Private sector the solution for Brazil’s sanitation crisis?

and . Nov 28, 2019
Congress tries to approve a new framework opening up the sanitation sector to private competitors. That could boost investments and lift millions from medieval-like living conditions. Open sewer going straight to Florianópolis beach. Photo: Helissa Grundemann

The Lagos microregion to the northeast of Rio de Janeiro is a picture-postcard place filled with idyllic beaches that have earned it the nickname of “the Brazilian Caribbean.” Beyond its natural beauty, however, the region has suffered from a staggering lack of basic sanitation services. Until the 1990s, less than one percent of households had access to a proper sewage system. Things, however, have dramatically changed over the past two decades.

In 1998, the region allowed private companies to operate in the sanitation sector, by way of partnerships with the state’s water company. Thus, the Lagos microregion may represent a microcosm of the pros and cons of the private sector wading into the management of sanitation services in Brazil.

</p> <p>In 20 years, sewage coverage in the region went from a paltry 0.8 percent of households to 79 percent. Potable water, then available to 30 percent of residents, is now in 98 percent of homes. Between 2001 and 2016, the number of people hospitalized with severe diarrhea went from 128 to nine.</p> <p>These numbers show that private companies are able to invest more—and quicker—than state-owned institutions bogged down by overly-bureaucratic processes and political interference. But the case of the Lagos microregion may also serve as a cautionary tale about how poorly-regulated privatizations can go wrong.</p> <p>Earlier this year, a massive sewage spill hit the popular Arraial do Cabo beach, turning the once brilliant blue water a murky brown.</p> <figure class="wp-block-embed-twitter wp-block-embed is-type-rich is-provider-twitter"><div class="wp-block-embed__wrapper"> <blockquote class="twitter-tweet" data-width="550" data-dnt="true"><p lang="pt" dir="ltr">Paraíso destruído! Praias de Arraial do Cabo estão impróprias para banho ⚠️➡️<a href=""></a> <a href=""></a></p>&mdash; A Gazeta ES (@AGazetaES) <a href="">January 30, 2019</a></blockquote><script async src="" charset="utf-8"></script> </div></figure> <h2>Is Brazil waking up to the sanitation crisis?</h2> <p>Brazil&#8217;s sanitation system is mostly public, with the private sector accounting for only six percent of the sector. Percy Soares Neto, executive director of Abcon—a lobbying organization for private sanitation companies—says entrepreneurs are &#8220;thirsty&#8221; to invest. But he points out to the massive barriers protecting state-owned companies as an almost insurmountable obstacle.</p> <p>Congress is discussing a way to open the market to private corporations, which would, according to estimates, be able to attract BRL 700 billion in new investments. A bill in the House would end the possibility of state- and municipal-level administrations signing long-term contracts with publicly-owned sanitation companies without holding a public bidding process. It also sets goals to increase the coverage of sanitation services around the country.</p> <p>To calm down different political interests, the bill&#8217;s rapporteur, Congressman Geninho Zuliani, added a loophole: once the new framework passes, state-owned companies will have one year to renew their contracts (which usually last between 20 and 30 years), as long as they universalize sanitation coverage by 2033.</p> <p>The House passed <a href="">a motion to fast-track the bill</a>—but no date has been set for a floor vote.</p> <iframe title="Down the drain" aria-label="Brazil municipalities choropleth map" id="datawrapper-chart-IlhDO" src="//" scrolling="no" frameborder="0" style="width: 0; min-width: 100% !important; border: none;" height="535"></iframe><script type="text/javascript">!function(){"use strict";window.addEventListener("message",function(a){if(void 0!["datawrapper-height"])for(var e in["datawrapper-height"]){var t=document.getElementById("datawrapper-chart-"+e)||document.querySelector("iframe[src*='"+e+"']");t&&(["datawrapper-height"][e]+"px")}})}();</script> <hr class="wp-block-separator"/> <h2>Lack of competition is a problem</h2> <p>On the one hand, Mr. Percy says that publicly-owned companies have proven their inefficiency. In 2018, they paid only BRL 850 million in dividends, despite earning over BRL 6 billion. Conversely, representatives of state-owned companies are standing their ground, calling out private investors for allegedly wanting to profit off the investments made by public firms.</p> <p>&#8220;[Private players] want to fight for the filet mignon without gnawing the bones,&#8221; as Marcus Vinicius Fernandes Neves, president of an association of sanitation companies, points out. He says private companies don&#8217;t have to comply with as many regulations as public ones do—and that would be what makes them less competitive.</p> <p>&#8220;We don&#8217;t have to reinvent the wheel. What we must do is list the best practices which already exist and use them at the national level,&#8221; says Leandro Mello Frota, a lawyer who formerly served as a director at the National Health Foundation.</p> <p>Regulation will also be a tough nut to crack in the new system Congress wants to approve. The new framework would concentrate on Brazil&#8217;s National Water Agency (ANA) all powers to set guidelines and enforce regulations. For Fernando Alfredo Rabello Franco, president of the Brazilian Association of Regulatory Agencies, that arrangement can only work if ANA is given financial and—most importantly—administrative independence. &#8220;Without that, the new regulatory framework will be dead before even being born.&#8221;</p> <h2>Inequality</h2> <p>As we have shown in a 2017 article, <a href="">Brazil&#8217;s sanitation problem is also a classist issue</a>. Sewage coverage remains a luxury in Latin America’s biggest country, putting Brazil behind much poorer countries such as Peru, Bolivia, or even Venezuela, in that category. And while the country is home to 12 percent of the world&#8217;s freshwater, over 33 million Brazilians still have no access to drinkable water at home.</p> <p>Coverage is far worse in the North region—where many geographical challenges come into play. In Porto Velho, the state capital of Roraima, only 32 percent of homes have clean tap water. In Macapá, the capital of Amapá, the rate is 41 percent.</p> <p>In states such as São Paulo and Rio de Janeiro, however, coverage is almost universal.

Brenno Grillo

The Brazilian Report's correspondent in Brasília, Brenno has worked as a journalist since 2012, specializing in coverage related to law and the justice system. He has worked for O Estado de S. Paulo, Portal Brasil, ConJur, and has experience in political campaigns.

Marcelo Soares

Marcelo Soares is a Brazilian journalist specializing in data journalism and reader engagement.

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