs to keep pace with world wide
developmentsin economics,managementand other socialsciencesto strengthenmanagementof its own
society. FinallyBrazil, as wellas othercountries,needs to have an educationand researchsystemwhich
will retain its best scientists and researcherswithinthe countryso that they can serve their country's
needs. There is a world market in ideas-the fundamentalbuilding blocks of technologicaladvances,
which developingcountriesneed to be capableof tappinginto. While it is difficultto measuredirectly
Brazil's positionvis a vis the world, in 1984Braziian scientistspublishedabout1000articlesin scientific
 m1I-25
journals of internationalreputation,a number which, while higher than any other Latin American
country, amountsto less than .04% of the 230,000scientificarticlespublishedin the world in 1984.
Using a larger data base-the numberof books and papers producedby Brazilianauthors in the social
sciences, arts, humanities,science and technology, Brazil in 1986 produced about 7000 of such
documentsout of a worldtotal of 1.2 million. Furthermore,it is strikingthat Brazil's two world-class
universitiesare the state-rununiversitiesof Sao Pauloand Camnpinas
whilethe federaluniversities,many
of whichstrive for this excellence,have relativelysmall numbersof graduatestudentsand only islands
of higher qualityresearch in the federaluniversitiesof Rio, Sao Carlos, Minas Gerais, Pernambuco,
SantaCatarina,and Rio Grandedo Sul.

There is a growingawarenessin Brazilof the needfor reformof higher education,especiallyat

the undergraduatelevel, as the burden on federal governmentbudgets of federally funded higher
educationcontinuesin a period of financialstringency. For the Governmentto follow through on its
objectives,it is essentialto begin to treat higher educationwith an insistenceon efficiencyand cost-
effectivenessas in other sectorsof the economy-throughreducingcontroland regulation,increasingthe
cost-effectiveness of publicexpenditures,and re-definingthe roleof Governmentso as to meet onlythose
social needs which cannot be met by the private sector. Governmentwill need to mobilizeits most
progressive and farsightedcitizensto implementa program of reforms which will in the short run
adverselyaffect the fortunesof pressuregroupsand lobbiesbut in the long run will ensure meetingthe
nation's goals of long term socialand economicdevelopment.

The Government'sHigher EducationReform Prgram, September1991-August1992

The overall compressionin governmentspending,decliningreal wages in universitiesas a result

of fiscalconstraints,continuousstrikesby facultyand students,and the impossibilityof improvingquality
under the currentsystemclearlyput Brazilianhighereducationin crisis. Beginningin September1991,
the Goverment beganto put forth an importantpackageof reforms.

The programof reform was a comprehensiveattemptto makeBrazil's higher educationsystem

more efficient, effective and equitableand to improvethe quality of output with the same level of
funding. The reform especiallysoughtto changethe relationshipsof Governmentto public and private
institutions,through establishingnew systemsof autonomy,accountability,evaluation,certification,and
fiancing of both publicand private institutions.

Refonningthe Student Loan Scheme.The objectiveof the reform of the loan program was to
establisha transparentand sustainablestudentloan system, to ensure that federal funds couldassistthe
largest numbersof students at the lowest cost to Government,and to utilize loans as a cost effective
meansof encouragingincreasedqualityin the privatesector. After four monthsof discussion,Congress
passeda law makingMEC responsiblefor establishingthe regulationsfor the studentloan program,and
mandatinga minimumof US$50millionper year for the program. This is a major step forward, since
it integratesthe loan programinto nationalhigher educationpolicy.

Reforming the Financng of FederalHigher Education. The Government'slong term objective

was to providefinancialautonomyto federal highereducationinstitutions,as a meansof ensuringthat
institutionsoperated efficientlyand effectively. The maininstrumentof financingwould be a funding
formula encouragingimprovedefficiencyand quality. The formula, reproducedin Annex 1, had the
followingexplicitobjectives:(a) to increasestudentteacherratiosby 25%, as well asto similarlyincrease
studentnon-staffratios; (b) to increaseenrollmentin public institutionswith no increasein staff, as a
 m-26
meansof achievingthe targetedreductionin unit costs (it was ascertainedthat the institutionshad more
than adequatephysicalcapacityto enroll morestudents);(c) to encourageupgradingof facultyby giving
extra weightto faculty with advanceddegrees; (d) to encouragemore timely completionof studies by
providing funding on the basis of graduates rather than enrollments; and (e) to ensure adequate
maintenanceand supportservices. An additionalset of fundswouldbe made available,on a competitive
basis, for specific institutionaldevelopmentprojects. Tbe fornula was designedto be a dynamic
instrument,changingover time. Institutionswould be subjectto audit to ensure the reliabilityof their
statisticalreportingwhich formedthe basis of the formula.

Formulafundingwouldhelp to breakthe culturewhere accountabilitywas absent.To get the most

Government funds, institutions would need to move towards the parameters set by the formula.
However,they-couldmaketheir own specifictrade-offsamongelementssuch as salaries, maintenance,
equipment,studentteacherratios, and teachingstandards. In principlethe institutionscould also seek
outsidefundsfrom students,graduates,and theprivate sectorif they wishedto maintainstandardshigher
than those whichformedthe basis of the formula.

Throughearly August,MECwas using its formulato allocateportions of the discretionaryfunds

directlyunder its control. In 1993, it plannedto allocate all of these funds (about 10% of the higher
educationbudget)on the basis of the formula. Based on the formula,a numberof institutionsalready
moved to increase enrollments(many through night classes that facilitate access for lower income
students)and to increasestaff qualifications. The implementationof the formulawouldcarry with it a
variety of risks that institutionswill not behave as expected. MEC would need to review carefully
implementation,and revise the formulaas needed.

MEC also introducedseveral laws which would explicitlyprovide financialautonomyto higher

educationinstitutionsthrough makingthem autonomouspublic insdtutions' not subjectto normal civil
service regulations. Passage of one of these laws would be a major step forward in giving federd
insttudons the capacityand responsibilityto managetheir ownaffairs. Parallelto this, MECwas seeking
to permitall federal insdtutionsto establishassociatedprivate foundationswhichwould give them even
firther flexibilityto seek new sourcesof funding and to provideadditionalservicesto governmentand
industry. Twinnedwith autonomywouldbe a new system of accountabilitythat has until now, been
absentfrom the system.

Over the long run, MEC was seekingto replacethe law of 'isonomy', which provides a single
salary and promotionpolicy for all higher educationteachingstaff, as well as civil serviceprotection,
with a new system under which teachingand non-teachingstaff would be employeesof the institutions
where they work. In principle,this would allowinstitutionsto developdifferentiatedprograms and to
manage their funds more effectively. Passage of legislationof this sort would be difficult and time
consuming. As an intermediatemeasure, a law which establishesa 'floor' for salaries which higher
educationinstitutionscould supplementwith their own funds was submittedto Congress. On this basis
MEC hoped to enable institutionsto be free to establishtheir own set of salary incentive. Passageof
laws on financial autonomyand on isonomy will be essental for full implementationof the funding
formula.

Evaluaion of Higher Education. MEC initiated work on a long term plan for evaluationand
certificationof undergraduatehighereducationinstitutionsand programs,to be mainlycarriedout by peer
review committee and with a minimumof bureaucracy. The main objectivesof the plan wouldbe to
provide publicly available informationon the quality of public and private institutions,so as to help
 m-27
informstudents' decisionson attendance,as well as to partiallytie publicfundingto the results of these
evaluations,as a means of encouragingincreasesin quality. MEC wouldbegin with evaluationsof
medicaleducationfollowedby teachereducation.

DeregulatngProfessions. MECplannedto introducelegislationto deregulatea large numberof

professions,with the exceptionof the traditionalareas of health services, law, structuralengineering,
teachingand accountancy. Deregulationwould help to end the pervasive *credentialism of higher
education. Professionalassociationsare expectedto opposevigorouslytheseproposals.

Changingthe Seledion Processof Redors. MEC was planningto introducelegislationleading

to indirectelectionof rectorsthrough electionby the universitycouncil. This wouldenableinstitutions
to carry out neudedrestructurings.

Divensiing Funding Sources. Manyof the laws describedabovewouldencourageinstitutions

to diversifytheir sourcesof income. For example,financialautonomywould free institutionsfrom
excessivelystrict civil serviceregulations. Currentregulations,for example,do not permit institutions
to deposit funds into interest bearing accounts. The establishmentof private university associated
foundationswould also encouragediversificationof income. Permittinginstitutionsto use their own
funds to top off teachers' salarieswouldalso functionas an incentivefor universitiesto seekadditional
sources of revenue. Implementationof the fundingformulawouldmake institutionsmore awareof the
trade-offsin expenditurecategoriesand maylead them to reducesubsidiesin the provisionof services.

RecoveringCosts in Public Institutions. The Ministerof Educationfloated numerousideason

ways and meansof asking studentsin publicinstitutionsto pay for a portion of their education,either
now or in the future. Theseincludeda *parent-tax.,a graduateincometax, and encouraginginstitutions
to chargefor miscellaneousservicessuchas diplomasor parking. The graduatetax idea wasperhapstoo
easily dismissedon the grounds that the current fiscal reforms seek to overhaulthe tax structureto
simplifyit and reducethe numberof taxes. Anotheridea, currentlybeingimplementedin MinasGerais,
is to establisha scholarshipfund whichbetter off studentswouldbe requiredto contributeto, and which
wouldthenbe providedto needystudentsattendingthe sameinstitution.Giventhepoliticaluncertainties,
and in order not to jeopardize the implementationof the other reforms, MEC was not seeking a
constitutionalamendmentwhichwouldpermitthe chargingof tuitionin publicinstitutions. Furthermore,
MEC believed that reforms in financing would enable it to achieve a 25% savings in unit cost
expendituresin higher education,withoutreducingquality.

