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Price Controls in, Profits out for Ecuador’s Private Universities

By: María Gabriela Díaz - May 23, 2014, 5:05 pm

Español On Wednesday, René Ramírez, head of the National Secretariat of Higher Education, Science, Technology, and Innovation (SENESCYT) and the Council of Higher Education (CES), introduced a regulation to cap tuition charged by private universities in Ecuador. Despite objections from the institutions, Ramírez expects that the CES will approve it with a vote next Wednesday. It needs six votes on the council, and so far, according to Germán Rojas, a member of the CES, it already has.

René Ramírez Gallegos
René Ramírez Gallegos of the Secretariat for Higher Education, Science, Technology, and Innovation. Source: Santiago Michelena.

With this new regulation, the tuition fees at private universities won’t be able to increase more than Ecuador’s annual inflation rate — which for 2014 is 3.23 percent.

During a press conference last Tuesday, Ramírez described higher education in Ecuador as “a social and public good, which means a constitutional right, and that private universities can’t operate in a profit-seeking manner. If they do generate profit, it has to be reinvested in their own institution.”

Ramírez has ensured this proposal will put an end to the universities’ “profit-seeking” approach, given that some of them have increased their tuition by up to 150 percent in one semester. According to him, these “unregulated” raises generate higher college dropout rates, and hinder equal opportunities for all students. In Ecuador, there are around 350,000 university students, from which 40 percent attend private institutions.

“This regulation is something we needed a long time ago,” Pablo Quiñónez, president of the National Federation of Private University Students (FEUPE) said during a meeting with Ramírez. “In regards to the structural change higher education needs, we want to achieve its democratization, but there are some private universities that avoid the norms of the higher education regulation bodies.”

However, for Julio Clavijo, public policy adviser at the National Congress in Quito, the answer for the problem of inequality in the access to higher education falls on the government’s willingness to invest in public education, and not to control private institutions.

Even though students like Quiñónez have embraced this measure, many still oppose it. Clavijo comments, “this proposal does not count on the complete support of the student population, and it needs a debate to reach an agreement.”

In this regard, the president of the Ecuadorian Corporation of Private Universities (CEUPA), Alejandro Rivadeneira, denies that the rise was as high as 150 percent. He also justifies the price augmentation on the grounds that state regulations have already been forcing universities to raise salaries, improve the conditions of their facilities, and increase the percentage of full-time professors.

Based on information released by SENESCYT, the national average of a private university tuition is US$4,814 per year, plus other expenses that can go from 10 to 30 percent of that figure. According to Ramirez, this figure is extremely high compared to the ones in Peru, Argentina, Colombia, and Mexico. The Organization for Economic Cooperation and Development (OECD) also ranks Ecuador as one of the countries with the most expensive education system with relative to the minimum income an average family earns in Ecuador, the cost of a basic consumption basket, and the annual inflation rate.

Universities or Students: Who’s the Victim?

For Santiago Gangotena, president of the University of San Francisco de Quito, this measure would mostly affect the universities’ performance. The restrained income that academic institutions receive from students, he contends, will have a direct impact on their capacity to acquire the necessary equipment and hire high-quality professors.

University of San Francisco Quito
University of San Francisco Quito. Source: USFQ.

Alejandro Rengel, coordinator of Students for Liberty in Ecuador, shared with the PanAm Post the implications this measure could have on Ecuador’s academic performance.

“The imposed cap for the increase in enrollment and course fees in private universities implies a cap on the quality of the education as well. In other words, it limits the improvement that these universities can achieve by denying them the chance to receive more income. If the government’s intention is to improve the quality of the education, they will achieve the exact opposite…”

For Rengel, the mistake is not the desire to expand access to higher education, but the how-to.

“I think this proposal, as many others that come from this administration, is aimed towards an intention, and not to the results,” the SFL coordinator explains, “even though the regulation will control the cost of existing universities, it eliminates a big part of the incentive to invest more resources in new academic institutions.”

The consequences of this price-cap regulation haven’t taken too long to arrive. Private universities such as the Pontifical Catholic University of Ecuador (PUCE) in Quito have already announced a decrease of 10 percent to their discounts for low-income students.

As soon as the news came out, students started to protest against this decision. Erik Mozo, head of the PUCE student federation, argued that the ones who are mainly affected are the students: “young people won’t be able to attend an university next semester, and others will be forced to drop out of school.”

For Rengel, this case is one of the first direct consequences from this price control: “universities won’t be able to charge more to students, therefore, they will be forced to reduce certain benefits such as the tuition discounts for low-income students. There we have it, the first of many unintended consequences.”

María Gabriela Díaz María Gabriela Díaz

María Gabriela Díaz reported from Caracas, Venezuela, and led the PanAm Post internship program. She has a Bachelor of Arts in political science with a focus in international affairs.