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close this bookFinancing Technical and Vocational Education: Modalities and Experiences (UNEVOC, 1996, 64 p.)
close this folderFinancing Vocational Education: Concepts, Examples and Tendencies
close this folder3 A brief review of experience
View the document3.1 Back to the roots: Brazil
View the document3.2 Financing training in a context of rapid growth: Examples from Asia and the Indian Ocean
View the document3.3 An African experience: Côte d’Ivoire

3.1 Back to the roots: Brazil

The Brazilian vocational education system

Brazil pioneered the establishment of autonomous institutions responsible for the training of the manpower required by the economy (CINTERFOR, 1991). Funded by payroll taxes and developed as distinct from the school system, this model was conceived as one of the instruments needed to face the challenges of industrialisation.

The National Industrial Apprenticeship Service (SENAI) was established in 1942 to provide a qualified workforce for the developing industrial sector5. Conceived to serve the needs of the industry, SENAI is also managed, financed and operated by industry. It was established by decree but is regulated under private law.

5 A sister institution, the National Commercial Apprenticeship Service (SENAC), was later set up for the tertiary sector

SENAI adopted a regional structure, partly due to the size of the country and its federal nature. The National Council, headed by the President of the National Confederation of Industry, comprises representatives of various industrial sectors, as well as those of fisheries, transportation and communications, officials from both the Ministries of Education and of Labour and the Presidents of the Regional Councils.

The National Department is mainly in charge of providing overall normative guidance, technical assistance and co-ordination. The Regional Councils have a pattern of membership similar to the one adopted at the national level. They are the executive arms of SENAI and operate the vocational training centres as well as provide training and related services to the enterprises. It is to be noted that workers’ organisations are not represented in the SENAI management bodies.

SENAI’s training infrastructure embraces a great diversity of elements, including over 500 various types of vocational training centres, more than 200 mobile training units and several personnel development centres. Many of these institutions are joint ventures operated in co-operation with industry. Major training activities combine in-centre pre-employment vocational training, an apprenticeship scheme and continuing vocational education, including company-based programmes. This diversified training structure and strategy has allowed SENAI to train, since 1942, more than 10 million people. SENAI’s activities are meant to cater for the needs of the modem sector of the economy, although the importance of the informal sector is recognised.

It is argued that one of SENAI’s major assets is its close relationship to industry and its needs. Such a close linkage is largely due to the financial participation of the employers and to the design of the governing bodies of the system. However, cooperation also exists at the operational level where business representatives are very active, taking part, for instance, in curriculum development, recruiting apprentices, providing part-time instructors or by participating in the technical advisory boards of the training centres.

Financing modalities

SENAI’s financing modalities are based on a 1 % payroll tax paid by enterprises from the industry, transportation, communications and the fish-processing sectors. Businesses employing more than 500 workers are subject to an additional levy of 0.2 %. The tax is collected by the Government Agency in charge of social security, and then transferred to SENAI. Government subsidies complement the budget.

The allocation of funds is governed by the following principles. SENAI’s central administration absorbs 1 % of funds raised to cover related costs and further retains 15 % of the general contribution for its running expenditures, as well as the product of the additional tax. The balance of the general contribution (85 %) is transferred to the regional bodies.

The retention of funds at the central level enables SENAI to perform a redistributive function by allocating supplementary resources to disadvantaged regions, such as the Northeast, or to support priority programmes. The additional resources levied from large companies are mainly used to finance their training plans. Finally, public subsidies benefit programmes linked to government policies, such as the training of trainers or the building and equipment of new training centres.

In 1975, the revenue-raising scheme was complemented by a tax-rebate incentive. This arrangement provided training enterprises with the possibility of deducting, within an upper limit, twice the amount of their training bill from their income tax. The tax rebate was subject to the prior approval of the enterprise’s training plans. Such an option reflected a Government strategy to boost in-company training, in view of improving labour productivity. However, it was suspended in 1990 for an indefinite period, within the framework of broader orthodox fiscal measures.

The effort to promote company training led SENAI to sign specific financing agreements with large enterprises. According to these contracts, the firm that agrees is exempted from the 1 % levy and is allowed to retain part of the 0.2 % additional tax. Corresponding savings must be allocated to enterprise-based training programmes. These contracts are primarily of benefit to enterprises making significant investments in areas considered as contributing to industrial development.

