Government spending is increasing as efforts to improve the school system continue

Government efforts to diversify the economy away from mineral extraction have made education a political priority. Education reform is a central goal for the current administration, which faces the task of improving the quality of education at all levels – not an easy one in light of Peru’s poor performance in recent national and international evaluations. Public spending is set to increase significantly in the coming years as the government attempts to address some of the sector’s most pressing challenges, one of which is an infrastructure gap that has perpetuated a significant urban-rural divide. In the process, opportunities for the private sector through public-private partnerships (PPPs) should abound. Meanwhile, at the tertiary level, a new university law is set to increase oversight and requirements for students and professors, though not without controversy.

Basics

The Peruvian basic education system is divided into three stages: initial, primary and secondary education. Initial or pre-primary education covers children up to five years of age, and at least one year is mandatory. According to the Ministry of Education (Ministerio de Educación, MINEDU), a little more than 1.6m children were enrolled at this level in 2014. Primary education consists of six years of schooling for students from around six to 11 years of age, and accounted for almost 3.5m students in 2014. Students aged 12 to 16 attend secondary school, which comprises a five-year block, divided into two cycles; the first, which lasts two years, is general and the same for all students. These two years, along with primary education, constitute the block of mandatory schooling. In the second cycle – the last three years of secondary schooling – students have the option to choose courses in sciences, humanities or technology. In 2014 more than 2.4m students were enrolled at this level. Students with disabilities as well as adults who failed to complete their schooling attend separate systems, the special basic and alternative basic systems, respectively, which combined numbered 223,440 in 2014. Total enrolment at the regular basic level surpassed 7.5m students in 2014. The vast majority, almost 5.6m, was part of the public system, where education is free, while the private system accounted for the remaining nearly 2m students. Of the 101,229 institutions at the regular basic level in 2014, 79,775 were public and 26,264 were private.

Coverage

In the past few years, Peru has made significant strides towards increasing coverage at the basic level. According to MINEDU, in 2013 coverage at the secondary level reached 81.5%, up from 77.8% in 2009. Though lower, coverage at the initial level registered the greatest rise, from 67.8% in 2009 to 78.8% in 2014. This is largely a result of the government’s Cobertura 100 programme, which began implementation in 2012 and aims to reach universal coverage for children aged three to five by 2016 through coordinated efforts between regional and national actors, as well as improved infrastructure, resources and teachers. At the primary level, however, efforts have not been as successful. In 2013 coverage was reported at 93.5%, down from 94.3% in 2009.

Despite these advances, the level of schooling among Peruvians remains generally low. According to MINEDU, the average number of school years for Peruvians from 25-64 years of age was 9.9 in 2013. A significant gap between urban and rural areas remains, a trend particularly visible at the secondary level. In 2013 net coverage at this level reached 86% in urban areas, compared to 72.1% in rural areas.

Quality

Advances in overall coverage have generally not been accompanied by improvements in the quality of the education. The country’s poor performance in recent international and national evaluations is a reminder of the amount of work that still needs to be done. In the World Economic Forum’s “Global Competitiveness Report 2015”, Peru ranked particularly poorly in the quality of math and science education (139 out of 144 countries), quality of primary education (136) and quality of the educational system (134).

International Assessment

In the 2012 edition of the Programme for International Student Assessment (PISA) Peru ranked last among the 65 countries evaluated, receiving a median score of 368 in mathematics, 384 in reading and 373 in science (out of a total of 600 points), well below the OECD mean scores of 494, 496 and 501, respectively, for each of those categories. Nearly half of the students (47%) did not meet level 1, the lowest of six levels, while the vast majority (74.6%) performed below level 2. No Peruvian student reached level six. The PISA scores revealed a significant urban-rural divide, with students from urban settings performing above (by 90 points) students in rural settings, a trend that has remained unchanged since PISA 2001. In contrast, the gap between public and private institutions has been closing. In 2001 students from private institutions scored on average 122 points above students in public institutions. In 2012 the difference was down to 74 points.

At the national level, the quality of education is measured through the Student Census Evaluation (Evaluación Censal Estudiantil, ECE), administered by MINEDU, which measures reading/comprehension and maths skills. The 2013 version revealed similar results to the PISA evaluation: only 13.1% of students reached a satisfactory level. Here too the public sector managed to lift a significant percentage of students from the lowest rankings, closing in on the private sector, whose scores remained relatively unchanged. Specialists agree that quality problems stem from two issues: the poor performance of teachers, often associated with a lack of incentives, and the inadequate management of sector resources, the latter being largely due to MINEDU’s limited administrative capacity. According to the National Education Council (Consejo Nacional de Educación, CNE), every year MINEDU returns around PEN2.85bn ($1.02bn) to the public treasury, because of its limited spending capacity.

