Training, Education, and Development

Stephen DeAngelis

December 17, 2008

In my posts about Development-in-a-Box™, I have often written about the importance of investing in human capital as part of the sustainable development process. Brazil is a good case study in this area. Touted as one of the up and coming economic powerhouses known collectively as BRIC countries (for Brazil, Russia, India and China), Brazil is nevertheless failing as a state when it comes to developing its human capital. Joshua Partlow, writing in the Washington Post, provides a good update of conditions there and what some companies are doing to mitigate the situation [“Brazilian Companies Step In To Educate Future Workforce,” 9 December 2008]. Partlow writes:

“Despite being one of the world’s most populous countries, Brazil does not have a single university ranked in the top 100 internationally. Of its college graduates, 5 percent are engineers, far below the rates of countries such as China and South Korea, according to Brazilian businesses. Since Brazil’s education system is falling short, Vale, [the world’s largest producer of iron ore] like several other Brazilian companies, has decided to build its own.”

Brazil is blessed with an amazing amount of natural resources and, as a result, it has been tapped for future superstardom for decades. Other developing countries are not quite so blessed with natural resources; but all countries are all blessed with human resources. Sadly, people are too often seen as anchors to prosperity rather than engines of prosperity. Companies desiring to exploit the economic potential of natural resources understand that human resources are critical in that endeavor. That is why I encourage leaders of emerging market countries to invest in education and training programs as part of their overall development strategy. Partlow provides the experience of one young employee of Vale.

“Fabiana Nunes Rodrigues didn’t know much about trains. But she wanted a good job, she said, something stable, maybe as a mechanic, like her grandfather. Brazilian college courses didn’t offer much in the way of technical instruction. But one company in her home town did, and she already knew it well. Since she was 15, Rodrigues had spent her afternoons in technical classes sponsored by the mining giant Vale. … So it made sense that when she graduated from high school she would enroll in Vale’s nine-month train maintenance course on this vast corporate campus on a rise above the Atlantic Ocean. ‘I’ve always wanted to work for Vale,’ said Rodrigues, 18, standing in a maintenance facility where cranes were lifting hulking metal tubing from a train engine. ‘Now many of my friends want to take this class, too.’ Vale also wants people like Rodrigues, and is willing to do a lot to get them. With more than 150,000 employees worldwide, it is one of several large corporations in fields such as mining, aerospace and construction that are driving Brazil’s ascent in the world economy. But the firms’ ambitious plans for growth have bumped into a problem hampering development across Latin America: a higher education system that does not churn out enough engineers and others with technical skills, even as the global economic crisis depresses demand.”

Leaders of emerging market countries often see themselves caught in a Catch 22 situation. They believe that if they can attract companies to help them build up their economies they can eventually improve the social services provided to their people (including education and healthcare). The companies they want to attract, however, are not just looking for cheap labor they want healthy and skilled workers. That is the situation in Brazil as well other Latin America countries.

“‘For years, technical education was not the main focus of the government,’ said Marco Dalpozzo, Vale’s global human resources director. ‘Mining was not seen for the last 20 years as a great opportunity or a vocational business opportunity for the country. So you have professions for which Vale had to create their own entire system of education.’ Over the past few years, several Latin American countries have enjoyed soaring growth rates as they exported oil, minerals and agricultural products around the world. In Brazil, gross domestic product more than doubled, to $1.3 trillion, in the five years ending in 2007, while inflation dropped to 3.6 percent, a quarter of the 2003 level. Yet recent studies have shown that workers in Latin America have less education than those in East Asia and Eastern Europe and that the percentage of students enrolled in high school is far lower than in developed countries. In Colombia, one out of every 700,000 people receive PhDs, compared with one in 5,000 in developed countries, wrote Jeffrey M. Puryear and Tamara Ortega Goodspeed in a contribution to a book published this year titled ‘Can Latin America Compete?’ ‘The region’s limited number of scientists and advanced degree recipients weakens the region’s competitiveness by limiting countries’ ability to use and generate knowledge, and to carry out research,’ they wrote.”

Saudi leaders understand the importance of educating their citizens for the future and are investing billions of dollars to become a center of education in the Middle East (see my posts entitled Education in Saudi Arabia and Looking Beyond Oil). Although Brazil doesn’t currently have the same resources available as Saudi leaders, they are nevertheless in a better position than any other Latin America country to become a center of educational excellence. Partlow reports, however, to do that Brazil will have to adopt a new education strategy.

“For younger students, Latin American countries have focused in recent years on building schools and expanding access to public education, rather than improving the quality of that education, said Emiliana Vegas, a senior education economist at the World Bank. Teachers’ pay raises are based on longevity rather than performance, and few parents are used to demanding more rigorous standards. ‘Most Latin American parents have less education than their kids. They feel their kids are already receiving an advantage they didn’t get,’ said Vegas, who co-authored the book ‘Raising Student Learning in Latin America.’ In the most recent results of the Organization for Economic Cooperation and Development’s triennial tests of 15-year-olds from 57 countries, the Latin American countries that participated, including Brazil, Argentina and Colombia, consistently scored near the bottom. ‘It’s not just that kids need to go to school, they need to learn in school,’ Vegas said.”

