Brazil's Rousseff announces more education spending cuts

By | July 31, 2015

BRASILIA/SAO PAULO Brazil announced another cut to education spending on Thursday, the latest step back from President Dilma Rousseff’s pledge to turn the Latin American giant into an “education nation” in her second term.

Brazil will reduce the amount it spends on education by 1 billion reais ($296.7 million) this year as part of a round of budget cuts announced last week, according to a special edition of the official gazette published late on Thursday.

The reduction comes on top of nearly 9.5 billion reais in education spending cuts implemented in May as the government works to slash expenditures and ward off a sovereign credit downgrade by rating agencies.

Shares of private education companies Kroton Educacional SA and Estacio Participacoes SA dropped 3.9 percent and 6.5 percent, respectively, after the cuts were reported earlier in the day.

Such firms, which run for-profit colleges, have been the main beneficiaries of generous government student-financing programs and their shares often swing based on the outlook for government spending in the area.

At her second inauguration earlier this year Rousseff pledged to focus on education, heralding “education nation” as her administration’s motto. The phrase is stamped on nearly all official communiques and is visible behind the president at most press conferences.

Last year Brazil’s federal government spent 23 percent of its tax income on education, well above the average of developed countries.

Still, low learning achievement and high dropout levels persist, dragging on productivity and hampering the country’s competitiveness in global markets.

In the Organisation for Economic Co-operation and Development’s most recent PISA education rankings for 2012, Brazil ranked near the bottom in mathematics, science and reading.

To be sure, some analysts say the problem lies in inefficient spending and a lack of strong tools to evaluate new or existing programs, suggesting the cuts may have a limited impact.

“When you take a model that already isn’t working well and you simply amplify it, its irrational for you not to evaluate and reform the system,” Marcos Mendes, an economist and legislative consultant to Brazil’s Senate said in a recent interview.

($1 = 3.37 Brazilian reais)

(Editing by Diane Craft and Chris Reese)