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Public Policy

Opening faucets

Research indicates that delays in providing sanitation in Brazil cause illness and are economically irrational

Open sewage in São Paulo: Almost 40% of Brazilian municipalities lack any form of sewage collection, according to an IBGE survey

Léo Ramos Chaves

The pandemic shone a harsh light on the lack of basic sanitation in Brazil. In order to be able to stay home during quarantine and wash their hands frequently people need access to running water, which isn’t always available in a country where many still depend on water trucks and live with open sewage. Although 85.5% of the population have running water, only 53% have sewage collection and only 46% of collected sewage is treated. Almost 40% of Brazilian municipalities lack any form of sewage collection, according to the National Survey of Basic Sanitation (PNSB) by the Brazilian Institute of Geography and Statistics (IBGE), published in July.

In June, the Brazilian Senate approved profound changes in the legal framework for basic sanitation, which dates from 2007 (Law No. 11,445). Based on two provisional measures from 2018 that expired without becoming law, the new legislation, Law No. 14,026, is based on economic analyses that seek to account for the failures of successive attempts to universalize sanitation in Brazil. Sanitation is provided for in the National Basic Sanitation Plan (PLANSAB), a 2013 document—updated in 2019—that guides public policy in the sector. Possible causes for such failures are brought to light in analyses such as those by researchers at the Center for Regulatory and Infrastructure Studies at the Getulio Vargas Foundation (FGV-CERI). In their article “The governance of water and wastewater provisions in Brazil: Are there clear goals?,” they point out the lack of clear objectives, the legal uncertainties, and the absence of administrative capacity in the municipalities.

The inefficiency of the system challenges economic rationality. Calculations made in 2013 by economist Célio Hiratuka, from the Institute of Economics at the University of Campinas (IE-UNICAMP) indicate that an investment of R$1 billion in sanitation produces “a) an increase of R$1.7 billion in economic production; b) an increase of R$245 million in wages, R$355 million in gross operating surplus, and R$139 million in direct and indirect taxes; and c) generates 42,000 new jobs, direct and indirect, throughout the entire production chain.” For this reason, adds economist Marco Antonio Rocha, from the Center for Industrial Economics and Technology (NEIT) at IE-UNICAMP, “it would be good economic policy to increase public investment in the sector, especially considering that investment in basic sanitation is a strong engine for employment and income and leads to decreases in other public expenditures such as healthcare.”

However, sanitation is one of the public services that has progressed the least in Brazil, compared to education, health, and telecommunications. PLANSAB envisions achieving universal water and sewer services by 2033, which would require investing over R$25 billion per year, in the government’s estimate. Between 1998 and 2018, funding allocation to the sector went from R$5 billion, on average, before 2007, to R$13 billion per year, but the increase of sanitation networks proceeds slowly. One reason is the low effectiveness of expenditures, explains Juliana Smiderle, a researcher at FGV-CERI. “Many projects carried out under the PAC [Growth Acceleration Program] have not been completed in a timely manner. In addition, water loss is still high, above 35%, which suggests a lack of incentive to be efficient,” she says.

The reform that changed the legal framework for sanitation is in part aimed at attracting private investment to the sector. Today, 7% of the population lives in areas where sanitation is under private concession. The state-owned basic sanitation companies (CESB) responsible for most of the country’s sanitation services were created under the first national legislation for the sector, the National Sanitation Plan (PLANASA), in 1971.

One of the ways in which the new legislation intends to expand private participation is to abolish “program contracts,” through which the municipalities have delegated these services to one of the state-owned companies, without public bidding requirements. Under the new law, bidding will be mandatory and state-owned companies will have to compete with private companies. “The big problem is with the goals. Many of these contracts were old and had ill-defined goals,” Smiderle observes. In her view, the concession contracts must be SMART, an acronym for objectives that are specific, measurable, achievable, relevant, and time-bound. A central point of the recently passed legislation is the requirement that contracts begin to establish clear goals that conform to PLANSAB guidance.