Apprenticeship, managed by SENAI, constitutes another financing modality of training. It is compulsory for enterprises to employ, and enrol in SENAI centres, a number of 14 to 18 year-old apprentices ranging from an equivalent of 5 % to 15 % of their ordinary workforce. During the first half of their training, apprentices receive half the minimum wage. This income increases to two-thirds of the base salary for the second part of the learning period.

The various components of this system are meant to contribute to the development of training. While the levy, complemented by public subsidies, guarantees, under normal circumstances, a certain financial stability, the tax-rebate scheme supports the expansion of in-service training and increases the interest of employers in training. Co-financing agreements and the management of the apprenticeship system are instrumental in ensuring that SENAI remains close to the enterprises and their changing needs.

What lessons?

The evolution and the results of the Brazilian financing system provide an interesting overview of the various financial instruments and strategies used. The payroll tax has obviously contributed to the development of a strong training system, focusing on long-term training programmes. However, the allocation mechanisms have not been able to operate a redistribution of funds in a manner which significantly reduces the disparities of access between the various regions, between the size of the enterprise, and between the category of worker. In addition, the expansion of the institution is sometimes said to have generated a quasi-monopoly or, at least, given it a dominant position, which has impaired the development of a competitive training market (Leite, in Gasskov, op. cit.)

The profound crisis that Brazil faced in the early 1980s revealed the solidity of the revenue-raising scheme and its ability to adapt to a changing economic context. Adverse conditions resulted in a fall in revenue as employment and salaries fell. In constant price, the contributions collected in 1989 represented only 63 % of the 1980 figure. Over that period, the survival of the institution required both the reduction of expenditures and the diversification of revenues. The interest produced by surpluses accumulated in the past constituted a stabilising income which guaranteed SENAI’s financial solvability. Developing closer links with enterprises also contributed towards supplementing the decline in the regular payroll-based income (Gomes, 1991).

The results of the tax-rebate scheme showed a significant increase in company training (2 million trainees in 1980), and the development of enterprise training centres. However, a careful analysis showed that only 1 % of the taxable companies took advantage of this device. The heaviness of the procedure for approval was sometimes identified as an obstacle to the system. The fiscal incentive was, in fact, taken up by the large companies from Sao Paulo, which used it to further consolidate their training policies. The impact on other industrial sectors and states remained limited. Therefore, the tax-rebate facility did contribute to an expansion of the training effort, but in a way that further increased the training gap between regions and categories of enterprises.

The co-financing agreements, conceived as an alternative way of developing enterprise-based training, have shown rather positive results, as indicated by a rapid increase in the number of contracts. However, this trend has also confirmed a bias towards large firms. Major agreements are signed with companies having their own training centre. The participation of smaller companies remains marginal.

In spite of its limitations (lack of competition, bias towards large companies, lack of adequate incentives), the Brazilian system demonstrated a strong capacity, in a changing labour market, to diversify its sources of income as well as its provision of services to firms. This flexibility and the close links established with enterprises are certainly the result of an appropriate mixture of institutional and financial arrangements. Administrative independence, a hybrid status combining private ownership and public mission, a management structure, including industrial and governmental representatives, probably accounted for SENAI’s achievements.

Its prestige explains the wide dissemination of the Brazilian experience all over Latin America and the Caribbean (Ducci, 1991). However, this propagation did not purely duplicate the model but adjusted it to specific conditions. Notably, most of the other institutions of the region depend upon the public sector, not on industry, and their governing body usually give predominance to Ministries.

In the case of Brazil, future adjustments to the system may put more emphasis on incentive instruments, as opposed to compulsory ones, in order to facilitate an evolution of company strategies for training and, more globally, for human resources development (Gasskov, op. cit.) The bias in favour of big companies also constitutes an issue that calls for increasing attention. Finally, the non representation of labour interests might resist the evolution of social forces and the trend towards further democratisation.

Government options in human resources development

More than anything else, a significant share of the Brazilian workforce remains quasi-illiterate and poorly skilled. The low education profile of the population constitutes a major obstacle to further modernisation and development of the economy (Amadeo et al, in Samoff, op. cit.). A training system in itself, as sophisticated and effective as it may be, does not offer an adequate long-term response to the needs of human resources development.