Investment in education increases in Peru as reforms gain momentum

After nearly two decades of sustained economic growth and stability, Peru’s economy continues to expand. Economic diversification and the introduction of more technology-intensive production processes are now key to enable the country to sustain the growth rates it was able to achieve during its commodity-led boom and avoid what economists call the “middle income trap”. Elected in 2016, Peruvian President Pedro Pablo Kuczynski has designated education as a key priority.

President Kuczynski is set to build on the education reform initiated under former President Ollanta Humala, which set out to improve quality, reduce the infrastructure gap, improve teacher performance and modernise institutional management. While the sector continues to face significant challenges, including significant infrastructure needs and persistent quality deficiencies, the effects of the reform are already beginning to yield results.

Basics

Peru’s basic education system comprises three stages; initial, primary and secondary education. According to the Ministry of Education ( Ministerio de Educación, MINEDU), a total of 8.62m students were enrolled at the basic education level in 2016. Nearly 1.7m students under the age of six were enrolled in initial or pre-primary education. At the primary level (students from six to 11 years of age) enrolment surpassed 3.5m, while at the secondary level (students aged 12 to 16) that figure exceeded 2.5m. The special basic and alternative basic education systems accounted for the remaining share of enrolment. The public sector is the largest provider at the basic education level, with 6.18m students in 2016, while the private sector accounts for 2.48m students. Of the 111,281 institutions at this level, 84,269 are public, or 76%.

Post-Secondary

Higher education falls into three categories. Universities offer minimum five-year programmes, up to doctorate degrees. Technical institutes (institutos de educación superior técnico-productivos, IESTPs), offer two- to three-year programmes leading to nationally recognised qualifications as “technician” and “professional technician”. Vocational training centres, or centros de educación técnico-productivo, offer short-term training of one to two years, leading to “technician” and “assistant technician” diplomas. Total enrolment at the tertiary level reached an estimated 1.6m in 2014, the last year for which data is available. Universities account an estimated 68% of enrolment at this level, with non-university institutions making up the remaining 32% of the student body.

Unlike at the basic education level, at the tertiary level the private sector is the leading provider. Since 1996, when the Law for the Promotion of Private Investment in Education (DL882) introduced tax incentives to for-profit tertiary institutions, the number of private universities in Peru increased exponentially. Between 2000 and 2017 the number of universities rose from 72 to 142, with private institutions more than doubling. At present, 91 of the 142 universities are private (for profit and not for profit), while the remaining 51 are public. With over 2500 institutes and vocational training centres in 2016, Peru’s offer at this level is also robust.

Advances & Challenges

Solid growth and stability allowed Peru to make significant advances in various indicators over the past decade. According to MINEDU, net enrolment at the primary level reached 92.3% in 2015, while enrolment rates at the secondary level stood at 82.6% during the same year, a significant increase from 68.8% in 2001. Access to communication technologies in the classroom has also expanded in that time. The average student to computer ratio in secondary schools fell from 11:1 in 2011 to 6:1 by 2016. Moreover, the percentage of secondary schools with access to the internet rose dramatically from 36.7% in 2011 to 71.5% in 2016.

However, significant challenges remain. Despite the advances made in expanding access across the country, dropout rates at the basic education level remain high, at 12.1% in 2015, with 43.4% of students being pressured to abandon their education because of financial reasons. The gap in progress and retention rates between urban and rural areas is also significant. Though it has decreased, the percentage of delayed students at the secondary level in rural areas was 23.3% in 2016, compared to a much lower rate of 7.6% in urban areas.

At the tertiary level, though enrolment has grown exponentially in the past decade, access remains low. According to Laureate Peru, only three out of 10 Peruvians between 18 and 24 access tertiary education. The average number of years of schooling among those aged 25 to 34 is therefore low, at 11.1 in 2015, according to MINEDU, an increase from 10.3 in 2005. The offer at this level is also concentrated in Lima, where the number of private universities and institutes is highest, while rural areas are served predominantly by public universities.

