Skip to content

Value Chain Analysis of the Sanitization in Brazil.

Commercial Relationships

The commercial relationships within the Brazilian sanitation value chain are intricate and multifaceted, driven by the interplay between public and private entities, regulators, suppliers, and end-users. At the core of the commercial dynamics are the service provision contracts, primarily concessions and Public-Private Partnerships (PPPs), particularly following the implementation of the New Legal Framework for Sanitation (Law nº 14.026/2020). These contractual agreements define the rights and obligations of service providers, including investment targets, service quality standards, tariff structures, and duration of operation.

Service providers, whether they are state-owned companies (CESBs), municipal entities, or private concessionaires like Aegea, Iguá, and Águas do Brasil, engage in commercial relationships with municipalities (or groups of municipalities, as per the New Legal Framework aiming for regionalization) as the contracting authorities. These relationships are formalized through competitive bidding processes where companies submit proposals to operate and expand sanitation services within a defined area. Once awarded, the concession or PPP contract dictates the commercial terms, including revenue mechanisms (primarily tariffs paid by end-users), performance incentives, and potential penalties for non-compliance.

Private companies are increasingly active and hold a significant share of the market, often through acquiring concessions previously held by state companies or winning bids for new projects structured as concessions or PPPs. This shift introduces new commercial dynamics focused on return on investment, operational efficiency, and risk allocation between the public and private sectors. For instance, PPPs often involve the private partner being responsible for infrastructure investments and operation, while the public entity might retain responsibility for commercial aspects like billing and collection, or vice-versa, depending on the specific model.

Another critical set of commercial relationships exists between service providers and the vast network of infrastructure and technology suppliers. Service providers are major procurers of pipes, pumps, valves, treatment equipment, chemicals, monitoring systems, and construction services. These relationships are typically based on procurement contracts, subject to public bidding rules for public or mixed-capital companies, and private procurement processes for purely private operators. Companies like aQuamec and DAS Brasil operate within this segment, selling their products and services to sanitation operators. The commercial terms involve pricing, delivery schedules, installation services, and often long-term maintenance and support agreements.

Financial institutions, including national development banks like BNDES and private banks and investment funds, play a crucial role by providing financing for the significant capital investments required in the sector. Commercial relationships here involve loan agreements, project financing structures, and equity investments, with terms related to interest rates, repayment periods, and risk sharing.

Finally, the relationship with the end-user (households, industries, businesses) is primarily commercial, based on the payment of tariffs for water supply and sewage services. The tariff structure is regulated by agencies like ANA and state/municipal regulators, aiming to ensure economic sustainability for the service provider while considering affordability for the consumer. Commercial operations include billing, collection, managing customer accounts, and addressing service complaints. The high rate of non-revenue water (losses in the system, including commercial losses from illegal connections and fraud) represents a significant commercial challenge.

In the solid waste segment, municipalities are typically the contracting authorities, either managing services directly or contracting private companies for collection, transport, treatment (sorting, recycling), and disposal. Commercial relationships here are based on service contracts, often paid for through municipal budgets or specific waste management fees levied on the population. The transition to regulated landfill disposal under the National Solid Waste Policy (PNRS) necessitates commercial relationships with landfill operators.

The rainwater drainage segment is predominantly managed by municipalities, with commercial relationships focused on contracting civil engineering and construction companies for infrastructure projects. Funding often comes from municipal budgets and sometimes state or federal transfers.

Products and Services Exchanged

Along the sanitation value chain in Brazil, a diverse range of products and services are exchanged between the various players at each step:

In the Planning and Regulation phase, regulatory agencies like ANA and state/municipal bodies provide normative services, establishing rules, standards (such as water quality parameters and sewage discharge limits), and tariff methodologies. They exchange these regulatory outputs with service providers who must comply with them. Consulting and engineering firms also provide planning and technical advisory services to municipalities and service providers, outlining infrastructure needs and feasibility studies.

The Infrastructure and Technology Supply segment exchanges tangible products such as pipes (PVC, concrete, ductile iron), fittings, valves, pumps, motors, electrical panels, and civil construction materials (cement, steel) with service providers for the construction and maintenance of networks, treatment plants, and reservoirs. Additionally, they supply specialized equipment for water treatment (e.g., coagulators, filters, disinfectors) and sewage treatment (e.g., screens, grit removers, aeration systems, sludge dewatering equipment). Technology providers offer software for network management, billing systems, SCADA (Supervisory Control and Data Acquisition) for remote monitoring, and process control systems. Engineering and construction companies provide services related to project design, civil works, and electromechanical assembly.