Another problem was the limitations of small municipalities, which don’t have the technical staff or resources to inspect and regulate the performance of concessionaires. Smiderle estimates that one possible reason for the lack of private capital in the sector is the difficulty smaller cities face when mounting bid processes. To reduce this difficulty, the new law makes it easier to create consortia that would allow municipalities to bid together, dividing costs and increasing private companies’ interest in larger concessions. The law also provides for creating the Interministerial Committee on Basic Sanitation (CISB), which will coordinate the allocation of funding nationwide. One of the changes is to increase the responsibilities of the National Water Agency (ANA), which has been renamed the National Water and Basic Sanitation Agency.

Léo Ramos ChavesThe strongest criticisms of private capital stem from the principle that there are drawbacks to treating water and sewage as commodities, because it can lead to rate increases, the exclusion of poorer populations, and exacerbating inequality. Rocha explains that the function of state-owned companies must be understood within a broader scope than just supplying the service. “State-owned companies have a public policy function that, by definition, cannot be commercialized,” he observes, citing the reallocation of resources and the possibility of drawing on subsidies. Today, some states work within a hybrid scenario, since their state-owned companies operate according to corporate governance rules, and are even listed on the stock exchange. Such is the case in the state of São Paulo, with its state-owned sanitation company SABESP, in Minas Gerais (COPASA), and in Paraná (SANEPAR).

According to economist Carlos Saiani from the Institute of Economics and International Relations at the Federal University of Uberlândia (IERI-UFU), there is a tendency for rates to increase, but this occurs because “some of the public providers charge inadequate fees, or none at all.” For Saiani, with the establishment of investment and subsidy goals where they’re needed, “unequal access tends to decrease rapidly, given that there is also a lot of inequality in public provision, which critics tend to ignore.” For Smiderle, the question isn’t whether sanitation is to be considered a market commodity or not, the problem lies in creating a legal framework in which the service is, in fact, provided. “It’s not important if the company is state-owned or private, but whether people are receiving water and the sewage is being treated,” she sums up.

Economist Paulo Furquim de Azevedo at the Institute of Education and Research (INSPER) in São Paulo compares the performance of private and public providers from the basis of the different incentives that motivate each: for the former, profit; for the latter, election victories, since they are to a greater or lesser extent under the control of mayors and governors. Azevedo estimates that attracting private investors will have a larger impact on wastewater treatment than on water. “Public operators have a conspicuous bias towards water supply, at the expense of investing in sewage and treatment systems. This is possibly because the electoral benefits associated with water are greater than with sewage,” he observes.

Private operation of sanitation entails operational difficulties, because it can only work if there is careful legislation, oversight, and planning. Unlike with consumer goods such as appliances, clothing, or food, it’s not easy to guarantee competition. Even in one store, one normally has a choice of various brands of refrigerators. However, water cannot come through pipes from different operators, so the competition happens during the bidding procedure. The municipality publishes a call for bids in order to choose a company that will provide the service for a specified period. The requirements the company must meet are defined at that time. Once the winning company begins operation, the government’s role becomes one of regulation and oversight.

But how can it be guaranteed that the contract is being fulfilled and services are well-operated? How can the water and sewage business be made profitable, maintaining fees at levels that people can afford, especially in the case of a vast and unequal country like Brazil? What should be done in crisis situations, such as a pandemic or prolonged drought, to avoid financial burdens on communities without making the provider’s business unfeasible?

For every sector of public utility, from electricity to transportation, issues like these have kept economists, lawyers, and other researchers busy for decades, trying to design institutional arrangements that are both efficient and fair. “For example, when we say that rates are higher where the supplier is a private company, we have to remember that sometimes not all costs are embedded in a state provider’s price,” Smiderle notes. On the other hand, to prevent water from being too expensive for people to afford, Brazilian law contains the principle of “affordable rates,” which prevents abusive increases.

Social tariffs and the potential of subsidies are also stipulated for the poorest areas. The supervision by the ANA, the work of the Interministerial Committee, and the creation of unified goals are all aimed at ensuring that any contracts signed in the future will share acceptable standards as regards the ambitions of universalization and pricing policies. According to the FGV-CERI analysis, however, unifying goals is not feasible, as “it can affect attractiveness for investors and/or affordable rates in certain areas, especially areas with lower incomes and higher need of investment.” The analysis also points out the risk of attracting investors who, when unable to meet goals, would seek to renegotiate contracts on less stringent terms.

