Rio de Janeiro concludes the largest privatization of basic sanitation services in Brazil

RIO DE JANEIRO, BRAZIL – The state of Rio de Janeiro celebrated this Friday, April 30, the largest privatization of basic sanitation services in Brazil, after an auction that raised R$22.69 billion (US$4.2 billion) for the state.

Rio de Janeiro granted to private investors, the right to operate the water and sewage service of the state for 35 years, after a bid held at the São Paulo Stock Exchange and attended by the President of Brazil, Jair Bolsonaro, and the Minister of Economy, Paulo Guedes, among other authorities.

In the auction, which was kept in suspense until Friday amid a legal and judicial battle, three of the four blocks into which the concession had been divided were awarded, in which investments of R$30 billion (about US$5.5 billion) are foreseen.

The winners must guarantee access to drinking water and basic sanitation for the entire population until 2033.

REVENUE DOUBLES THE MINIMUM

The revenue obtained was double the minimum of R$10.6 billion (about US$1.9 billion) set for the four blocks.

The Aegea consortium, whose partners include a Singapore sovereign wealth fund, won Blocks 1 and 4. The Iguá group, which includes the Canadian pension fund Canada Pension Plan Investment Board, won Block 2.

Block 3, however, did not have any interested parties.

Aegea offered R$8.2 billion (about US$1.52 billion) for Block 1, considered one of the most attractive, and R$7.203 billion (about US$ 1.333 billion) for Block 4. The amounts were, respectively, 103.13% and 187.5 % higher than the minimum required bid.

The Iguá consortium, bid R$7.28 billion (about US$1.35 billion) for Block 2, 129.6% higher than the minimum.

According to the project, the state government will continue to be responsible for water collection and treatment. The private sector will be responsible for water distribution and wastewater collection and treatment.

The 4 blocks serve 35 cities in the state of Rio de Janeiro, including the capital, with a total of 13 million inhabitants.

Until now, the services were provided by the State Water and Sewerage Company (Cedae), which has been criticized in recent times for supplying the population of the state with poor quality water.

THE GOVERNMENT CELEBRATES THE RESULT: “CONFIDENCE IN BRAZIL”

In a brief speech, Minister Guedes described the auction as an act of “confidence in Brazil” and in the “market economy” on the part of investors.

He also highlighted “the courage and boldness” of the acting governor, Claudio Castro, to launch the first major privatization” of Rio de Janeiro “with the largest sanitation, environmental and public health program”.

“We are going to remove millions of Brazilians from misery,” Guedes stressed, referring to the fact that 100 million people in the country have problems with basic sanitation and adequate water supply treatment.

In a statement, Bolsonaro said the auction is “a moment that marks our history and our economy” and demonstrates that “the current government is committed to a free-market economy.”

In April alone, the federal government has privatized some thirty assets in the infrastructure area, including 22 airports, five ports, and a major railroad.

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