Infrastructure Gap

Decades of underinvestment have also given way to a significant infrastructure gap, estimated to surpass PEN63bn ($18.7bn), according to MINEDU. A 2014 education infrastructure census by the National Institute of Statistics (Instituto Nacional de Estadística e Informática, INEI), in coordination with MINEDU, revealed that around 48% of basic education schools needed to be replaced due to structural problems, while some 18% needed reinforcements and only one-third of schools were in good condition. The problem is particularly acute in rural areas, where more than 80% of buildings have limited access to water and sanitation, and more than one-third had no access to electricity. Overall, 44.4% of public schools lacked water, sanitation and electricity. Between 2011 and 2015 investment in basic education infrastructure reached nearly PEN15.3bn ($4.5bn), an increase of 150% relative to the preceding five-year period. However, according to MINEDU, at current spending levels it would take two decades to close the gap.

Quality Concerns

The significant infrastructure gap has partially contributed to the system’s quality deficiencies. In the 2012 edition of the Programme for International Student Assessment – an evaluation by the OECD that measures 15-year-olds’ comprehension in reading, maths and science – Peru ranked last among 65 countries surveyed. However, recent reform measures are already having a visible impact on the country’s scores. In the most recent edition of the assessment, which was published in 2015, Peru was among the countries with the highest improvement in the region, climbing to 62nd place out of 69 participating countries, with improved scores in all three categories.

At the higher education level, while the proliferation of universities helped respond to increasing demand, it is also widely linked to deteriorating standards. Quality standards vary greatly across institutions, with the most prestigious offer in the country being concentrated in some 10 universities. Primarily private, these institutions have achieved high quality standards on par with institutions in advanced economies. Nonetheless, Peruvian universities have yet to make it to the Quacquarelli Symonds (QS) ranking of the top-400 universities in the world. The closest, Pontificia Universidad Católica del Perú, a private school, came in at 481-490 in the QS World University Rankings 2016-17.

At the basic education level, quality weaknesses are attributed to low spending and poor teacher performance, while at the post-secondary level concerns relate to a weak quality assurance system. Though total public spending in the sector as a percentage of GDP rose steadily in the past decade – from 2.9% in 2009 to 3.7% by 2017 – it remains among the lowest in the region and well below the OECD average of 5.5%. Spending on education has nonetheless been increasing at a rapid pace in recent years. At the secondary level, public spending per student nearly doubled from PEN1885 ($559) in 2011 to PEN3673 ($1067) in 2015. The increase was equally dramatic at the university level, with spending per student rising from PEN5438 ($1610) in 2011 to PEN9701 ($2880) in 2015.

Out Of Alignment

Despite the expansion of post-secondary education, the system continues to struggle to generate the mix of skills needed to fuel growth and development. A survey by Manpower Group in 2014 revealed that 69% of employers in Peru have difficulties sourcing workers with the right skill set. The majority of Peruvians pursuing higher education (68%) continue to opt for university degrees. Since 2006 enrolment in university programmes increased more than four-fold to over 1.1m students, according to figures from the INEI. By contrast, technical and vocational training saw its share of enrolment decrease by 7% between 2010 and 2013. In its 2016 study, entitled “A Skills Beyond School Review of Peru”, the OECD notes that, “the system is under-supplying graduates from science, maths and engineering fields and oversupplying graduates in fields like accounting and administration”. A lack of alignment between the supply of technical and vocational programmes and labour market needs adds to the challenge, with significant negative impacts on productivity. Underemployment among university graduates, for example, is not uncommon.

“Obtaining a university degree continues to be an important achievement for many Peruvian families, so there is a cultural nuance that would need to change for technical and vocational training to become more widespread,” Armando Valdés, secretary-general at the Universidad San Martín de Porres, told OBG. “Overcoming this cultural barrier will be key to steering more students toward the programmes the labour market requires,” Valdés added. A lack of clear pathways to transition from technical and vocational programmes to higher education has also fuelled students’ preferences for a university education. Even so, there are early signs that this could be changing. According to Peruvian consultancy group Maximixe, the number of students enrolled in technical education institutes – or institutos de educación superior tecnológica – is estimated to have increased by 7.8% in 2015 and a further 5.8% in 2016 to 412,000.

