Drinking water supply and sanitation
Electricity
Irrigation and drainage
Water transport
Both the Federal Government and state governments in Brazil are transferring state-owned companies to the private sector, but until recently the privatization programme did not included water-related public utilities. The situation has now changed at both the federal and state levels. There is increasing private participation in the provision of drinking water supply and sanitation services and the power sector is being included in the privation programmes.
The federal government has adopted Law þ 8.987 þDispäe sobre o regime de concessÆo e permissÆo de prestaçÆo de serviços públicos previsto no artigo 175 da ConstituiçÆo Federal, e dá outras providênciasþ of 13 February 1995, Law þ 9.075 þEstabelec normas para outorga e prorrogaçäes das concessäes e permissäes de serviços públicos e dá outras providênciasþ of 7 July 1995 implementing the above Law, and other measures to open attractive opportunities for private sector participation in public utilities and to create a more competitive environment for the public sector concessionaires obliging them to become more efficient. Law þ 8.987 regulates the delegation of public service provision to third parties through concessione schemes.
The general thrust of the reforms is to reduce the role of the public sector as an investor and manager of infrastructure services and to increase and reinforce its role as a regulator of private initiative. The Union, the States, the Federal District and the Municipalities may grant - through a bidding process open to both public and private sector companies - fixed-term concessions to third parties to provide public services on their behalf; the concessionaire invests its own funds, operates at its own risk and recovers the investment by charging fees.
The Conselho Nacional de DesestatizaçÆo (CND), set up in January 1995, directly subordinated to the President of the Republic, supervises the national privatization programme, known as þprograma nacional de desestatizaçÆoþ, including proposing what companies should be included in or excluded from it. The Banco Nacional de Desenvolvimento Econômico e Social (BNDES) provides administrative, operational and secretarial services to the CND. It serves as the government privatization administration. BNDES is also a major source of federal credit. One of the priority areas for its funding are infrastructure projects, especially those in key public service sectors such as electricity generation, involving both privatizations and joint ventures between the public and the private sector.
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| Nationally, 71 per cent of Brazilian households are served by a public water supply system. Sanitation services are less well developed, only 35 per cent of households are connected to public sewers. About 80 per cent of the sewege does not receive treatment. | ||||||||
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Policies for the improvement of basic sanitation are a joint responsibility of the Union, the States, the Federal District, and the Municipalities. The federal government sets national policies for drinking water supply and sanitation, coordinates activities in the sector, and provides financial and technical assistance to other levels of government.
Everywhere in Brazil, the provision of drinking water supply and sanitation services is the responsibility of the municipalities. The municipalities either operate the systems through municipal autonomous entities, known as Serciços Autônomos de µgua e Esgotos (SAAE), or administer them directly through the Departamentos de µguas e Esgotos (DAEE), or delegate their operation under a concession or license.
In many cases, the municipalities delegate the responsibility for service provision to the Companhias Estaduais de Saneamento Básico (CESBs), state basic sanitation companies, under a concession agreement. These agreements cover the whole territory of the municipality and run from 25 to 50 years. There are 27 state companies. CESBs promote the necessary studies and investigations; participate in the elaboration of state sanitation plans; and plan, construct, operate, maintain and administer drinking water supply and sanitation systems. They are responsible for all aspects of service provision and the municipalities do not interfere in the administration of drinking water supply and sanitation systems. CESBs increasingly use service contracts, known as þterceirizaçÆoþ, for specific services such as metering and billing. Although CESBs provide drinking water supply and sanitation services to a vast majority of the population of Brazil, they operate, almost exclusively, in urban areas.
One example of a CESB is afforded by the Companhia de Saneamento Básico do Estado de SÆo Paulo (SABESP), which is responsible for drinking water supply and sanitation services for 329 of the 672 municipalities in the State of SÆo Paulo. It plans, builds, operates and maintains drinking water production and distribution systems; and collects and treats domestic sewage and industrial wastes. SABESP is a large company: it provides drinking water supply to more than 20 million people and sanitation to almost 15 million. It also provides consulting services to other states in Brazil and to numerous countries in Latin America. SABESP, in common with other CESB's, contracts out many services to the private sector. It could be transferred, totally or partially, to the private sector. A possibility of selling some US$ 4 billion worth of shares to the public has been mentioned.
SABESP has recently signed an agreement with the International Finance Corporation (IFC) for the latter to act as financial advisor for the structuring and implementation of a US$ 265 million þJuquitibaþ project on a BOT basis. The project will enhance SABESP's water delivery capability by bring an additional 141 million cubic meters of treated water into the SABESP system. The project involves building a water intake, pumping station, pipeline, and tunnel to transport water 24 kilometres from the Juquiá River to the Santa Rita stream, in which it will flow a further 18 kilometres to the Guarapiranga Reservoir where the project developer will build a water intake, pumping station, water treatment plant, treated water pumping station, and pipelines to deliver 4.5 cubic metres per second of drinking water into SABESP's distribution system. The project is intended to serve as a model for a series of other projects in the state of SÆo Paulo.
