Brazil's water industry is set to witness a boom of new investments this year as a record 27.4 billion reais (US$4.66 billion roughly) value of new contracts will be open to bid. Despite some difficult conditions, plenty of opportunities are on the horizon, particularly in Brazil's north and northeast.
Most of the advanced projects currently in the pipeline are planned by development bank BNDES and cover the northeast state of Pernambuco and northern states of Rondônia and Pará.
The largest of these is a concession planned in Pernambuco with an overall planned investment of 18.9 billion reais. The target of this plan is to serve approximately 9.2 million state residents. BNDES estimates that the sale of this contract is expected to occur in the second half of the year.
In Rondônia, they are preparing to bring on stream a 35-year concession agreement with estimated investments of 4.9 billion reais. The project would benefit around 1.27 million residents, with the auction to occur in the second quarter of 2025.
Simultaneously, BNDES Pará is attempting to re-auction one of the lots from a recent concession auction. A top Brazilian water company Aegea purchased contracts on three out of four available lots in Pará last week, freeing up around 15.2 billion reais of investments in the state.
But Lot C, covering 27 municipalities and requiring an investment of an estimated 3.6 billion reais, was bid on none. BNDES is currently renewing the contract and will put it out for bid again soon.
Brazil's water and sanitation sector has been undergoing a dramatic overhaul since mid-2020, driven by new federal regulations mandating universal water and sewage coverage by 2033. Non-compliant municipal governments will be cut off from federal funds, spurring a concession project boom, public-private partnerships (PPPs), and in other cases, privatizations.
While initial contract awards were directed at Brazil's more industrialized southeastern and southern states, attention now is shifting to the north and northeast, which have under-served states.
"These regions present additional challenges because they require proportionally more capital investments," said Percy Soares Neto, former president of Abcon, the association of water and sewage concessionaires. "Historically, the north and northeast have lower coverage levels, which necessitates increased investment."
He also added that the higher share of low-income population in these regions is a risk to private sector operators.
According to Abcon, the number of new contracts in the regions can surpass current estimates by BNDES, with Paraíba, Alagoas, and Bahia states also looking into possibilities for private sector participation.