This paper asserts that initiatives to promote community colleges in Latin America should be linked with assessments of Latin American higher education overall. What are the higher education norms and practices that have largely excluded such colleges? And what changing reality opens doors for them? This paper highlights the concept of differentiation, and it explores the institutional and functional differences that have emerged and those that have been stifled in Latin American higher education. Community colleges would represent a radical but logical extension of differentiation. This paper: (1) sketches a general overview of the performance of Latin American higher education; (2) analyzes differentiation by indicating how differentiation is crucial to positive and negative performance and how public policy has often hindered appropriate differentiation; (3) applies the analysis of differentiation to two-year institutions; and (4) explores how changes in Latin American higher education and its environment create conditions conducive to community college development. The paper contends that, in general, the state and public schools in the Latin American higher educational system offer less differentiation than what is needed and that the growing participation of business in concert with government for purposes of community college development is a positive influence. (NB)