INVESTAGUA: Brazil opens the door to private capital in order to provide universal water services
Apr 28 2021
INVESTAGUA, along with Isle Utilities, dedicated the last session of Wednesday April 21 to discussing the important investments that Brazil needs in order to ensure universal access to sanitation and adjust the services to the needs of its population.
The session’s moderator Víctor Arroyo, Director, Latin America and International Financial Institutions at Isle Utilities, noted that “Brazil has raised much interest in the region and internationally after some changes in its public policies which have stimulated the market”. Firstly, the speakers discussed the role of each of the institutions that are part of the public policy framework for the sector in Brazil, the changes to date, and the expected impact on the sector. Pedro Ronald Maranhão, National Sanitation Secretary at the Ministry of Regional Development of Brazil, said the new regulatory framework has opened the door to private investment in sanitation, and thanks to it, now there are 700 billion reals ($128 billion) available up to 2033: “Brazil seeks universal access to water services, regardless of whether the capital is public or private”.
Gabriel Fiuza, Assistant Secretary of the Department of Infrastructure Development of Brazil, agreed, adding as well that “universal sanitation is a historical debt Brazil has with its most vulnerable population”. Furthermore, he said it is essential for the regionalisation strategy to bring about financial sustainability, and to be inclusive, explaining that the government of Brazil relies on two pillars: the role of the National Water Agency (ANA) and the reference regulations, and the role of regionalisation. “It is important to make public policies for the sanitation sector that enable projects to ensure universal access and good regulatory practices”, he noted.
Percy Soares, Executive Director of ABCON, outlined three fundamental changes brought about by the new Brazilian regulatory framework: to the ANA as an entity that promotes regulatory harmonisation with general guidance for the water and sanitation sector; public tenders, which ensure market competitiveness; and regionalisation and maintenance of the scale of service provision: “The new regulatory setting comes at a very important moment because private operations were always very small in Brazil”.
On the other hand, the National Bank for Economic and Social Development (BNDES), in partnership with States, has been working on a series of projects to improve the business model of state sanitation companies, which represent about 72% of the market. In this regard, Guilherme Albuquerque, Head of Department of BNDES, has explained the project portfolio currently in place with a value of 60 billion reals ($11 billion) for the next 12-24 months, to benefit 35 million people: “If you want to invest in sanitation in Brazil, now is the time. Don’t miss this train”. One of the most important projects in the short term is a water diversion in the northern region, currently seeking final approval, with an investment of 3 billion reals ($500 million).
Afterwards, Víctor Arroyo asked the speakers what is left to be done to transform the water sector in Brazil, and Pedro Ronald Maranhão answered that nowadays the biggest challenge is regionalisation and the creation of regional blocks: “Governments have to regionalise the sanitation sector in the states and create the blocks”. In terms of regulatory challenges and public policies, Gabriel Fiuza talked about the Decree on Economic and Financial Capacity and the improvement to the current Sanitation Law in Brazil, and said the philosophy should be to offer security so that the private sector can invest: “Governance will imply a higher level of transparency”.
Moreover, Guilherme Albuquerque mentioned the largest infrastructure project in the country, undertaken by CEDAE in Rio de Janeiro. The project has generated a lot of expectation in the country due to the many economic, social and environmental benefits expected from it, and it is worth 25 billion reals ($4.6 billion): “It is a transformative project”.
The session ended with a discussion on new technologies and the path Brazil should follow to include them in water management: “we have to develop technologies to enable efficient implementation of services in remote communities, but with similar efficiency”, said Percy Soares. To this effect, Pedro Ronald mentioned that Brazil’s sanitation sector is quite behind in the area of digitalisation and that “technological innovation is there. It needs to arrive”.