The reformprogramthus put forwardwassignificant.Its focuswas to improvethe efficiencyand

effectivenessof the currentpublic interventionin highereducation. The strategywas two-fold:first to
improvethe governanceand oversightof the system,by providinginstitutionswith greater autonomyand
introducingnew mechanismsof accountability- throughevaluationand a new fundingformula. Within
this new autonomyand accountabilityrelationship,publicfinancewouldbe used to stimulatequality and
efficiency. A funding formulafor public institutionswouldpromoteefficiency,while the studentloan
programwouldbe used to promotequalityin private institutions.

The resignationin early August 1992of the Ministerof Educationand his team put the reform
processon hold. It remainsto be seen whetherreformwill be taken up again at a later time.
 Em1-28
REFERENCES

ABM, "O EnsinoPrivado e o Poder Pl5blico,"in Estudos, No. 2. Brasilia.

ABM, O Ensino SuperiorParticular," in Estudos, No. 1, Brasilia.

Albrecht,D., and Ziderman,A., (1991) "DeferredCost Recoveryfor HigherEducation,"Washington:

World Bank.

APICE, (1989)EfectosSocialesI Econ6micosdel CreditoEducativo,Bogota:APICE.

Brazil, (1988) Constituieaoda Reriblica Federativado Brasil.

Brazil, Ministerioda Educaqo, (1989)A Isonomiano Contextoda Polfticade RecursosHumanosdas

Instituic6esFederaisde Ensino Superior,Brasilia:SESU/MEC.

Brazil, Ministerioda Educarao, (1990) A Educag1ono Brasilna Decadade 80," Brasflia:MEC.

Brazil, Ministdrioda Educa;5o, (1990) `Organizalo das PrincipaisIdeias Contidasnos Documentos

Apresentadospelos Grupos de Trabalho Institutdospelo Ministdrioda Educarao," Brasilia:
SENESU/MEC(mimeo).

Brazil, Ministerio da Educagio, (1990) Sistema de Acomanhamento e Avuliaclo: Resultados da

Avaliaciopor Area do Conhecimento- 1978-8,Brasilia:CAPES/MEC.

Brazil, Ministerioda Educacao,(1985) 'Uma Nova Polfticapara a Educalo Superior. Relat6rioFinal

da ComissaoNacionalpara a Reformultao da EducaqIoSuperior," Brasilia:MEC (mimeo).

Brazil, Ministerioda Educasao, (severalyears) Sinowsedo Ensino Superior,Brasilia:SEECISGIMEC.

Brunner, J, (1990) 'La Educaci6nsuperior en Chile: 1960-1990:evoluci6ny politicas,- document

presentedto the meetingof the RegionalProjectfor Comparisonof Higher EducationPolicies,
BuenosAires: FLACSO.

Clark, B. R., (1990) 'Basic Categoriesin Cross-NationalUnderstandingof Higher Education,"paper

preparedfor the Ford Foundationmeetingon HigherEducationin Latin America,November15-
16, 1990, New York.
Castro, C. de M., (1990) "SpecializedEducationfor GeneralJobs: The Marketfor Higher Education
in Brazil,' Internaional Journal for EducationalDevelopment,10(4):245-252.

Cunha, L. A. (1990), "Public Policies for Higher Educationin Brazil,' Higher Education Policy,
3(2):21-25.

de Souza, E. M., (1980), Crises e Desafiosno Ensino Suneriordo Brasil, Fortaleza:UFC.

 m-29
Divonzir,A. G.. et al. (1990)Educacaoe Cultura- 1987: Situacaoe PolfticasGovernamentais,Skris
IEA No. 128. Brasfia: IPEA/IPLAN.

Durham, E. R., (1989), A AutonomiaUniversitaria:0 PrincfoioConstitucionale suas Implicac6es,

Document9/89. Sao Paulo:NUPESIUSP.

Durham,E. R., (1988)-O EnsinoSuperior:Contribuigioao Debatesobreos Fundamentosde umaNova

Lei de Diretrizese Bases," Paper presentedat the 46' meetingof the Conselhode Reitoresdas
UniversidadesBrasileiras,March 1988,Floriandpolis,SC.

Durham,E. R., and Schwartman, S., (1989)Situacaoe PersDectivasdo Ensino Superiorno Brasil: Os
Resultadosde um Semingao,Document3/89, Sao Paulo: NUPES/USP.

Farret, M.M.L., (1985)ExDansboe Elitizacaodo Ensino Superior no Distrito Federal, Unpublished

Masterthesis.

Gaetani, F., & Schwartzman,J., (1991) Indicadoresde Produtividadenas UniversidadesFederais

Document1/91, Sao Paulo: NUPES/USP.

Gomes, M., (1990) "PersonalBackgroundof the BrazilianUniversityStudent,"preliminaryresults of

Ph.D. dissertation.

Guia do Estudante90, Sao Paulo: EditoraAbril.

Guimaraes, E. A., (1989) 'A Evolugbodos Custose das Mensalidadesdas Instituig6esPrivadas de

Ensino Superior," (mimeo).

Heyneman,S. P., & Etienne,B., (1988)Higher Educationin DevegopingCountries:What. How. and

When?,EDTWorkingPapers, Washington:The WorldBank.

IBGE, (severalyears), AnuarioEstatlsticodo Brasil, Rio de Janeiro:IBGE.

IDB, (1988)Economicand SocialPoiress in Latin America. SpecialSectionScienceand Technology,

Washington.

IPEA, (1990)Para a D6cadade 90: Prioridadese Pers=ectivasde PoifticasPiblicas IV, PolfticasSociais

e Organiza;Aodo Trabalho,Brasflia:IPEAIIPLAN.

James, E., (1979) "Product Mix and Cost Disaggregation:A Reinterpretationof the Economicsof
Higher Education,"Journalof HumanResources,12(2).

James, E., (1989) Differences Between Public and Private Higher Education: An International
Perspective (mimeo).

James, E., (1988)PhiliDpinesEducationSectorReview,Washington:The World Bank.

Leal, C. I. S., & Werlang, S. R. da C., (circa 1989) 'Retornos em Educagbono Brasil: 1976-86,"
(mimeo).
 m1I-30
Leal, C. I. S., & Werlang, S. R. da C., (circa 1988)'Polftica Educacionalno Brasil,' (mimeo).

Levy, D. C., (1986) Higher Educationand the State in Latin America Chicago: The Universityof
ChicagoPress.
Mendes, C., & Castro, C. de M., (eds.) (1984) Oualidade. Exoanslo e Financiamentodo Ensino
SuReriorPrivado, Rio de Janeiro: EDUCAM/ABM.

Meyer, V., (1982)An Analysisof AlternativeTuitionPoliciesfor BrazilianPublic Higher Education,

unpublishedPh.D. dissertation.

OECD,(1989)Evolutiondes Modesde Financementede l'EnseignmentSunerieur,OEMDMonogzgpb

on Higher Education,Paris: OECD.

OECD, (1988)ChangingPatternsof financein HigherEducation:Ja=an,OECDMonographson Higher

EducationParis: OECD.

Plank, D. N., Sobrinho,J. A., & Xavier, A. C. da R., (1991)Born Old: Why Brazil Lags Behindin
Education DeveloRment,unpublisheddraft manuscript.

Paul, J-J., (1991) 'Brazilian Higher Education: An EconomicApproach to its Rationality,' (draft
mimeo).

Paul, J-J., & Wolynec, E., (1990) 0 Custo do Ensino SuDeriornas InstituicoesFederaisDocumento
11/90, Sao Paulo: NUPES/USP..

Paul, J-J., & Ribeiro, Z. D., (1990) 'As Condigoesde Vida e de Trabalho dos Alunos do Ensino
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Paul, J-J., & Ribeiro, Z. D., (1989) 'Diversidadeda Ofertae EstrategiasdosVestibulandos:0 Caso de
Fortaleza,' in Cadernosde Pesauisa,Rio de Janeiro:FundabaoCarlos Chagas.

Psacharopoulos, G., (1987) "Education and Development: A Review,' Research Observer 3(1),
Washington:The World Bank.

Psacharopoulos,G., (1985)'Returns to Education:An InternationalUpdate and Implications,' Journal

of HumanResources,Winter, 1985.

Psacharopoulos,G., Tan, J-P, & Jimenez, E., (1990) 'El Financiamentode la educacidnen los pafses
en desarrollo,' in DocenciaPost-Secundaria18:2.

Psacharopoulos,G., Tan, J-P, & Jimenez, E., (1986)FinancingEducationin DevelopingCountries:An

exolorationof Policy Options,Washington: WorldBank.

Rcth, G., (1987) The Private Provision of Public Servicesin DeveloningCountries, EDI Research
Papers on Develo2ment,Washington:The WorldBank, .
 m-31
Saliba,A., (1990)TheVestibularExaminationand Accessto HigherEducationin Brazil:Evidencefrom
Brasfia, unpublishedPh.D. dissertation.

Schiefelbein,E., (1990) 'Chile: EconomicIncentivesin Higher Education",Higher EducationPolicy

3(3).
Schwartzman,J, (1989) "A SelectividadeSdcio-Economicado Vestibulare suas Implicaeoespan a
Polftica UniversitariaPdblica," in Educacaoe Selecao 19, Rio de Janeiro: Fundacio Carlos
Chagas.

