Water privatization in Brazil
Encyclopedia
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. 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. 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 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.
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."
, 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. 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. 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.
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."
However, the jurisdictional conflicts characterizing the regulatory environment in the water and sanitation sector complicated privatization efforts. 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. According to McNallen Brazil’s system of civil law
, with its limited adherence to precedent, is another obstacle to further privatization. It also affected concessions, planned for Espirito Santo
and
Petrolina
. According to a report by Business News America, between 2002 and January 2007, no private sanitation contracts were signed. 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. The specific Brazilian context of water governance has produced "unprecedented wrangling” between national, state, and municipal officials.
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.
. 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.”
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.
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.
One justification for privatization has been that it would increase investments. For example, the Brazilian Association of Private Water and Sewage Operations (ABCON) promotes privatization primarily by arguing that it is the only way to acquire necessary infrastructure investments. Between 1990 and 2006, the Brazilian water and sewage sector produced 52 private projects, received US$3.069 billion in private capital.
In some concessions, actual investments remained below investment commitments, such as in concessions in Limeira
, Manaus
, Campo Grande
. For example, in July 2000, Campo Grande, the capital of the Mato Grosso do Sul
state granted a 30-year, US$ 217 million water and sewage concession to Aguas de Barcelona, a subsidiary of Suez-Lyonnaise des Eaux; by November 2001, planned investment was reduced 27.1% from the amount pledged.
, a global federation of public sector trade unions—in Manaus
, Suez-Lyonnaise des Eaux backtracked on promises to expand access to 95% of the population immediately after receiving a 30-year concession in June 2000.
According to Olivier, a 2004 tariff increase in the Manaus
municipal water network by Aguas do Amazonas—a private operator and subsidiary of Suez Environment, which acquired a 30-year concession in June 2000—resulted in a substantial reduction in consumption, even steeper among low income users. According to PSIRU in another case poor water users in Paraná
reverted to drinking rain water and other contaminated sources as a result of tariff increases by Vivendi’s subsidiary, Sanepar.
Opposition to privatization has too often been characterized by "controversial and emotional debates," laced with “doubts, fears and prejudices” originating from generalized objections to globalization
and neoliberalism
. Similarly, according to Lemos and Oliveira many potentially beneficial public private partnerships
(PPPs) have suffered from widespread mistrust—bred by “decades of broken promises”—and numerous “accounts of policy failure.”
Many politically influential groups in Brazil harbor an “outright aversion to private capital participation” in water and other essential services. Politically, water privatization has often been conflated with conflicts over decentralization vis-à-vis the return of control from State water companies established under the military regime to re-municipalized companies. Thus, Brazilian water reform has remained “paralyzed by the controversy” because the municipal-state contest has too often been reduced to a question of which level of government should have the authority to grant concessions to private actors, rather than the authority to develop a coherent policy including both public and private elements.
Political parties that oppose privatization include the Workers' Party
(PT) and the Socialism and Freedom Party
(PSOL).
and Recife
have developed “people-centered, participatory models” for improving water access. This has allowed them to position themselves as more than just being anti-privatization, but to develop a constructive alternative. Porto Alegre’s DMAE in particular has become known for its participatory budgeting process
. According to PSIRU, this has enabled Porto Alegre to "continually fight off privatization attempts" that were allegedly supported by the Brazilian Congress as well as international donors such as the Inter-American Development Bank
(IADB) to the World Bank. The participatory budgeting process — which allows any public demand to be included in the following year’s budget subject only to a popular vote and evaluation for technical feasibility — has become a model for direct democracy elsewhere in Brazil, and the world.
, the largest water company in Latin America, has chosen a different path. Instead of awarding a private concession it has sold shares in the Brazilian stock market and even on the New York Stock Exchange
. In addition, it obatined loans from the Inter-American Development Bank
and the Japan Bank for International Cooperation
. Rio de Janeiro's state government also plans to sell shares in its water and sewerage company, Nova Cedae, while still retaining majority control of the company, citing the example of SABESP (four attempts to privatize the company in 1998 failed due to lack of agreement between the city and state governments).
According to PSIRU such "civically active utilities" are alternatives to "desperation-induced privatization attempts" in Parana and Rio de Janeiro.
a 1998 concession agreement had given Dominó Holdings (formed by Vivendi
, Brazilian bank Opportunity, and the Andrade Gutierrez group) control of the state water and sewer company SANEPAR. Recently, the Supreme Federal Court authorized the state government to increase its stake in SANEPAR, overturning an injunction granted by a lower court which had prevented the state from calling a general shareholders meeting.
