Private sector the solution for Brazil’s sanitation crisis?

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.

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.

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...