Brazil’s inferior school system is bad for business

. Jul 15, 2020
Brazil's inferior education system is bad for business Photo: Andrey Popov/Shutterstock

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We’re covering today how expensive it is for Brazil not to fund a proper education system. The Economy Minister dreams of private pensions and new taxes. And a loss for suspected coronavirus patients in Brazil.

The costs of Brazil’s poor education system

A study presented on Tuesday by the Roberto Marinho Foundation and the São Paulo-based Insper Business School estimates

that Brazil&#8217;s poor education system is costing the country no less than BRL 214 billion (USD 40 billion) per year. Researchers say that 17.5 percent of Brazil&#8217;s 16-year-olds will not complete their basic education curriculum — that&#8217;s 575,000 people.</p> <ul><li>The government spends around BRL 90,000 on each student who finishes the basic curriculum — and loses BRL 372,000 by failing to prevent truancy, according to economist Ricardo Paes de Barros, one of the authors.</li><li>The total impact amounts to roughly 3 percent of GDP.</li></ul> <p><strong>Why it matters.</strong> For years, the government has slashed the education budget, focusing on how much it costs to enforce policies. However, this study shows that inaction is actually much costlier for the country.</p> <div class="flourish-embed flourish-map" data-src="visualisation/3184871" data-url="https://flo.uri.sh/visualisation/3184871/embed"><script src="https://public.flourish.studio/resources/embed.js"></script></div> <p><strong>Impacts.</strong> It should be a no-brainer by now, but Brazil&#8217;s productivity woes are <a href="https://brazilian.report/society/2018/12/07/brazil-education-productivity/">linked to its lack of educated and skilled workers</a>. Brazilians complete, on average, seven years of education and produce 25 percent as much as workers in the U.S., according to research organization Conference Board.</p> <ul><li>Workers who haven&#8217;t finished school earn 25 percent less, on average. They are mostly confined to low-paying, informal jobs with fewer opportunities for social ascension.</li></ul> <div class="flourish-embed flourish-scatter" data-src="visualisation/1383344" data-url="https://public.flourish.studio/visualisation/1383344/embed"><script src="https://public.flourish.studio/resources/embed.js"></script></div> <p><strong>Slow improvement.</strong> The average Brazilian is gradually staying in school for longer, but this increase is at a snail&#8217;s pace. Every seven years, Brazil has managed to improve average education time by just one year. Brazil’s 1988-born generation reached (by 2013) an average of 10.1 years in school. Chile was at that level 24 years ago, reached by the generation born in 1964.</p> <p><strong>Pandemic effects.</strong> Income, place of residence, ethnicity, and the education level of parents are directly linked to grade repetition and truancy. And the <a href="https://brazilian.report/society/2020/04/23/covid-19-widens-the-education-gap-between-rich-and-poor-students/">pandemic is widening this gap</a>. Private institutions have been able to partner up with online services such as Microsoft Teams in order to keep up with coursework, while most students in public institutions don&#8217;t even have access to the internet.&nbsp;</p> <ul><li>The study shows that 28 percent of poorer youngsters of school age are not thinking about returning to classes after the pandemic. Half want to give up on the National University Entrance Exam (Enem), the best gateway for poor students towards free, high-quality higher education.</li></ul> <hr class="wp-block-separator"/> <h2>Guedes wants to revive talks of private pensions</h2> <p>Economy Minister Paulo Guedes <a href="https://economia.uol.com.br/noticias/redacao/2020/07/15/trabalho-hora-capitalizacao-imposto-digital-paulo-guedes-plano.htm?utm_campaign=resumo-do-dia-edicao-da-manha&amp;utm_content=hyperlink-texto&amp;utm_medium=email&amp;utm_source=newsletter">hasn&#8217;t given up</a> on changing Brazil&#8217;s pension system from the current pay-as-you-go framework to a private capitalization model, according to news website UOL. According to the system Mr. Guedes supports — which is used in countries such as Chile, Peru, and Colombia — workers’ pensions will depend on how much they have saved individually.</p> <p><strong>Why it matters.</strong> A <a href="https://www.ilo.org/wcmsp5/groups/public/---ed_protect/---soc_sec/documents/publication/wcms_648574.pdf">2018 study</a> by the International Labor Organization has called this private pensions system a &#8220;failure,&#8221; and points out that 18 of 30 countries which adopted it have rolled it back.</p> <div class="flourish-embed flourish-map" data-src="visualisation/3183908" data-url="https://flo.uri.sh/visualisation/3183908/embed"><script src="https://public.flourish.studio/resources/embed.js"></script></div> <p><strong>Cautionary tale. </strong>The system is ill-suited for a country where informal work accounts for a sizable portion of the labor market — which is Brazil&#8217;s case. In Chile, where nearly half of all labor is informal, the average pensioner today receives less than the minimum wage, with nine out of ten retirees getting only 60 percent of the minimum wage — currently at USD 450.</p> <p><strong>Also in store.</strong> Mr. Guedes has also clung on to another unpopular idea: a <a href="https://brazilian.report/business/2019/09/11/cpmf-economy-ministry-central-bank-new-tax/">tax on financial transactions</a>. This type of levy is proportionally burdensome on the poor. It also has a cumulative effect on the productive chain, causing inflation and structural imbalances in the economy.