Water privatization
Water privatization is a short-hand for private sector participation in the provision of water services and sanitation, although sometimes it refers to privatization and sale of water resources themselves . As water services are seen as such a key public service, water privatization is often...
in Brazil
Brazil
Brazil , officially the Federative Republic of Brazil , is the largest country in South America. It is the world's fifth largest country, both by geographical area and by population with over 192 million people...
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
São Paulo (state)
São Paulo is a state in Brazil. It is the major industrial and economic powerhouse of the Brazilian economy. Named after Saint Paul, São Paulo has the largest population, industrial complex, and economic production in the country. It is the richest state in Brazil...
, Rio de Janeiro
Rio de Janeiro (state)
Rio de Janeiro is one of the 27 states of Brazil.Rio de Janeiro has the second largest economy of Brazil behind only São Paulo state.The state of Rio de Janeiro is located within the Brazilian geopolitical region classified as the Southeast...
, Espírito Santo
Espírito Santo
Espírito Santo is one of the states of southeastern Brazil, often referred to by the abbreviation "ES". Its capital is Vitória and the largest city is Vila Velha. The name of the state means literally "holy spirit" after the Holy Ghost of Christianity...
, Mato Grosso
Mato Grosso
Mato Grosso is one of the states of Brazil, the third largest in area, located in the western part of the country.Neighboring states are Rondônia, Amazonas, Pará, Tocantins, Goiás and Mato Grosso do Sul. It also borders Bolivia to the southwest...
, Mato Grosso do Sul
Mato Grosso do Sul
Mato Grosso do Sul is one of the states of Brazil.Neighboring Brazilian states are Mato Grosso, Goiás, Minas Gerais, São Paulo and Paraná. It also borders the countries of Paraguay and Bolivia to the west. The economy of the state is largely based on agriculture and cattle-raising...
, Santa Catarina
Santa Catarina (state)
Santa Catarina is a state in southern Brazil with one of the highest standards of living in Latin America. Its capital is Florianópolis, which mostly lies on the Santa Catarina Island. Neighbouring states are Rio Grande do Sul to the south and Paraná to the north. It is bounded on the east by...
, Minas Gerais
Minas Gerais
Minas Gerais is one of the 26 states of Brazil, of which it is the second most populous, the third richest, and the fourth largest in area. Minas Gerais is the Brazilian state with the largest number of Presidents of Brazil, the current one, Dilma Rousseff, being one of them. The capital is the...
, Paraná
Paraná (state)
Paraná is one of the states of Brazil, located in the South of the country, bordered on the north by São Paulo state, on the east by the Atlantic Ocean, on the south by Santa Catarina state and the Misiones Province of Argentina, and on the west by Mato Grosso do Sul and the republic of Paraguay,...
, Pará
Pará
Pará is a state in the north of Brazil. It borders the Brazilian states of Amapá, Maranhão, Tocantins, Mato Grosso, Amazonas and Roraima. To the northwest it also borders Guyana and Suriname, and to the northeast it borders the Atlantic Ocean. The capital is Belém.Pará is the most populous state...
and Amazonas. Private companies have committed to invest 4.5 billion reais (US$ 2.8 bn) in the sector. 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 supply and sanitation in Brazil
Water supply and sanitation in Brazil is characterized by both achievements and challenges. Among the achievements is an increase in access to piped water supply from 66% to 77% between 1990 and 2006; an increase in access to improved sanitation from 71% to 77% in the same period; a functioning...
).
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
Water privatization in Argentina
The privatization of water and sanitation services in Argentina between 1991 and 1999 under the government of Carlos Menem was part of one of the worlds largest privatization programs. Water and sanitation concessions with the private sector were signed in 28% of the country's municipalities...
and Bolivia
Water privatization in Bolivia
The privatization of water supply and sanitation in Bolivia took place during the second mandate of Bolivian President Hugo Banzer in the form of two major private concessions: One in La Paz/El Alto to Aguas de Illimani S.A...
, but also less widespread than for example in Chile
Water privatization in Chile
The privatization of water in Chile was undertaken from 1998 to 2005 under the democratically elected governments of Eduardo Frei and Ricardo Lagos. Chile is the only country in Latin America that privatized its entire urban water supply and sanitation sector...
. 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. 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
Water supply and sanitation in Chile
Water supply and sanitation in Chile is characterized by high levels of access and good service quality. Compared to most other countries, Chile's water and sanitation sector distinguishes itself by the fact that all urban water companies are privately owned or operated...
. 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.
19th century
Rio de Janeiro
Rio de Janeiro , commonly referred to simply as Rio, is the capital city of the State of Rio de Janeiro, the second largest city of Brazil, and the third largest metropolitan area and agglomeration in South America, boasting approximately 6.3 million people within the city proper, making it the 6th...
