Spotlight: Brazil's planned 2023 sanitation auctions

Sanitation concession auctions in Brazil will be focused on small and medium contracts, 14 of which are likely to be offered this year, according to water and sewerage concessionaires association Abcon.

The contracts cover 545,800 people and are expected to generate investments of 739mn reais (US$142mn).

While the total could still increase, the localities of Flexeiras, Cachoeira Dourada, São Mateus do Maranhão, Nanuque, Eliseu Martins, Cerejeiras, Espigão D'Oeste, São Miguel do Guaporé, São Francisco do Guaporé, Pomerode, Ilhota, Santa Cruz das Palmeiras, Brodowski and Marília are planning to launch sanitation auctions this year.

“Around 170 municipal projects are currently being structured in Brazil, and some of these are consortium projects, so [the actual number should be higher]. We are interested in some of these auctions and our focus is on contracts in the states of Rio Grande do Sul, Santa Catarina, Minas Gerais and São Paulo,” Yves Besse, CEO of sanitation company Cristalina Saneamento, told BNamericas.

However, “it must be recognized that small municipalities have not enough knowledge and even financial support to structure projects and this requires the help of [development banks] BNDES or Caixa Econômica Federal, which have such expertise,” added Besse.

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Private participation in the sector increased starting in mid-2020, after a reform was approved.

By law, municipalities must provide water and sanitation services to all households by 2033. Failure to do so could lead to the loss of federal resources. Although the law also applies to smaller localities, most contracts offered so far related to big projects in populous states.

A shift to smaller contracts might prove challenging, since they are not as lucrative for bigger companies.

REGULATORY UNCERTAINTY

Sector players are concerned the government could change its approach toward sanitation concessions and strengthen the role of state players. A review of the competencies of regulator ANA is also planned.

"Brazil has to face sanitation as a matter of the state and not of a specific government, because it is extremely important for people's lives. We have to put an end to the debate that some people want to resume, that sanitation is a matter only for state-owned companies, because, in practice, this has not brought any results," said Besse.