Incoming Measures

In October 2016 President Kuczynski underscored the importance of modernising the education system in preparation for rapid change. “Peru and economies at its income level face a huge challenge today which is that our educational systems were organised years ago based on the idea of ‘learning what’ and education today is about ‘learning how’,” he said. “We’re evolving so fast at the moment with 4G, 5G and everything else that it is no longer enough to know something.” With education exercising a pivotal role in the country’s wider efforts to diversify the economy, the sector has been designated a priority, receiving the largest budget allocation for the 2017 fiscal year. The education budget reached nearly PEN26.2bn ($7.8bn), a 5.3% increase from the previous year, representing 18.4% of the state’s total expected expenditure. Of that amount, over PEN4.4bn ($1.2bn) is earmarked for infrastructure improvements, nearly PEN1.28bn ($379.4m) has been allocated to programmes for improving the quality of learning, PEN1.2bn ($355.7m) will be used to strengthen teacher training while a further PEN1.55bn ($459.4m) will help to continue the reform effort at the tertiary level.

At the basic level, MINEDU has already begun curricula reform and will be prioritising the implementation of the Full School Day programme in an additional 400 secondary institutions in 2017, adding to some 1600 secondary schools that were incorporated into the programme by 2016.

President Kuczynski will also continue the previous administration’s drive to expand the network of specialist schools for high achievers (colegios de alto rendimiento, COAR) modelled after Colegio Mayor Secundario Presidente del Perú in Lima, established in 2010. The 2017 education budget allocates PEN21m($6.2m) for the creation of three COARs in Tumbes, Ancash and Lima. Between 2010 and 2016 the network of COARs expanded from Lima to 22 regions across the country.

Increasing integration of communication technologies is another key goal of the current administration, with authorities projecting that 80% of students will learn the most important subjects with the support of educational software by 2021.

Bridging The Gap

To bridge the infrastructure gap more quickly, in 2012 the government opened the education sector to public-private partnerships (PPPs) for the construction, equipment and maintenance of regular basic education centres and IESTPs. Through PPPs, MINEDU expects to expand its network of COARs and rehabilitate at-risk schools – facilities with more than 1000 students that need more than 50% of infrastructure reinforced. It further hopes to increase the number of IESTPs. As of March 2017 no projects had been executed through PPPs yet, though ProInversión, the country’s investment promotion agency, is in the process of reviewing seven private initiative proposals.

The sector has also benefitted from the government’s Works for Taxes scheme, a programme which allows companies to pay a portion of their tax bill by undertaking public works, thereby making funding available to projects. Since its launch in 2009, the programme has generated private investments of PEN385m ($114.1M) for the education sector, with 68 projects affecting approximately 270,000 students, according to ProInversión. The education sector accounted for 29% of the programme’s total investment in 2016, which reached PEN713m ($211.3m), a figure expected to more than double in 2017, to PEN1.6bn ($474.2m), according to Prime Minister Fernando Zavala. The Banco de Crédito del Perú is among the investors to make use of the programme to boost education infrastructure in 2017. According to local media, the bank will be investing PEN186m ($55.1m) for the construction of three COARs in Lambayeque, Ica and Piura.

Teacher Performance

Improving teacher performance is another pillar of the government’s education reform package. The budget for FY 2017 allocated nearly PEN1.22bn ($361.6m) to strengthen teacher training; PEN721m ($231.7m) to finance the first phase of a salary increase for 90,000 teachers; and a further PEN497m ($147.3m) to bring the salaries of 140 teachers in institutes and higher education facilities in line with their peers.

The measures give continuity to the Law of Magisterial Reform 29944 of 2012, which introduced mandatory evaluations for teachers as well as performance assessments for key personnel and incentives for career advancement, among other things. Since the reform began, 71,000 teachers and 8000 professors have been selected or have advanced through 11 rounds of evaluations, while some 27,000 have exited the education system.

In January 2017 the government approved a new decree, which raised teachers’ base salary from PEN1555 ($461) to PEN1780 ($528), and included a provision that no teacher will earn less than PEN2000 ($593) per month by 2018. According to MINEDU, between 2012 and 2016 teacher salaries increased by 56% and the new measure is expected to raise the average salary by an additional 20% by 2018. Additional bonuses are also being awarded to teachers working in difficult conditions, such as in rural areas. There were a total of 548,621 teachers at the basic education level in 2016, with most staff (448,702) located in schools in urban centres.

