Public Funding: Latin America

Abstract

Latin American countries (LAC) are characterized by the stagnation of their economies in the middle-income category, the so-called middle-income trap. One solution to move on to the high-income status is to change the production structure and invest in higher value-added activities. In this respect, LAC show serious inadequacies in education and innovation, as well as in their infrastructures and access to credit. One key issue, then, is to raise the level of investment in education and R&D. This is no easy task. Despite a decade of commodity-driven economic expansion from 2003, LAC economic growth declined in 2015 and showed a 0.8% contraction in their growth rate in 2016. So, LAC face the challenge of increasing the amount of resources for higher education and allocating these through efficient mechanisms that promote the improvement in quality and equity. Although this article focuses on higher education public funding in LAC as a whole, we also address some special cases which help illustrate why financial mechanisms in LAC are far from homogeneous. The article first examines where LAC stand regarding public expenditure on higher education. Second, we focus on the funding instruments that governments implement to allocate public resources to higher education institutions (HEIs) and to students.