Schwartzman,S, (1990). "A Diferenciaciodo Ensino Superiorno Brasil. *Mimeo.

Schwartzman,S, (1988). *Brazil:Opportunityand Crisis in HigherEducation.' In High Education,

17:99-119.

Schwartzman,S, (1989). -Ciencia,Profissoese a Questaoda Autonomia.Documento8/89. SaoPaulo:

NUPESIUSP.

Tan, J-P & Mingat,A., (1989)EducationalDevelopmentin Asia: A Com2arativeStudyFocusingon

Cost and FinancingIssues, InternalDiscussionPaper #51, Washington:The WorldBank.

Tramontim,R., & Braga, R., (1988) As UniversidadesComunitArias:Um Modelo Altemativo,Sao

Paulo: IPEAIIPLAN/CEC.

Tramontim,R., & Braga, R., (1990) 'Ensino Superior:Perspectivaspara a D6cadade 90.' Brasilia:
IPEA (mimeo).

UNESCO,(severalyears), StatisticalYearbook,Geneva:UNESCO.
USDepartnent of Education,AnnualStatistics(1989).
Vahl, T. R., (1980) A Privatizacao do Ensino SuDeriorno Brasil: Causas e Conseguencias,
Florian6polis:UFSClEditoraLunardelli.

Veloso,J.R., & Bastos,V.L., (1984)'Ensino Superiore Subemprego:Um Estudode Casoem Brasilia'

in C. Mendes& C. de M. Castro(eds), OualidadeExpansaoe Financiamentodo EnsinoSuperior
(pp. 129-155),Rio de Janeiro: EducamlABM.

Winkler,D., (1990)HigherEducationin LatinAmericaWorldBankDiscussionPM #77, Washington.

Woodhall,M. (ed.), (198?)FinancialSupportfor Students:Grants, Loans or GraduateTax? London:

Kogan Page.

Woodhall, M., (1983) StudentLoans as a Means of Financing Higher Education:Lessons from

IntemationalExperience. Staff WorkingPaper No.599., Washington.

The World Bank, (1986)Brazil:Finance of PrimaryEducation,Washington.

 m-32
The World Bank, (1989) BrazileIssues in SecondaryEducationReport No. 7723-BR(green cover),
Washington.

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7086-BR(gray cover), Washington.

The World Bank, (severalyears) World DeveloRmentReport,Washington.

 m-33
ANNEX1. PROPOSEDFUNDINGFORMULAFOR
INSTIUTIONS
BRAZIllANFEDERALHIGHEREDUCATION

Objeetive: StimulateQualityand Productivity

I. Calculation of the number of Full Tune Equivalent Undergraduate Students

N. = NS * D. * 1.3 + (Ni-Nk)* D, / 2 (1)

N. = Number of FTE undergraduatestudents

N, = Number of studentsreceiving and undergraduatedegree
De = Duration of course
Ni Number of new entrants

The coefficientof 1.3 assumesthat a studentcompletesthe course in 30 percent more time than
the official duradon of the course.

The term (N,-N,) indicatesthe drop-out and the term (N;-N3) De/ 2 assumes that students
who drop-out remain in the institutionfor a time equal to half of the duration of their course.
It is also the equivalentof a linear drop-out throughoutthe length of the course.

IL. Calculation of the Ideal number of teachers per undergraduate student

TABLE 1

Area Students/Teacher
(R)

Engineering and
Agricult. Sciences 9

Health Sciences 6

Natural Sciences
and Biology 9

Humanitiesand
Languages 12

Social Sciences 12
 m-34

The ideal number of teachers per student, Nd,, is calculatedusing the number of FTE students
in equation (1) for each of the areas in table 1 and dividing by the corresponding number of
studentsper teacher.

Ndg N,IR

3L Calculating the Basic Number of Graduate Students

N. e 3 Nuimberof Masters Theses (2)

- N,d =5'S Number of Ph.D. Theses (3)
N. = Basic number of Masters students
N,= Basic number of Ph.D. students

IV. Calculating the Ideal Number of Teachers for Post Graduate Programs

For each Masters Program, the ideal number of teachers, Nd. is:

Na. = 2 + (N_ I tY * R)) (4)

Where R is the ratio of studentsper teacher in table 1 and Ydepends on the assesment by
CAPES (the national evaluationorganizadon of post graduate training and rsearch) as shown
in Table 2.

Table II

CAPES Asssment Value of Y

A 0.5
B 0.7
C 1.0

D or not evaluated infinite

To obtain the ideal number of teachers, N,. for doctorate programs, the same method is used.
substitutingirh (4) N, for N.

Ndd = 2 + (Nd/ (Y *R)

 m-35

The ideal numberof teachersfor graduatesis the sum of the teachers for masterslevel and for
doctoratelevel of all programs. A program that does not have theses, or whose evaluationis
worse than C or not evaluated,receives2 teachers.
V. Ideal Number of Teachers for the Institution

The ideal total number of teachers, Nd,is the sum of the teachers calculated for all areas of
undergraduatestudiesplus the teacherscalculatedfor the graduate programs with an additional
10 percent above the total.

VL Cakulation of the Number of Non-Teaching Staff, excluding those for hospitals.

1. Support staff dedicatedto teaching(Ntrw):

Nf_ -(Ideal Number of teachers in the area) eZ (6)

The ideal number of teachers in an area uses the values calculatedfor the undergraduateand
graduate, supplementedby 10 percent, and Z is given in the table below.

TABLE 3

Areas Staff/Teacher

Engineeringand
Agricult. Sciences 1.1

Health Sciences - 0.9

Natural Sciences
and Biology 0.8
Humanidesand
Languages 0.15

Social Sciences 0.2

2. Staff for other activities:

N,|, = 1.05(130 + 0.06 * (N. + N,) + 0.07 " Nf + 0.0006 Physical Area (7)

N. + NN = The calculatedtotal number of FTE students(undergraduateand post graduate).

 m-36

Area = Constructionarea in square meters of the institution.

The ideal number of staff is calculated:

N, - Ntr. + Nf,, (8)

VIL Budget Allocation, Excluding Resources for Hospitals

The budget can be divided as:

1. Salaries and benefits for active teaching staff

2. Salaies and benefits for non-teachingstaff
3. Budget increase for with higher level degrees
4. Other recurrent costs and capital costs
Maintenance
Basic Expenditures
5. Trnsition (Adjustment)Budget
6. InstitutionalDevelopmentProjects

The budget will be calculatedin the following form.

1. Salaries and benefits of teaching staff utilizingthe average salary and the ideal number of
teachers.

2. Salaries and benefits of non-teachingstaff utilizingthe ideal numberof non-teachingstaff and

the average salary.

3. Budget increase for staff with higher level degrees.

T -((E + 3M + 7D) / (G + E + M + D)) *(0.2 / 7) (9)

T= Percentage budgetary increase

E= Number of teachers with a specialized(technical)degree
G- Number of teachers with a undergraduatedegree
M= Number of teachers with a masters degree
D- Number of teachers with a Ph.D

In equation (9), if all teachers have Ph.D's, T=20%

The budget increase for staff upgrade is:

T * No S,

St = Salary of full time professor with doctorate

 m-37

4. Other recurrentcosts and capital costs

Maintenance:(USS1.5)* ConstructedArea in Square Meters

Basic expenditures:0.2 * Ndt* SI

5. Transition(Adjustment)Budget
The institutionswhose budgets as calculatedabove are below the expenses for active
personnel will receive a transitional allocation, negotiated case by case on the basis of an
adjustmentplan.

6. InstitutionalDevelopmentProjects
These will be allocated especiallyfor projects of institutionaldevelopment.
 m-38
ANNEX2. LIST OF CONSULTANTREPORTS'

T1TE AUTHOR(S)

Administra,co de Universidades PSIblicas: A JacquesSchwartznan

Racionalidadeda Ineficiencia

A Produtividade Interna das Institui;5es de Ensino Jean-JacquesPaul

Superiorno Brasil

Aspectos do Perfil do CandidatoJBeneficiariodo Herbert GuariniCalhau

Programnade CreditoEducativono Brasil'

CreditoEducativono Brasil:0 Programa do MEC/Caixa Herbert GuariniCalhau

Econ6micaFederal

Evolu,co e Institucionaliza;aodo EnsinoSuperiorPrivado Edson de OliveiraNunes

no Brasil: 1968-1990 Laura Dantas
VioletaMaria Monteiro

O Futuro da Educa;ao Superiorno Brasil SimonSchwarlzman

O Problema Administratvo das UniversidadesFederais Pedro Lincoln Mattos

Brasileiras:Quest6es-Chave

O ProcessoDecisorioe a Problemdticado Gerenciamento TeodoroRogerioVahl

das UniversidadesFederais
Brasileiras

UniversidadesPlSblicase Privadas: SfnteseComparativa TeodoroRogerioVahl

de Alguns Indicadores de Universidades
Comunitariase UniversidadesFederais

1. All dated 1990 and written in Portuguese(unlessnoted othewise).

2. Also availablein English.

 HIGHER EDUCATION IN VENEZUELA:

ISSUES AND OPTIONS FOR REFORM

Laurence Wolff and Jose Joaqu(n Brunner

Table of Contents

STRUCTUREAND ENROLLMENT .................................. iV-

Intenal Efficiency .............. ..................... 3v-3
Outputand ExternalEfficiency................................... IV- 5

HIGHEREDUCATIONCOSTSAND FINANCING........................... IV- 6

EQUTrY .................................. iv-9

SCIENCEAND TECHNOLOGY.................................... IV-10

MANAGEMENTAND BUDGETING................................... IV-12

OPTIONSFOR REFORM .................................... V-16

CONCLUSIONS.......... ,V-17

REFERENCES ......... iV-19

 I

I
 STRUCTURE AND ENROLLMENT

The Venezuelanhigher educationsystem includes100 differentestablishments,classifiedin two

broad categories:university institutions(enrolling75% of students) and non-universityinstitutions
(enrolling25%), whichincludetechnologicalinstitutes,pedagogicalinstitutes,polytechnicinstitutesand
junior colleges. Public institutionsenroll 78% of students,comparedto 22% in private institutions.
Private education is more important in the non-university sector, where it accounts for 51% of
enrollment,comparedto only 12% in the universitysector (table 1). The structureof the system is
similarto Mexico,CentralAmerica,Peru, and Argentina,wherethe publiceducationsystemdominates,
rather than Colombiaand Brazil, wherethe majorityof studentsare enrolledin the private sector.

