Brazil sanitation auctions at risk of delays

Rising prices could dampen investment in Brazil’s sanitation sector, which has attracted much interest due to a massive concessions program.

"The sanitation sector has consolidated itself as one of the infrastructure segments that is attracting more investments in Brazil, thanks to the regulatory changes that bring more legal certainty," Roberto Guimarães, planning and economics director at infrastructure and basic industry association Abdib, told BNamericas.

"However, new auctions expected for the coming months are at risk of being delayed, because inflationary pressures have forced a review of all public notices, postponing several processes. This phenomenon has an impact on the advances of concessions in several infrastructure segments, not only in the sanitation area," added Guimarães.

Between mid-2020 and March 2022, 16 sanitation auctions were launched across various states and municipalities, generating 46.7bn reais (US$8.6bn) in planned investments and 29.5bn reais in fees for local governments, according to a study by water and sewage concessionaires association Abcon.

Abcon expects 28 more sanitation concession auctions by end-2023, involving estimated investment of 24.5bn reais, benefiting 16.5mn residents.

Approved by congress in mid-2020, the sanitation framework requires municipalities to create plans for full water and sanitation coverage by 2033, including proof of financial capacity to reach the goals.

Various local authorities then opted to offer concessions, although most municipal water and sewage services are still handled by public utilities.

With the new regulation, market share of private sanitation players in municipalities reached 9.1%, compared to 7% in 2021. In 2020, before the approval of the new regulation, market share was 6%.