Water works

Brazilian sanitation seeks investment with robust regulation and municipality partnerships.

In June 2020, the Brazilian Senate passed a Basic Sanitation bill to guarantee sanitation services across the country. Under the new bill, by 2033, the Brazilian government aims to universalise water distribution services to 99% of the population and offer sewage collection and treatment services to 90% of Brazilians. At present only 83% of the population has access to water distribution services while 46% have access to sewage treatment.

The new law opens the market to private investors and operators and seeks to attract BRL 700 billion (USD 135 billion), according to federal government estimates.

A respected, Sao Paulo-based infrastructure lawyer put this in context for us, “This is an unprecedented, major transformation in the sector. Private operators only have a 6% market share of water systems in Brazil and foreign investors will be key to meet the objectives set for 2033.” He continued to explain that the new bill has taken deliberate care to provide legal security to investors. “Concession contracts will have to contain clauses protecting investors from additional costs, compensation for the value of assets that have not fully amortised in the case of contract termination and other legal provisions to attract foreign investors.”

The same source expressed some doubts over the gigantic task the National Water Agency (ANA) will assume in the implementation of the new bill. ANA has been given supervisory powers and it will be responsible for regulatory standards throughout the country. The lawyer told us, “It is positive to see an autonomous regulator accumulating all this power, but I am not sure whether ANA is currently prepared to efficiently manage the workload. They will learn through experience and stakeholders will need to be patient.”

“It is positive to see an autonomous regulator accumulating all this power, but I am not sure whether ANA is currently prepared to efficiently manage the workload.”

Senior Infrastructure Lawyer, Sao Paulo

Under the new law, municipalities, which are responsible for providing water sanitation services, will have to call for public tenders to grant projects to private companies. A government affairs director of ABCON-SINDCON, the Brazilian Association of Private Concessionaries of public water services, told us, “The bill gives municipal governments additional powers over water sanitation services which favour alliances between municipalities to create larger infrastructure facilities to attract foreign investors. Municipalities will be able to join regional authorities which will set up a joint organisation for a specific group of municipalities to commonly offer their water management services in a single tender.”

“State governments will need to make significant investments too. Thus, we will need to see their infrastructure plans before we understand the impact of the new regulation.”

Government Affairs Executive, ABCON-SINDCON

“State governments will need to make significant investments too. Thus, we will need to see their infrastructure plans before we understand the impact of the new regulation can have for the population and investors,” said our ABCON-SINDCON source, who added “BNDES [the Brazilian Development Bank] is ready to start funding private-public projects. It has been involved in discussions with all stakeholders, from public officials to private sector representatives and it will incorporate the elements of the new regulatory framework to its concession model.”

The source continues, “Although there have been already a few public tenders, I don’t expect a boom in tenders until 2022. The maintenance and quality of services of water sanitation infrastructure projects can be very expensive and require a significant subsidies which need the green light from state legislators.”

Important Notice
While the information in this article has been prepared in good faith, no representation, warranty, assurance or undertaking (express or implied) is or will be made, and no responsibility or liability is or will be accepted by Deheza Limited or by its officers, employees or agents in relation to the adequacy, accuracy, completeness or reasonableness of this article, or of any other information (whether written or oral), notice or document supplied or otherwise made available in connection with this article. All and any such responsibility and liability is expressly disclaimed.
This article has been delivered to interested parties for information only. Deheza Limited gives no undertaking to provide the recipient with access to any additional information or to update this article or any additional information, or to correct any inaccuracies in it which may become apparent.

Most recent in Infrastructure

The need to restructure infrastructure

Transforming infrastructure in Latin America.

Roseau’s Renaissance

The Roseau Enhancement Project and its complexities in Dominica.

Transforming Brazil’s aviation landscape

Challenges and opportunities in the new growth acceleration programme. 

Mexico’s ‘megareforma’

Balancing public interests and investors' concerns.

Turbulent recovery

Caribbean airports refurbished as international flights return to pre-pandemic levels but regional flights lag.

Smart stadiums

Could technology in use at the World Cup transform Latin America’s stadiums?

Sustainable roadways

Could post-pandemic investment in sustainable road infrastructure plug Latin America’s infrastructure gap?

Aging infrastructure

Floods highlight decades of underinvestment in water infrastructure in the Dominican Republic.

Dollar threat

A strong dollar presents a risk to Colombia’s import-dependent construction industry.

Reinventing the city

Cities across Latin America are investing in urban reform projects to revitalise city centres.