June 24 (Bloomberg) -- A month after Dilma Rousseff took office in January 2011, the Brazilian president vowed to step up subsidized loans for students attending the nation’s for-profit universities. The initiative was a bid to expand access to training for an emerging middle class that grew by 40 million people in a decade.
Since then, about 8 million people have received state-sponsored scholarships and another 1 million were approved for student loans. The demand has been a boon for Brazilian school operator Ser Educacional SA and its founder, Janguie Diniz. Since the company’s October initial public offering, Brazil’s largest for an education company, the stock has surged 44 percent, making the 50-year-old a billionaire.
“Those programs are extremely important, because most of the students are young and can’t afford to pay,” Diniz said in a phone interview from his office in Recife. “I was never really interested in becoming a billionaire but in doing the work that needs to be done on education.”
Ser Educacional’s revenue jumped 44 percent in the first quarter from a year ago to 155 million reais ($70 million), fueled by a 51 percent increase in total students, which reached 113,000. About 19 percent of them received vocational and technology scholarships under Rousseff’s Pronatec program. About 45 percent of the company’s undergraduates received student loans under the government’s Fies program, which grew more than six-fold to 556,000 contracts since it began in 2010.
Other education companies also benefited from the programs. Kroton Educacional SA and Estacio Participacoes SA surged 101 percent and 83 percent over the past year, the two best performers on Brazil’s Bovespa Index.
The programs have triggered a wave of consolidation. Regulators last month approved Kroton’s acquisition of Anhanguera Educacional Participacoes SA, a transaction that will make it the world’s biggest for-profit education company. They also approved Gaec Educacao SA’s purchase of Sao Judas Tadeu university for 320 million reais and Estacio’s deal to buy university operator Uniseb.
Ser Educacional bought Unespa and ISES schools with 12,000 students in the Brazilian state of Para, according to a May 19 filing.
“To build the professional training that Brazil needs, we must guarantee that courses are free,” Rousseff said in a June 18 speech in Brasilia, vowing to offer 12 million scholarships under a program for vocational studies scholarships. “It’s not just an entryway into the job market, but it’s knowing that it’s a condition for people to have a permanent victory, the victory of reducing inequality.”
Rousseff, a former guerrilla with an economics degree from Universidade Federal do Rio Grande do Sul, said she will increase support for students at for-profit universities if re-elected. She’s seeking a second term on her ruling worker party’s ticket in an October vote.
“Government support has boosted the education sector and the official discourse suggests that will continue,” Felipe Pezerico, an investment analyst at Quantitas Asset Management in Sao Paulo, said in a phone interview. “Ser Educacional is set to benefit because it acts mostly in the northeast and is more exposed to a region where potential for growth is highest.”
Higher education penetration is 10.6 percent in the northeast region, below the national average of 14.5 percent, according to Brazil’s statistics agency. Brazil ranks below Bulgaria, China and Ecuador for higher education in the World Economic Forum’s Global Competitiveness Index, at 72nd.
Diniz, who was born in a small village in the semi-arid hinterlands of northeast Brazil, said he discovered his passion for academia when he moved in with an uncle in Recife at age 14. He worked as an office boy by day and studied at night.
“I didn’t want to be a farmer,” he said. “I wanted to study. My parents never had that opportunity because they were always working.”
While attending law at Universidade Federal de Pernambuco, where he received his doctorate, he built a collection agency on the side with 30 workers, according to his biography on the website of his Recife-based school Mauricio Nassau.
He worked as a professor at the Universidade Federal de Pernambuco and as a judge and labor attorney before creating Bureau Juridico, a course to prepare students applying for government jobs. He created Grupo Ser Educacional in 2003 to oversee a growing network of schools.
Diniz renounced his right to practice as a state lawyer last year after the national council of attorneys general pointed out potential conflicts of interests involved with running his business and holding a post as a labor lawyer at the Attorney General’s office. He decided it wasn’t worth the controversy, he said, even though he wasn’t breaking any rules.
“I resigned because I figured it would be better to dedicate myself to my company after so many polemics,” he said. “I had to chose.”
Diniz’s group today has 23 schools in 11 states, stretching from Manaus, Brazil’s biggest city in the Amazon, to Salvador, the capital of Bahia state. The billionaire, who’s never appeared on an international wealth ranking, said he’s refused offers by Brazilian political parties to back him if he runs for congress.
“I felt honored, but I think the work I’m doing in education is so important that I preferred to take this route,” he said. “It’s the one I want. The success we’ve had, regardless of whether it makes me a billionaire or not, is a consequence of the work we do.”
To contact the reporter on this story: Blake Schmidt in Sao Paulo at firstname.lastname@example.org
To contact the editors responsible for this story: Peter Newcomb at email@example.com Matthew G. Miller