&nbsp;</p> <ul><li>Agostinho Pascalicchio, an economics professor at Mackenzie Presbyterian University, told <strong>The Brazilian Report</strong> that talking about the creation of a new tax amid debates on reforming and simplifying the current system creates even more confusion and mistrust in the Brazilian economy.&nbsp;</li></ul> <hr class="wp-block-separator"/> <h2>Covid-19 tests no longer imposed on health insurers</h2> <p>A court of appeals struck down an injunction forcing health insurance companies to pay for serological Covid-19 tests. The decision followed the recommendation of the National Supplemental Health Agency (ANS) and overturned a June regulation. An association of health insurance users has promised to appeal.</p> <p><strong>Why it matters.</strong> The decision affects 47 million consumers. Moreover, the lack of widespread testing prevents Brazil from successfully monitoring — and much less controlling —&nbsp;the spread of the coronavirus.</p> <p><strong>By the numbers.</strong> Total confirmed cases amount to 1.92 million. Deaths have reached 74,133. The 7-day rolling average of new daily deaths reached 1,056 — the second-highest since the beginning of the pandemic. This average has been in four-digit territory for all but three days since June 19.</p> <div class="flourish-embed flourish-chart" data-src="visualisation/2641192" data-url="https://flo.uri.sh/visualisation/2641192/embed"><script src="https://public.flourish.studio/resources/embed.js"></script></div> <ul><li>The state of São Paulo, Brazil&#8217;s most populous and the one with most cases and deaths, registered 417 casualties on Tuesday — the second-highest daily tally. The discouraging figures come as the state reopened gyms and parks, after already greenlighting bars and restaurants.</li></ul> <p><strong>Health Ministry.</strong> It has been two months since the &#8220;military occupation&#8221; in the Health Ministry, with interim Minister Eduardo Pazuello — an Army general with a logistics background — at the helm. Under his leadership, the department broke with medical consensus, trying to hide infection numbers and endorsing antimalarial drug hydroxychloroquine — which has no proven efficacy on Covid-19 patients.</p> <p><strong>Crisis. </strong>Mr. Pazuello&#8217;s tenure has been much criticized and has sparked a crisis between the Armed Forces and the Supreme Court, after Justice Gilmar Mendes said the Army is joining President Jair Bolsonaro in a &#8220;genocide,&#8221; a reference to the piling coronavirus deaths and government inaction. The Defense Minister asked for the Federal Prosecution Service to investigate Mr. Mendes for <a href="https://brazilian.report/power/2020/06/26/proposals-to-toughen-brazil-national-security-law-met-with-protest/">breaking the National Security Law</a>.</p> <hr class="wp-block-separator"/> <h2>What else you need to know today</h2> <ul><li><strong>Stocks.</strong> Mining giant Vale will publish its latest quarterly results on Monday, and analysts are optimistic. In a report to clients, Goldman Sachs said the company is set to announce the resumption of <a href="https://brazilian.report/business/2020/06/25/tax-free-dividends-make-brazilian-stocks-attractive-but-will-the-party-end/">dividend payments</a> in the near future — which pushed the firm&#8217;s stock prices to an all-time high of BRL 61.70, a 7-percent jump.</li><li><strong>Environment.</strong> One day after dismissing the head of earth monitoring within the National Institute of Space Research (Inpe), the government announced a new, &#8220;more accurate&#8221; system to monitor deforestation. Last week, Inpe published troubling deforestation data for June, showing the highest levels in five years.</li><li><strong>Fake news 1.</strong> Last week, Facebook announced it had <a href="https://brazilian.report/power/2020/07/10/how-pro-bolsonaro-facebook-misinformation-networks-operate/">taken down a network of social media profiles</a> owned by figures linked to Brazilian President Jair Bolsonaro and two of his sons. The company said these accounts presented ‘inauthentic behavior.’ Now, the Federal Police wants access to the social network&#8217;s entire investigation — which would be used in two Supreme Court investigations: (1) around the use of <a href="https://brazilian.report/newsletters/brazil-daily/2020/05/28/supreme-court-fake-news-probe-brazil-unemployment-pandemic/">misinformation online</a> for political gain, and (2) on the organization of anti-democratic street protests. Both cases are overseen by the same Supreme Court Justice, <a href="https://brazilian.report/power/2020/06/23/jair-bolsonaro-possible-hangman-supreme-court/">Alexandre de Moraes</a>.</li><li><strong>Fake news 2.</strong> The lower house is debating the Senate&#8217;s fake news bill — and at least one change could be made to the proposal: congressmen want criminal punishment for people who finance and spread misinformation online.&nbsp;</li><li><strong>Covid-19.</strong> Paulo Skaf, chairman of the Federation of Industries of the State of São Paulo (Fiesp), tested positive for Covid-19 on Tuesday. He met with President Jair Bolsonaro on July 3.</li><li><strong>Carnival 2021.</strong> The pandemic has upended one of Brazil&#8217;s most traditional celebrations: Carnival. The sumptuous samba school parade in Rio could even be suspended altogether, with half of the top schools claiming the event would not be feasible unless a vaccine is available. The final decision will be made in September.

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