I received the following message from Julio Ronchetti, President of FPP EduMedia, a company that organizes international student recruitment fairs, events, and webinars around the world. FPP is based in Brazil, and Julio currently resides and works there. As a result, he has been able to observe the economic and political issues that have been plaguing Brazil for the past year or two and gain his own perspective on how they affect the work that we do every day in this industry.
After being asked by some of his clients about whether it is still worth it to recruit in Brazil, Julio penned the following message and distributed it to FPP’s contacts. It provides interesting “food for thought” on the state of the Brazilian international education market from the perspective of someone who is experiencing it every day.
Julio has granted me permission to post his message on my blog. His message begins beneath the image below.
BEGIN MESSAGE BY JULIO RONCHETTI
“I have been asked by some of our clients – how is the current situation in Brazil in terms of student mobility; the economy, and if it is time to recruit from Brazil.
I would like to take a few minutes to share with you what I think of the situation in Brazil, as I am Brazilian and President of FPP EDU Media – a company with strong roots in Brazil, even though we are a US registered company (about us).
In summary, the current situation in Brazil stemmed from political reasons and not economical ones, but at the end of 2014 the politics began to contaminate the economy reaching a peak in January/February of this year. However, even with some economic problems, Brazil is still in the top 5 – 10 country to send more students abroad, depending on the criteria (undergrad, language, receiving country, etc.).
The Olympics is about to start in Rio and the media is doing a pretty good job of touching on any little problem the country has been facing. It is understandable that this generates uncertainty among international recruiters, but most of these problems are not new and were also present when confidence in Brazil was strong.
Where do I think the country stands now?
Just like the saying goes … is the glass half full or half empty? I see the glass half full in Brazil and let me explain why.
The political problems are being corrected, and the economy has begun to pick up. Maybe this is my ‘half full glass’ view but let me try to prove my point here.
One of the reasons to be extremely optimistic is what the federal police and federal prosecutors have been doing during the corruption investigations. This is ‘cleaning’ the country’s culture of corruption, and with the support of Brazilian citizens in pressuring everyone with street demonstrations and constant posts on social networks, the media has been forced to cover the whole process daily, nonstop for the past two years.
In the long run, this is the best thing that could happen in this country. As a Brazilian, I would like to see this era of cleaning to continue as it sets up Brazil for great success, thanks to fair and open democratic systems.
With my ‘half full glass’ vision of what’s going on I really see a brighter future for Brazil, with its economy recovering strongly from 2017. This means the wave is now, and now is the time to invest your recruitment dollars in Brazil, as Warren Buffet said:
“Be Fearful When Others Are Greedy and Greedy When Others Are Fearful”
The Brazilian economy is headed in a very good direction, however, there is a small chance that the old government might come back as the final impeachment judgment is supposed to be announced in August. If that happened it would be a major frustration. That said, all indications point to impeachment being likely with a smooth transition to new leadership already in the works.
Those who come to recruit from Brazil in September/October of 2016 will reap the rewards from the improving political situation and the recovering economy, with the benefit to negotiate better deals with providers and agents who are looking for partners to receive their students. This will not be as easy when the economy has fully recovered, and everyone is back recruiting in Brazil.
A major sign that the Brazilian economy is recovering is the USD! The USD frequently acts as a barometer to indicate if an emerging economy is having problems or if it is growing strong. The USD on March 5th, 2015 during our Student Fairs in Brazil was 3.01 Real for 1 USD.
As the crisis continued, the USD continued to appreciate and at the end of January 2016, when it was the peak of the crisis in Brazil, the exchange rate reached 4.10 Real for 1 USD (January 22, 2016). That was a huge increase !!!
Students visiting our events in March 2015, who were thinking about studying abroad the following year saw the price of their course increase by over 73% in less than a year. Even so, Brazilian students continued to go abroad, albeit some went for shorter amounts of time (language courses), or they chose institutions that offered better prices.
Of course, there are hundreds of thousands of families in Brazil who are extremely wealthy and do not care about currency fluctuations. For them, sending their children to study abroad is a must, and I don’t see that deep-rooted culture changing anytime soon.
The Brazilian Real is now around 3.29 for 1 USD. Considering the inflation the country experienced during that period, the amount now is less than it was in March 2015 when 1 USD was at 3.01 Real.
Through 2016 the Brazilian Real is the currency that has appreciated the most of the 16 main currencies in the world.
Why is that?
Again, the reason is that the market is recovering from the crisis and economists already see a growth in the economy in 2017, after a few years of negative growth. Actually economists see a new growth cycle starting end of this year to continue for the coming years which I corroborate.
Students and parents are starting to be more optimistic now, and I foresee that students visiting our events in September and October will be more eager to study abroad in 2017 than they were in 2016.
Why are things changing in Brazil?
1- The federal police and prosecutors are comprised of young and highly educated individuals, including Harvard graduates. They are smart and are playing this as a game of chess, always steps ahead of the criminals.
2- They managed to have one law passed in Congress in 2013 for ‘plea bargaining’. This law states that if the courts declare someone as guilty, and this guilty person assists the prosecution in further convictions, then this person is eligible for a reduced prison sentence.
3- The Supreme Court is independent of the legislative or executive powers, as it should be, which in Latin America is not always the case. In an historic moment on February 17th, the Supreme Court changed the law allowing prison time directly from a conviction via a second appeal. This triggered an avalanche of plea bargaining agreements. As a result politicians and high-caliber business people have been imprisoned for the first time.
This is changing the culture of corruption in Brazil, which should lead to much less corruption, and an increase in productivity in the future.
Investors are already coming back to Brazil, and interest rates are starting to move back to lower levels.
The President has not yet been impeached. This is a democracy after all, and not a coup, as the international media portrayed many months ago. Now, the Senate will judge the possible impeachment no later than August to give the removed President time to defend herself. Meanwhile, the Vice President acts as the interim-president and things are moving forward.
After August, when the president is removed (as seems very likely), this will allow more certainty in general, which will bring the USD to an even lower value and it will attract greater levels of direct foreign investment.
This perception will be clearer after August, and students will feel more inclined to go abroad. Students and parents will be reassured on the economy and especially on the USD. The appreciation of the USD or not is not so much the problem. The fact it fluctuates constantly in one direction is the major problem for students and parents as this leads to uncertainty and this seems to be being fixed now.
The end can only be known in the end, but the Brazilian Real continues to stabilize with downward bias. This is a great indicator for the recovery of the economy and for the future growth of Brazil.
In 2017 you will see students and parents returning to their original study abroad plans, and you’ll be relieved that you made the right decision in continuing to recruit from this huge market. If you’d like to discuss further, please do not hesitate to contact me directly.
Julio Ronchetti can be reached at email@example.com.