Table 1
HigherEducationEnrollment,1990-91

Public Private Total

University 419,993 59,654 479,647

Non-University 78,928 80,551 159,479

Polytechnic 11,150 0 11,150
TechnologyInstitutes 53,698 64,616 118,314
Colleges 14,080 15,935 30,015

Total 498,921 140,205 639,126

Source:OPSU

Universityinstitutions,both public and private, are overseenby the NationalUniversityCouncil

(CNU). The Departmentof HigherEducation(DES)of the Ministryof Education(MOE)oversees all
non university systems. The CNU, controlledby the higher education institutionsthemselves, is
responsiblefor allocatingthe budgetwhich is negotiateddirectlywith the Ministryof Finance.

A strikingaspectof the systeurhasbeenthe rapidgrowthover the last thirty years, as can be seen
below.
 IV-2

VENEZUELA
Enrollment Grovth In Higher Education
1960-1990

700

600 …---------------------- ---

500…____________

400…_____________________ H__________

300 …-----------------
- ------------

ioo …--------- ------

1960 1970 1980 1990

Private-- 2.634 4.736 38.869 140.205

Public 22.088 70.816 296.726 498.921
Total -W- 24.722 75.552 335.595 639.126

Source: OPSU
 IV-3
Enrollmentin 1960was less than25,000. This amounthas increasedrapidlyto 639,000in 1990.
Privateenrollmenthas grownfrom 2,600to 140,00duringthe sameperiod,increasingits shareof overall
enrollmentfrom 12%to -20%. Enrollmentis equivalentto about26% of the 20 to 24 age group. This
figure is well abovethe 19% averagefor Latin America. OnlyEcuador (33%) and Argentina(38%)
enrollhigherpercentages,and Brazil (11%), Mexico(16%)and Colombia(13%) are significantlylower.
In 1960the correspondinggross enrollmentrate was below 5%. However, the very high levels of
repetitionin Venezuelasignificantlyinflatethe gross enrollmentratios. Furthermoreas much as 10%
of enrollmentin the public system is reportedto be fictitious,i.e, to consistof students who rarely, if
ever, attend classes.

Graduateenrolmenthas grown significantly. For the year 1987, enrollmentwas 11,881. The
number receiving advanced degrees was 1,917. In 1987 437 graduate programs were officially
registered, 51 of them Ph.D programs,208 MA programsand 178 labelled'especializaciones'. This
means that the average size of such programswas an excessivelylow 27 students. Nearlyhalf of the
doctoral programs were offered by the Central University of Venezuela (UCV). There is little
informationon the qualityof those programs.

Interndl Efficency

In 1988-89,the highereducationsystememployedabout35,000teachers. 65% of thoseemployed

in the publicsector workedfull time. In comparisononly 13% of teachersin private institutionswork
full time. After accountingfor part-timeteachers,the FTE studentteacherratio in publicuniversities
is 16:1. This compares with over 35:1 in private institutionsas well as in public non-university
institutions.In the publicuniversitiesthe ratiovariesbetweenSimonBolivarUniversity,with a 7:1 ratio,
and the Universityof Carabobo,with a 44:1 ratio. Table 2 summarizesthesefigures. If the 10%of the
enrollmentin publicinstitutionsreportedto be fictitiousis subtractedfromthe total figures,then the FTE
studentteacher ratio shouldbe 14:1 rather than 16:1.

Table 2
Student-Teacher
Ratiosin Higher Education,1988-89

Nom. Student/
Full-Tim Half-Time Part-Time FTE/Studant Teacher
Enrollmt Teo:as Teachers Teachers* Rato Ratio

University
Public 280,507 15,521 1,781 4,133 16.1 13.1
Private 56,825 784 412,212 36.8 16.6
Public Pedagogical
Institutes 52,976 1,654 175 2,894 21.5 11.2
Non-University
Public 53,551 1,088 292 559. 39.0 27.6
Private 64,672 307 222 4,155 44.4 13.8
Total 508,531 19,354 2,887 13,953 20.9 14.1

Source: OPSU
*Part-ti"mteachersetmated to be working onequrter time
 IV-4

Internationalcomparisonsare difficultbecausesome countriesreport only nominalstudentteacher

ratios. The nominal ratios for neighboringcountriesare: Argentina(1985) 17:1; Chile (1984) 11:1);
Colombia(1987)9:1; Brazil (1988 public 9:1 (FIE) and private 30:1). OutsideLatin Americasome
figures are as follows: USA, public four year institutions17:1; Spain 19:1; and UnitedKingdom12:1.
Therefore, Venezuela'spublic studentteacherratios are roughly in line with similar countries.

Table 3 providesan estimateof completionratios in the higher educationsystem:

Table 3
CompletionRates - Higher Education

Entered Entered Completed s

1983 1986 1989 Completing

Universitie
Public Universities 53,300 14,096 26
Prive Universities 4,807 4,191 87
PublicPedagogicalInsL 12,673 1,506 12

Non-Univerities
Public Polytechnic 1,964 622 32
Publc TechnologyInsL 13,312 3,051 23
Privae TechnologyInsL 13,892 5,722 41
Public Coleges 2,502 1,571 63
Private Coleges 2,977 1,656 56

Total 70,730 34,647 32,415 31

Source: OPSU

The graduationrate in the universitysubsystem-consideringentrantsin year x and graduatessix

years later-is estimatedat 26% in the public universities,comparedto 87% in the private universities.
In the non-universitysector, which mainly providesthree year diplomas,the public completionrate is
29% comparedto 45% in the private institutions. While in principleit shouldtake only five or six years
of schoolingto produceone universitygraduate,in fact, after accountingfor the years of repetitionand
dropout, it probably takesthe subsystemaround 16 years of schoolingto producea graduate, or about
three times the ideal cost.

Another way of lookingat the efficiencyof the highereducationsystem is to calculatethe number

of graduatesas a percentageof total enrollment. On this basis the ratio of graduatesin public institutions
in 1989 to total enrollmentwas 1:15. The ratio of total graduates(both universityand non-university
institutions)to total enrolmentin other countriesin Latin Americais as follows: Brazil 1:6, Costa Rica
1:13, Cuba 1:9, Chile 1:10, El Salvador1:12, Mexico 1:10, Peru 1:46 and Uruguay 1:25.

The low internalefficiencyof public higher educationis a result of a numberof ad-hoc policies
which have become generalized. In spite of having a national entrance examination, most public
institutionshave a de facto open entrancesystem. They then seek to weed out studentsthrough failing
 IV-5
them in the first and secondyear of their studies. At the same time these institutionsdo not enforce
regulationsrequiringfailed studentsto leave the university. The result is that enrollmentsare severely
inflated.

Output and External Efficiency

Thehighereducationsystemgraduated210,577newprofessionalsand techniciansduringthe period

1980-1988,with a yearlyaverageof 23,400. Graduatesfrom the universitieshave doubledduring that
same period, increasingfrom 11,500 to 21,100. Graduatesfrom the non-universitysub-sectorhave
increasedthree times, expandingthe proportionof graduatescomingfrom this subsystemfrom 24.5%
in 1980to 359%.Thedistributionof graduatesaccordingto inowledgeareas and its differencesbetween
publicand privateuniversitiesis as follows:

Table4
Area,1987
of Graduatesaccordingto Knowledge
Distribution
Public Private

Number 17,155 3,964

Percent 100 100
BasicsSciencec 2.0 0.03
Enineerin,architecture
& lmohnlogy 24.1 21.0
Agricultual scienee 6.5 0.4
Healthscience. 21.9 2.5
Education 14.5 7.3
Socialscence andBA 29.3 67.9
Humanities 1.6 0.8

Source:OPSU

Comparedto aboutten years ago these figuresshowdecreasesin sciencesand engineeringand an

increasein socialsciences. Overall11%of the totallabor forcehas post-secondaryeducation,compared
to 5% twentyyears ago.

The estimatedprivate rate of return to studentsattendingpublic institutionsis about 12%. The

social rate of return is about 7%, which reflects the public costs of providing free public higher
education. This figure is considerablylower thanthe socialreturnsat lower levels, whichare estimated
at 18% for primary education,9% for generalsecondaryeducation,and 11% for technicalsecondary
education.' At the same time unemploymentof highereducationgraduateswas estimatedat 6.7% in
1990, muchlower than the figureof 11%amongsecondaryschoolgraduates.