Léo Ramos Chaves Running water: while 91% of homes in the Southeast have access, in northern Brazil only 57% doLéo Ramos Chaves

“Will the private sector be able to allocate R$700 billion in 13 years? If so, at what rates for providing the services? We must take into account the profitability to be guaranteed in order for the sanitation sector to be attractive, while reaching that level of investment during the next decade,” says Rocha. In the international scenario, this difficulty is apparent in the significant number of privatizations that have been reversed. According to the study Reclaiming Public Services, from the Dutch consultancy Transnational Institute, 267 cities worldwide resumed management of water and sewage services between 2000 and 2016. Economist Gesner Oliveira of the School of Business Administration (EAESP) at FGV, is former president of SABESP, the state-owned sanitation company in São Paulo State. In 2018 his consultancy GO Associados published the study Remunicipalização dos serviços de saneamento básico [De-privatizing basic sanitation services], which examined several cases of de-privatization, concluding that there are differing reasons why municipalities return to a state-provider system. These include service fees that are either too high for the public, or too low for private companies, contracts with insufficient information, and inefficient regulation. But there are also cases where the contract came to an end, and the cities, which control the services, believed they were in a position to provide services themselves.

The Brazilian case is different because state and local governments are fiscally unable to make investments on their own “or even with financing, since funding has also been reduced during the crisis,” Saiani observes. For this reason, the economist estimates, “opting for concessions will inevitably result in more investments.” He argues that this increase in investment will have a direct impact on important indicators, such as health, with the proviso that the concession contracts and regulators “pay special attention to quality parameters, given that private providers, to reduce costs and increase returns, can also reduce quality—or not invest in it,” he says. Azevedo also argues that bringing in the private sector may have a positive impact on inequality. In a recent, yet unpublished study the economist found that private concessions “are associated with an increase of 6.1 percentage points in sewage system access, which represents a 26% increase,” particularly in less advantaged municipalities.

The difficulty Brazil has guaranteeing sanitation rights further exacerbates the country’s characteristic inequality, points out Leo Heller, a researcher at the Oswaldo Cruz Foundation (FIOCRUZ) and professor at the Federal University of Minas Gerais (UFMG). This inequality has multiple dimensions. It’s regional: while 91% of the population in the Southeast have running water, in the North only 57% do; it’s social: in every region of the country, the peripheries and favelas (slum districts) suffer from open sewage; it’s territorial: rural sanitation is precarious, with only 11% of the population served by municipal water systems and 0.8% with sewage collection; and it’s gender-based, because women are still responsible for most of the tasks that require contact with water, as pointed out in the report Women and Sanitation, from the Instituto Trata Brasil (a sanitation NGO).

“It’s clear that the people who suffer most from the lack of water are the very underprivileged, both those who live in precarious ghettos, or on the streets, and those who have no water tank [for their individual dwelling, the standard in Brazil] and are at the mercy of an intermittent provider,” states Vanessa Empinotti, a professor at the Federal University of ABC (UFABC). When Brazil’s social isolation began in March, leaders from various parts of the country submitted lists of demands to the government to help the peripheries and favelas get through the quarantine. In response, several states have adopted measures such as suspending payment-related water cut-offs during the pandemic, according to the study “A Covid-19, a falta de água nas favelas e o direito à moradia no Brasil” (COVID-19, the lack of water in favelas, and housing rights in Brazil), from the Institute for Applied Economic Research (IPEA).

“Looking at the sanitation issue, we see Brazil’s inequality as a whole,” the researcher summarizes. In a study carried out in 2019 for the Pan American Health Organization (PAHO), Heller, who is the United Nations special rapporteur on the human right to water and sanitation, explored various dimensions of inequality, comparing the homes of white, urban families in rich states with the homes of black, rural families in poor states. Access to a sewage treatment system, in the first group, is 92%; in the second, 16%—a difference of 76 percentage points. “Why such dramatic inequality? It results from public policies implemented over history that were guided by economic viability,” he explains. In the study, Heller points out that the logic of economic viability even guided planning in the 1970s, when state companies were created. The result was the unequal expansion of sanitation access, which favored regions that were already wealthier. In his view, the recent changes in the sanitation law only reinforce this approach. He also notes that municipal consortia, although they are a good idea, have thus far not achieved satisfactory results in Brazil.

