Brazil water infrastructure investment marks opportunity for private, foreign water players

Boston — Brazil’s revised US$6.7 billion annual investment target for water infrastructure through 2033 points to a greater reliance on the private sector, according to a new report from Bluefield Research. Private municipal water concessionaires are slated to account for US$750 million annually from 2014 to 2017 — 11 percent 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.

The 2013 passage of Brazil’s National Basic Sanitation Plan (PLANSAB), which requires a step-up in investment from US$3.4 billion to US$6.7 billion annually, highlights the government’s commitment to improving water and wastewater infrastructure. The new plan was approved at a time when the approaching 2014 World Cup and 2016 Olympic Games place Brazil’s infrastructure shortcomings under a microscope, and as Brazil’s northeastern states face severe drought conditions. Under PLANSAB the country would achieve universal water supply and wastewater treatment by 2033.

A complex market structure in Brazil has discouraged private-sector participation in the past, according to Bluefield Research, and has all but shut out foreign company participation. But due to a changing competitive landscape and a ramp up of private water concessions, Bluefield predicts a jump in private players and foreign entrants, although incumbent, state-participated water utilities are expected to retain control of the market.

“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 percent market penetration.”

“Much of the private competition comes from entrenched local players,” said Hays, “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.”

Geographically, the states of Rio de Janeiro and São Paolo 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.

“The experience of São Paulo and Rio de Janeiro opens the door for greater private participation in water,” Hays continued. “Despite national government funding, several municipalities are already considering private investment if they are to meet new requirements.”

Brazil Private Water Strategies & Market Outlook 2014, a report provided to clients of Bluefield Research’s Private Water Insight research service, is now available for purchase. The report provides analysis of regulatory trends, review of current concessions, company strategy profiles, private municipal water market share, and an overview of upcoming concession opportunities. In addition, the report presents updated data from over 270 water concessions across the market through 2014.

For more information on Brazil Private Water Strategies & Market Outlook 2014, visit https://bluefieldresearch.com/brazil-private-water-2014.