(1857) and São Paulo
São Paulo
São Paulo is the largest city in Brazil, the largest city in the southern hemisphere and South America, and the world's seventh largest city by population. The metropolis is anchor to the São Paulo metropolitan area, ranked as the second-most populous metropolitan area in the Americas and among...
(1877) at the time of the post-colonial Empire under Pedro II of Brazil
Pedro II of Brazil
Dom Pedro II , nicknamed "the Magnanimous", was the second and last ruler of the Empire of Brazil, reigning for over 58 years. Born in Rio de Janeiro, he was the seventh child of Emperor Dom Pedro I of Brazil and Empress Dona Maria Leopoldina and thus a member of the Brazilian branch of...
. 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."
Water privatization in the 1990s
Privatization in Brazil was initiated under President CollorFernando Collor de Mello
Fernando Affonso Collor de Mello was the 32nd president of Brazil from 1990 to 1992, when he resigned in a failed attempt to stop his trial of impeachment by the Brazilian Senate...
, 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. The nine first private concession agreements were in 1994-96 were all in the state of Sào Paulo (Limeira
Limeira
Limeira is a city in the eastern part of the Brazilian state of São Paulo. The population in 2004 is 270,733 and the area is 582.48 km². The elevation is 588 m. It is 154 km far from São Paulo, the state capital, and 1011 km far from Brasilia, Brazil's capital...
, Mairinque
Mairinque
Mairinque is a small city near Sorocaba, in the state of São Paulo in Brazil. The city has a population of 45,376, and an area of 210.28 km², which includes an urban area of 18 km² plus a surrounding hinterland...
, Marília
Marília
Marília is a Brazilian city and municipality in the midwestern region of the state of São Paulo. Its distance from the state capital is by highway, by railway and in a straight line. It is located at latitude 22º 12'50 "south and longitude 49º 56'45" west, with an altitude of 675 meters...
, Mineiros do Tietê
Mineiros do Tietê
Mineiros do Tietê is a municipality in the state of São Paulo in Brazil, located at 22º24'34" S latitude and 48º27'02" W longitude, at an altitude of 669 meters. The estimated population in 2004 is 12,407 and the area is 212.44 km²...
, Ourinhos
Ourinhos
Ourinhos is a municipality/county in the state of São Paulo in Brazil. The population in 2010 is 103,026 and the area is . The elevation is .The city of Ourinhos was emancipated from Salto Grande in the 1910s...
, Pereiras
Pereiras
Pereiras is a municipality in the state of São Paulo in Brazil. Its population in 2004 was 7,139 and its area was 222.72 km². Its elevation is 490 m....
, São Carlos
São Carlos
São Carlos is a city of 221,950 inhabitants in the state of São Paulo, Brazil. It is located at , at about 231 km from the city of São Paulo.-History:...
, Salto
Salto, São Paulo
Salto is a municipality in the state of São Paulo in Brazil. The elevation is 555 m. The city has one main river, rio Tietê. Poll from 2004 shows the population is 103.884.The city has an important geological park: "Moutonée Park"....
and Tuiuti
Tuiuti
Tuiuti is a municipality in the state of São Paulo in Brazil. The population in 2004 was 5,398 and the area is 126.86 km². The elevation is 790 m....
).
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. 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
Water supply and sanitation in Pernambuco
Water supply and sanitation in Pernambuco is characterized by high levels of access to water supply in urban areas, but also by poor service quality , inadequate access to sanitation, and insufficient access to improved water sources and improved sanitation in rural areas.In urban areas, where 76%...
, it became extremely difficult to craft an acceptable loan proposal sans privatization.
In 1999, Brazil was viewed as "one of the world's largest concentrations of water and wastewater privatisation opportunities"; Thames Water
Thames Water
Thames Water Utilities Ltd, known as Thames Water, is the private utility company responsible for the public water supply and waste water treatment in large parts of Greater London, the Thames Valley, Surrey, Gloucestershire, Wiltshire, Kent, and some other areas of in the United Kingdom...
opened an office in Rio de Janeiro and Azurix
Azurix
Azurix Corp. is a water services company, headquartered in Houston, Texas. The company owned and operated facilities in North America , Europe, and South America...
purchased AMX Acqua Management Inc. in order to get a "foot in the door."
However, the jurisdictional conflicts characterizing the regulatory environment in the water and sanitation sector complicated privatization efforts. For example, attempts to encourage private sector participation at the state level (in Bahia
Bahia
Bahia is one of the 26 states of Brazil, and is located in the northeastern part of the country on the Atlantic coast. It is the fourth most populous Brazilian state after São Paulo, Minas Gerais and Rio de Janeiro, and the fifth-largest in size...
and Rio de Janeiro) have been challenged in the Supreme Federal Court by municipal governments. According to McNallen Brazil’s system of civil law
Civil law (legal system)
Civil law is a legal system inspired by Roman law and whose primary feature is that laws are codified into collections, as compared to common law systems that gives great precedential weight to common law on the principle that it is unfair to treat similar facts differently on different...
