Sanitation projects in Brazil are gaining momentum, with over 67 new projects in the works. These projects are designed to attract international capital, following a financing model similar to the UK’s post-1989 settlement. Rather than relying on public investment, infrastructure projects are now funded through borrowing.
One key financial instrument in Brazil is incentivised debentures, tax-exempt bonds sold to investors. This approach mirrors the bond-heavy structures utilized by British water companies after privatization. However, according to Gerbase, Brazil’s 2020 sanitation reforms have accelerated privatization and shifted financial risk onto the public.
Between 2017 and 2024, nearly R$40 billion (£5.5 billion) was raised through incentivised debentures in Brazil’s sanitation sector. Unfortunately, a significant portion of this capital was not utilized for infrastructure improvements but rather to pay concession fees or refinance debt. This echoes the UK experience, where borrowing has been used to prop up corporate balance sheets rather than enhance systems.
Gerbase emphasizes that the use of incentivised debentures is a political choice that could be reversed through regulatory changes. By altering the regulations governing these incentives, public funds could be redirected towards infrastructure rather than subsidizing privatization.
A detailed investigation by CICTAR highlights similarities between the UK and Brazil, particularly in the case of BRK Ambiental, Brazil’s largest sanitation operator. Controlled by Canadian asset manager Brookfield, BRK has rapidly expanded through debt-backed acquisitions, raising over R$12 billion (£1.6 billion) in debt. This has resulted in substantial interest payments and significant tariff increases, disproportionately affecting lower-income communities.
The financialized concession models employed by companies like BRK limit real investment, leaving marginalized communities with inadequate alternatives. Similar to the situation in the UK, where privatized water companies like Thames Water have seen rising bills, mounting debt, and deteriorating environmental performance.
Regulation in Brazil tends to intervene only after harm has occurred, offering limited accountability during long concession periods. This lack of effective regulation coupled with deep inequality mirrors the challenges faced in the UK.
Ultimately, the privatization of essential services like water and sanitation perpetuates environmental injustice. Access to clean water and sanitation is a human right, yet privatized systems prioritize profitability over social need. This results in higher bills, poorer service, and increased pollution in disadvantaged communities.
To address these issues, there is a need to rebuild public control, prioritize ecological restoration, and measure success based on clean rivers, public health, and dignity rather than investor returns. Brazil must learn from the mistakes of the UK and avoid the pitfalls of prioritizing financial gains over environmental and social well-being.
As Monica Piccinini aptly concludes, Brazil must be cautious of the promises of privatization and learn from the lessons of the past. Environmental justice should be the guiding principle in decision-making processes, ensuring that water is treated as a fundamental human right rather than just another asset.
