Deregulation and decentralisation have been the main thrust of reforms in higher education in Latin America. As a result, important changes have been made in university structure, management and funding. These changes include: a decrease in state involvement in providing and financing tertiary education; the creation of systems of higher education accreditation and bodies for quality assurance; the adoption of new criteria for quality and funds allocation; and greater control over the use of resources. In addition, under the strong influence of globalisation, countries in Latin America have been gradually opening up to transnational providers of education services at the tertiary level. In different countries in the region, these changes have been incorporated in a new regulatory framework for education through specific laws, decrees or, in some cases, constitutional reforms, such as in Argentina and the Plurinational State of Bolivia.36

These reforms have resulted in a significant increase in heterogeneity in tertiary education, at the expense of average quality. As a result, the need to strengthen the regulatory role of the state through the creation of bodies for quality assurance has become an urgent priority. New outcome-oriented assessment models, which prioritise institutional efficiency and productivity, require public information systems and logistics that can provide comparative data at the national and international level. Under new quality criteria, and with the expansion of privately provided tertiary education, the production of knowledge has lost importance in these institutions.

The growth of the higher education system in Latin America in recent years has increased the pressure to diversify funding mechanisms. New forms of financing have developed, among which four main mechanisms or schemes stand out:

• Direct public funding: in some countries, the allocation of public funding is increasingly characterised by performance-based funding through competitive procedures.

• Public funding based on policy objectives: funds to address specific objectives or advances in research, such as the university for all Programme (Prouni) in Brazil.

• Private funding: fees paid by families, firms that finance research and post- graduate programmes, or private donations. The cost of education is increasing even in state universities (the most noteworthy case is Chile).

• mixed model: Chile.

An urgent challenge to resolve in terms of funding higher education in the region is to balance access and equality. If young people from the lowest income quintiles are going to achieve real and lasting social mobility through better employment opportunities, they must have access to and be able to complete university. The challenge for a more egalitarian education system is not to reduce public spending on tertiary education. On the contrary, it involves increasing access for young people from low-income households, identifying alternative forms of funding for those who cannot afford to pay (through cross-subsidisation or scholarships based on ability to pay), having flexible timetables with evening hours and having an adequate supply of publicly and privately provided tertiary education.

Tertiary education in Latin America and the Caribbean is faced with various “traditional” challenges that can only be overcome with the active support of the State. These challenges include: improving the quality of teaching; improving the efficiency of educational institutions; aligning technical education with labour market demand; and complementing the teaching mission with research and extension. The increased private presence in state education has not resolved the problem of obtaining resources for research and for the production of other public goods, which remain in general the responsibility of state universities and others that receive public funding for this purpose.

Along with these challenges, others will be emerging for Latin American universities in the coming years, such as new technological paradigms and the need to strengthen the university’s role in development. The transition towards the knowledge-based economy has brought about major changes in productive structures and redefined the function of higher education institutions. Knowledge and technology transfer is beginning through the dissemination and application of academic research results and, in short, the generation of profits derived from them. The public sector in Latin America must therefore take these demands into account in defining coherent and effective policies in education, science, technology and innovation. The role of universities in creating skills in the region is crucial, so they need to become key players in the region’s development.

Modernising the university in Latin America involves establishing a solid relationship with the production sector through research and development. Traditionally, higher education institutions have had another mission in parallel with teaching: to carry out research. In Latin America, higher education institutions have a great potential in this respect, given that they account for most of the human resources dedicated to scientific and technological research. However, Latin America has not reached a “critical mass” of researchers. This is illustrated by the number of full-time researchers with respect to the size of the economically active population, which continues to be below the levels of OECD economies. This limitation in resources is also reflected in the poor performance of the region in terms of scientific production and innovation performance (see chapter 6).37

In addition to having fewer researchers, Latin American universities are characterised by the greater weight of the social sciences and humanities. In fact, the distribution of university students in the region is concentrated mainly in these disciplines, while there is a smaller proportion in science and technology. This pattern differs considerably from that of the OECD economies, where we see cases such as Korea and Finland with a greater concentration of graduates in the fields of engineering, science and technology. This is consistent with the strategy in these countries to increase human resources in disciplines with applications in sciences and technology, as they look to develop a productive system based on the development of manufacturing value added.

Given the limited public resources available, closer interaction between universities and the productive sector could help reconcile the traditional missions of higher- education institutions with their new functions related to knowledge and technology transfer. For universities, collaboration with business could strengthen the training and retraining of teachers, in particular in regard to scientific and technological skills and the dissemination and practical application of research results, and promote alternative sources of funding. From a business perspective there are multiple reasons for having more direct contact with universities: to help resolve problems specific to the structure of production, to provide an alternative source for research and development, and to carry out a long-term strategy to maintain and improve competitiveness.38