As citizens were locked up in their houses during the COVID-19 pandemic, education shifted from classrooms to online lessons. Many Latin American children lacked access to the Internet and fell behind in their education. Online education functioned as a double-edged sword cutting off the poorest of society while simultaneously showing great promises to connect to isolated communities providing a cheaper alternative to face-to-face lessons. Brazil is the biggest market for education technology (EdTech) in Latin America, attracting half of the investments in the region.
Brazil has one of the world’s most unequal societies, with many lacking access to quality education and job opportunities. The use of technology for educational purposes might be a tool to help close the socioeconomic gap. Expectations are that Brazil’s leftist president, Luiz Inácio Lula da Silva, will invest in education as a tool to alleviate poverty and tackle endemic inequality in the nation. This article will cover the EdTech companies positioning themselves to benefit from government subsidies under Lula’s presidency.
Lula’s first presidency improved accessibility to education
In his first presidency, Lula increased education spending by 50% to lift poor Brazilians out of poverty and lower dropout rates of young students. After years of neglect by the political elite, the lower classes of society finally got some attention. Coming from humble beginnings himself, Lula has always seen education as the pathway to fight out of poverty. Access to education was not only improved by lowering educational fees but also by improving access to basic necessities and guaranteeing food security. Several of these programs were the following:
Bolsa Familia: reached more than 50 million people with conditions ensuring full-time education for the children and regular health check-ups. Resources were used to buy food, school supplies, and clothes in order for children to be prepared for a full day at school.
Fome Zero: implemented in 2003 to target food insecurity and hunger in working-class communities providing free meals in public schools. Hard to study on an empty stomach.
All Programme: implemented in 2005 to increase the number of disadvantaged students attending public universities. The number of enrolments in higher education more than doubled during Lula’s and Rousseff’s governments, rising from 3.5 million in 2002 to more than 7.1 million in 2014, according to the National Institute for Educational Studies and Research.
The education system has taken some blows in recent years
Under former president Bolsonaro, budgets for the education system were cut/restricted by the Ministry of Education (MEC). Steep budget cuts were made to public universities as the far-right president claimed that leftist ideologies were being spread at the institutions. Large protests followed as students and teachers took to the streets fighting for the right to proper education. The huge backlash eventually lead to funds being freed up after all .
Many children were cut off from the education system as they did not have the means to transition to online education. The Covid pandemic painfully showcased the inequality issues in the country as approximately 5 million children were left behind.
Of all the OECD countries, Brazil had the longest shutdowns of its schools in 2020 with 180 days compared to an OECD average of 44 days.
Expectations for EdTech are high under Lula 2.0
On the 19th of April 2023, President Lula announced a R$2.44 billion increase in the budget of universities and federal institutions across the country. The budget increase is to fund basic university operations, as well as investment initiatives such as scholarships.
Nowadays, online education has proven its value in providing education to a broader audience at lower costs. It attracted growing attention during the pandemic as investments flooded the EdTech sector. For many, it has also become a manner to follow education without having to relocate far away from family and friends, benefitting especially Brazil’s isolated communities.
In addition, Lula’s focus on social inclusion could lead to increased demand for EdTech products and services. Many Brazilians, particularly those from low-income families, do not have access to quality education. EdTech companies can help to bridge this gap by providing affordable and accessible educational resources.
Market has been expanding with record levels of investment
Latin America and the Caribbean (LAC) is home to a large and growing population of learners. There are over 180 million students in formal primary, secondary, and tertiary education, and another 300 million workers and job seekers looking to re-skill and up-skill. This demand for education is driving the growth of the EdTech market in LAC. Venture Capital investment in LAC EdTech has more than tripled from 2020 to 2021.
The EdTech ecosystem in LAC is now home to over 1,500 companies, which have created over 4,500 jobs and attracted $1 billion in investment over the last 10 years. These companies are developing innovative solutions to meet the needs of learners across the region, from early childhood education to lifelong learning.
The EdTech market in LAC is still in its early stages, but it has the potential to transform the way education is delivered in the region. By harnessing the power of technology, EdTech companies can provide learners with access to high-quality education that is affordable, flexible, and relevant to their needs.
The Brazilian EdTech ecosystem is the largest and most mature in Latin America, with more than 880 startups. The market totaled $1.3 billion in revenues in 2021 and is expected to grow into the future. Most of these startups focus on K12 and workforce education, while only 15% focus on higher education. However, higher education attracts the most funding. The Brazilian EdTech ecosystem is still in its early stages, but it has the potential to transform the way education is delivered in Brazil and Latin America.
Several big established EdTech companies have foreign listings on the Nasdaq or OTC. The companies accessible for foreign investors:
EdTech stocks reacted positively on Lula presidency announcement
The announcement of Luiz Inácio Lula da Silva as the new president led to some mixed reactions from financial markets. The leftist agenda raised doubts about the consequences for the business environment. EdTech stocks reacted positively with the foresight of receiving government investments in the future.
Lula’s spending plans were met with some resistance, which dampened some of the initial excitement for the future of the EdTech sector. After a prolonged decline in EdTech stocks, it appears that a floor has been reached.
President Lula is exerting political pressure on the Brazilian central bank to relax its restrictive monetary policy. Interest rates in Brazil are currently much higher than the inflation rate, with the real interest rate sitting at around 9,8%. This leaves room for the central bank to lower interest rates, which would free up cash for public spending, including education.
Trend of online education is expected to grow into the future
The education technology sector has passed its trial phase with flying colors and is expected to stay. Latin American countries have seen the benefits of distance education in providing schooling to those living in remote communities. A prerequisite for the success of online education is a guaranteed internet connection for all, also the poorest of society. Improved affordability of online education should open up education to a broader audience.
Brazil is the largest market in Latin America for EdTech investments, and its large landmass makes it perfectly suited for distance education. Close collaboration with the government is required to break the stigma of education inequality in the country. The new government has already committed capital to education, and it is only expected to grow in the future as Lula tries to free up more funds.
