Bill halted by lobbyists could release investment of R$ 600bn.
In a health crisis, and with its economy in deep dive, Brazil’s federal government and Senate are caving to lobbies from state companies controlling 70% of the nation’s water infrastructure, to block a bill to regulate them – and enable competition. The bill could attract investment of R$ 600 billion, and kickstart employment, but has been stuck in the Senate since November.
To unlock its paralyzed economy, attract private sector investment and generate employment,Brazil urgently needs to resume investment in infrastructure. Politicians cannot use C-19 as an excuse for delay in approving the regulatory framework bill for basic water and sewerage services – which is halted in the Senate since November.
Brazilian and international private-sector companies and investorsare ready and willing to invest billions of reais to generate hundreds of jobs before the end of this year.
The question is: why are the government and Senate not working to pass this bill which could generate investment and employment at a moment when Brazil is into its deepest recession ever, with a record 16 million unemployed?
The answer, unfortunately, is: government and Senate have given in to pressure from state corporatism.
- The established water and sewerage giants owned and run by states are afraid to open their water and sewerage utilities market to competition from the private sector.
A dominant group of them – including Sabesp (São Paulo state), Copasa (Minas Gerais), Cedae (Rio), Caesb (Brasília) and Sanepar (Paraná) – control 70% of the market.
They are massive examples of what Brazilians call “job coat-hangers” (cabides de emprego), badly managed and unable to meet the country’s demand for sewerage service and treated water.
The numbers are shameful, and reflect their incompetence:
- 150 million Brazilians have no access to sewage treatment; and 35 million have no access to drinking water.
With Brazil suffering the Covid pandemic – where a key health requirement is frequent hand-washing – millions of Brazilians have no drinkable water at home.
Opening the market will release R$ 600 billion
The new regulatory framework will open up this state-company reserved-market to private sector competition.
Analysts estimate that achieving the target of universal water and sewerage provision in Brazil by 2033 will mobilize investment of some R$ 600 billion.
For Brazil to resume growth, its government, Congress and society will have to cut the tentacles of the country’s state corporatism, which continue to drain its productivity and competitiveness.
State corporatism is Brazil’s economic virus: deepening the country’s inequality, killing the growth of its economy – and along with it, private-sector investment and the possibility of massive job creation.