Pscharopoulos and Fizbein.

 IV-6
HIGHE EDUCATION COSMS AND FINANCING

Table 5 below summarizes unit and total costs of higher education in 1990:

Table SA
Annual Expenditre in Higher Education, 1989-90

Enrollmt Unit Total % of

1989 Cost (USS) (USS) Total

Public 386,638 1,625 628,165,158 89.2

University 332,091 1,747 580,215,582 82.4
Non-University 54,547 879 47,949,576 6.8

Private 140,205 543 76,067,900 10.8

University 59,654 600 35,792,400 5.1
Non-University 80,551 500 40,275,500 5.7

Total 639,106 1,802 704,233,058 100

Source: OPSUand misson estimate.

Table SB
Unit and Total Cost in SelectedHigherInstitutio, 1989-90

Enrolmet Expenditur Unit Costs

(USS) (US$)

Centrd Universityof Venezuela 52,268 133,840,849 2,561

Universityof Cambobo 45,854 57,323,658 1,250
libertador PedagogicalUniversity 64,924 55,386,809 853
SimonBolivarUniversity 7,144 32,274,263 4,518
Open University 54,410 15,336,365 282
AndresDBeloCatholicUni;eruity 11,000 148,850 650
Franciscode MirandaCollege(private) 3,900 1,714,248 440
PublicTechnologyInstitutes 53,689 31,927,470 595

Source: OPSU

Total public expendituresin higher educationwere equivalentto US$628 million, while private
expenditureswere about US$76million. Thus Govenumentcontributes89% of the total costs of higher
education,whilethe private sector contributesabout 11%. Thesefiguresdo not includeexpendituresfor
loans and scholarships(discussedbelow). They also do not include expendituresfor R&D, much of
which goes to universities. About39%of the incomeof publicuniversitiescomesfrom the sale of goods
and services, a significantportion of which may be purchasedby public agencies.

The FundacidnAyacucho(FGMA)is the largestproviderof loans and scholarships,providingin

1990a total of 3,406 loans and 4,970grants, with an averagesize of loans equivalentto aboutUS$4,600.
Of these loans aboutone third are for study outsideVenezuelaand about a third are for undergraduate
 IV-7
studies. CurrentlyFGMArecovers1.5% of the real volumeof its outstandingloans. FGMA's budget
in 1990was aboutB350million, or USS7.8million,or aboutone percent of total public expenditures
in highereducation. A numberof other institutions(BANAP,Educredito,CONICIT,PDVSA)provide
smallernumbersof loans and scholarships.FGMAis planningto strengthenits management,expandthe
numbersof loans, and set newrepaymentrequirements,withsupportfrom a recentlysignedWorldBank
loan.

In termsof unit costs,the estimatedunit cost in public universitieshigher educationin 1989was

US$1,747. This figure has been decreasing significantly. Two years earlier it was estimatedat
US$2,600and the estimatein 1990is approximatelyUS$1,200. Withinthe individualuniversitiesthese
figures vary significantlyfrom a high of USS4,500for Simon Bolivar University,which is the best
research oriented higher educationinstitutionin Venezuela, and CNU, which has a large research
establishment,to the PedagogicalUniversity(UPEL),at US$850. The OpenUniversity,with students
participatingon a part time basisusuallyon weekends,has a unit cost of USS280.

The privatecontributionto the financingof highereducationin Venezuelaconsistsmainlyof tuition

fees paid by studentsenrolledin private sectorinstitutions. There is no comprehensivestudy of tuition
fees in all privateinstitutions. However,currentlyseveralof the larger privateuniversitiesare charging
aboutUSS600per year and severalnon-universityinstitutionsaboutUS$500per year. A small portion
of expendituresof privateinstitutionsis coveredbtygovermnentthrough studentloan schemes,as well
as throughgrants and supportfor capitalconstructionto a few of the higherqualityprivate institutions.

Becauseof the low internalefficiencyof public universities,the unit cost per graduatein public
universitiesis estimatedat 16 timesUSS1,747,or $27,952. This is morethan three timesthe ideal cost
of US$8,735if all students completedtheir studies in five years withoutrepetitionor dropout. This
comparesto a cost per graduatein privateuniversitiesof about$3,600.

Table 6 belowsummarizesthe sourcesanduses of fundsin publicuniversities.It showsthat public

universities get 89.5% of their funds directly from government. An additional6.3% comes from
'deficit' financing,in which the universitiesborrow from future governmentallocations. Only 2.7%
comesfrom sale of good and services. By lawthe publicuniversitiesdo not chargetuitionand therefore
this does not exist as a source of income.
 IV-8
Table 6
Public Universities
Sourcesand Uses of Funds, 1991

%) USS
(00(0)

Direct Goverment Support 88.5 642,023

Other GovernmentSupport 1.0 7,254
Sale of Goodsand Services 2.7 19,587
Other Income 1.5 10,882
Deficit Financing 6.3 4S703

Total 100.0 725,449

Uses by Program:

Teahng 26.8 194,618

Research 4.6 33,172
Extension 1.5 11,044
SocioeconomicProtection 36.2 262,766
(includingpensions)
AcademicServices 4.4 31,612
FinancialServices 9.8 70,883
GeneralServices 7.9 57,257
PhysicalPlant 2.0 14,688
Development 1.7 11,976
AdminiStation .2 7433

Total 100.0 725,449

Uses by Expenditur Ctegory:

Personnel 58.1 421,808

Maintenance 10.5 75,995
Debt Service 0.0 29
Equipmentand Furnitue 3.2 23,329
Supportto Other Public Agencies 0.0 64
Constuction & CapitalInvestment 0.9 6,865
Transfers 16.7 121,493
Investments 0.0 8
Other FinancialTransations 5.1 37,222
Other UndefinedExpenditures S. 38,637

Total 100 725,449

Source: OPSU
 IV-9
Table 7 summarizes public higher education expenditure in Venezuela and neighboring Latin
American countries:

Table 7
PublicHigherEducationExpenditureas a Percentageof
TotalEducationBudgetand of GDP
SelectedCountries

X of Education % of Year of
Budget GDP Data

Venezuela 35.3 1.24 1988

CostaRica 39.9 1.72 1988
Mexico 31.7 0.67 1988
Bolivia 23.2 0.72 1988
Brazil 21.0 1.20 1989
Colombia 20.3 0.55 1987

Soure: UNESCOand WorldBank reportL

Comparedto the rest of Latin America,the unit costs of Venezuelanpublic higher educationin
1990were higher than Argentina,Mexico,and Chilebut lower than Costa Rica, Colombiaand Brazil.
At the same time Venezuela's total public expenditures as a percentage of the education budget, as well
as a percentageof GDP are, alongwith Costa Rica, amongthe highestin the region and amongthe
highest in the world. This is the result of a publichigher educationsystemwhich, whileits unit costs
are not excessivelyhigh, enrollsa very high share of the 20-24year old population,comparableto that
of manydevelopedcountries. In short Venezuela,like Costa Rica, has optedto utilize public fundsto
satisfy the continuallygrowingsocialdemandfor educationwhile at the sametime it has sought, with
increasingdifficulty,to retain a reasonablelevel of quality in at least some of these publicuniversities.

During the 70's, the proportionof the public educationalbudget devoted to higher education
increasedfrom 32% to 46% and then declinedto 33% duringthe first six years of the 1980 decade.
In 1987the proportionof the public educationbudgetgoingto highereducationescalatedto 54.5% and
then droppedin 1988to 38%.

EQUIrY

Venezuelais unusualamongmanyLatin Americancountriesin that it collectsdetailedinformation

on the socioeconomicstatus of studentsin higher education. Table 8 summarizesthis informationfor
1986. The informationwhich forms the basis of the table is self-reportedby first year applicantswho
providedinformationon the educationand occupationsof their parents.
 IV-10
Table 8
Socioeconomic Status of Students Entering Higher Education, 1986 (%)

Private Public Population

Instiutions Institutions as a Whole

High 22.3 5.9 1.0

Middle 38.6 21.7 4.5
Middle-Low 32.4 42.9 14.1
Worker. 6.5 27.1 42.4
Marginal 0.2 2.4 38.0

Total 100 100 100

Source: Navarro

The table reveals that public institutionsenroll a much larger percentage of the two lower
socioeconomicgroupsthan the private institutions-29%comparedto 7%. Therefore to a great extent
the current publicsystemprovides an avenueof accessto highereducationfor large numbersof under-
privilegedyoung adults. However,at the same time overall enrollmentin higher educationis heavily
skewedtowardsthe higherincomegroups. A full 70% of the populationas a whole is in the two lowest
income levels, comparedto 29% attendingpublic higher educationinstitutions. Put another way the
chancesof those in the two highestincomegroupsattendingpublicor privatehighereducationare about
twentytimes greater than those in the two lowest incomegroups.

Thirty-four percent of students enrolled in public institutionsattended private fee charging

secondaryschools. These studentscouldat a minimumaffordto pay similar fees in higher education.
However,publicinstitutionsare legallynot permittedto chargetuition,thereforeheavilysubsidizingthose
studentsrecruitedfrom the higher and middle incomegroups.

