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Private Sector Water Infrastructure Opportunity in Brazil

brazilBrazil’s revised US$6.7 billion annual investment target for water infrastructure through 2033 points to a greater reliance on the private sector, according to a report from Bluefield Research.

Private municipal water concessionaires are slated to account for US$750 million annually from 2014 to 2017–11 percent of Brazil’s water infrastructure investment– leaving a US$5.9 billion annual gap over the next four years for cash-strapped municipalities to shoulder, according to Brazil Private Water Strategies & Market Outlook 2014.

The 2013 passage of Brazil’s National Basic Sanitation Plan, or PLANSAB, which requires a step-up in investment from US$3.4 billion to US$6.7 billion annually, highlights the government’s commitment to improving water and wastewater infrastructure. The new plan was approved at a time when the approaching 2014 World Cup and 2016 Olympic Games place Brazil’s infrastructure shortcomings under a microscope, and as Brazil’s northeastern states face severe drought conditions. Under PLANSAB the country would achieve universal water supply and wastewater treatment by 2033.

A complex market structure in Brazil has discouraged private sector participation in the past, according to Bluefield Research, and has all but shut out foreign company participation. But due to a changing competitive landscape and a ramp up of private water concessions, Bluefield predicts a jump in private players and foreign entrants, although incumbent, state-participated water utilities are expected to retain control of the market.

Geographically, the states of Rio de Janeiro and São Paolo have been the most hospitable to private participation in municipal water concessions, and have therefore seen the greatest competition, with 11 private water players active in those two states. In addition, one-off large concessions in Northeast Brazil have paved the way for greater private activity in the populous and water-scarce Northeast, the report says.

A report from Bluefield Research, released last December said that private ownership is expected to account for 51 percent of the 25 million cubic meters per day of large-scale desalination projects currently planned or under construction.

Global Desalination Market Trends & Ownership Strategies, 2014-2018, says the Middle East remains the geography epicenter, representing 64 percent of total installed capacity since 1980. However, the past 10 years have seen desalination technology deployment expand to more than 65 countries and across a mix of industry verticals, including agriculture, mining, power generation, and oil and gas.

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