Latin America has begun to invest more in education. Traditionally, total public spending on education in Latin America has been low in comparison with OECD economies. These differences, however, have begun to decline. An average of 4% of GDP in the region is spent on education, representing a slight increase since 2000, while the average for the OECD is 5%. Distribution by levels shows that education spending is concentrated on primary and secondary education; while the level of spending on pre-school education, despite low coverage, is close to that of OECD economies. Spending on tertiary education is below the OECD average, with some exceptions (Colombia, Uruguay and the Bolivarian republic of Venezuela).

Three factors explain the increase in education spending per student in the region: economic growth, demographic changes and private-sector participation. First, the significant economic growth of the last decade, which has increased GDP per capita in many of the countries of the region, must be taken into consideration. Second, the ageing of the population has led to a decrease in the proportion of school-age population, a factor that is particularly relevant in Argentina, Brazil, Chile and Mexico. Lastly, there has been an increase in private-sector participation in the provision of education services (especially in Argentina and Chile), leading to a higher percentage of students in private schools and freeing up more public resources per student.16

The recent increase in public spending per student (on primary and secondary education) is linked to improvements in the education conditions.17 Since 1990, most Latin American and Caribbean countries have been increasing public spending per student, a trend that has been strengthened in the past decade. Between 1990 and 2000, school coverage was increased (especially in secondary education, as primary education had already been essentially universal since the beginning of the 1990s); thus, a large share of the increase in education spending was concentrated on facilitating the incorporation of new students. this, however, limited the increase in average spending per student. Between 2000 and 2008, the increase in spending was used to improve conditions that affect the quality of education, such as infrastructure, equipment and didactic materials, among others.18 However, there are still important differences between countries: in primary education, for example, public investment per student as a percentage of GDP oscillates between8% (Peru) and 16% (Brazil). Similar differences occur with secondary education.

Regarding public investment per student, spending on tertiary education is higher compared to other levels of education. This can be seen clearly in Brazil, Costa Rica, Cuba, Mexico, Panama and Uruguay.19 On the other hand, for a notable group of countries this indicator has decreased, in particular Argentina, Chile and Colombia. This decrease is much more significant in Latin American countries than in OECD economies. this is partly due to strong differences in investment in education by income quintiles making public spending per student at the tertiary level regressive and higher than spending per student at primary and secondary levels.

Spending on public education remains more important, although some countries do have high levels of spending on private education. On average, public investment in education in Latin America reaches levels similar to those in OECD economies (4% of GDP), with the private sector covering about a quarter of total spending in this area (Figure 4.7). In OECD economies, private spending on education does not reach 1% of GDP, while in Latin America it accounts for 1.3% on average, with Chile, Colombia, the Dominican republic and Peru standing out.

Figure 4.6

Latin America & Caribbean: Evolution of Public Spending on Education by Level Between 2000 & most recent available data

Figure 4.6. Latin America & Caribbean: Evolution of Public Spending on Education by Level Between 2000 & most recent available data

Box 4.4

Demographic Bonus & Evolution of Public Expenditure on Education

The growth of GDP and income per capita in the past decade is not the only factor that has made the expansion of public spending on education in Latin America possible; in fact, public spending per student in primary and secondary cycles —considering students that attend public schools— has also been positively affected by the decline in the number of school-age children and adolescents (from 5 to 19 years of age).

The existence of this “demographic bonus” in the region has been apparent since the beginning of the 1990s, as the percentage of the school-age population has decreased from 27% (1990) to 23.4% (2008) of the total population.a This demographic transition fostered an increase in public spending on primary and secondary education in the past two decades; for every dollar allocated per potential student in 1990, 2.7 dollars were allocated in 2008.

The existence of this “demographic bonus” in the region represents a great opportunity to strengthen the education of young generations. However, this opportunity must be seized now, as these particular demographic conditions will not last in the long- term. Strengthening the skills of youth becomes even more urgent if we consider that that these generations will have to maintain high levels of productivity in order to sustain the dependent population resulting from the gradual ageing of society. This is the situation OECD economies now find themselves in, as they have completed this demographic transition. A more skilled labour force is one that can incorporate knowledge and innovation to drive sustained economic growth; therefore, it is fundamental to invest some of the resources freed up by this “demographic bonus” into strengthening the competencies of those generations who have recently entered the labour market.b