SCIENCE AND TECHNOLOGY

Venezuela'seffort in scienceand technologyis estimatedat 0.7% of GDP, a figure whichis higher

than most other Latin American countries. As a matter of policy Venezuelahas been increasingthis
percentage,which stood at 0.4% in 1984. Venezuelarecentlysoughtto further increasethe amountof
fundsprovidedto scienceand technology,especiallythrougha recentlysigned MDB loanof US$92million
to CONICITfor support of scienceand technologyresearch. In 1991a total of B15 billion is estimated
to have been invested in R&D by Governmentas well as by parastatalorganizations.Of this amount
approximately11% is expendedthrough universitybudgets, 73% is expendedby autonomouspublic
research institutions,and 16% is expendedthroughthe ConsejoNacionalde InvestigacionesCientfficas
y Tecnol6gicas(CONICMI).Table 9 showsthe changesover time.
 IV-li
Table 9
Venezuela: Public Investment in R & D

1978 1984 1991 1991

Universities 31% 22% 7% 11

Research Institutions 54% 72% 71% 73%

Planning and Supporting Institutions 15% 6% 21% 16%

Total
9% 100% 100% 100% 100%
Amount (Bs. mils) 600 1,361 12,300 15,250

As a Percntage of GDP .4 .6 .7

Source: CONICIT (1991)

SeveralVenezuelanresearchinstitutionsare of world-classquality. The most notableis the Center

for Research and Investigationin Petroleum(INTEVEP),which gets a significantportion of all of
Venezuela's R&D funds (30%). Other high quality institutionsinclude the VenezuelanInstitute of
ScientificInvestigation(VIC) as wellas researchcentersin agricultureand environment.In the last few
years these institutionshave significantlyincreasedtheir share of the total governmentbudgetfor R&D
from 54% in 1978to the current73%.

CONICIT itself appearsto be a well-managedinstitutionutlizing a system of peer review for

award of most research contracts. It has no research institutiondirecdy under its jurisdictionand is
thereforea purelyinformational,planning,and fincing agency. CONICITusesthe peer reviewsystem
to recognizeand categorizeactiveresearchers. It currendyrecognizes6,000 researchers,of whichonly
about 1000 are receivingspecial salarysupplements(an averageof 20,000 Bs per month)on the basis
of their researchproductivity. CONICITalso has a programof approvinggraduateprograms (masters
and doctorates). CONICIT's new and major effort in financingR&D in Venezuelais being financed
through the IDB loan, which focusses on the key areas of chemistry and chemical engineering,
metallurgy,new materials,medicine,and environment.Agriculturalresearchis beingsupportedunder
separatefundingand institutions. CONICIThas alsoset up a fund, equivalentto US$200million,to lend
moneyfor technologicalinnovationin industry.

The weak link in Venezuela'seffort in R&D is that of university-basedresearch. The numberof

classifiedresearchersrepresentsless than 5% of the total number of faculty of the public universities,
rangingfrom 22% in the case of the USB to none in the case of UPEL. 85% of these researchersare
concentratedin three universities-UCV,ULA and USB. Currently CNU allocatesonly 3% of the
universitybudgetsto research. This percentagehas beendecliningsignificantlysince 1978,whenit was
equivalentto 7% of the universitybudget. The result is that many institutionsare findingthat their
equipmentis outdated. In addition,growthin enrollmentsand decreasingsalariesrelativeto industryare
making a research career within the university system far less attractive than it was a few years ago.
Studentshave been respondingto these trends. The result is that few students are studyingthe hard
sciences(only2% in 1990). The apparentdeteriorationof the qualityof puplicsecondaryeducationmay
also be restrictingentrantsinto scienceand technologycareers.
 IV-12

MANAGEMENTAND BUDGElTING

The Venezuelanpublicsystemis widelyperceivedto be in a crisis, with studentand teacherstrikes

regularlyclosinginstitutions,oftenbecauseof oppositionto reducingsubsidiessuch as bustransportation.
Publicinstitutionsthemselvesare under severebudgetarypressuresand the annualnegotiationswith the
Ministryof Financeare becomingincreasinglydifficult.

Manyof Venezuela'sdifficultiesandproblemswith publichighereducationstemfrom the current

way it budgets and oversees the universitysystem. Under the current system the CNU reviews and
approves plans, budgets, and policies of each university. However, the CNU is fundamentallya
cooperativeinstitutionformedby the highereducationinstitutionswhichit oversees. Specifically,votes
in the CNU are as follows: each autonomousuniversityhas one vote; three votes are made availableto
the experimentaluniversitiesand the private universities;one vote is providedto a representativeof
teachers;two votes to representativesof the Congress;two votes to students;and one voteto CONICIT.
Overall some 40 people, some with partial votes, meet eleven times a year to decide on policy.
Therefore the CNU is not a ubuffer" institutionwhich is independentof both Governmentand the
institutionsit oversees. Rather it is a cooperativemanagementgroup controlledby the institudons.
Therefore the CNU has a very limited mandatefor insistingon improvedefficiencyor quality of the
institutionsit oversees. Its most hotlycontestedfunctioncurrentlyis its abilityto approvenew programs
and courses in both public and private institudons. About 80% of its work is adminitative and only
about20% is relatedto policy.

The budgetingprocess normally begins in September, when each university makes a budget
proposal based on technicalguidelinesprovidedby CNU, fundamentallyrelatedto numbersof students
and numbers of staff. OPSUstudies these proposalsand, on the basis of technical criteria, normally
questionsor cuts the university'srequest. On average about30% is cut by OPSU. Overall80% of the
budgetis fixed on the basis of enrollments,and OPSUexaminesthe remaining20%. Becauseof budget
constraintsCNU has been strongly resistingrequestsby public institutionsfor authorizationto increase
intake of new students. Normallythe CNU mandatesa small percentagefor non-teachingsalaries,
currently3% for researchand 0.75% for library expenses. The CNU does not utiize criteria of internal
efficiencyor facultyproductivityfor fundingdecisions, which aretaken on an historicalbasis. However,
the CNU recognizes that the more research-orientedinstitutionslike the UCV and Simon Bolivar
Universityshould receivemore funding per studentthan the less prestigiousinstitutions.On this basis
unit costs vary by as much as a factor of three amongthe various universities.

The CNU sends its proposedbudgeton to the Ministryof Finance, which recentlyhas cut these
amountsby about30%. However,in the courseof the yearthe universitiesgo on spendingon a monthly
basis as if their full amounthas been approved. By Octoberof each year, the universitiesrun out of
funds and then request additionalfundsto completethe year. This requesthas generallybeen accepted,
often after strikes, but the funds are consideredto have been drawn from the followingyear. On this
basis the universitiesare graduallyaccumlating an increaseddeficitintothe followingyear whichmakes
forward budgetingand planningincreasinglydifficult.

All universitiesare required to providethe same salary scale and rules of promotionto all staff.
Universityteachers can retire at age 50 after 25 years of service. Large numbersof staff are currently
 IV-13
reaching retirementage and large numbersof vacanciesin the older institutionsare expectedshortly.
Pensionsfor all retired staff are includedin the universitybudgetunder the rubric 'socioeconomic
protection". These currentlyaccountfor 20% of the total budgetof the universities. A few institutions
(UPEL for example)are already unable to finance pension paymentsfully. Some institutionshave
workedout proceduresby which teacherscan retire but can continueto teachon a contractbasis.

The CNU staff has prepareda proposalfor more systematicreviewof institutionalbudgets. The
proposedsystemwould be based on a formulautilizingenrollments,numberof sections,and numbers
of professors. Usingthis formulathe CNU wouldbe able to put pressureon institutionsto fully utilize
its teachingstaff, who are supposedto teach 12 hoursper week. In additiona new parameterwouldbe
set for the ratioof non-teachingto teachingstaff, whichis an excessivelyhigh four non-teachingstaffper
teacher or one for every three students. The new parametersmight be that of one half per teacher.
Finallythe proposalfor researchwouldprovidea fixedamountallocatedto each publicuniversity,which
is expectedto be 6% of the total yearlyallocationto eachuniversity,and a variableamountthatwill take
into considerationthreeproductivityindicators:i.e., the ratio of accreditedresearchersworkingin each
universityto the total numberof researchersin the correspondingsciencesector, the ratio of accredited
researchersto FTE facultyin each institutionand the ratio of postgraduatesto postgraduateenrollment
within eachuniversity.

Theseproposalsare still under consideration.Other proposalsincludeincentivesfor universities

to diversifytheir sources of funds, includingfuller cost reimbursementfor servicesrenderedto other
governmentagenciesand increasedstudentpaymentfor servicessuch as food and transport, as well as
trnsferring out of each instituton's budgetall paymentsrelatedto pensionsand health. While all of
theseproposalsare a clearstep in the rightdirection,theywillnot encourageincreasedinternalefficiency
of these institutions,especiallywith regard to students. Becauseof the collegialnature of the CNU as
well as possiblepoliticaloppositionfrom students,it willbe difficultto developstrongerformulas.
 IV-14

A napsho of TwOo
Ihgtihutioni
ahe *ndres 3db; Un_versity (UAB) is a pat tholic institution estabied n 953..it
'owvenrols 9500tudts.in....ndergraduat'e
uction.'oe
anda 1500sdents:in a vaety of raduate
.o.'n vtribte et ot.." ilymongdmintr na
enierig oia omniain,euaio,jyhooyad eoois
: eab ....-.... r- ... .t
-... .i-ee... t..