There was a time when the stereotypical view of Latin Americans was that they were more interested in a siesta than a job and that they would gladly put off something until mañana if they could. And mañana didn’t mean tomorrow, it meant not today but sometime in the future. That stereotype, like all stereotypes, is untrue. Most Latinos are hard working, but too many of them are unskilled. Partlow continues:

“Poor education leads to a lack of skilled workers. A survey of more than 1,700 industrial firms by Brazil’s National Confederation of Industry last year found that more than half could not find enough trained workers. The biggest companies in Brazil, as well as elsewhere in Latin America, have taken it upon themselves to change this dynamic. For the past several years, Embraer, an airplane manufacturer, has partnered with Brazilian universities to train thousands of engineers, and in June, the company opened an educational headquarters at its Eugenio de Melo plant in Sao Paulo state.”

During most financially-hard times, the first things that many companies cut are training and education programs. They are considered a luxury — overhead the company can’t afford. Vale, however, looks on their programs as a shrewd investment.

“The declining global demand for minerals amid the financial crisis has recently slowed Vale’s rapid growth. The company said last week that it would cut 1,300 jobs and that about 5,000 workers would take enforced holidays in coming months to slow production. But the company said it is still investing heavily in its future employees. Over the next five years, Vale estimates it will need 62,000 new workers. This year, about 7,000 students are taking courses in its schools and training programs, from graduate studies for engineers and geologists to technical courses for high school graduates. The company has opened three schools and is building a fourth to educate potential employees. It pays students salaries and health benefits, provides food and dental care, and sometimes offers bus passes and hotel rooms to students who don’t live close to their classes, all part of the fierce competition for skilled local labor. ‘The biggest companies woke up in the past years, and they all need these kind of professionals,’ Dalpozzo said. ‘So the companies that want to have a sustainable future need to invest in that.'”

Many of globalization’s critics argue that globalization is exploitive and has caused multinational corporations to scour the globe looking for cheap labor. If that were true, countries like Haiti would be filled with corporations instead of unemployed workers. Labor costs certainly are a consideration but not the only consideration. Enlightened companies are companies that invest in the future. They invest in resources, infrastructure and people. Good companies are always looking to create customer loyalty and they create employee loyalty as well. Vale’s program is one way to help develop that loyalty. Partlow, for example, examines the course that teaches potential employees about trains:

“For three months, the students learn theory in the classroom, and for six months, they work alongside technicians to get a practical feel for the job. They work seven hours a day and are paid $170 to $510 a month. ‘It wasn’t like I had a specific interest in Vale, but it was the course that attracted me. It is a very good course,’ said Acy de Vasconcelos Almeida, 28, as he twisted a wrench on a 2,300-gallon fuel tank. ‘But if I become an employee here, I would be happy to work here my whole career.’ Vale says it hires nearly 70 percent of the students who complete its training programs. In another company class in Vitoria, students learned about railroad line signals and data transmission in preparation for working on a line from Vitoria to the nearby state of Minas Gerais. Monik Rodrigues Espirito Santo, 21, said she had always enjoyed math and physics and became excited about electrical circuits in high school. She hopes to eventually study engineering in college but decided to enroll with Vale first. ‘Most of the people want to work as fast as possible, so the fastest path is to do a technical course and get right into the market,’ she said.”

It’s not just direct hires who are receiving the attention of corporations. Partlow reports on an innovative program that trains independent downstream construction workers as a marketing ploy.

“Educating a workforce also opens up marketing opportunities. The construction and plumbing supply company Amanco has launched a series of classes in 56 hardware stores to teach construction technique — using Amanco products — via lessons broadcast from a studio in Sao Paulo. About 26,000 students have completed the two-month course so far and graduated as ‘construction doctors.’ ‘There are a lot of people who are working now without any kind of training. They learn with their fathers or uncles and do things the way that they did before, but have no formal training,’ said Marise Barroso, director of marketing for Amanco. ‘In Brazil, 80 percent of the construction business is informal.’ If construction workers know how to use Amanco pipe fittings and tubing, she said, they will recommend these products to their customers. Amanco has found that sales of its products are 26 percent higher in stores where the classes are offered. ‘There is nothing like this in any other country in Latin America,’ said Luiz Ros, a manager at the Inter-American Development Bank, which supports the Amanco project. He said that construction companies typically pitch their advertisements to the consumer but that it is often the construction worker who actually decides what materials to buy. ‘What’s fascinating is they’re doing this for profit … by understanding who decides and who doesn’t,’ Ros said. ‘The ultimate result is they are creating a community of well-trained and qualified production workers in Brazil when it is facing a huge bottleneck in terms of qualified construction workers.'”

I am encouraged whenever I see investments being made in people. Sustainable economies rely on sustainable middle classes and middle classes emerge when people are given the education, skills and opportunities to succeed. Whenever I’m pushing Development-in-a-Box, I make a strong case for balanced investments in resources, infrastructure and human development. My belief is that an out of balance investment portfolio has much less chance of achieving a diversified and sustainable economy.