Spotlight: Digital transformation in Brazil's water, sanitation industry

Bnamericas Published: Monday, September 26, 2022

Investments in digital transformation in the Brazilian sanitation sector are rising rapidly, as better capitalized companies backed by global funds establish new business models and seek solutions to increase efficiency, while simultaneously looking to reduce costs and waste.   

One of the chief drivers of this process is the new regulatory framework, which has opened up the sector to private investment after it was enacted two years ago.

Water and sewage concessions granted after the approval of the legislation led to investment commitments of around 47bn reais (US$8.9bn) as of last July, according to the association of water and sewerage concessionaires, Abcon.

That figure considers the 16 water and sewerage tenders carried out by state governments in the two years since the law was passed.

“The need for digital transformation was already a reality in the sector. With the new legal framework, this agenda was accelerated to meet the new regulatory requirements, to bring a better experience to the consumer and to bring innovation in operating technology, with industry 4.0, IoT, remote monitoring, etc.,” Jorge Freire, director of Accenture Brasil for infrastructure and utilities, told BNamericas.

“The new framework and the opportunities it has generated have intensified the digital agenda of companies in the sector,” he added.

Freire said that Accenture is consulting on digital projects with three of the largest private groups operating in the sector in Brazil: Aegea, BRK Ambiental and Equatorial Saneamento. 

These projects involve customer service transformation, digital solutions for billing, digitization of operations centers, digital solutions for payments and cybersecurity.

Accenture’s client Aegea, the largest private sector company in the industry, with a 49% market share, started activities in six cities in 2010. It is now present in 154 municipalities in 13 states, serving 21mn people. In 2021, its net revenue was 2.9bn reais, up 27.1% year-on-year.

Aegea has won six tenders in the last two years: the public-private partnerships (PPPs) Ambiental Cariacica in Espirito Santo state, Ambiental Metrosul (Rio Grande do Sul) and Ambiental Pantanal (Mato Grosso do Sul), as well as blocks 1 and 4 of Rio de Janeiro’s Cedae concession and sewage services in Crato (Ceará).  

These contracts involve 26bn reais in new investments for the universalization of sanitation services in the long term.

The Brazilian economy ministry claims that the new legislation has sharpened the focus on targets for the universalization of water and sewerage services, while also increasing competition with new bidding processes for the provision of those services under concessions.

According to the ministry, the framework also provided greater legal certainty for the privatization of state-run companies and enabled regionalized sanitation provision, with gains in scale and efficiency and the commitment of new investments.

Freire at Accenture is upbeat about the market.

“Our view is that the outlook is the best possible for investments in the coming years. We’re connected to the agendas of the main players in the sector (both public and private) and all of them are projecting reasonable investments to structure the digital agenda and to structure companies internally to be able to capture the opportunities that are emerging with the new framework,” he said.


At a recent IoT event in São Paulo, Marcello Xavier, head of planning and development at Sabesp, the country's largest state-operated water utility, said the company has made important gains in efficiency with the installation of 100,000 smart water meters, with sensors for remote readings of distribution in the metropolitan region. 

With the use of multiple technologies, including low-power data transmission LoRaWAN, of which Everynet is the largest operator worldwide, the company has access to key data, such as volumes of water supplied and consumed, apparent losses and operational efficiencies, according to the executive.

Claudius Rubens, business consultant for Sanitation at Chilean firm Sonda, one of the main technology integrators in Latin America, told BNamericas that the company is prospecting digital transformation projects with five companies in Brazil's sanitation sector.

They are mostly seeking innovative solutions that solve problems immediately, without the need for large deployments or large investments, Rubens said.

“We still have significant demand for customer service [projects] under a 360-degree concept, to interact with the customer and improve the experience of that interaction," he said.

Clients are also looking to use sensors and IoT connected with grid components that generate data.

Rubens said that the new sanitation framework has made the sustainable development of concessions a reality and it enables companies to prospect investments to meet customers’ needs.

Nevertheless, every client has a different level of maturity with regard to the digital transformation, he added.

