Joining forces to change the scene

The sanitation sector needs major investments in Brazil, where local governments and private enterprise are teaming up to carry out water and sewer projects

Every four seconds, a child dies of a disease caused by lack of clean water and sanitation, according to a (UN ) report. In Brazil, 7.5 million households do not have sanitation facilities, and just half of the population has sewer service. However, the total amount of sewage actually treated is less than 30%. The situation is alarming for municipal government, which need to invest BRL 170 billion to provide sanitation services to all. However, for every Brazilian Real invested in that sector, the government will save BRL 4.00 in public health costs.

Limeira, a city of 280,000 located 156 km from São Paulo, is setting an example. There, all residents have sewer connections and piped-in treated water in their homes, getting both services 24-hours a day. The child mortality rate in Limeira has dropped drastically and is among the lowest in São Paulo State. The dental cavity rate among children is also among the best in the state, because fluoride is added to the water. As a result, over 90% of Limeira’s residents are satisfied with the sanitation services that the concession company Águas de Limeira provides in their city.

The work of Águas de Limeira – a subsidiary of Lumina Engenharia Ambiental Ltda. – is setting a Latin American benchmark. The concession agreement guarantees that the municipality will get all of the services, technology investments and infrastructure works it requires until 2025. “This is a viable and effective model for solving this country’s sanitation problems,” says Fernando Mangabeira, President and CEO of Águas de Limeira.

Limeira’s experience of this partnership between the government and private enterprise has encouraged studies leading to new sanitation projects in Brazil. The biggest step forward in the development of regulatory frameworks for this sector was the approval in 2004 of the Public-Private Partnership (PPP) concession model by the Brazilian House of Representatives in 2004.

Under PPP contracts, the private-sector partner invests in and takes responsibility for the engineering, construction, operation, maintenance and financing of the project. In its turn, the government supervises the works and monitors bill collection and the quality of the services.

Odebrecht is currently taking part in three PPP projects: the sewer systems in Rio Claro, São Paulo; Rio das Ostras, Rio de Janeiro; and Salvador, Bahia. “Aside from these ventures, we are also studying and negotiating other opportunities in the sanitation sector, particularly in the Piracicaba River Basin, near Limeira, and another project on the north coast of Rio de Janeiro,” says Geraldo Villin, CNO’s Director for Investments in the South and Southeast of Brazil. “Expectations are that we will be signing new contracts and breaking ground by the second half of this year.”

The PPP in the city of Rio Claro, which is 30 km from Limeira, will invest BRL 140 million in the project to ensure that 100% of its households have access to treated water and sewage within five years. The city currently treats less than 30% of its sewage. The PPP agreement was signed in February by the Autonomous Water and Sewer Department of Rio Claro (DAAE) and Esgoto and Saneamento de Rio Claro, a Specific Purpose Enterprise (SPE) created by Odebrecht to manage the venture.

The project includes the construction of two new sewage treatment facilities. The PPP will also retrofit and expand two more treatment plants, as well as installing the main and intercepting sewers and pumping plants and expanding the sewer system as a whole. “We are very enthusiastic about our involvement in a project that will have positive impacts on public health and economic development,” says Renato Medeiros, General Director of the SPE.

Although this PPP is concentrating on upgrading the city’s sewer system, Saneamento de Rio Claro will also help the DAAE update its registry of water users, and set up a system for water-meter reading and billing, as well as detecting leaks and installing new water meters.

Cutting-edge technology and planning
A model PPP project is now underway in Rio das Ostras, on the Rio de Janeiro coast. The first stage of the modernization of the city’s sanitation system began in 2004, when Odebrecht won a public tender to build a marine outfall.

The final stage of the installation of this 3,800-m outfall was carried out in late January. “It was a complete success. We worked with cutting-edge technology and overcame the unpredictable tides and currents,” observes Leandro Azevedo, CNO’s Project Director in Rio das Ostras.

During the next stage of the PPP project, BRL 335 million will be invested in the municipality. This time the challenge will be expanding Rio das Ostras’s sewer system by 40% in 18 months. “Planning is essential,” says Leandro. “We will hire 1,200 people to work on the project, which is the equivalent of 2.7% of the local population.”

Brazil’s first PPP agreement was signed in Bahia by Embasa – Empresa Baiana de Água e Saneamento and Concessionária Jaguaribe (an SPE controlled by Odebrecht Investimentos em Infra-estrutura and Construtora Norberto Odebrecht). This contract includes a private-sector investment of BRL 240 million in the construction and operations of the Jaguaribe Marine Disposal System (SDO Jaguaribe), the city of Salvador’s second marine outfall. The concession company will operate and maintain the Jaguaribe SDO for 183 months after construction is completed, after which it will hand the facility over to Embasa.

In Campinas, São Paulo, which is 96 km from the state capital, the construction of a sewage collection and treatment system in the Capivari River Basin will benefit 200,000 people. Odebrecht will invest BRL 60 million in this project. Unlike a PPP project, this one does not involve providing sanitation services. Odebrecht will build the project and lease it to Sanasa – Sociedade de Abastecimento de Água e Saneamento for 20 years, which is estimated to be enough time for Odebrecht to recoup its investment.

“The market is open to new investments,” observes Alexandre Barradas, CNO’s Director for Investments in the North and Mid-West of Brazil. He recognizes that municipal governments are prioritizing the need to provide basic services to their citizens, and this means that excellent business opportunities are arising throughout the country. “We also have another responsibility: encouraging a policy for building social works that not only produces economic benefits but also improves Brazil’s Human Development Index (HDI).”

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