, with its limited adherence to precedent, is another obstacle to further privatization. It also affected concessions, planned for Espirito Santo
Espírito Santo
Espírito Santo is one of the states of southeastern Brazil, often referred to by the abbreviation "ES". Its capital is Vitória and the largest city is Vila Velha. The name of the state means literally "holy spirit" after the Holy Ghost of Christianity...
and
Petrolina
Petrolina
Petrolina is a city located in the southernmost point of the state of Pernambuco, in Brazil. The population was 281.851 in 2009 in a total area of 4756.8 km²....
. According to a report by Business News America, between 2002 and January 2007, no private sanitation contracts were signed. In part due to this legal uncertainty, a mayoral initiative to cancel a 40% tariff increase in Limeira
Limeira
Limeira is a city in the eastern part of the Brazilian state of São Paulo. The population in 2004 is 270,733 and the area is 582.48 km². The elevation is 588 m. It is 154 km far from São Paulo, the state capital, and 1011 km far from Brasilia, Brazil's capital...
requested by the concessionaire Suez was upheld by a federal court. The specific Brazilian context of water governance has produced "unprecedented wrangling” between national, state, and municipal officials.
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.
21st century
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 primary controversy over the bill was about the interpretation of the Federal ConstitutionConstitution of Brazil
During its independent political history, Brazil has had seven constitutions. The most recent was ratified on October 5, 1988.-Imperial Constitution :Background...
. 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.”
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.
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
Water and sanitation investment by public and private utilities has dropped by an average of 30% since 1998. Projections of future capital requirements vary. One source estimates a minimum need of US$60 billion over the next 20 years.One justification for privatization has been that it would increase investments. For example, the Brazilian Association of Private Water and Sewage Operations (ABCON) promotes privatization primarily by arguing that it is the only way to acquire necessary infrastructure investments. Between 1990 and 2006, the Brazilian water and sewage sector produced 52 private projects, received US$3.069 billion in private capital.
Limeira
Limeira is a city in the eastern part of the Brazilian state of São Paulo. The population in 2004 is 270,733 and the area is 582.48 km². The elevation is 588 m. It is 154 km far from São Paulo, the state capital, and 1011 km far from Brasilia, Brazil's capital...
, Manaus
Manaus
Manaus is a city in Brazil, the capital of the state of Amazonas. It is situated at the confluence of the Negro and Solimões rivers. It is the most populous city of Amazonas, according to the statistics of Brazilian Institute of Geography and Statistics, and is a popular ecotourist destination....
, Campo Grande
Campo Grande
-Climate:Campo Grande has a highland tropical climate, semi-humid, hot, and notably seasonal, with a dry winter season from May through September or October. Under the Koppen climate classification Campo Grande features a tropical wet and dry climate, albeit a noticeably cooler version of the...
. For example, in July 2000, Campo Grande, the capital of the Mato Grosso do Sul
Mato Grosso do Sul
Mato Grosso do Sul is one of the states of Brazil.Neighboring Brazilian states are Mato Grosso, Goiás, Minas Gerais, São Paulo and Paraná. It also borders the countries of Paraguay and Bolivia to the west. The economy of the state is largely based on agriculture and cattle-raising...
state granted a 30-year, US$ 217 million water and sewage concession to Aguas de Barcelona, a subsidiary of Suez-Lyonnaise des Eaux; by November 2001, planned investment was reduced 27.1% from the amount pledged.
Access
One justification for privatization has been that it would accelerate the increase of access to water and sanitation, in particular the poor. However, according to McNallen and Olivier, private cherry picking has had deleterious effects on the cross-subsidization which has made possible even the moderate provision of water and sanitation services to such users. According to the think tank PSIRU—which is financed by Public Services InternationalPublic Services International
Public Services International is a global union federation of public sector trade unions. It 620 affiliated unions, in 160 countries, representing 20 million workers...
, a global federation of public sector trade unions—in Manaus
Manaus
Manaus is a city in Brazil, the capital of the state of Amazonas. It is situated at the confluence of the Negro and Solimões rivers. It is the most populous city of Amazonas, according to the statistics of Brazilian Institute of Geography and Statistics, and is a popular ecotourist destination....
, Suez-Lyonnaise des Eaux backtracked on promises to expand access to 95% of the population immediately after receiving a 30-year concession in June 2000.