maae -byan indeenn cucl wc mustaprve te propoerecto..heouclcludes

both.religius.d lJayrersnavs-wo Jeuis two bishp,the rectr -oneryersnttv of

Ee''voimcfdecides onthebudgetand
Th't"' tuition.Mth yeartuion charges-wllbe.B.3000.per...
monthbighi~t
ovemrcraiten:
subsdfr~edmontlh
period.
ii0Students.in
educthioe loan...so.to. iengineernag
W fud will be
.. paying0
.a B 3500:'permonth.'Thbi:s,:
.....vilbe.o...nt~. A
' comes:to
.00 about$600per'year. TheGovernentprovided
.a ..bidy10 niIionX......ast.year.
equiv:alento about'
5%' of .AB similar-mount
'.s".:" ex'ecd t yea. C 8%
.........

institutidns.
Such donations a:c::::.- about...
2... ope..
ingexpen.
.:so iuc . .a .. c..d

j-etting>
.n contribuio for aptalSconDSt ructiO from:n governme .and ndstry... .e...currt ,.
,;--onstructionprogram
c was80%finane bygovernmentand20% byprivateinidustry.Thephysica.l$S
--aci.itiesare'a,dequatein size:andwellmanaie and'manicured.'.UABsalaries"-are equivalent'-.o
publ*iesecor.'crie b iteh'
ot.hedlarge.:n'7::.',e
amountsoffrbingS bn't "1em' on-
"e .af memerfo e 0 students ecaeo ac of f sB oes researc only.
-:in> .:the B'bil -- nsprovEides anamnder,graduate:-.education:-wi
lo is' equtialen-t fthebeNs
-.0.:--
. pitbltc
.- 0 ;.:,
nsttutonsA'ccording to0 .1987 -figures,S% :ofenering
.''0'.
'....
-. '-'' . .',.-'y-:fLX
stdents 't?--:0,-'''''60j
. on the- };
scored above
entrance :aminat-:ns. 81 of enteringstudentsere wTlhe in :the:meddleorupper
3 classes.
institutionhas :10,000applicantsfor 2,00 spaces the firstyear of education. .Studentsat.UAB
seelcto completethieir--studiesin a reasonable periodof timeandentertheclaborforce. .BasedOn:
-enrollments
:: .- live years.earlier,.approxcimatelyG33%e
of enteringstudentsgraduate.However,therebpo
:::islittlerepetitioandstudents-who failusuallydropout. T eccostper graduateis aboutUS$4,800.iD0
le totalbudgetofUS$6.6millionresultsiabout
MO 1100 graduates.
 IV-IS

TheUniversityof Carabobo (UC) is a publicuniversitywith problemswhich,albeitsimilar

to those of.other public institutions,.appear.to be more severe. UC currently enrolls 52,000.
students',whichmakes it one of the thireelargest publicinstitutionsin Venezuela. However,it is
estimatedthatit least'10% of these students do notzatend classes. Ihe physical facilities at
.. Caraboboare extremely"outdatedand.inadequate..t has.0.8 square meters for each enrolled,'
stdent,: a figurewhich'is far'lower thanthe.interiona y a epted re of five'sare meters..;
-perstudent andis.lower than any other institution in Venezuela. .Pysicaly most buldingsaren',
:.:deplorable:shape withitotallynindequiatescientificand'teachingequipment.anda lc'lkofalibrar.
'.boos.-.UC,.has'been unableto resist pressur.sto accept'largenumers of unquaified sudent.
Onlyabout"I o enteringstudentsscred Abve 60'in the entra'n exaia . About47*%are' .
in the -middte:or uper classes.. * e' situation -isuch hat' on 17% of ene ng'meering
"students, of which there are 1000,passed the end.ofthe first yearexamination.:.Similarly:'UCwas.,
accepting800per year into medicine,whilethe"insitution has agreementswith the local hospitals
-to train a maximumof 100. There'are8500studentsenrolledin'the facultyof law. Utl' last year..
studentswere permittedto continuetheir studiesno matterhowtheyiscoredonthe,finalexamination..
-andno checkswere madeon howmanyclasses theyattended.,.. ;......

-About.19%ofienteringstudentseventuallygraduate. Becauseof high repetition rates, the

