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Solid waste could be a goldmine for Brazilian companies
Brenno Grillo . Jan 23, 2020
Photo: Joa Souza/Shutterstock
Many of Brazil’s companies are throwing their money in the trash, or, perhaps, they are not spending enough money on recycling it. The country’s threadbare recycling policies lead to a massive margin of underperformance and cause severe impacts on the environment. While markets are salivating over the prospect of opening up the country’s struggling sanitation services to the public sector, the real money could be lying in solid waste disposal and treatment.
In ten years, Brazil has increased its generation of garbage by 13 percent, going from 70 million tons in 2011 to 79 million last year. This growth—of almost one ton a year—is in stark contrast to the progress in public policies to combat waste and pollution.
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<p>Sanctioned in August 2010, the <a href="http://www.planalto.gov.br/ccivil_03/_ato2007-2010/2010/lei/l12305.htm">National Solid Waste Policy</a> has little to show for its near ten years of existence. While 92 percent of all the generated waste in 2018 was collected, 40 percent was dumped in inappropriate locations—a ratio identical to that seen in 2011.</p>
<p>A 2014 estimate showed that Brazil would need to invest BRL 11.6 billion by 2031 to universalize proper waste disposal practices and another BRL 15.59 billion per year to fund the operation and maintenance of the refuse plants to be built. There is no data displayed on these items. Still, the 2017 study by the Brazilian Association of Machinery and Equipment Industry shows that the Brazilian economy loses about BRL 120 billion a year by failing to properly dispose of its waste and boosting the recycling industry.</p>
<p>According to data from the association of private waste collection companies (ABRELPE), Brazil invests an equivalent to <a href="http://abrelpe.org.br/download-panorama-2018-2019">2.2 percent of its GDP</a> each year in infrastructure. This total, according to the organization, shows that there is room for the private sector to operate in this market.</p>
<p>However, there is no incentive for recycling waste. Luciana Figueras, a specialist in waste and environmental management, explains that this is the result of the regulatory model used by state and municipal governments, which do not comply with national policies.</p>
<p>Currently, garbage dumps are paid based on the weight of the waste they receive. Thus, Ms. Figueras says that the managers of these facilities prefer to receive more and more garbage as opposed to seeking recycling partnerships. Despite a federal law dictating that all landfills were to be eradicated and closed by 2014, there are more than 3 million such areas in Brazil.</p>
<p>“Landfills in Brazil are businesses. We do not reach 10 percent of the market we could exploit on the circular economy,” says Ms. Figueras. This business model does not encourage investment or job creation. Between 2017 and 2018, funding for garbage collection fell by BRL 10 billion, resulting in cuts of 4,700 vacancies in a sector that employs 332 million people.</p>
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<h2>Environmental profits of properly managing waste</h2>
<p>Though Brazil is still some way away from having an adequate widespread waste collection, some sectors already have functional policies to recycle the products they produce. One such example is the tire industry, which has moved to re-use its waste as an ecological and public health matter.</p>
<p>In the past, waste tires were blamed in Brazil for the proliferation of dengue fever. The water that would pool in their cavities was one of the primary sources of proliferation for the Aedes aegypti mosquito in rural areas—the insect is the vector for not just dengue fever, but also the zika virus, and chikungunya. Rodrigo Santiago, director of institutional relations for Michelin in Brazil, says that the company is now spending BRL 12 million on reverse logistics.</p>
<p>According to Mr. Santiago, 80 percent of waste tires are used in energy production, serving mainly as fuel for cement kilns. Reciclanip, an association that gathers recycling data from the sector, shows the total number of tires authorized in 2017 reached 458,000 tons. The total collected in 2019 adds up to just over 56 million tires used on light cars.</p>
<p>Also in the automotive industry, companies manufacturing lubricating oils have collected the packaging they sell. In 2018, 4.5 million tons of waste were removed from the environment. This same path is followed by pesticide producers, who collected 44,200 tons in the same period.</p>
<p>However, these numbers could be much higher. Mr. Santiago laments the absence of incentives for companies that recycle reusable waste. “We think about the National Solid Waste Policy without thinking about the circular economy. We need to analyze sector-by-sector how to increase the lifespan of products,” he says.</p>
<p>The Brazilian tax system is another barrier that gets in the way of recycling. Mr. Santiago highlights the example of the country’s State Goods and Services Tax (ICMS), which taxes the transportation of material to be recycled, making the whole process more expensive. He suggests that the tax reform that is being discussed in Congress should account for environmental issues, as the effects go beyond protecting the environment, also bringing higher performance gains and advantages.</p>
<p>Regardless of the results for the environment, Mr. Santiago says he is keen to see an overhaul of the tax regime in Brazil. “Twenty-five percent of the employees responsible for paying taxes at Michelin work in Brazil. On the other hand, the Brazilian branch represents just 10 percent of total sales.”</p>
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<p><em>Correction: A previous version of this article reported that “50 percent [of Brazil’s collected wasted] was dumped in inappropriate locations.” The correct figure is 40 percent. </em>
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