Efficiency
There has apparently be no study analyzing changes in efficiency of privatized utilities in Brazil. However, Motta and Moreira have compared the efficiency of public and private utilities in Brazil at one point in time. Their cross-sectional statistical study examined the relative technical efficiency of public and private water companies in Brazil reveal that utilities with private sector participation are not much more efficient than public utilities. Faria speculates that the relatively low difference in efficiency in comparison to private sector participation in other countries can perhaps be explained by the relative weakness of the Brazilian regulatory regime. Public and private local operators also apparently face similar firm-specific costs. The differences between which are swamped by the stark difference between state and municipal firms. Ayres concludes that privatization is not a sufficient condition to improve efficiency, unless coupled with regulation to curtain anti-competitive practices and additional government stabilization.Impact on water use
Water tariff increases have occurred throughout Brazil in both public and private utilities, contributing to a decrease in water use.According to Olivier, a 2004 tariff increase in the Manaus
Manaus
Manaus is a city in Brazil, the capital of the state of Amazonas. It is situated at the confluence of the Negro and Solimões rivers. It is the most populous city of Amazonas, according to the statistics of Brazilian Institute of Geography and Statistics, and is a popular ecotourist destination....
municipal water network by Aguas do Amazonas—a private operator and subsidiary of Suez Environment, which acquired a 30-year concession in June 2000—resulted in a substantial reduction in consumption, even steeper among low income users. According to PSIRU in another case poor water users in Paraná
Paraná (state)
Paraná is one of the states of Brazil, located in the South of the country, bordered on the north by São Paulo state, on the east by the Atlantic Ocean, on the south by Santa Catarina state and the Misiones Province of Argentina, and on the west by Mato Grosso do Sul and the republic of Paraguay,...
reverted to drinking rain water and other contaminated sources as a result of tariff increases by Vivendi’s subsidiary, Sanepar.
Health impact
There are no specific data on the health impact of water privatization in Brazil. According to Peres et al., privatization is likely to negatively affect the health of poorer populations if service gaps between rich and poor increase. This would contrast the experience of at least another country that has been studied in detail. According to a detailed 2002 study in Argentina, water privatization has had a positive impact on child mortality. It found that in the 1991-1997 period child mortality fell 5 to 7 percent more in areas that privatized compared to those that remained under public or cooperative management. It also found that the effect was largest in poorest areas (24%). The authors estimate that the main reason is the massive expansion of access to water, which was concentrated in poorer areas that did not receive services before private sector participation was introduced.List of concession agreements
| Brazilian municipality or state | MNC | Concession | Year | Notes |
|---|---|---|---|---|
| Araçatuba Araçatuba Araçatuba is a city located in the northwest of São Paulo state, Brazil. The city has 181.579 inhabitants and 1,167.4 km² of area. The city name comes from the Tupi language and means "abundance of araçá "... (city) |
Aracatuba Saneamento | 1998 | R$11.6 million investment to build, rehabilitate, operate, and transfer a potable water and sewerage treatment plant | |
| Campo Grande Campo Grande -Climate:Campo Grande has a highland tropical climate, semi-humid, hot, and notably seasonal, with a dry winter season from May through September or October. Under the Koppen climate classification Campo Grande features a tropical wet and dry climate, albeit a noticeably cooler version of the... , Mato Grosso Mato Grosso Mato Grosso is one of the states of Brazil, the third largest in area, located in the western part of the country.Neighboring states are Rondônia, Amazonas, Pará, Tocantins, Goiás and Mato Grosso do Sul. It also borders Bolivia to the southwest... |
Suez (Aguas de Barcelona subsidiary)/Agbar Grupo Agbar Agbar is a Spanish company dedicated to services, distribution or treatment of water. The company was founded in 1867 in Liège as Compagnie des Eaux de Barcelone by an investor from France and Catalonia . The group is present in almost all the continents as North America, South America, Asia and... |
Aguas Guariroba (originally Interagua, spun off from state company, Sanesul) | 2000 | 30-year, US$ 217 million water and sewage concession; Posted an immediate R$ 1.46 million loss and began operating a 20% monthly deficit after winning a 30-year concession. |
| Cachoeiro de Itapemirim Cachoeiro de Itapemirim Cachoeiro de Itapemirim is the name of a municipality and of its capital, located in the south of Espírito Santo, Brazil, on the banks of the Itapemirim river. It is the economic hub of southern Espírito Santo, being the most important producer of marble and granite in Brazil. Home to one of the... (municipality) |
Aguas de Cachoeiro | 1998 | R$41.4 million investment to build, rehabilitate, operate, and transfer water utility with sewerage | |