In the Raw Water Abstraction/Collection step, the "product" is raw water itself, abstracted from natural sources. This "exchange" is primarily with the environment, but service providers manage this process, utilizing infrastructure supplied by the previous step (pumps, intake structures). The service provided is the capture of the resource.

During Water Treatment, the service providers process the raw water, utilizing chemicals (chlorine, aluminum sulfate, polymers) and energy as inputs from other suppliers. The resulting "product" is potable water that meets regulatory standards, ready for distribution. The service provided is the purification process.

In Treated Water Distribution, service providers utilize the distribution network infrastructure to transport potable water from treatment plants and reservoirs to consumer connection points. The "product" exchanged with the end-user is potable water delivered under pressure. The service is the reliable supply of this water.

For Sewage Collection, the "product" collected is raw sewage from residences and establishments, transported through the sewer network. The service provided is the collection and conveyance of this effluent.

During Sewage Treatment, service providers receive raw sewage and, using treatment processes involving equipment, chemicals, and energy, transform it into treated effluent and sludge. The "product" is treated effluent, which may be discharged into receiving bodies according to environmental permits, or potentially reused. Sludge is also a product that requires further management (disposal, or potential agricultural use after treatment). The service is the purification of the sewage.

In Urban Cleaning and Solid Waste Management, the "product" is urban solid waste and debris from public areas. Services exchanged include regular waste collection from households and businesses, street sweeping, transportation of waste, sorting for recycling, and processing for other forms of treatment or energy recovery. The final "service" is the environmentally sound disposal of residual waste in sanitary landfills. Municipalities contract these services or provide them directly.

For Urban Rainwater Drainage and Management, the "product" is rainwater runoff in urban areas. The services include managing drainage infrastructure (culverts, canals, reservoirs) to collect, transport, and manage this water to prevent flooding and erosion. This involves infrastructure maintenance and operational services, often provided by municipal departments or contracted companies.

Monitoring and Control involves the provision of services related to data collection, analysis, and system oversight. This includes laboratory services for water and sewage quality testing, performance monitoring of infrastructure using sensors and software, and auditing for regulatory compliance. These services are exchanged internally within service providers and externally with regulatory bodies and specialized firms.

Finally, Financial Management and Commercial Operations involve the exchange of financial resources for services rendered. Service providers issue bills for water and sewage consumption (the service), and customers exchange payment (financial product). Service providers also interact with financial institutions to exchange financial products like loans and investments for capital.

Business Models

The business models in the Brazilian sanitation industry are evolving, significantly influenced by the New Legal Framework (Law nº 14.026/2020) which aims to attract private investment and achieve universalization goals by 2033.

Historically, the predominant model was the state-owned company (CESB) model, where state-level companies (like Sabesp, Copasa, Sanepar) held concessions granted by the state governments to operate water and sewage services across multiple municipalities within the state. In this model, revenues are primarily generated through tariffs paid by users. Investments are financed through a mix of tariff revenues, state budgets, federal funds (often via BNDES or other programs), and sometimes international loans. The commercial relationship with municipalities was often based on program contracts.

Another traditional public model is the municipal autonomous entity (autarquia) or municipal company, where the municipality itself is the service provider. This model is common in smaller municipalities or for specific services like solid waste collection. Funding comes from tariffs, municipal taxes, and transfers from higher government levels.

The New Legal Framework strongly encourages private participation through concessions and Public-Private Partnerships (PPPs). In a concession model, a private company is granted the right by the public authority (municipality or group of municipalities) to provide the full service (water and/or sewage) for a specified period (typically 20-35 years). The private company is responsible for all investments, operation, maintenance, and commercial activities, generating revenue through user tariffs. Examples include concessions operated by Aegea and Iguá.

Public-Private Partnerships (PPPs) are gaining traction, allowing for a sharing of responsibilities and risks between the public and private sectors. There are different types of PPPs: * Administrative Concession: The public sector is the primary user of the service (e.g., a contract for a private company to build and operate a sewage treatment plant for a state-owned company). The private partner is paid by the public entity based on service availability and performance. * Sponsored Concession: A combination of user tariffs and public payments (contributions or subsidies) is used to remunerate the private partner. This model is often used for projects where tariffs alone might not cover the required investments for universalization. The recent PPP between Sanepar, Aegea, and Acciona is an example of a model that involves private investment and shared responsibility.