Infrastructure Deficit

Limited infrastructure and resources is another factor affecting the quality of education and perpetuating the urban-rural divide.

While recent years have seen progress in closing the infrastructure gap in the sector, it remains significant, particularly in rural areas.

According to MINEDU, there was a shortage of 1938 centres at the initial education level in 2010, the last year for which data is available, down from 2314 in 2008. This deficit is particularly pressing in regions such as Puno, Cusco and Huánuco. At the secondary level, the deficit is smaller: it totalled 142 centres in 2013, down from 229 in 2011.

The previous government’s emphasis on technology at the basic level led to the implementation of the “one laptop per student” plan. As a result, the student-to-computer ratio at the secondary level was reduced from 23:1 in 2010 to 9:1 in 2011, though it increased to 10:1 in 2013. As for access to the internet, in 2013, 65.9% of urban schools at the secondary level had access, compared to 9.8% in rural areas, bringing the country’s average down to 49.6%.

Expenditure

Public expenditure on education has been increasing steadily in the past few years. In 2013 it represented 3.3% of GDP, up from 2.5% in 2007. As a percentage of total public expenditure it has remained around 14% since 2007.

Spending is expected to continue increasing in the coming years too as the sector becomes central to efforts to diversify the economy. The sector’s budget for 2015 represents a 24% increase (PEN4bn, $1.4bn) compared to the previous year, the equivalent of 0.7% of GDP, totalling almost PEN22.3bn ($8bn). The increase is in line with the government’s plans to raise spending to 6% of GDP by 2021.

The extra funds are destined for a few key areas, including addressing the infrastructure gap, teacher training and incentives, modernisation of education management, and quality improvements through curricula reform and the establishment of high-performance schools across the country.

Improving Structure

To address the infrastructure gap facing the sector, the government is allocating more than PEN2.9bn ($1bn) to build new and improve existing infrastructure in an initiative that is expected to generate significant opportunities for the private sector through PPPs. The private sector has been invited to participate in the construction, equipment and maintenance of infrastructure in two categories: regular basic (initial, primary and secondary) education centres and higher education technical productive institutes (institutos de educación superior técnico productivos, IESTP).

The administration of schools as well as staff management remain the responsibility of the public sector, though in the case of IESTPs there is a possibility the private sector could play a larger role. “The role of the private sector could eventually extend to other areas such as teacher training, but the feasibility of this is still being evaluated,” Mario Hernández, the chief of health and education projects at ProInversión, the state agency in charge of promoting private investment, told OBG. According to ProInversión, concessions will be awarded for a 20- to 30-year period. MINEDU has already published a list of priority schools – 275 projects – and is currently welcoming private initiative proposals. All of these serve more than 1000 students and are in urgent need of upgrading. A significant portion, 43%, is located in the capital.

Specialist Schools

In addition, the government has plans to build a series of specialist schools for high achievers, known in Peru as colegios de alto rendimiento (COAR) and modelled after the Colegio Mayor Presidente del Perú in the capital.

“The basic idea is to select the best students in the country from the third year of secondary to the fifth, and, following a boarding school model, provide the best-quality education for free, with highly qualified teaching staff,” Hernández told OBG. COARs will be part of the network of schools around the world offering an international baccalaureate.

To replicate this model in the provinces the national government is investing PEN520m ($185.6m) in 2015, which will be used to build 14 COARs in Lima, Piura, Lambayeque, La Libertad, Amazonas, San Martin, Pasco, Huancavelica, Cusco, Ayacucho and Arequipa, Puno, Moquegua and Tacna.

In a speech announcing the programme, President Ollanta Humala said the plan is to eventually have one COAR in each of the country’s 24 regions. The projects will stem from private initiatives, and concessions will be awarded for 20-year periods. ProInversión is in charge of evaluating proposals. According to the agency, the opportunity has elicited significant private interest and a number of proposals have already been received. “There is a willingness to advance quickly with the evaluation to pass on to the construction phase,” Hernández told OBG.

Improving Quality

Another key aspect of efforts to improve quality is the continued professionalisation of teaching staff. The 2015 budget assigns an extra PEN858m ($306.3m) for the implementation of the second stage of the Law of Magisterial Reform (Ley de Reforma Magisterial, LRM), for which a total of PEN1.3bn ($464.1m) has been allocated thus far.

Introduced in May 2013, the LRM established, among other things, mandatory evaluations for teachers as well as performance-based incentives. Teachers performing in the top third will be awarded a one-time bonus of PEN18,000 ($6426), which will be disbursed over three years. The bonus is expected to attract more professionals into the teaching profession.

Other efforts to improve quality include curricula reform focused on strengthening English teaching, sports, and the acquisition and distribution of new pedagogic materials at the basic level.

