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Brazil's sanitation sector needs clearer contract laws in order to attract more investors, Fernando Gentil, director for the Brazilian branch of US private equity firm Darby Overseas Investments, told BNamericas.
"Better regulatory norms have to be implemented for the private sector. They need to demonstrate a firm intention to respect contractual obligations," Gentil said.
Complications with existing contracts mean concessions and other contracts in the sector end up being cancelled, which makes investors reluctant to become involved with future projects.
The process of awarding contracts is also slow and bureaucratic. A number of large tenders have been suspended, most recently the process to concession sanitation services in Rio Grande do Sul state's Santa Cruz do Dul city.
This year will be the first time Darby has invested in Brazil's sanitation sector, investing some 130mn reais (US$78.5mn) over the next 12 months. Following the success of its Brazil Mezzanine Infrastructure Fund (BMIF), the company plans to open a second infrastructure fund totaling some 500mn reais across various sectors.
Darby, a division of Franklin Templeton Investments, manages some US$2.6bn in assets. The firm completed fundraising for BMIF in 2008, with total capital commitments of 388mn reais.