The business model for Infrastructure and Technology Suppliers is primarily Business-to-Business (B2B), selling equipment, materials, and services directly to the service providers (state, municipal, or private). Their revenue comes from sales contracts and service agreements.

In the Regulation and Planning segment, the business model is governmental, funded by public budgets. Regulatory agencies impose fees or contributions on service providers to cover their operational costs.

Financial institutions operate on models based on lending (interest income), equity investment (returns on investment), and financial advisory services (fees). Their commercial relationships are with service providers and public entities seeking funding.

The commercial relationship with End-Users is a Business-to-Consumer (B2C) or Business-to-Business (B2B) model (for commercial and industrial users) based on tariff payment. The tariff structure is designed to cover the costs of providing the service, including operation, maintenance, and investment, while also potentially incorporating social tariffs for low-income populations.

Overall, the trend driven by the New Legal Framework is towards business models that leverage private capital and expertise through long-term contracts (concessions and PPPs) to accelerate the achievement of universalization targets, moving away from solely public provision funded primarily by government budgets.

Bottlenecks and Challenges

Despite the potential brought by the New Legal Framework and increased private participation, the Brazilian sanitation value chain faces significant bottlenecks and challenges that hinder progress towards universalization by 2033.

One of the most critical challenges is the investment gap. The estimated investment needed to achieve universal access to water and sewage services is between R$ 509 billion and R$ 551 billion by 2033, requiring an average annual investment of around R$ 50 billion. However, actual investments have averaged significantly less (R$ 20.9 billion/year between 2018 and 2022), leading to a substantial annual deficit, estimated at R$ 24 billion for 2024. This gap is a major bottleneck, directly impacting the ability to build new infrastructure and upgrade existing systems.

Regulatory fragmentation and inconsistency pose another significant challenge. Although ANA establishes national guidelines and reference norms, there are numerous state and municipal regulatory agencies, leading to potential variations in standards, tariff methodologies, and enforcement across different regions. This can create legal and regulatory uncertainty for investors and operators, making it harder to scale operations and achieve efficiency gains. The slow pace of municipalities adhering to regionalized structures and contracting ANA for regulation also contributes to this fragmentation.

Technical and commercial losses in water distribution systems are a major operational and financial bottleneck. The high average loss rate of around 40% means that a large volume of treated water is lost before reaching consumers, wasting resources and increasing operational costs. Reducing these losses requires significant investment in network maintenance, leak detection technology, and combating illegal connections, which is often hampered by the overall investment constraints.

Lack of adequate planning and project structuring capacity, particularly at the municipal level, is a bottleneck in attracting investment. Developing bankable projects that are attractive to private investors requires technical expertise in engineering, financial modeling, and legal structuring, which is often scarce in smaller municipalities. While BNDES and other institutions provide support, scaling this capacity across thousands of municipalities is a challenge.

Environmental challenges related to raw water quality deterioration due to pollution and inadequate sewage treatment impact the cost and complexity of water treatment. The low rate of sewage treatment (around 50-52% of generated sewage) means a significant volume of untreated effluent is discharged into rivers and other water bodies, further exacerbating water quality issues and creating a vicious cycle. Achieving higher treatment rates requires substantial investment in sewage treatment plants and collection networks.

The solid waste segment faces particularly severe investment challenges, with only a fraction of the needed investments contracted compared to the targets. Many municipalities still rely on inadequate disposal methods (landfills that are not sanitary), and there is a need to expand collection, sorting, and environmentally sound disposal infrastructure.

Political and institutional factors, such as changes in government, political interference in state-owned companies, and resistance to private sector participation in some areas, can create uncertainty and slow down the implementation of the New Legal Framework's objectives.

Finally, the economic capacity of users to pay for services, particularly in low-income areas, is a challenge that needs to be addressed through social tariffs and targeted subsidies while ensuring the financial sustainability of the service providers.

Addressing these interconnected bottlenecks requires sustained efforts in increasing investment, strengthening the regulatory framework, improving operational efficiency, building technical capacity, and ensuring effective long-term planning across all levels of government and among all stakeholders in the value chain.

