Water privatization in Brazil has been initiated in 1996. In 2008 private companies provided 7 million Brazilians - 4% of the urban population - in 10 of the country's 26 states with drinking water. The private sector holds 65 concession contracts in the states of São Paulo, Rio de Janeiro, Espírito Santo, Mato Grosso, Mato Grosso do Sul, Santa Catarina, Minas Gerais, Paraná, Pará and Amazonas. Private companies have committed to invest 4.5 billion reais (US$2.8 bn) in the sector.ABCON Reals are converted using the exchange rate of 1.61 of July 4, 2008 The bulk of Brazil's population receives water and sanitation services from public municipal or state-level utilities (see Water supply and sanitation in Brazil).

Water privatization in Brazil has been relatively limited compared to other infrastructure sectors (power, transport, telecommunications). Compared to other Latin American countries, it has been more stable than in Argentina and Bolivia, but also less widespread than for example in Chile. As under all concession contracts, the infrastructure itself remains public, but is being operated by the private sector. Likewise, water resources themselves remain publicly owned.Sabbioni 2008: 13. Most concession contracts have been awarded by municipalities. A lack of legal clarity as to the right of state governments to also award concession contracts has thwarted some efforts at water privatization, notably in the state of Rio de Janeiro.

Privatization in Brazil has taken place without having previously developed a comprehensive regulatory regime, as it was the case in Chile."The privatization of water and sewage services in Brazil is still at the pre-regulatory stage, and is thus lagging behind other "pioneering" countries in Latin America, namely Argentina and Chile" (Parlatore 1999: 15-20). The impact of water privatization on access, investment, service quality, water use, tariffs and efficiency has been assessed in a 2008 study with the support from various Brazilian stakeholders as part of a global multistakeholder dialogue on water and the private sector.Multistakeholder Dialogue on water and the private sector in Brazil

History

19th century

The first water privatizations in Brazil took place with English capital in Rio de Janeiro (1857) and São Paulo (1877) at the time of the post-colonial Empire under Pedro II of Brazil. Two decades later Campanhia Cantareira's services In São Paulo were deemed unsatisfactory and its contract was not renewed. Rio de Janeiro's services were similarly re-municipalized a few years later following "popular uprising."Barraqué et al. 2007: 3446; Prasad 2007: 224.

1990s

Privatization in Brazil was initiated under President Collor, through the Programa Nacional de Desestatização created in April 1990. In infrastructure, a major privatization program was initiated only in 1994, covering energy, transport, water supply and sanitation and telecommunications.

Between 1994 and 2000 a total of 38 private sector contracts (concessions, BOTs and service contracts) were signed, with investment commitments of more than US$2.5 billion.World Bank PPI database The nine first private concession agreements were in 1994-96 were all in the state of Sào Paulo (Limeira, Mairinque, Marília, Mineiros do Tietê, Ourinhos, Pereiras, São Carlos, Salto and Tuiuti).

To support the privatization effort, in 1997 the Workers Compensation Fund FGTS approved the use of 10% of the funds allocated for the Pró-Saneamento program to be directed towards privatization. In the same year, the Caixa Economica Federal, which was a main source of funding for water and sanitation, established a Special Water Works Concession Bureau (Eesan) to support private concessions.Parlatore 1999: 13. International financial institutions such as the World Bank supported private sector participation. For example, according to Miranda, following an unsuccessful 1999 attempt to privatize Compesa, the state water company of Pernambuco, it became extremely difficult to craft an acceptable loan proposal sans privatization.Miranda 2005

In 1999, Brazil was viewed as "one of the world's largest concentrations of water and wastewater privatisation opportunities"; Thames Water opened an office in Rio de Janeiro and Azurix purchased AMX Acqua Management Inc. in order to get a "foot in the door."FT Energy Newsletters - Global Water Report. 1999, September 17. "Brazil: Azurix secures Rio foothold." lexis.

However, the jurisdictional conflicts characterizing the regulatory environment in the water and sanitation sector complicated privatization efforts.da Motta and Moreira 2006: 185; Tupper and Resende 2004. For example, attempts to encourage private sector participation at the state level (in Bahia and Rio de Janeiro) have been challenged in the Supreme Federal Court by municipal governments.McNallen 2006: 178-179, 193. According to McNallen Brazil's system of civil law, with its limited adherence to precedent, is another obstacle to further privatization.McNallen 2006: 185. It also affected concessions, planned for Espírito Santo and Petrolina.McNallen 2006: 175; Arretche 2001. According to a report by Business News America, between 2002 and January 2007, no private sanitation contracts were signed.Business News Americas. 2008, March 6. "Abcon; Only PPPs can solve sanitation problem." In part due to this legal uncertainty, a mayoral initiative to cancel a 40% tariff increase in Limeira requested by the concessionaire Suez was upheld by a federal court.de Motta and Moreira 2006: 187. A landmark court ruling in May 2002 against Sanepar—suspending an 18.6% tariff increase—has led to successful copycat litigation in neighboring municipalities (See Hall and Lobina 2002: 17). The specific Brazilian context of water governance has produced "unprecedented wrangling" between national, state, and municipal officials.McNallen 2006: 172.

