In June the eyes and ears of the world will be sharply focused upon Brazil. Playing host to the 2014 World Cup, any shortcomings in public infrastructure will likely be targeted by the media and the country's ability to host such a major tournament questioned. Often the first areas scrutinised during a tournament are public transport, security, catering and hospitality – the offerings that impact a visitor's experience immediately and directly. Yet drinking water and sanitation should also be considered as important.
Leading up to the World Cup, the 2013 passage of Brazil's National Basic Sanitation Plan (PLANSAB), requires a step-up in investment from US$3.4 billion to US$6.7 billion annually, highlighting the government's commitment to improving water and wastewater infrastructure. Brazil's revised US$6.7 billion annual investment target for water infrastructure through 2033 points to a greater reliance on the private sector.
Under PLANSAB the country would achieve universal water supply and wastewater treatment by 2033. Private municipal water concessionaires are slated to account for US$750 million annually from 2014 to 2017 – 11% of Brazil's water infrastructure investment– leaving a US$5.9 billion annual gap over the next four years for cash-strapped municipalities to shoulder, according to a new report from Bluefield Research.
A complex market structure in Brazil has discouraged private sector participation in the past, according to the report, and has all but shut out foreign company participation. But due to a changing competitive landscape and a ramp up of private water concessions, report predictions show a jump in private players and foreign entrants, although incumbent, state-participated water utilities are expected to retain control of the market.
Geographically, the states of Rio de Janeiro and São Paulo have been the most hospitable to private participation in municipal water concessions, and have therefore seen the greatest competition, with 11 private water players active in those two states. In addition, one-off large concessions in Northeast Brazil have paved the way for greater private activity in the populous and water-scarce Northeast.
"Brazil's private municipal water market accounts for approximately US$15 billion annually based on the current level of private participation in concessions," said Keith Hays, vice president at Bluefield Research. "That translates to 271 municipalities nationwide, or roughly 5% market penetration."
Hays added: "Much of the private competition comes from entrenched local players such as Foz do Brasil, CAB Ambiental, SAAB Àguas do Brasil, and Aegea. Bluefield is also monitoring new interest in the Brazilian market from foreign players such as Beijing Enterprises Water Group to join already active players GS Inima of Korea, AGS of Portugal, and Banco Santander from Spain."
The vice president went on to say: "The experience of São Paulo and Rio de Janeiro opens the door for greater private participation in water. Despite national government funding, several municipalities are already considering private investment if they are to meet new requirements."