| Guariroba | Suez | Aguas Guariroba | ||
| Juturnaiba Rio de Janeiro Rio de Janeiro , commonly referred to simply as Rio, is the capital city of the State of Rio de Janeiro, the second largest city of Brazil, and the third largest metropolitan area and agglomeration in South America, boasting approximately 6.3 million people within the city proper, making it the 6th... |
Aguas de Juturnaiba | 1998 | R$65.2 million investment to build, rehabilitate, operate, and transfer water utility with sewerage | |
| Limeira Limeira Limeira is a city in the eastern part of the Brazilian state of São Paulo. The population in 2004 is 270,733 and the area is 582.48 km². The elevation is 588 m. It is 154 km far from São Paulo, the state capital, and 1011 km far from Brasilia, Brazil's capital... |
Suez | Aguas de Limeira | 1995 | R$100 million investment to rehabilitate, operate, and transfer water utility with sewerage; 30-year water/wastewater concession ($50–70MM investment) |
| Manaus Manaus Manaus is a city in Brazil, the capital of the state of Amazonas. It is situated at the confluence of the Negro and Solimões rivers. It is the most populous city of Amazonas, according to the statistics of Brazilian Institute of Geography and Statistics, and is a popular ecotourist destination.... , Amazonas |
Suez | Aguas do Amazonas | 2000 | 30-year concession; 90% of shares in state company, Manasa, for R$193 million; Loans from BNDES in 2001 (R$72 million load for both purchase and further investment) |
| Mairinique | Mairinque Water Company | 1997 | R$28.5 million investment to build, rehabilitate, operate, and transfe water utility with sewerage | |
| Mineiros do Tietê Mineiros do Tietê Mineiros do Tietê is a municipality in the state of São Paulo in Brazil, located at 22º24'34" S latitude and 48º27'02" W longitude, at an altitude of 669 meters. The estimated population in 2004 is 12,407 and the area is 212.44 km²... (municipality) |
Mineiros do Tiete Water Company | 1995 | R$2 million investment to build, rehabilitate, operate, and transfer water utility with sewerage | |
| Marília Marília Marília is a Brazilian city and municipality in the midwestern region of the state of São Paulo. Its distance from the state capital is by highway, by railway and in a straight line. It is located at latitude 22º 12'50 "south and longitude 49º 56'45" west, with an altitude of 675 meters... (city) |
Marilia Water Company | 1997 | R$3 million investment to build, rehabilitate, operate, and transfer water utility with sewerage | |
| Ourinhos Ourinhos Ourinhos is a municipality/county in the state of São Paulo in Brazil. The population in 2010 is 103,026 and the area is . The elevation is .The city of Ourinhos was emancipated from Salto Grande in the 1910s... (municipality) |
Ourinhos Water Service | 1996 | R$1.2 million investment to build, rehabilitate, operate, and transfer water utility without sewerage | |
| Paraná (state) Paraná (state) Paraná is one of the states of Brazil, located in the South of the country, bordered on the north by São Paulo state, on the east by the Atlantic Ocean, on the south by Santa Catarina state and the Misiones Province of Argentina, and on the west by Mato Grosso do Sul and the republic of Paraguay,... |
Vivendi Vivendi Vivendi SA is a French international media conglomerate with activities in music, television and film, publishing, telecommunications, the Internet, and video games. It is headquartered in Paris.- History :... (with Brazilian Andrade Gutierrez Group) |
Companhia de Saneamento do Paraná (SANEPAR) | 1998 | R$216.7 million investment; 2001 loans from World Bank World Bank The World Bank is an international financial institution that provides loans to developing countries for capital programmes.The World Bank's official goal is the reduction of poverty... -International Finance Corporation International Finance Corporation The International Finance Corporation promotes sustainable private sector investment in developing countries.IFC is a member of the World Bank Group and is headquartered in Washington, D.C., United States.... ($30 million investment in AGC) Problems have included: increased faecal colibacteria Fecal coliforms A fecal coliform is a facultatively-anaerobic, rod-shaped, gram-negative, non-sporulating bacterium. Fecal coliforms are capable of growth in the presence of bile salts or similar surface agents, are oxidase negative, and produce acid and gas from lactose within 48 hours at 44 ± 0.5°C.Coliform... and algae Algae Algae are a large and diverse group of simple, typically autotrophic organisms, ranging from unicellular to multicellular forms, such as the giant kelps that grow to 65 meters in length. They are photosynthetic like plants, and "simple" because their tissues are not organized into the many... contamination, unlicensed groundwater exploitation, and raw wastewater discharging. As a result, managing director Jean-Mari d’Aspe returned to France in December 2001 under threat of imprisonment for criminal charges from litigation brought by a local NGO, Instituto Timoneira. The Vivendi-led consortium’s 30% share in Senepar bought them 59.3% of total voting power on the Board of Directors, and the right to appoint directors who oversaw a combined 87% of Sanepar’s employees. |
