09/07/2012 03:39 pm ET Updated Nov 07, 2012

Multilatinas and the Private Sector: A New Partnership for Education

Latin America has seen sustained, robust growth over the past decade, even as most of the developed world struggled through financial crisis and recession. Many factors have driven this success story: high commodity prices, a growing middle class, solid macroeconomic management and increasingly sophisticated financial markets.

One particular force behind the region's growth has been the rise of multilatinas--corporations based in Latin America with operations throughout the region and often around the world. Multilatinas are now responsible for 2.1 million employees in the region and approximately $780 billion in annual revenue. Multilatinas themselves, however, opt to invest most of their money elsewhere in the world. While there has been an increase in foreign direct investment inflows in the region, totaling $113 billion in 2010, Latin American foreign direct investment outflows have been on the rise. The total outflow quadrupled between 2009 and 2010, reaching an all-time high of $43.1 billion.

One of several hypotheses for the lack of regional investment is that the state of education and learning in the region constrains the ability of multilatinas to expand and reinvest in their own backyard. Despite relatively high enrollment rates in Latin American and Caribbean countries, numerous indicators demonstrate a drastic need for improved educational quality. It was to improve our knowledge about how the private sector is engaging with efforts to improve education that Brookings, together with Formar Foundation, underwent a year-long endeavor to investigate the magnitude of corporate social investments in education in Latin America. The full report can be found at the Brookings website.

Several international and domestic assessments and indicators highlight the extreme nature of the learning crisis in the region. The most recent OECD Programme for International Student Assessment (PISA) study measuring reading, science and math skills of 15-yearolds around the world ranked Chile the highest scoring country in the region at 44th out of 65 countries in reading and science. Uruguay ranked highest of all countries in the region in math at 49th place overall. Similarly, a survey of business leader perceptions found Latin American countries to have some of the lowest ranked education systems in terms of quality.

Despite increased government support for education in Latin America over the past decades, lagging commitments in national budgets and stagnant donor country aid resources have left many public systems underfunded. While some countries in the region make larger investments in education than others, government budgets for education are impacted by structural issues ranging from tax collection capacity to tax avoidance by small and large corporations. This year, as donor governments decrease, phase out or cut education aid to the region, the education budgets of over 20 countries in Latin America will be impacted.

To date, there has been no aggregate data about Latin American corporate social investments in education within the region. Thus, our study asked a simple question: What are the multilatinas doing through their social investment and philanthropy portfolios to support quality public education in the region?

The results indicate that two-thirds of the largest multilatinas make social investments in education in the region, with projection totals ranging from $224-569 million annually. While most companies make modest contributions, several invest tens of millions of dollars, and the majority of support is provided through cash contributions. Brazil and Colombia top the list of likely countries to receive education support from multilatinas. Most contributions target local schools and NGOs, and the most popular investment areas are teachers and adolescents.

On the positive side, the study shows a long-term commitment to education. Less than one-fifth of the companies surveyed made one-time only contributions. Commitments of two to three years were reported by 36 percent of surveyed companies with another 46 percent of those companies indicating their investments in education exceeded three years.

However, major problems with their approaches surfaced as well. A primary challenge is that the study found little evidence of coordination or collaboration between multilatinas and government organizations. A total of 32 percent coordinate with host governments, compared to five percent which coordinate contributions with international donor agencies. A full one-half report not coordinating contributions with anyone outside of the company

Another missing component is consumer engagement. None of the surveyed multilatinas reported using consumer cause marketing or point-of-sale campaigns to generate financial resources for education in the region. This may be a missed opportunity given the growth of the Latin American middle class and resulting increase in consumer spending. While companies cite public relations and branding as major reasons for education investments, the degree to which companies make those investments as part of a broader business strategy remains unclear.

Our report comes to two main conclusions. First, there is an opportunity for business to do more for education. The investment in people through support for education is minimal compared to corporate revenue and the multilatinas' potential to give. And secondly, there is an opportunity to do better with current investments through better targeting efforts and greater coordination with governments and other relevant organizations.

Trends indicate that the multilatinas can improve the effectiveness of their current investments in education. If education is a public good and human right, as we believe it to be, multilatinas have a vested interest and responsibility in ensuring that education quality in the region improves