As of 2000 only 1% municipalities had issued concession agreements to private companies. 71% of Brazil's municipalities delegated water and sewage services to state companies and 28% retained municipal provision.Barraqué et al. 2007: 3462.

2000s

A bill (Bill 4147/2001) which would have granted states the conceding authority for metropolitan areas failed to be passed due to opposition from trade groups.The Brazilian Association of Sanitary and Environmental Engineering (Abes) and the National Water Works Association (Assemae) are two prominent and vocal opponents of Brazilian water privatization (See Parlatore 1999: 12). Curiously, though, current private sector involvement has not resulted in employment "adjustments" seen in other sectors in Brazil (See Anuatti-Neto et al. 2003: 26). The primary controversy over the bill was about the interpretation of the Federal Constitution. But the discourse was also infused with rhetoric of the private sector as "inherently abusive in setting rates and unable or unwilling to invest to serve poorer areas adequately."da Motta and Moreira 2006: 186. Finally another bill (Bill 5296/2005) was passed that clarified the role of the federal government in the sector, but failed to clarify the respective roles of states and municipalities. The law became effective in January 2007 as the sanitation law (law 11.445). Subsequently, seven new contracts for public-private partnerships (PPPs) were signed in 2007 alone, with Abcon expecting 15-20 more in 2008.

The sanitation law allows service contracts without launching a bidding process. It is being challenged by Brazil's Attorney General Antonio Fernando Souza, who is seeking an injunction from the Supreme Federal Court.Business News Americas. 2008, April 1. "Attorney general requests injunction against sanitation law." lexis.

2010s After the period of economic crisis and political instability that culminated in the impeachment of Dilma Rousseff and the assumption of office by Michel Temer, as part of political and economic opening reforms, the process of creating the Legal Framework for Basic Sanitation began in 2018 and continued during the government of Jair Bolsonaro, with the aim of modernizing, regionalizing, and attracting private investments to the sector. At least four legislative projects were presented, including two Provisional Measures, which expired due to lack of political convergence.

In mid-2019, Senate Bill 3,261/2019, proposed by Senator Tasso Jereissati, was introduced, but the Executive Branch also presented another bill (Bill 4,162/2019) with similar content to expedite the process. During the bill's passage in the Chamber of Deputies, lawmakers from the Northeastern states also resisted the elimination of "program contracts". The turnaround occurred when Congress extended the deadline for the renewal of these contracts without bidding until March 2022, gaining the support of the Northeastern lawmakers for the bill.

2020s The Legal Framework for Basic Sanitation (Law No. 14.026/2020) was approved in July 2020 and sanctioned with vetoes by President Bolsonaro.

With the regulatory standardization of the sector through national reference norms, local, regional, or state regulatory agencies must follow a standard established by the Agência Nacional de Água e Saneamento Básico (ANA) to increase legal certainty in the provision of services and encourage public and private investments. However, this requires institutional capacity, human resources, and financial resources from ANA, which has not yet been able to significantly expand its workforce or budget. The universalization targets were set to achieve coverage of 99% of the population with drinking water and 90% of the population with sewage collection and treatment by December 31, 2033.

Auctioned for R$22.7 billion in April 2021, the Companhia Estadual de Águas e Esgotos do Rio de Janeiro - CEDAE is no longer responsible for water distribution in Rio de Janeiro, with the companies Aegea Saneamento and Iguá Saneamento taking over water and sewage services in regions of the state for the next 35 years. However, there was lack of interest from concessionaires in one of the auction blocks, and after deliberations, Águas do Brasil acquired the west zone of Rio de Janeiro for R$2.2 billion.

CEDAE will continue to exist and will be responsible for water capture and sale to the concessionaires.

In April 2023, President Lula signed two decrees that revoked the 25% limit for subdelegations in Public-Private Partnerships and extended the deadline for municipalities to structure their regionalized operations until the end of 2025. ABCON, the entity of private companies, criticized the decrees, while AESBE, the entity of state-owned companies, celebrated them. Some companies, such as Sabesp, Copasa, and CORSAN, requested disaffiliation from the entity in response to the decrees.

Results

So far no comprehensive study has assessed the results of private sector participation in water supply and sanitation in Brazil. Such a study is, however, currently underway with support from various Brazilian stakeholders as part of a global multistakeholder dialogue on water and the private sector. The study attempts to assess private sector participation using the following criteria:

improvements in operational performance improvements in financial performance increase in sector investments

In the absence of a completed comprehensive study this article draws on partial data and case studies quoted in the literature. The criteria used are increase in investment, increase in access, changes in efficiency, impact on water demand and health impacts.

Investment