Transforming garbage into value

Bnamericas Published: Wednesday, August 24, 2022
Transforming garbage into value

The solid waste sector in Brazil currently comprises many small and medium-sized players and is expected to undergo consolidation in the coming years. The trend is likely to be driven by the need for more investments, with companies engaging in more sophisticated operations, including the production of energy through waste. 

Hugo Nery, the CEO of Marquise Ambiental, one of the largest companies in the industry, told BNamericas about the opportunities in the sector and also the risks involved.

BNamericas: How is the Marquise group structured today?

Nery: Marquise is a company from Ceará state that has two partners who started together with a construction company.

These partners expanded the company's activity and currently there are three main divisions in the group, the real estate development area, the infrastructure area and the solid waste area. It’s a company that has a very open view of the markets in which it operates, always looking for possibilities to generate value.

BNamericas: You lead the group's solid waste area. How do you evaluate the current scenario of the sector?

Nery: In my solid waste area there are many opportunities. This sector is no longer just a sector involved in cleaning up urban areas, today we are a different company than we were in the beginning.

I come from the industrial area and when I was hired by Marquise what the company did was urban cleaning, transporting waste. Until five years ago we called this transported material garbage.

This has been changing in recent years with Europe in the vanguard.

Today we also have a different view of the sector in Brazil, for example, for industries there is already very strong legislation for companies to take care of their waste.

Marquise has this differential because it has always seen that garbage was a product and there’s no turning back from this transformation.

BNamericas: Why do you think we are at a point of no return regarding solid waste reuse strategies?

Nery: At some point we will have to think about separating all residential waste at the source, through three separations: leftover food; recyclable waste, bags, paper, glass; and human waste.

Right now, without proper waste separation, Brazil throws away 120,000t of leftover food [per day] that could be generating gas, biogas and also fertilizer for agriculture.

BNamericas: The Brazilian government has tried to attract companies to sanitation and solid waste concessions. Do you believe that this plan will generate a large inflow of private sector companies in small and medium-sized cities as well?

Nery: Brazil has more than 5,000 municipalities but only 320 of these municipalities have more than 100,000 inhabitants.

Ninety percent of cities in Brazil are still very dependent on resources from the federal government and this means that we have a structural problem that needs to be solved.

But in addition to the fact that most municipalities are not self-sufficient, there are other problems as well.

BNamericas: What are these problems?

Nery: There are some obstacles to the development of the solid waste sector.

One is the fact that we have a low level of education and this impacts the hiring of qualified labor and due to this, we always have low technology implemented.

The second obstacle is that we have a very big political problem, every two years in Brazil we are in the middle of an electoral process, so governments stop making long-term decisions, they are always thinking about the next elections.

And the third one, also linked with elections, is legal insecurity. There is legal uncertainty in the sector, where there are always contract risks.

BNamericas: Where does Marquise see business opportunities?

Nery: We have just come out of a pandemic and it has affected all companies. All our plans before the pandemic were suspended in order to survive and we had to control costs. In all the cities in Brazil where we are present, we have seen difficulties in readjusting our contracts.

But that didn't stop us from looking ahead.

This segment is hot and there are many investments entering the market.

Brazil in the next 10 years will need to increase its energy capacity by 40% and this will require all kinds of energy sources, renewable, among others.

Marquise then decided to invest in the generation of gas from sanitary landfills. We are investing 110mn reais [US$21mn] in these initiatives related to the production of biogas, the generation of energy that comes from waste.

Regarding the solid waste sector, there are a total of between 500 and 600 cities today that have a relevant size and are served by about 280 companies.

In other words, it’s a very dispersed market and I expected major consolidation of this market. 

BNamericas: Given this expectation of being part of the consolidation of the market, when does Marquise Ambiental expect to grow?

Nery: This year the expectation is that my area will generate revenues of 1.1bn reais and the group as a whole will generate revenue of 1.6bn reais. In 2023, our growth should be at least 10%.

BNamericas: What funding is available in Brazil today for investments in the solid waste area?

Nery: Investments in this sector have always been low, because basically companies invested in waste collection trucks.

Now we already have bigger investments, in sanitary landfills, and today there is more need for financing and there are investment funds entering the sector, wanting to finance projects.

In addition, the sector also currently has credit lines from state-run banks BNDES and Caixa Econômica Federal.

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