References

  • ABREMA. SANEAMENTO DEVERÁ INVESTIR R$ 24 BI AQUÉM DO NECESSÁRIO EM 2024. https://abrema.org.br/saneamento-devera-investir-r-24-bi-aquem-do-necessario-em-2024/
  • Assembleia Legislativa do Piauí. Brasil: apenas 50% do volume de esgoto é efetivamente tratado. https://www.alepi.pi.leg.br/2023/11/28/brasil-apenas-50-do-volume-de-esgoto-e-efetivamente-tratado/
  • Aegea Saneamento. Quem Somos. https://aegea.com.br/quem-somos
  • Gazeta do Povo. Investidores comemoram crescimento na participação do setor de saneamento. https://www.gazetadopovo.com.br/economia/investidores-comemoram-crescimento-na-participacao-do-setor-de-saneamento/
  • ABCON SINDCON. SANEAMENTO BÁSICO: Brasil precisa investir cerca de R$ 551 bi para alcançar metas de universalização. https://abconsindcon.com.br/saneamento-basico-brasil-precisa-investir-cerca-de-r-551-bi-para-alcancar-metas-de-universalizacao/
  • Portal Gov.br. Marco Legal do Saneamento. https://www.gov.br/mdr/pt-br/assuntos/saneamento/marco-legal-do-saneamento
  • Kartado. As 07 maiores empresas de saneamento do Brasil. https://kartado.com.br/blog/maiores-empresas-de-saneamento-do-brasil/
  • Nexo Jornal. Brasil perde quase 40% da água tratada, mostra estudo. https://www.nexojornal.com.br/expresso/2023/10/19/Brasil-perde-quase-40-da-%C3%A1gua-tratada-mostra-estudo
  • Iguá Saneamento. Nossas operações. https://igua.com.br/nossas-operacoes
  • Jornal de Brasília. Mercado de saneamento privado é dominado por 4 empresas; veja quem é dona do quê. https://www.jornaldebrasilia.com.br/economia/mercado-de-saneamento-privado-e-dominado-por-4-empresas-veja-quem-e-dona-do-que/
  • Agência Nacional de Águas e Saneamento Básico (ANA). Normas de Referência - Saneamento. https://www.gov.br/ana/pt-br/assuntos/saneamento-basico/normas-de-referencia
  • Agência Nacional de Águas e Saneamento Básico (ANA). Agência Nacional de Águas e Saneamento Básico (ANA). https://www.gov.br/ana/pt-br/acesso-a-informacao/institucional/copy_of_quem-e-quem
  • Poder360. Brasil precisará investir R$ 509 bi para universalizar saneamento. https://www.poder360.com.br/economia/brasil-precisara-investir-r-509-bi-para-universalizar-saneamento/
  • Instituto Trata Brasil. Perdas de Água 2023. https://tratabrasil.org.br/blog/perdas-de-agua-2023-indicadores-mais-recentes-e-analise-historica/
  • ONDAS. As empresas privadas atuantes no saneamento: entre a financeirização e a concentração do mercado. https://ondasbrasil.org/as-empresas-privadas-atuantes-no-saneamento-entre-a-financeirizacao-e-a-concentracao-do-mercado/
  • aQuamec. Equipamentos. https://www.aquamec.com.br/equipamentos/
  • Acqualogic. Conheça os tipos de empresa de abastecimento de água e como funcionam. https://www.acqualogic.com.br/blog/tipos-de-empresa-de-abastecimento-de-agua/
  • Brasil 61. Saneamento: apenas 52,2% do esgoto gerado no Brasil é tratado. https://brasil61.com/n/saneamento-apenas-52-2-do-esgoto-gerado-no-brasil-e-tratado-pnews640250
  • Instituto Trata Brasil. Saneamento no Brasil: operadores públicos são maioria entre as 20 melhores cidades. https://tratabrasil.org.br/blog/ranking-do-saneamento-2024-estatais-dominam-as-primeiras-posicoes/
  • DAS Brasil. Home. https://dasbrasil.com.br/
  • Nivetec. Descubra como o saneamento industrial pode contribuir com o desenvolvimento das cidades. https://nivetec.com.br/saneamento-industrial/
  • aQuamec. Unidade Fabril - Itu. https://www.aquamec.com.br/unidade-fabril/
  • Mecaltec. Equipamentos para Saneamento. https://mecaltec.com.br/equipamentos-para-saneamento/
  • SBR Saneamento. Saneamento, Monitoramento e Operação - Sistemas Água e Esgoto. https://www.sbrsaneamento.com.br/
  • Saneamento Ambiental Tecnosan. Saneamento Ambiental Tecnosan - Tratamento de Água, Efluentes e Esgotos. https://www.tecnosan-sanea.com.br/
  • jus.com.br. Saneamento básico: conceito jurídico e serviços públicos. https://jus.com.br/artigos/36493/saneamento-basico-conceito-juridico-e-servicos-publicos