Asked about the turbulent scenario in Brazil in the run-up to next month’s election and a more adverse macroeconomic context for certain private investments, the executive said that digitization is a need and that Sonda has continued to operate regardless of the political climate and its effects on the market. 

Brazil-based multinational CAS Tecnologia is participating in smart water projects in the sanitation sector in Rio de Janeiro state, as well as working with water distributors in Chile, the firm’s smart grids manager, Octávio Brasil, told BNamericas.

“The main goals of these projects [for sanitation] is to improve the management of distribution data and measurement of consumption. Communication modules, with embedded intelligence, and data management and analysis platforms for measurement monitoring make up the solutions that are increasingly and irreversibly contributing to the quality of services, monitoring to reduce losses in the distribution system, as well as rates and environmental issues,” Brasil told BNamericas.

CAS Tecnologia provides its solutions for the industry in Europe, the Middle East, India, Oceania, South Africa and South America. The company also has a strong presence in the power sector, mostly with smart grid applications.

CAS is betting on new opportunities to digitize the sanitation sector with emerging 5G tech and even new satellite connectivity, namely for IoT, AI and process automation.

The executive said that the new sanitation framework is “the beginning of a positive turnaround … as it attracts investments and defines goals for quality and coverage of distribution and basic sanitation services, long-standing and urgent demands in Brazil.”


Italian multinational Engineering, a digital transformation consultancy specializing in utilities, considers the sanitation sector to be one of its "core markets", Filippo Di Cesare, CEO of Engineering for Latin America (Brazil and Argentina), told BNamericas.

“In Brazil, in particular, for many years we’ve invested in solutions and today we have a portfolio of prestigious clients, with projects that are a reference for the entire sector,” Di Cesare said.

Engineering is working on three fronts with sanitation firms: customer service, operational efficiency and new business models/sources of monetization, said the executive.

“The modernization brought by the legal framework for sanitation forces companies to undergo a transformation similar to what took place in the telecommunications sector in previous decades, in which the customer went from being held 'hostage' by a monopoly service to becoming the center of corporate action," Di Cesare said.

The [end] customer, he added, is not just a passive user and must be served proactively with quality and agility.

“Providing a better customer service involves improving companies' knowledge (data) about their clients for a differentiated experience. In that, we have innovative projects and solutions that allow companies to stand out in the market.”

In operational efficiency, Engineering is offering solutions for smart operations, data-driven applications, digital twins, sensors to collect information, cloud storage and machine learning to identify patterns and predict scenarios.

One of the main solutions being deployed by Engineering is the AI-powered DHuO Data, which predicts losses in the distribution of collected water through sensors that monitor water consumption.

Di Cesare said Engineering is also helping companies in the sector to explore new ways to monetize assets and raise revenues, such as by making data available via Application Programming Interfaces [API] to external ecosystems or providing value-added services (VAS), offered by third parties in a marketplace format.

New services offered to customers could include insurance sales, water tanks, premium services, cleaning, among other things, he said.

According to the executive, the new legal framework makes the segment attractive for private investment, establishing clear objectives and efficiency indicators, and that is producing a big push for investments in technology.

As for the macro and political contexts, he said: “It would be naive to say that politics has no impact. In fact, it’s impossible to say that the sector doesn’t have natural exposure to politics. Sanitation works have an environmental and social bias and it’s not by luck that they face great difficulties in execution and completion."

The executive referred to figures from the federal audit court (TCU), which show that Brazil has a backlog of more than 14,000 unfinished water and sanitation works under contracts totaling 144bn reais.

The sanitation sector in particularly has a large number of stalled or unfinished projects, mainly due to poor quality of the initiatives, lack of funds or incapacity of the contracted company to carry them out. Most of these go back to the period before the new legal framework was put in place.

“But there’s no alternative. Investment in sanitation has grown and will grow a lot in the coming years. Brazil has a lag in that area, as it doesn’t match its status as a great world economic power," said Di Cesare.

The investments in the sector also have long-term benefits, as each real invested in basic sanitation saves four reais in health spending, according to estimates based on World Health Organization (WHO) projections.

“The adoption of technology in a journey of digital transformation is essential for the sanitation industry to help Brazil catch up and reach the levels it should have," Di Cesare said.

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