-system 'requires 222shoolyes
i to rod onegrde.., Crty; g adu om o
medicine take :avcrageeof9aOf half years colete the 6 year cour.. h education and
'engineering
those who`docompd the.:coursoaveeage
' .sixeao..ac''coralte. ' e.r lei
erall: "the fitcos U$100rnslteintoaompc raduate-couo.
about S--o' 0.
aks tam6t ....
~tih ourti esusex ....
eniv.a
~~~~~~~~~~. . -.
. . ;-;. iii. ..toal.bud
i. ..-- ... . etsao
:- utUS 5 ilo
,-nis
was
in fraed-ofu.lages
tne sc000 studentsproests.
ofare'als
it mmMcr
schooli"
the o'-'-

famuntyof000,
amnthe.
and Fmealschooly
f acrcepted200
rater tag nitsi permcitted'amountiof10om0
this wadiinthe face'of large S. e st;ulet protests.A numberof theichool are alssponsoring
pre-,, ente oursesto helpraise up thestandard-of
c nteringstudents. ofC is also fial biing
tomenrce rules
f readONITboo 'student attendance,requeiraiyg
for stuidentsto pass at least50%,,..
of the cou-re work or -to drop out To uvimdroadinistration,
ec has established wa pivate"C
foundationto administratethe library aed to:p
p '-va
-d - ety of infort sy'stemsfor'students:..'
faculty,andadministrators. Fnallythe UChas recevived'aagreement inprincijplefrom
government.
that additionalfacilitieswfil,bebuilt. The total'costs wouldbe :in.excess,OfUs$50 million....
'Currentlthe facultyof lawis under:construction.,
lDespitebeingoneof the weakestpulcuieste ntrsof research,UChasatrce
some fundsfrom CONICrr for engin'eering research,'especiall in healthiand environmentally,.
relatedareas., A totalo6f3% of UC's budget'isallocatedto research. In.accrdancewit
gUidelines, I75 ialoated to libraries.
 IV-16
OPTIONSFOR REFORM

To create an environmentthat will provide the necessary incentivesto improve quality and
efficiencyin the publicsystem, enhancefacultyperformance,and encourageself-assessment,a new set
of transparent funding criteria and mechanismswill need to be introduced, based on how much the
Governmentestimatesthe public system should cost rather than on how higher educationinstitutions
would like to spend such funds. As noted above the CNU is already discussingmoving away from
incrementalfunding through establishinga formula which combinesdifferent criteria for allocating
resources to teaching,research and extension.However, the current attemptshouldbe consideredonly
a modestattemptat settinga formulawhichwouldprovideappropriatesignalsfor institutionsto improve
their efficiency;giventhe collegialnature of the CNU eventhese modestattemptsmay fail.

While the currentproposedformulawouldhelp to regularizeuse of staff time, would reducethe

number of non-teachingstaff, and wouldput researchsupporton a systematicbasis, it wouldnot deal
with the most fundamentalproblemof publichighereducation,whichis high dropoutand repetitionrates
and the excessivetime i takcesfor studentsto graduate. It is highly inefficient,both for studentsand
for Government, for public institutionsto accept large numbers of students and then to fail them
repeatedly.

The simplestand most powerfulformulato encourageimprovedefficiencywould be one which

financesinstitutions,at leastpartially,on its numbersof graduates. A modelwhich couldbe considered
would be that of the Netherlands,which has an utomaticadmissionspolicy. The proposed Brazil
formula could also be adaptedto Venezuela. In the Netherlands'fundingformula, universitiesreceive
4.5 years of annmalunit cost fundingper graduate and 1.5 years for dropouts-regardlessof how long
studentstake to completetheir studiesor at whatpoint in their studiesthey drop out from the institution.
The dual incentivesare both to weed out poorly performingstudents early on, and to get people to
graduate as quicklyas possible. Odter criteriashouldbe based on performanceand efficiencyin the use
of resources and should help ensure that institutionsdo no arbitrarilyaward degrees to get increased
funding. The results of such changeswouldbe a major reductionin the costsper graduate and a much
higher social and private rate of return to investmentin higher education.

The implementationof such fundingmechanismswouldrequirea changein the status of the CNU,

which shouldbecome independentof the institudonsh oversees. A majorityof the CNU would consist
of representativesof Govermmentand societyas a whole. 'Buffer' institutionsof this sort have been
shown to work well in the UnitedKingdom,Netherlands,and the UnitedStates.

There is also a strong case for reducingthe absolute amountsof public expenditureon higher
educationand for increasingthe private contributions.The most straightforwardway of achievingthis
aim would be to charge tuition fees to all students in public institutions and simultaneouslyoffer
subsidizedloans and scholarshipsfor the needieststudents. At a minimumsuch fees couldbe equal to
the current charges in private secondaryschools which one third of public university students have
attended,and loan and scholarshipscouldbe offeredto the remainingtwo thirds of students. Venezuela
currentdyhas some small but relatively well organized student loan schemes (FundacidnAyacucho,
Educredito)which couldbe expandedunder this scenario.

As in most of Latin America there is very strong oppositionin Venezuelato chargingtuition in

public institutionswith their long traditionof free education. It has beenarguedthat cost recovery could
 IV-17
alsobe achievedthrough a graduateincometax system,in whichgraduatesof publicinstitutionswould
pay, say, an additionaltax equivalentto 29%of their incomeover a fifteen year period. An alternative
currentlyunder discussionin Brazil wouldadd a portionof the costs of public higher educationtO the
gross incomereportedon tax returnsof parentsof studentsattendingpublicinstitutions,who wouldthen
be taxedat the currentmarginalrate. Howeverboththesealternativesrequirea better functioningincome
tax systemthan Venezuela'scurrentsystem.

In addition,higheradmissionstandardsin publicinstitutionswill resultin increasedprivatesector

growth. This is alreadyhappeningunderthe pressureof reducedfundingfor public institutions. Under
this scenario public universities would increasinglybecome higher quality, research and graduate
educationorientedinstitutions. This policywouldalso require expandedloan and scholarshipschemes
for needystudentswishingto attendprivateinstitutions.

Increasedfundingon the basisof opencompetitionfor innovativeresearch,teachingand extension

programsshouldalso be explored. The recentexpansionof fundingby CONICITon the basis of open
competitionfor researchcontractsis a strongstep in the right directionbut more can be done by CNU
itself in areas such as extensionand innovativeteachingprograms.

Along with fundingmechanismsbased on formulae,contractualarrangements,studentfees and

other similar provisions,it will be necessaryto strengthencurrent initial efforts towardsutilizationof
institutionalself-assessmentproceduresas well as the use of externalevaluationsand accreditation.Such
procedures,as well as the reportingto the publicof results, can serve to guideresourceallocationand
to createfurther incentivesfor qualityand performanceimprovements.

In additionto these system changes,Venezuelaneeds to examinecloselythe role of the higher

educationsystem in trainingand upgradingprimaryand secondaryschoolteachers. The current system
seems to be succeedingin providingbachelor's degreesto large numbersof currentlypracticingand
futureprimaryschoolteachersbut withlittle discernibleimpacton studentlearningor reducedrepetition
or dropout. It maywellbe appropriateto reducethe requirementsfor primaryschoolteachercertification
from those of the five year bachelor's degree to a three year 'certificate' while at the same time
refocussingpre-servicetrainingon increasedpracticeteachingthrough'sandwich' coursesandsupervised
internships.

Another way that the higher educationsystemcan providea serviceto the lower levels wouldbe
to undertakeresearchon the resultsof the universityentranceexaminationand then reportthe resultsof
this researchto secondaryschool teachersand schooldirectors. This researchcouldidentifythe higher
order thinkingskills in whichstudentsare deficient. The resultswouldthenbe incorporatedinto in- and
pre-servicetrainingprograms.

CONCLUSIONS

The adoptionof fundingmechanismsbased on formulas,contractualarrangements,studentfees

and other similarprovisionswould greatlyenhancethe alreadyemergingtrend towardsthe utilizationof
institutionalself-assessmentproceduresand the continuoususe of externalevaluationsand accreditation.
Evaluation, at its simplest need not be linked to funding criteria but it can serve to guide resource
allocationandlor create incentivesfor quality and performanceimprovements. Anotherpolicy option
which would help ensure that higher educationserves societymore effectivelywouldbe reformof the
 IV-18
systemof trainingteachersto emphasizeincreasedpracticeteachingandto shortenthe excessivelylengthy
periodof trainingprimaryschoolteachers. In addition,the CNU couldundertakeresearchon why some
students do better on the university entrance examinations, as well as remedial programs for
underprivilegedstudentsdoing poorly on such examinations.
 IV-19
REFERENCES

Albrecht,Douglasand Ziderman,Adrian, FundingMechanismsfor Higher Education: Financingfor

Stability.Efficiencyand ResponsivenessTheWorldBank, DiscussionPap, Washington:1991.

CONIC1T,Im Plan Nacionalde Cienciay Tecnologfa,Caracas: 1991.

Navarro, Juan Carlos, WVenezuelan

Higher Educationin Perspective,' Higher duclati2n21(2):177-8,
the Netherlands:March, 1991.

OPSU (Oficina de Planificaci6ndel Sector Universitario), CNU (Consejo Nacional de Educaci6n

Superior),BoletfnEstadfsticode Educaci6nSugeriorno. 13, vols. I-IV, Caracas: 1990.

Psacharopoulos,George, and Fizbein, Ariel, 'A Cost-BenefitAnalysisof EducationalInvestmentin

Venezuela,1989,' The WorldBank, A View From LATER, Washington:1992.

Reimers,Fernando,'The Feasibilityof IntroducingLoanSchemesto FinanceHigherEducationin Latin

America: The caseof Venezuela, The WorldBank, unpblishedpaper, Washington:1990.

UNESCO - CRESALC,Visi6n gualitativade la educacidnsu2erior en America Latina I el Caribe,

Caracas: 1991.
l~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
 - Continued from back Page

No. 19 'Inve sme in Science Researchand Training:The Case of Brazil and Implicationsfor Other
Countries'by Laurence Wolff, with contributionsfrom George Psacharopoulos,Aron
Kuppermann,Charles Blitzer, GeoffreyShepherd, Carlos Primo Braga and Alcyone Saliba,
September 1991

No. 20 'Prenatal and Perinatal Health Carc- A DiagnosticInswnment- by Francisco Mardanes,

September 1991

No. 21 "MaternalAnthropomeny in Prenatal Carm:A New Maternal Weight Gain Chasrt by Pedro
Rosso, September1991

No. 22 "PovMy and Inequawlityin Lain America and the CaribbeanDuring the 70s and 80s: An
Overiew of tie Evidence' by Dominiquevan de Wale, September 1991

No. 23 'Social Indicators in Lxin Amenricaand the Caribbean.A Compilationof Statistisfrom 1970
to the Present" by George Psalaropoulos and Bill Wood, October 1991
No. 24 01CElEX - A StudemtLoan Succss Story in Colombia' by Samuel Carlson, October 1991

No. 25 'EducationalDevelopment and Costing in Meico, 1977-1990:A Cross-Statrelne-Series

Analysis' by Juan Prawda and George Psacharopoulos,November 1991

No. 26 OACost-Benefi Analsis of EducationalInvestment in Venezuela,1989' by Ariel Fiszbein and

George Psacharopoulos,November 1991

No. 27 'EducationalDecontr ion in Latin AnriL Lessons Learned" by Juan Prawda, March
1992

No. 28 'Education and the Labor Market in Uruguay' by Geore P and Eduardo Velez,
lcharopoulos
June 1992

No. 29 'Some OperationalGuidelinasand bsus for the Evduation of Investmentsin Pmwy Health
Care in the IAC Aegion' by Francisco Mardonesand Barton Burkhater, June 1992

No. 30 'The Economics of Higher Education in Brazil' by Jean-JacquesPaul and lAurence Wolff,
July 1992

No. 31 'Repetition and InadequateAchievanent in Latin Amenrca'sPrunay Sdwools: A Rview of

Magnitudes, Causes, Relationshipsand Strategies- by Enesto Schiefelbeinwith Laurence
Wolff, August 1992

No. 32 'Early ChildhoodDevelopmentPrograms in Latin America: Toward Definition of an

Investment Strategy' by Robert G. Myers, August 1992

No. 33 'PrimarySdiool Quality in Mceico' by Juan Carlos Palafox, Juan Prawda and Eduardo Velez,
November 1992

No. 34 'Higher Education Wfonmin Chile, Brazil and Venezuela. Towards a Redefinition of the Rok
of the State' edited by Laurene Wolff and Douglas Albrecht, November 1992.
 Views from LATHR
No. 0 'lhc Magnitude of Poverty in Latin America in the 1980s' September, 1990

No. I 'An Ounce of Prevention is Worth How Much Cure? Thinkingabout the Allocation of Health
Care Spending' by Philip Musgrove, September 1990.

No. 2 'Decentralizationand EducationalBeraucraciaes- by Juan Prawda, November, 1990

No. 3 'What Should Social Funds Finance?.:Portfolio Mix, Targeting,and Efficiency Citeria' by
Margaret E. Grosh, December 1990

No. 4 "Financal Balanc in Chil: The ISAPRES (Institudones de Salud Previsional) Health Care
System and the Public Seaor" by Philip Musgrove, Janury, 1991

No. 5 *Popukation,Health and Nutrition Issues in the Latin Amerncanand CaribbeanRegion and the
Agedirfor the 90's' by Oscar Echeverri, January, 1991

No. 6 'Population and Family Planning in the 1990's: ReconcilingMacro and Micro rsues' by
Boce D. Carlson, February, 1991

No. 7 "TheFeasibility of Student Loans in Latin America: A Simulation' by Samuel Carlson and
GuozhongXie, March, 1991

No. 8 'Jansforming the Viidous Orcie - The Costs and Savings of School Inefficiency in Mcdco' by
Samuel Carlson, April 1991

No. 9 'Colombia's "ErcuelaNueva": An EducationInnovation' by Eduardo Velez, May 1991

No. 10 'Health TechnologyDevelopment and Assessment:Do LAC Countries Have a Choice?' by

Oscar Echevei, June 1991

No. 11 'The RecurrentCost Faaor in the PHR Sector' by Jacob van LutsenburgMam, July 1991

No. 12 "TheBurden of Death at Differm Ages: Assumptions, Parameters and Values" by Philip
Musgrove, August 1991

No. 13 "GovernmentExpenditureon Social Secors in Latin America and the Caribbean. Statistical
Trends' by Hongyu Yang, August 1991

No. 14 'From Manpower Planning to Labor Market Analysis' by George Psacharopoulos,September

1991

No. 15 'An Update on Cholera in the Americas' by Francisco Mardones, August 1991

No. 16 'What do we think about Health Care Finance in Latin America and the Caribbean?' by Philip
Musgrove, September 1991

No. 17 "PopulationGrowth, Ezernalities and Poverty" by Nancy Birdsall and Charles Griffin,
September 1991

No. 18 'Wage Trendr in Latin America' by AlejandraCox Edwards, September 1991

- Continuedon inside Page