| Paranaguá Paranaguá Paranaguá is a city in the state of Paraná in Brazil. Founded in 1648, it is Paraná's oldest city.It is known for its excellent port facilities, being the sea port for Curitiba, the capital of Paraná.... (state) |
Paranagua Water and Wastewater System | 1997 | R$66 million investment to build, rehabilitate, operate, and transfer water utility with sewerage | |
| Pereiras Pereiras Pereiras is a municipality in the state of São Paulo in Brazil. Its population in 2004 was 7,139 and its area was 222.72 km². Its elevation is 490 m.... (municipality) |
Pereiras Water Company | 1994 | R$1.2 million investment to build, rehabilitate, operate, and transfer water utility and sewerage infrastructure | |
| Petrópolis Petrópolis Petrópolis , also known as The Imperial City of Brazil, is a town in the state of Rio de Janeiro, about 65 km from the city of Rio de Janeiro.... (city) |
Petropolis Water Company | 1998 | R$89 million investment to build, rehabilitate, operate, and transfer water utility and sewerage | |
| Ribeirão Preto Ribeirão Preto Ribeirão Preto is a municipality and city in the Northeastern region of the state of São Paulo in Brazil. It is nicknamed Brazilian California, because of a combination of an economy based on agrobusiness plus high technology, wealth and sunny weather all year long. With 605,114 inhabitants,... |
Inima, subsidiary of OHL | Ambient | 80% stake | |
| Municipalities in Rio de Janeiro State (including the five municipalities of Buzios, Cabo Frio, Sao Pedro da Aldeia, Iguaba and Arraial do Cabo out of the 91 municipalities in the state of Rio de Janeiro) | Águas de Portugal Águas de Portugal Águas de Portugal group is a Portuguese state-owned company that operates in the environmental sector, in water supply, wastewater sanitation and treatment and recovery of waste. Its services include collection, treatment and disposal of urban and industrial wastewater, including its recycling and... |
Prolagos | 2000 | 93.5% share (sought $38.8 million from European Investment Bank European Investment Bank The European Investment Bank is the European Union's long-term lending institution established in 1958 under the Treaty of Rome. A policy-driven bank, the EIB supports the EU’s priority objectives, especially European integration and the development of economically weak regions... in 2001 for investment) |
| Salto Salto, São Paulo Salto is a municipality in the state of São Paulo in Brazil. The elevation is 555 m. The city has one main river, rio Tietê. Poll from 2004 shows the population is 103.884.The city has an important geological park: "Moutonée Park".... (municipality) |
1996 | R$364,000 investment to rehabilitate, operate, and transfer sewerage collection and treatment | ||
| São Carlos São Carlos São Carlos is a city of 221,950 inhabitants in the state of São Paulo, Brazil. It is located at , at about 231 km from the city of São Paulo.-History:... (city) |
Sao Carlos Water System | 1994 | R$1 million investment to rehabilitate, operate, and transfer water utility without sewerage; concluded | |
| Tangará da Serra | 2001 | 30-year concession One city counselor was murdered on the steps of city hall on the day of a water privatization vote in which other counselor’s confessed to having been bribed. |
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| Tuiuti Tuiuti Tuiuti is a municipality in the state of São Paulo in Brazil. The population in 2004 was 5,398 and the area is 126.86 km². The elevation is 790 m.... (municipality) |
Tuiuti Water Company | 1996 | R$1.4 million investment to build, rehabilitate, operate, and transfer water utility with sewerage |
Opposition
Globalization
Globalization refers to the increasingly global relationships of culture, people and economic activity. Most often, it refers to economics: the global distribution of the production of goods and services, through reduction of barriers to international trade such as tariffs, export fees, and import...
and neoliberalism
Neoliberalism
Neoliberalism is a market-driven approach to economic and social policy based on neoclassical theories of economics that emphasizes the efficiency of private enterprise, liberalized trade and relatively open markets, and therefore seeks to maximize the role of the private sector in determining the...
. Similarly, according to Lemos and Oliveira many potentially beneficial public private partnerships
Public-private partnership
Public–private partnership describes a government service or private business venture which is funded and operated through a partnership of government and one or more private sector companies...
(PPPs) have suffered from widespread mistrust—bred by “decades of broken promises”—and numerous “accounts of policy failure.”
Many politically influential groups in Brazil harbor an “outright aversion to private capital participation” in water and other essential services. Politically, water privatization has often been conflated with conflicts over decentralization vis-à-vis the return of control from State water companies established under the military regime to re-municipalized companies. Thus, Brazilian water reform has remained “paralyzed by the controversy” because the municipal-state contest has too often been reduced to a question of which level of government should have the authority to grant concessions to private actors, rather than the authority to develop a coherent policy including both public and private elements.
