The Brazilian market for undergraduate education is a large, growing, comparatively underpenetrated and fragmented market, which is predominantly served by the private sector. In 2009, Brazil represented the fifth largest undergraduate education market in the world and the largest undergraduate education market in Latin America, according to UNESCO’s study “Global Education Digest 2011”, with data from 2009.

According to the MEC’s and the INEP’s data, undergraduate education enrollment in Brazil increased from 1.9 million in 1997 to 5.4 million in 2010, representing a compound annual growth rate of 8.2%. Most of the growth in total enrollment in that period was captured by the private sector, which increased its share in total enrollment from 61% in 1997 to approximately 75% in 2010, and consolidated its role as the main provider of undergraduate education in Brazil. Graduate enrollments (master degrees and doctorates) had a compound annual growth rate of 28% between 2005 and 2009, according to Hoper Consulting, totaling 173.4 thousand enrollments in 2010, according to the MEC’s data.

Despite recent growth, the gross enrollment penetration rate in the Brazilian postsecondary education market for the 18- to 24-year old population during the year 2009 was 25%, according to Hoper Consulting. This rate is much lower than the penetration rate in other developing countries such as Chile and Argentina, which had penetration rates of 55% and 69%, respectively, according to UNESCO, evidencing the growth potential of the Brazilian postsecondary education market.

The Company believes that the number of enrollments in postsecondary institutions in Brazil will continue to grow due to several factors, such as: (i) career advancement perspectives; (ii) relevant increase in the individual income of people who have a postsecondary degree; (iii) substantial excess demand for qualified workers, which continues to grow; and (iv) the increasing availability of educational alternatives for low- and middle- income population, due to the Brazilian federal government’s continuous support of the postsecondary education industry and, in particular, due to private investment in the postsecondary education industry.

The increase in the number of accredited private postsecondary education institutions in Brazil over the past ten years was led by a proliferation of small sized institutions, resulting in a very fragmented market with over 2,000 private institutions in 2010, according to the MEC.

In 2010, the 17 largest private postsecondary education institutions in Brazil (accounting for 30% of total undergraduate enrollments) had an average student enrollment of approximately 81,100, while the other 2,082 private institutions (accounting for 70% of total undergraduate enrollments) had an average student enrollment of approximately 1,500, based on the Hoper’s data.

Anhanguera believes that the majority of these small-sized institutions: (i) are family-owned; (ii) lack economies of scale; (iii) have limited access to capital; (iv) are generally less able to attract and retain qualified faculty and management professionals; and (v) have limited expertise and resources available for developing new high-quality programs that meet student demand or for opening new campuses.

Distance Learning Education

According to a survey conducted by the Brazilian Distance Learning Education Association (Associação Brasileira de Educação a Distância), or ABED, published in the 2010, there were approximately 2.6 million enrollments in distance learning programs in Brazil in 2008.

Distance learning education presented the highest growth rates in the postsecondary education industry, with a 69.7% annual accumulated growth rate between 2004 and 2009, totaling 930.2 thousand enrollments in 2010, according to the MEC’s data.

According to Hoper Consulting, the main drivers for the success of institutions offering distance learning programs in postsecondary education are: (i) the number of learning centers and their distribution throughout the country; (ii) the competitive strengths of learning centers’ managers and their ability to attract and retain students; (iii) the adequacy of learning centers’ infrastructure and facilities; (iv) national recognition and the impact of the institutional brand; and (v) the institutional reputation perceived by target students and faculty members and positive reviews of the educational content.