Guanabara Bay, in Rio de Janeiro

If Pedro Alvares Cabral, the Portuguese navigator who landed Brazil in 1500, could see some of the country’s beaches in 2019, maybe he wouldn’t have been so keen on writing home to the king. While the beaches around the Porto Seguro area—in Bahia, where he originally arrived—are generally suitable for bathing, the state capital of Salvador is home to several dirty beaches in the midst of the hot Brazillian summer.

Unfortunately, Salvador is not alone. In fact, sewage collection is insufficient all around the country but “once urban areas have a larger population density, they may generate proportionally more sewage,” recalls the Department of Infrastructure and Environment of the state of São Paulo, in an emailed statement to The Brazilian Report.

A lack of investment is to blame. According to a study by CNI, the national industry confederation, Brazil should increase current investments in sanitation by 62 percent to universalize access by 2033, as established in the National Basic Sanitation Plan.

But even when there are investments, the problem persists. One of the most emblematic cases is the pollution in Guanabara Bay in Rio de Janeiro, which shocked the world during the Olympics in 2016. One of Rio’s most picturesque spots, the bay hosted sailing competitions during the Games and one of the city’s Olympic legacies was meant to be a grand clean-up operation in the bay. Instead, athletes swam in dirty waters and some even said they were harmed by trash in the water.

The saga of the Guanabara Bay dates back to well before the Olympics. The area has had cleaning programs since the 1990s, but so far it presented few results. The most recent one, called the Environmental Sanitation Program of Municipalities around the Guanabara Bay (PSAM), had USD 452 million available from the Inter-American Development Bank (IDB), as well as USD 187.5 million from the Rio government. But after spending USD 122.7 million in six years, little has changed.

A report by Época magazine from 2016 shows that most of the money has been spent on sewage treatment plants, but not on pipelines connecting them to homes. It may seem logical, but it shows how the sanitation issue is part of a broader urban planning problem.

When money goes to waste: pollution in Brazilian beaches

Guanabara Bay, in Rio de Janeiro

“The accelerated demographic advance and the lack of public policies during the last decades led to a huge shortage of sanitation, in both rich and poor cities. We have an increasing number of irregular occupations, that do not have plumbing for water or sewage, which forces the local population to make clandestine connections to obtain these resources,” explained Édison Carlos, executive-president of Trata Brasil, an organization focused on promoting basic sanitation, in an emailed statement.  

According to the most recent report from Fundação João Pinheiro, the housing deficit in Brazil reached 6.06 million homes in 2015—460 thousand in Rio de Janeiro alone.

Tangled legislation

As sanitation is the responsibility of municipal government (according to the Constitution), regional inequalities are even more pressing. According to IBGE, only 14.6 percent of towns in the northeastern state of Bahia have a basic sanitation plan, the worst rate in the country. While the southern state of Santa Catarina is the leader in the ranking, with 87.1 percent of municipalities presenting a sanitation plan.

According to Mr. Carlos, “the absence of municipal sanitation plans in Brazil shows that there is little political maneuver to expand the sector. Meanwhile, there are obstacles that restrain advances, mostly regarding approving resources and executing construction works.”

In fact, municipal responsibilities regarding sanitation have been at the center of a legislative battle since last year, when former president Michel Temer issued a decree to reform the national sanitation law. The measure, considered market-friendly, sparked political outcry and was overlooked by the Congress until it lost validity. That led Mr. Temer to issue a very similar measure during his last days in office—and now it is up to president Jair Bolsonaro to decide what to do.    

According to Mr. Temer’s text, the National Water Agency (ANA) would be responsible not only for managing water resources but also to regulate public sanitation services—giving federal supervision to a municipal task. The measure also determined that every concession would require a new bidding process; this step was not always necessary if the services were provided by a state-owned company.

For those in favor, this would open up space to private companies to contribute, bringing more competition, but those opposed believe it could jeopardize poorer cities. That’s because it would end the so-called “crossed subsidies”: in practice, state-level companies use the profits obtained in richer cities to provide services for the poorer ones.

In Mr. Carlos’ view, simplifying the matter between privatization and nationalization just makes things worse. “This binary discussion does not make any sense, because universal sanitation won’t be reached by just privatizing or nationalizing everything. For a complex, bureaucratic and critical sector such as this, it is essential that private and public sectors work together,” he says.

Dirty beaches take a toll on the Brazilian economy

Cases like Guanabara are detrimental to Brazil’s image, but mostly to its economy. Poor sanitation is connected to medical issues such as diarrhea, increasing health spending and decreasing the productivity of citizens. It is also a hazard to tourism, which relies on a protected environment as an attraction.

According to Trata Brasil, the financial benefits of universalizing sanitation would amount to BRL 1.5 trillion from 2016 to 2036—BRL 42.8 billion of which would be exclusively from tourism.

But there are initiatives trying to encourage places that support an eco-friendly lifestyle. One example is found in the Blue Flag-awarded sites across Brazil. The organization, founded in France, provides one of the world’s first eco-seals awarding sustainable, accessible and safe beaches, marinas and other sea sites in 44 countries.

Although Brazil has only 14 awarded beaches —behind smaller countries, such as Israel or South Africa—the presence of the seal is growing. And Brazil has plenty of potential, with its 7,000 kilometers of coastline. Most of all, it stimulates tourism as a guarantee of a clean environment and raises environmental conscience in Brazilian society.

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MoneyMar 10, 2019

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BY Natália Tomé Scalzaretto

Natália Tomé Scalzaretto has worked for companies such as Santander Brasil and Reuters, where she covered news ranging from commodities to technology. Most recently, worked as an Editor for Trading News, the information division from TradersClub investor community.