Political parties that oppose privatization include the Workers' Party
Workers' Party (Brazil)
The Workers' Party is a democratic socialist political party in Brazil. Launched in 1980, it is recognized as one of the largest and most important left-wing movements of Latin America. It governs at the federal level in a coalition government with several other parties since January 1, 2003...
(PT) and the Socialism and Freedom Party
Socialism and Freedom Party
The Socialism and Freedom Party is a Brazilian political party . Among the party leaders are Heloísa Helena , federal deputies Luciana Genro and Babá , and a number of well-known Brazilian left-wing leaders and intellectuals, such as Milton Temer, Carlos Nelson Coutinho, Ricardo Antunes,...
(PSOL).
Alternatives
Emerging Brazilian alternatives have increasingly transcended the public-private debate by focusing on stakeholder participation and institutional cooperation.Participatory models
Public water companies in Porto AlegrePorto Alegre
Porto Alegre is the tenth most populous municipality in Brazil, with 1,409,939 inhabitants, and the centre of Brazil's fourth largest metropolitan area . It is also the capital city of the southernmost Brazilian state of Rio Grande do Sul. The city is the southernmost capital city of a Brazilian...
and Recife
Recife
Recife is the fifth-largest metropolitan area in Brazil with 4,136,506 inhabitants, the largest metropolitan area of the North/Northeast Regions, the 5th-largest metropolitan influence area in Brazil, and the capital and largest city of the state of Pernambuco. The population of the city proper...
have developed “people-centered, participatory models” for improving water access. This has allowed them to position themselves as more than just being anti-privatization, but to develop a constructive alternative. Porto Alegre’s DMAE in particular has become known for its participatory budgeting process
Participatory budgeting
Participatory budgeting is a process of democratic deliberation and decision-making, and a type of participatory democracy, in which ordinary people decide how to allocate part of a municipal or public budget...
. According to PSIRU, this has enabled Porto Alegre to "continually fight off privatization attempts" that were allegedly supported by the Brazilian Congress as well as international donors such as the Inter-American Development Bank
Inter-American Development Bank
The Inter-American Development Bank is the largest source of development financing for Latin America and the Caribbean...
(IADB) to the World Bank. The participatory budgeting process — which allows any public demand to be included in the following year’s budget subject only to a popular vote and evaluation for technical feasibility — has become a model for direct democracy elsewhere in Brazil, and the world.
Sale of shares in the stock market
São Paulo’s state water and sewer company SabespSabesp
Sabesp is a Brazilian state owned utility that provides water and sewage services to residential, commercial and industrial use in the São Paulo and in 364 of the 645 municipalities in São Paulo State, Brazil...
, the largest water company in Latin America, has chosen a different path. Instead of awarding a private concession it has sold shares in the Brazilian stock market and even on the New York Stock Exchange
New York Stock Exchange
The New York Stock Exchange is a stock exchange located at 11 Wall Street in Lower Manhattan, New York City, USA. It is by far the world's largest stock exchange by market capitalization of its listed companies at 13.39 trillion as of Dec 2010...
. In addition, it obatined loans from the Inter-American Development Bank
Inter-American Development Bank
The Inter-American Development Bank is the largest source of development financing for Latin America and the Caribbean...
and the Japan Bank for International Cooperation
Japan Bank for International Cooperation
The , also known by its acronym, JBIC, is a Japanese public financial institution and export credit agency, and was created on October 1, 1999, through the merging of the Japan Export-Import Bank and the Overseas Economic Cooperation Fund ....
. Rio de Janeiro's state government also plans to sell shares in its water and sewerage company, Nova Cedae, while still retaining majority control of the company, citing the example of SABESP (four attempts to privatize the company in 1998 failed due to lack of agreement between the city and state governments).
According to PSIRU such "civically active utilities" are alternatives to "desperation-induced privatization attempts" in Parana and Rio de Janeiro.
Reduction of private sector influence in existing agreements
In ParanáParaná (state)
Paraná is one of the states of Brazil, located in the South of the country, bordered on the north by São Paulo state, on the east by the Atlantic Ocean, on the south by Santa Catarina state and the Misiones Province of Argentina, and on the west by Mato Grosso do Sul and the republic of Paraguay,...
a 1998 concession agreement had given Dominó Holdings (formed by Vivendi
Vivendi
Vivendi SA is a French international media conglomerate with activities in music, television and film, publishing, telecommunications, the Internet, and video games. It is headquartered in Paris.- History :...
, Brazilian bank Opportunity, and the Andrade Gutierrez group) control of the state water and sewer company SANEPAR. Recently, the Supreme Federal Court authorized the state government to increase its stake in SANEPAR, overturning an injunction granted by a lower court which had prevented the state from calling a general shareholders meeting.