What was the traditional method of funding Latin American universities, and what were its limitations?

Traditionally, Latin American universities relied on 'negotiated funding,' where governments allocated budgets based on previous allocations or macroeconomic indicators. A large portion, 80-90%, covered salaries, leaving minimal funds for operations or capital improvements. This system often lacked transparency and objective criteria.

How do 'formula funding' and 'special programs' work in Latin American universities, and what are the key differences between them?

Formula funding allocates a small percentage of the total budget, around 5% or less, based on factors like student numbers, faculty, infrastructure, and performance indicators. Special programs invite universities to bid for funds dedicated to specific activities, ensuring compliance with agreements, with beneficiary institutions often contributing as well.

How are Latin American universities leveraging financial agencies to boost research and development, and what role do governments play in monitoring and promoting these activities?

Financial agencies are increasingly inviting universities and faculty to bid for research funds, focusing on national priorities to drive human and economic development. Governments monitor fund usage and promote private sector R&D activities, as seen in Argentina, Brazil, Chile, Colombia, and Mexico. However, challenges remain in aligning faculty behavior with institutional objectives.

What organizational and technical obstacles must be addressed to ensure the effectiveness of these new funding mechanisms in Latin American universities, and why is aligning faculty behavior with institutional objectives crucial?

For these new funding mechanisms to be truly effective, they must overcome organizational and technical obstacles. Aligning faculty behavior with institutional objectives is crucial, as many decisions affecting teaching and research quality rest on the faculty. The success of government-university contracts depends on governments fulfilling funding commitments, allocating sufficient resources, and developing institutional capacity to follow up on contracts. Overcoming macroeconomic instability and strengthening public bureaucracies are also essential.

Surreal illustration of money trees on a Latin American university campus, symbolizing innovative funding for education.

Funding the Future: How Latin American Universities Are Reinventing Themselves

Q: Could you provide specific examples of 'special programs' implemented in Argentina, Brazil, and Mexico, and what are their primary goals?

Examples of special programs include Argentina's Fund for the Improvement of Quality in Universities, Brazil's Program for Restructuring and Expansion of Federal Universities, and Mexico's Fund for the Modernization of Higher Education. These initiatives aim to improve quality and modernization within the respective university systems.

Elliot Brynn in Mind & Education August 2025 • 4 min read.

"Discover the innovative strategies Latin American universities are using to secure funding and drive change in higher education."

For decades, most Latin American universities relied on a simple funding formula: governments allocated budgets based on prior years' allocations or macroeconomic indicators. Typically, 80-90% of these funds covered salaries for current and retired faculty, leaving little for operational costs or vital capital improvements. This system, often dubbed 'negotiated funding,' lacked objective criteria and transparency.

However, since the 1990s, a wave of change has swept through Latin American higher education. Inspired by models in industrialized nations, new funding mechanisms are emerging, designed to boost organizational efficiency through economic incentives and strengthen accountability in resource distribution. The ultimate goal? To empower autonomous public universities to drive organizational change that aligns with broader public policy objectives.

This article explores these innovative approaches, from formula funding and special programs to contract-based agreements, examining their potential to transform the landscape of Latin American higher education.

The Rise of Formula Funding and Special Programs

Surreal illustration of money trees on a Latin American university campus, symbolizing innovative funding for education.

In countries like Argentina, Brazil, Chile, Mexico, and Venezuela, governments are allocating a small percentage of the total budget (around 5% or less) to public universities through formula funding or programs that meet specific goals. Formula funding often considers input factors like student numbers, faculty, staff, infrastructure, and performance indicators such as faculty qualifications, student dropout rates, and program quality.

Special programs involve government agencies inviting universities to bid for funds dedicated to specific activities. The government sets the conditions, and universities meeting the requirements gain access to the funding. This approach ensures that institutions comply with agreements. Public funds are often supplemented by contributions from the beneficiary institutions themselves. Examples include Argentina's Fund for the Improvement of Quality in Universities, Brazil's Program for Restructuring and Expansion of Federal Universities, and Mexico's Fund for the Modernization of Higher Education.

Argentina: Fund for the Improvement of Quality in Universities
Brazil: Program for Restructuring and Expansion of Federal Universities
Chile: Program for Quality and Equity Improvement of Higher Education
Mexico: Fund for the Modernization of Higher Education

Another growing trend is financial agencies inviting universities and faculty to bid for funds to conduct research. These research-funding agencies create instruments to promote research in both public and private sectors. National research agencies also specify national priorities to make R&D activities more relevant to human and economic development. Governments retain the right to monitor how funds are used, with countries like Argentina, Brazil, Chile, Colombia, and Mexico launching programs to promote private sector R&D activities.

Challenges and the Path Forward

Despite these advancements, the proportion of funds allocated through these new mechanisms remains relatively low. To be truly effective, these mechanisms must address organizational and technical obstacles. For example, many relevant decisions affecting teaching and research quality rest on the faculty, yet mechanisms often target university executives and collegial governments. Aligning faculty behavior with institutional objectives is crucial. Moreover, the success of government-university contracts hinges on governments fulfilling their funding commitments, allocating sufficient resources, and developing the institutional capacity to follow up on contracts. Overcoming macroeconomic instability and strengthening public bureaucracies are essential to ensure lasting change in Latin American higher education.