Brazil’s push to achieve universal access to water and sanitation infrastructure through privatisation has not gone unnoticed among investors.
“We expect new players to be interested in the segment as the bill opens the possibility for privatisation with or without new contracts, targets the expansion coverage, with significant investments needed to get there, and fosters a better regulatory framework,” says Carolina Carneiro, an equity analyst at Credit Suisse covering the utilities sector.
Brazil’s president Jair Bolsonaro signed a new sanitation bill into law on July 9, which is expected to spur privatisation in the water and sewage sector. The government hopes to attract up to 700bn reais ($134bn) of private investment towards its goal of universal access to sanitation services by 2033.
Currently, almost 16% of Brazilians lack access to clean water, and 46% of sewage in the country goes untreated, a situation that has a significant negative impact on Brazil’s most vulnerable populations.
Sergio Segovia, president of national investment promotion agency Apex-Brasil, said: “These circumstances result, every year, in thousands of sick leaves due to gastrointestinal diseases, hospitalisations, and deaths. It also influences the average household income and rates of school delay. But the new regulatory framework for basic sanitation will transform this situation.”
The framework sets a target of 99% water coverage and 90% sewage coverage by 2033. In July, Apex-Brasil held a webinar to illustrate how foreign investment can help achieve these targets. It presented new investment opportunities in the sanitation sector, expected to attract 55.1bn reais in investment and expand sanitation systems to 24.5 million people across eight new concessions to be auctioned by the end of 2021.
The largest project, which is currently the largest infrastructure concession in Brazil, aims to expand sanitation systems to 13.7 million people in the state of Rio de Janeiro, at a cost of 33.6bn reais. It will universalise water distribution and sewage collection in 64 of the state’s municipalities, including all those whose untreated sewage drains into the famously polluted Guanabara Bay.
Despite the progress promised by the new law, challenges remain to universalising access to sanitation. According to Mr Segovia, the business environment as a whole needs reform, including through a recently initiated tax reform process.
Furthermore, when the president approved the bill, he vetoed a key portion that would have allowed state-run sanitation companies to automatically renew their concessions, reducing their value in the event of future privatisations.
Finally, with the law coming alongside a larger privatisation drive by Brazil’s right-wing government, some question how effective water privatisation would be in expanding access. Léo Heller, UNHCR special rapporteur on the human rights to safe drinking water, said it would increase inequality. Mr Heller, who is also a researcher at the Oswaldo Cruz Foundation, was speaking in an interview published by CartaCapital.