Different dimensions of public policy converge on sanitation. This convergence is reflected in the country’s broad definition of the concept, both in the 2007 law and its recent update. It includes drinking water supply, sewage collection, urban cleaning, solid waste management, and storm drainage. “It is a specifically Brazilian definition, which makes sense, but it isn’t used in other countries,” Heller points out. “What these dimensions have in common is that they are interventions on the physical environment that aim to promote health,” he adds.

Considering the volume of water taken from water sources, the amount of sewage produced daily, and the necessity of building dams and piping networks, clearly, sanitation is directly linked to the environment. Water supply has a direct relationship to the management of water resources, and controlling storm runoff is an element that connects sanitation to urbanism. The intersection of these various dimensions makes sanitation “the greatest public health advance in the last century,” according to a book edited by researchers Rita de Cássia Franco Rêgo and Maurício Lima Barreto, both from the Federal University of Bahia, and Cristina Larrea-Killinger of the University of Barcelona.

Although it seems evident, the bridge between sanitation and public health has previously been narrower. At the beginning of the 20th century, physician and medical hygienist Geraldo Horácio de Paula Souza, who earned a doctorate at Johns Hopkins University in the United States, worked at the Institute of Hygiene in São Paulo. They were responsible for planning water and sewage systems based on public health needs, reports social scientist Cristina de Campos, from São Judas Tadeu University, in São Paulo. The plans operated on two axes: on one axis, public health physicians; on the other, engineers. “These professionals were working across very broad scientific fields: from water and sewage control in the cities, to mapping diseases across the entire state,” Campos says.

Over time, the perspective was reversed. “The field of engineering captured the subject of water management as being exclusively within its scope. Their field wasn’t open to dialogue with others, such as ecology, except through pressure from the new social movements,” observes economist Norma Valencio, deputy coordinator of the Center for Social Research on Disasters at the Federal University of São Carlos (NEPED-UFSCar). This was during a period when large dams and treatment plants were being built to provide ways to supply fast-growing metropolises.

The situation began to change again over recent decades, with the encouragement of interdisciplinary research that deepened the connections between the various dimensions of sanitation. Historical circumstances have also been decisive, since one of the expected effects of global warming is an increase in water stress events, which makes the environmental crisis the principal backdrop for sanitation legislation.

The climate crisis is a constant presence on the pages of PLANSAB, which promotes coordination with the National Plan for Adaptation to Climate Change (PNA). PLANSAB’s own list of sanitation paradigms for the 21st century include “sustainability, integrated urban water management, ecological sanitation, recycling, and the fight against global climate change.” One of its goals is to “significantly reduce” the number of deaths due to climate-related disasters by 2030.

Indeed, floods and landslides are expected to become more frequent, while at the same time longer dry seasons and droughts will become more common, creating new challenges for water and sewage management. The World Health Organization (WHO) estimates that within five years, half of the world’s population will live in areas experiencing intense water stress. In this scenario, demands on sanitation providers, private or public, will only become more intense. “The dynamics of both socio-environmental and socio-political relationships point to the amplification and intersecting of crises that have previously been considered as distinct,” warns Valencio. “We are experiencing a disaster on multiple scales. I’m afraid the water crisis tends to make the situation worse.”

Scientific articles
HIRATUKA, C. et alImpactos econômicos dos investimentos em saneamento básico no BrasilRevista DAE, no. 180, pp. 20–25, 2013.
SMIDERLE, J.; CAPODEFERRO, M.; FERNANDES, P.; GONÇALVES, E.; DUTRA, J. The governance of water and wastewater provisions in Brazil: Are there clear goals? Network Industries Quarterly, vol. 22, no. 1, 2020.
RODRIGUES, R. I.. A Covid-19, a falta de água nas favelas e o direito à moradia no Brasil. Brasília: IPEA, 2020.

Books
FRANCO RÊGO, R. C.; LARREA-KILLINGER, C.; LIMA BARRETO, M. Impacto de um programa de saneamento ambiental na saúde. Fundamentos teórico-metodológicos e resultados de pesquisa interdisciplinar. Salvador: Edufba, 2019.
HELLER, L. (org.). A Agenda 2030 para abastecimento de água, esgotamento sanitário e higiene na América Latina e Caribe. Um olhar a partir dos direitos humanos. Washington: Organização Pan-americana de Saúde, 2019.

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