Tertiary Education

Tertiary education falls into three categories. Universities offer minimum four-year programmes up to doctorate degrees, while non-university institutes offer programmes in pedagogic, technological or artistic areas that last up to a maximum of three years. Finally, IESTPs offer technical training.

According to figures provided by MINEDU, in 2013 there were a total of 1002 non-university institutes, 748 of which were technical institutes. IESTPs numbered 1853, while universities totalled 140.

Gross coverage in tertiary education has increased significantly, from 48.6% in 2005 to 63.3% in 2012, placing Peru ahead of neighbours such as Colombia (around 45%) or Mexico (28.6%). Nonetheless, here too the gap between urban and rural areas is particularly marked: in 2013 coverage in urban areas reached 74.9%, compared to a much lower 28.2% in rural areas.

Growing Offer

Since 1996, when a law aimed at promoting investment in the education sector offered tax incentives to for-profit tertiary education institutions, the number of private institutions has risen substantially, along with demand. In 2013, 89 of the 140 universities in the country were private, according to the National Chancellors’ Assembly (Asamblea Nacional de Rectores, ANR), having increased from 63 in 2009.

The public sector has also grown, but at a much slower pace, from 38 universities in 2009 to 51 in 2013.

Private universities account for the largest share of enrolment at the tertiary level and their share continues to grow rapidly. In 2012, 642,203 students were registered in private universities – more than double the number of students in public universities – having increased from 473,795 just two years before. Public universities accounted for 321,581 students in 2012, a small increase from 309,175 in 2010.

Several foreign universities, some without a formal campus, have also entered the market, including Chilean Universidad de Tarapacá and Mexican Tecnológico de Monterrey, which offers online degrees. While this growth has contributed to a decentralisation of the educational offer, increasing access outside urban centres, it has been generally heterogeneous. A number of private universities offer quality education with a healthy degree of internationalisation. Exchange programmes and fluency in a second language are common among top-tier institutions.

However, in the past decade the country has seen the establishment of a number of low-quality institutions. Universidades chichas, as they are known in the country, typically offer courses that do not require expensive equipment or infrastructure. The proliferation of this type of university has in large part been due to a weak accreditation system, which until recently was still voluntary. As of May 2014, only 14 majors in nine universities had received accreditation by the Board of Assessment, Accreditation and Quality Certification of University Education (Consejo de Evaluación, Acreditación y Certificación de la Calidad de la Educación Superior Universitaria, CONEAU), the entity in charge of accreditation of courses, programmes and institutions at the tertiary level.

“Though tertiary education in Peru has been improving in the past 20 years, the fact that no Peruvian university ranks among the world's top 400 shows that there is still a lot of work to be done,” Juan Manuel Ostoja, the CEO of Universidad San Ignacio de Loyola, a large private university, told OBG.

Reform

In an effort to improve the calibre of tertiary education, the government passed a new university law in July 2014. Promulgated by President Humala, the law was the result of a parliamentary debate that lasted nearly two years. One of its main tenets is the establishment of a supervisory authority, the National Superintendent of University Education ( Superintendencia Nacional de Educación Universitaria, SUNEDU), which replaces the previous ANR, an autonomous public body made up of rectors from public and private universities. SUNEDU has a regulatory role over all universities, including privately run ones, and falls under the purview of MINEDU.

SUNEDU will be responsible for monitoring the quality of tertiary education, managing the flow of money through the university system and authorising the establishment of new universities. The superintendent is appointed by MINEDU, while SUNEDU’s board of directors is composed of seven people, including one representative from MINEDU and another from the National Council of Science, Technology and Technological Innovation. The remaining five board members, selected from the public and private sectors, are elected in a public contest administered by MINEDU. Candidates are evaluated by the CNE.

The new law establishes mandatory accreditation for university majors and higher education institutions, both of which will undergo review by CONEAU to receive accreditation. Majors or institutions that fail to receive accreditation after three evaluations or a period of seven years will be forced to close.

Requirements for students and university professors have also increased. To earn a bachelor’s degree, students will now have to complete a research project, write a thesis and show evidence of their ability to speak a second language. Professors must hold a minimum of a master’s degree, and 30% of lecturers in any single university must hold a doctorate degree.

Legal Dispute

Proponents of the law claim SUNEDU is necessary to oversee the university system, stop the establishment of low-quality universities and strengthen the accreditation system. However, critics have questioned the constitutionality of a law that places MINEDU at the centre of sector regulation and quality evaluation. The establishment of SUNEDU is seen by many, including the Federation of Private Institutions of Tertiary Education, as an infringement on the autonomy of universities. The concern led a group of parliamentarians and a lawyer’s association to ask the Constitutional Court to review the constitutionality of the law. The demand was accepted by the court in early August 2014. At the time of writing a formal review of the law had yet to begin.

