- The prevailing assumption is that investments in education take decades to yield results, well beyond political cycles and fiscal planning horizons.
- As a result, education spending is often deprioritized when short-term fiscal pressures mount, undermining economic growth and long-term fiscal sustainability.
- Breaking this cycle requires building integrated data systems that enable countries to better measure the long-term fiscal and economic returns on education investments.
Insufficient investment in education is not a future problem. It is today's problem because it affects productivity, with negative consequences for economic growth and the fiscal strength of countries over time. Governments need to change their approach to education and consider it as a key pillar of their strategy to achieve sustained economic growth and fiscal balances.
The situation in Latin America and the Caribbean is challenging. Most of the new people entering the labor market have limited education. For example, only 19% of young people in the region finish secondary school with minimum skills in mathematics. For low-income youths, that figure is 5%.
Another challenge is the growing need for retraining as technology adoption will reshape work. By 2030, 87% of the region's workforce will consist of people who are already working today (not in school, not in university, already in the labor market), and most of them have little or no access to reskilling.
There Is Both an Economic and a Fiscal Case for Investing in Education
The economic case: over half of leading firms in LAC identify skills gaps as their top barrier to transformation, more than access to finance or regulatory burden. This signals a deeper problem: the region’s talent pipeline is not delivering and is holding back investment, productivity, and growth. To prosper, firms need human capital accumulation to raise labor productivity, enable technology adoption, and power innovation. This is not a soft argument; it is critical for competitiveness. These are the engines through which countries escape the middle-income trap and achieve sustained prosperity.
The fiscal case is just as strong, but often overlooked: cutting education spending may help balance budgets in the short term, but it undermines long-term sustainability by postponing costs that only grow over time. The less educated and skilled the labor force, the higher the unemployment and informality, shrinking the tax base while increasing demand for social protection, health, and security systems.
The result is a double fiscal hit: less revenue flowing into public coffers and higher spending on social services. Such fiscal pressure, deferred, compounded, and spread across multiple ministries, is ultimately more expensive to manage than the original investment in education would have been.
We Need to Break the "Long-Term-Only" Myth
One of the most damaging narratives in education policy is that reforms only deliver results after decades. This leads governments and finance ministries to deprioritize education in budget cycles and politicians to avoid reforms whose benefits they will not see within their mandates.
The evidence tells a different story. Strategic education reforms can produce measurable improvements in learning outcomes within three to seven years, well within political and budget cycles. Across LAC and globally, countries and subnational systems have achieved improvements equivalent to one to two additional years of schooling within that timeframe. Brazil, Chile, Ecuador, Peru, Poland, Portugal, London, Ontario, Pernambuco, Puebla, Sobral, Teresina, Washington DC are not outliers. They are replicable, and we know what drives them.
Making the Case Requires More Than Arguments: It Requires Data and Trust
The most effective progress on education financing happens when two things come together: credibility and shared ownership.
Education ministers say: “show me the money.” Finance ministries reply: “show me the numbers.” Too often, the numbers are not available for education ministers. Investing in data systems to show where the gaps lie, what the evidence says works, and what the return on investment looks like, is not a technicality. It is the starting point for a productive conversation.
Equally important is building a genuine sense of shared responsibility. The most productive moments are when finance and education align around a simple principle: you step up, and so will I.
That means education ministries tackling inefficiencies, and finance ministries reinvesting those savings and scaling up investment.
Building an Integrated Data System
To reach consensus, governments need to build integrated data systems so that finance and education ministries work from the same numbers and can together model the long-term fiscal and economic returns on education investment.
This includes designing needs-based funding formulas, quality assurance frameworks, and teacher development systems that demonstrate to finance ministries and to citizens that resources are being well spent. It also means bringing the private sector into the conversation both as an agent and as a stakeholder with a direct economic interest in the quality of the talent pipeline.
Most importantly, education leaders must clearly articulate the case for investing in education as a driver of fiscal sustainability and economic returns, not only as a matter of human rights and social justice, critical as they are.
The bill for underinvesting in education always arrives. The only question is when it arrives, how large will it be, and who will pay it. The countries that achieve fiscal sustainability over the next two decades are not the ones that have protected their budgets by keeping education spending flat. They will be the ones that invested strategically in human capital and built the institutions that ensured investments delivered results.
To delve deeper into how to optimize these resources, I invite you to download the IDB publication, Smart Spending in Education in Latin America and the Caribbean, which offers a clear roadmap for our region.
Note: Inspired by my interventions at the High Level Steering Committee (HLSC) Sherpa Group meeting (12-13 March 2026, UNESCO HQ) and the Financing session organized in the context of the G7, here is the second part of reflections in this context.