Published On: February 11, 2015

Private Education Grows

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Despite the weak economy, Brazilians are spending more on private schools than ever before. The continued willingness to provide better education for their children shows a strong commitment towards the future of Brazil by middle- and upper-class families.

Private school enrollments are also rising in Brazil thanks to the decade-long economic expansion, which has added 44.7 million people to the middle class. Brazilians pinched by the slowing economy will give up eating out and other personal expenses before putting their kids back in public schools.

“The quality of Brazil’s public schools is terrible, so that’s the top priority for families making a little more money,” said Marco Gregori, a former for-profit college executive who’s seeking U$23 million for a fund called Eduinvest to buy private elementary and high schools.

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Enrollment in private schools in Brazil climbed 24 percent in the past decade to 8.6 million last year, while enrollment in public schools fell 9.5 percent.

Manhattan’s Avenues School, which touts plans to build campuses in 20 or more of the world’s “leading cities,” will announce a São Paulo location soon, said Alan Greenberg, president of Avenues Schools for the Americas. The school, which charges annual tuition of U$43,400 ($120 thousand reais) at its New York campus, is backed by U$75 million in financing from its founders and two buyout firms, LLR Partners and Liberty Partners.

The lengthy waiting lists at the British and American schools in São Paulo show strong demand, Greenberg said. Those schools — which employ expat teachers, offer one-on-one music classes and study-abroad programs — charge more than 74,000 reais a year for high school, with an entrance fee of up to 35,000 reais, according to school documents. “The number of new schools that have been built has just not kept up with the growth of demand.”Cognita_New-KKR-logo

Private-equity firm KKR and a handful of Brazilian billionaires are betting families will continue to spend their money on private schools for their children. KKR’s Cognita Schools last month bought part of a Rio de Janeiro school, two years after buying an institution in São Paulo. Billionaire Julio Bozano is raising 800 million reais (U$300 million) for an education fund, documents show.

The number of high net worth individuals — people with at least U$1 million of investable assets — in Brazil grew by 17 percent between 2009 and 2013, according to the World Wealth Report. The middle class in Brazil is defined as those whose annual household income is 24,000 reais or more.

Investor Marco Gregori said there are even more Brazilians willing to pay monthly tuition of 450 reais to 1,000 reais. Gregori owns two schools and wants to buy eight more before taking the company public. He spent seven years as a top assistant to Gabriel Mario Rodrigues, who sold the for-profit college company Anhembi Morumbi to Laureate International Universities.

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The proliferation of for-profit private schools comes after the higher-education industry produced some of Brazil’s richest people, among them Janguie Diniz, who became a billionaire thanks to the 2013 initial public offering of Ser Educacional SA.

Shares of for-profit college chain Kroton Educacional SA, which has 124 campuses and 667 distance-learning centers with a combined 1.1 million students, surged 69 percent this year.

Billionaire Jorge Paulo Lemann, whose 3G Capital Inc. investment firm teamed with Warren Buffett’s Berkshire Hathaway Inc. last year on the U$23 billion takeover of ketchup maker HJ Heinz Co., is the principal investor in Gera Capital Venture, an education-focused investment fund.

“It’s not just better education that newfound wealth brings,” Gregori says, “it’s safety and security.”

[This article was written by Denyse Godoy and Christiana Sciaudone with assistance from David Biller for Bloomberg News. It was edited by CIE.]

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