Opposition to the new law has also focused on other aspects as well. According to some critics, higher requirements for professors could lead to the dismissal of experienced professors, or indeed encourage some to get doctorate degrees from low-quality programmes simply to meet the requirement, while the compulsory thesis requirement for students to obtain a bachelor’s degree could create a black market for plagiarised dissertations. Others have claimed that the law discourages private investment.

The lack of involvement of sector players in the development of the law is another concern. “The intention of the government is a good one and one that is indicative of the importance of the education sector to the government. However, there was a lack of horizontal dialogue and involvement of the different actors, in particular the private sector,” Juan Carlos Mathews, director of the executive education centre at Universidad del Pacifico, told OBG.

Rodrigo Prialé, the general manager at Gerens, a private post-graduate school, believes efforts to improve quality should start at the basic level. “Though the new university law will help improve the quality of tertiary education in the country, the real issue lies with the quality of basic public education, with emphasis on the provinces, where the lack of infrastructure, funds and staff is a serious concern,” he told OBG.

Labour Market

While the new law is expected to strengthen accreditation, a number of other challenges remain for tertiary education, one of which is the mismatch between the educational offer and labour market needs. The majority of tertiary students opt for a university education. As a result, the country’s demand for technically trained professionals goes unfulfilled. Enrolment in universities increased significantly in 2013, from 900,708 in 2012 to 960,707. In contrast, enrolment in technical institutes registered only slight growth from 354,813 in 2012 to 363,245 in 2013. “There is still a stigma in Peru surrounding technical and technological education. University education is better recognised, despite the fact that the labour market is demanding technically trained professionals,” Jorge Chavez, academic manager at El Servicio Nacional de Adiestramiento en Trabajo Industrial, the country’s largest technical institute, told OBG.

The cumbersome process to approve new programmes is additionally holding back the country from adjusting to labour-market needs.

Carlos Seminario, the general manager of Instituto San Ignacio de Loyola, a technological institute, told OBG, “The bureaucracy involved in getting new degrees approved in a timely manner is making it harder to adapt to the needs of the market, ultimately affecting the country’s competitiveness.”

Overcoming this challenge is even more important as Peru works to professionalise its workforce. “The increase in demand for postgraduate education shows an understanding from the management class of the need to improve their skills to be competitive in a growing regional and international market,” Roberto Calvo, the admissions manager at INCAE, a postgraduate business school, told OBG.

Financing

Cost continues to be one of the most important barriers to tertiary education, as government scholarships have traditionally provided only limited options. However, as part of the current government’s efforts towards social inclusion, in 2012 the National Scholarship and Educational Credit Programme was established, aimed at improving access to higher education among high-performing students from low-income socio-economic groups. As of May 2014 almost 30,000 students had benefitted from the programme, representing an investment of PEN624m ($222.8m), and the government hopes to increase the number of recipients to more than 50,000 by 2016.

An alternative, this time from the private sector, also emerged in 2013, with the arrival of Lumni, a student financing initiative which began in Chile in 2002 and expanded to Colombia, the US and Mexico in 2009. Lumni offers financial support to high-performing students in programmes considered to be in demand in the labour market, such as business, administration, accounting and engineering.

“Lumni tries to fill that void within universities that offer quality education but have high drop-out rates for financial reasons, a market which is currently not addressed,” Juan Pablo Bustamante, general manager for Lumni Peru, told OBG. Lumni works with 11 universities in the country – nine private and two public – the only ones that currently meet its selection criteria. Repayment rates range from 10% to 15% of income over a period of between 24 and 84 months and annual returns are currently around 7%.

Peru has proved to be a particularly attractive market for the private-sector initiative. “In other countries it took Lumni two to three years to reach the first 100 students. In Peru we totalled 450 in the first year and attracted $8m from private investors,” Bustamante told OBG. The organisation has ambitions expansion plans. “Our goal is to finance 30,000 students in the next 10 years with an investment of $180m,” he added.

Outlook

As efforts to diversify the economy continue, education – a long neglected sector – should finally get its moment. While the government is laying out the foundation for meaningful education reform, the success of current efforts will ultimately be tied to the strengthening of MINEDU’s administrative capacity, without which results will be hard to see.

At the tertiary level, the new university law should have an immediate impact on the number of new universities. Growing competition among tertiary institutions as well as the strengthening of the accreditation system should also help to improve quality, though results are likely to be seen only in the long term.

In the meantime, simplifying bureaucratic procedures for approval of new programmes and actively promoting programmes in demand in the labour market are likely to rise to the top of the reform agenda.