University Reform

At the university level, reform began in mid-2014 with the introduction of Law No. 30220, also known as the University Law. Among other things, the law created the National Superintendency of University Education ( Super-intendencia Nacional de Educación Superior Universitaria, SUNEDU), a new supervisory authority under the purview of MINEDU. SUNEDU assumed a regulatory role over both public and private universities, which are now required to obtain a licence to operate. SUNEDU is also tasked with authorising the establishment of new institutions and supervising quality standards, among other functions.

While the creation of SUNEDU led to significant controversy at the time it was announced, with some fearing it could stifle innovation and infringe on the autonomy of universities, the organisation – now approaching its third year – is forging ahead with the implementation process. Of the 142 universities in the country, 79 volunteered to undergo licensing by the end of 2016. Of those, 56 were private and 23 were public. “As of March 2017, 10 universities have been granted licences, all of them private,” Julio Homero Miranda Coll-Cárdenas, director of SUNEDU’s licensing board, told OBG. Pontificia Universidad Católica del Perú, Universidad de Lima, Universidad Ricardo Palma, Universidad Peruana Cayetano Heredia and Universidad del Pacífico, are among the newly licensed universities.

The process is forcing institutions, particularly public ones, to undergo significant management adjustments, for which more funding is required. In 2016 the government transferred PEN87m ($25.8m) to 12 public universities to enable the institutions to meet management commitments. An additional PEN380m ($112.6m) is being allocated in 2017 to 25 universities, for management adjustments, salary increases, and the creation of vacancies and scholarships for students and professors, according to Marilú Martens Cortés, minister of education. Overall, the budget allocated to public universities increased to PEN2.6bn ($770.6m) in 2017, from PEN2.27bn ($672.8m) the previous year. “For SUNEDU’s third year, we expect that the universities which have lagged behind in terms of reaction time, will catch up,” Miranda told OBG. “Public institutions have a different management mode so it is taking longer to show that they meet the requirements.”

Other measures introduced by the law include a 50% limit on the proportion of courses students can take online, which some have argued significantly reduces the scope for online education, an important tool to expand access in remote areas, given the country’s complicated geography. Professors must hold a minimum of a master’s degree and 30% of lecturers in any single university must have a doctorate. Institutions were given a five-year transition period to adjust to the new requirements.

Vocational Education & Training

At the technical and vocational training level, a newly approved law is also expected to improve quality, boost the attractiveness of technical careers and foster greater alignment between the training offer and labour market needs in the medium term. Approved in June 2016, the Law of Institutes and Higher Education Schools No. 30512 outlines basic licensing conditions, regulates the establishment of new schools and oversees the quality of academic curricula. The law will create the Organismo de Gestión de Institutos y Escuelas de Educación Superior (Educatec), a new supervisory body tasked with managing the network of technical and vocational training schools. According to MINEDU, Educatec will work with regional governments to align what is on offer with labour market needs. The new law will also enable technical and vocational training centres to award bachelor’s and technical bachelor’s degrees in addition to professional diplomas, making it easier for students to continue with higher studies. Recent initiatives such as the website ponteencarrera.pe are also supporting students to make key decisions on study paths by providing them with data on the cost and labour market outcomes of specific programmes of study at technical institutes and universities.

Increasing access to higher education, particularly among high-performing underprivileged students, is another priority. The current administration plans to double investment in Beca 18, a scholarship programme launched in 2011, which has since benefitted more than 69,000 students.

Outlook

As the period of contraction of the commodity cycle continues to dampen Peru’s growth prospects, the education sector has become critical to the country’s ability to begin its transition to a knowledge-based economy. In a post-commodity cycle scenario, aligning vocational and technical training with labour market needs is expected to gradually rise to the top of the agenda in the medium term, as efforts to stimulate growth outside of natural resource-based sectors gain momentum. Though the challenges facing the education system are significant, Peru is on its way to building a strong foundation for meaningful, long-term success.