How much can Brazil grow? For any economist studying the country, this is the key question. Brazil has demography on its side, but how does this booming economy remain on its growth path and continue to bring more Brazilians into the nova classe media (emerging middle class)?
Take the case of Pedro. He was born in 2004 in Carajas, a rural city in northern Brazil. Close to four million of his peers are not in school, but he is part of the 91.5% of those ages four to 17 who are. Unfortunately, by third grade, only 34.2% of his class will have attained the expected grade-level skills in math and language. By ninth grade, only 26.2% will have mastered the expected level in language and only 14.2% in math. In actuality, there is just a 50/50 chance that Pedro will even graduate from high school. Will he ever be part of the 69% of adults who are functionally literate?
The lack of qualified workers, whose ranks Pedro is likely to join, is nothing new in Brazil. It has three principal impacts on the country’s economy: the attraction of foreign human capital, unnecessary salary inflation and under-qualified managers. According to BRAiN’s (Brazil Investments and Business) publication, Talent and Human Capital for the Brazilian Investment and Business Hub, the shortage of qualified personnel in Brazil is affecting inflation. For 2010, the research cites a 10.4% increase in the cost of labor and a 36.0% increase in the compensation paid to company directors over the previous year.
These conditions make it possible for Brazil to take short-term advantage of current opportunities, including the demographic bonus and economic growth. However, the country requires a long-term solution that could come from within. To accomplish this, it is essential to educate the country’s young population properly and prepare them for the labor market. This is not an easy task, given the current state of education, the growing population and the increasing immediate demand for quality education from the emerging middle class. What opportunities are available to Brazil in the short and medium term? How can the country best harness its demographic bonus, and what business opportunities does the education sector currently offer?
Originally published by Knowledge@Wharton January 2, 2013 as part of The Lauder Global Business Insight Report 2013: Building Blocks for the Global Economy.