Although private sector participation in the provision of drinking water supply and sanitation services is still incipient, due to the complexity of the management system and the existing contractual arrangement between the municipalities and the states, there are examples. In 1995, Aguas de Limeira (AdL), a joint venture between Lyonnaise des Eaux of France and Companhia Brasileira de Projectos e Obras (CBPO), a major Brazilian civil construction firm and a subsidiary of the Odebrecht Group of Brazil, was awarded a 30 year concession to provide drinking water supply and sewerage services to the Municipality of Limeira in SÆo Paulo state. The contract commits AdL to an investment program of some US$ 124 million over the concession term, including a five year capital expenditure programme (1996-2001) of about US$ 71 million. The programme is directed at rehabilitating, improving and extending the drinking water supply and sewerage services within the concession area, and increasing capacity, particularly for the treatment of sewage, by completing an unfinished wastewater treatment plant.
Other municipalities in SÆo Paulo, not served by SABESP, have implemented sewage treatment concession projects and others are under discussion. The state of Rio de Janeiro is considering including in the privatization programme its state sanitation company. Specifically, it is considering offering a concession for sewage treatment and water supply, particularly in the district of Barra da Tijuca.
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Net installed capacity in 1994 (MW):
Percentage of population with residential connections in 1989.............70 |
Companies owned by the federal government and state governments predominate in the power sector. Federal utilities account for the bulk of transmission and, together with the Itaipú bilateral project with Paraguay, for more than half of the generation capacity. Utilities owned by the states and the municipalities account for the majority of distribution. There are several private utilities mostly providing distribution services in marginal markets and accounting, until recently, for only about 2 per cent of sales. Self-generation has been growing rapidly.
The Departamento Nacional de µguas e Energia Elétrica (DNAEE), within the Ministério de Minas e Energia, has regulatory functions over the sector, including the granting of concessions, tariff setting and monitoring operations.
An important step towards greater private participation in the power sector has been taken with the sending to the legislative branch of the bill þ 1669-D of 1996 to establish an autonomous regulatory agency, the Agéncia Nacional de Energia Elétrica (ANEEL), also under the Ministério de Minas e Energia, which will take over the responsibility for regulation and supervision of electricity generation, transmission, distribution and commercialization from the DNAEE.
The Centrais Elétricas Brasileiras S.A. (ELETROBRµS) is the federal government's holding company for power sector assets. It is a joint stock company and its shares are almost all owned by the federal government, which must hold at least 51 per cent of the voting stock. A minor portion of the shares has been traded in the stock exchange since its creation. ELETROBRµS is responsible for implementing the government's electric power policy and also has planning, coordinating, financing and supervisory responsibilities in the power sector.
The major holdings of ELETROBRµS are four large federal regional companies which are responsible for large-scale generation and transmission in their respective areas. ELETROBRµS also holds the Brazilian share in the Itaipú hydroelectric project on the Paraná River, as well as majority and minority stock interests in many generation and distribution utilities. Both ELETROBRµS and its subsidiaries are included in the federal privatization programme. The main exceptions are the nuclear plants and the share in Itaipú.
It is expected that prior to privatization, ELETROBRµS subsidiaries will be separated from the holding company and vertically restructured into generation, transmission and distribution segments. The generation and distribution segments will be privatized, while the transmission segment will probably remain in the hands of the government in order to ensure competition in generation and distribution. The exact structure to be adopted is still under discussion and a bidding process for consulting services on the power sector restructuring has been announced. Bids are also expected to be called for consulting services on the privatization of isolated power systems owned by ELETROBRAS.
Many foreign companies, particularly from Chile and Argentina, have expressed interest in the privatization process. In addition, local companies either already operate power stations or have an intention to bid for new ventures, either for independent power production or for self-generation. Three large local business groups - Bradesco, a commercial banking group; Camargo Corrêa, a large construction firm; and Votorantim, a big cement producer - have recently formed a consortium, VBC Energia to participate in the privatization of the power sector.
The privatization of the power sector assets owned by the federal government started with distribution utilities. The Espírito Santo Centrais Elétricas S.A. (ESCELSA), acquired by ELETROBRµS in 1964, a distribution utility, which also generates, it has about 166 MW of installed capacity, and transmits electricity in the state of Espírito Santo was the first company privatized. A controlling stake was sold in 1995, to a local consortium of banks and pension funds.
The second company to be sold was a part of the much larger Light Serviços Eletricidade S.A. (LIGHT), again mainly a distribution company. It operates in the city and part of the state of Rio de Janeiro and was acquired by ELETROBRµS in 1979. It is one of the most efficient electricity distribution companies in the country and also has 776 MW of generating capacity. Prior to privatization, the LIGHT was divided into two companies: LightRio, which holds the electricity distribution business and other assets, and LightPar, a holding company for LIGHT's 47.5 per cent stake in Eletricidade de SÆo Paulo (ELETROPAULO), a power utility of the state of SÆo Paulo. In May, 1996, a consortium led by Electricité de France (EDF) payed US$ 1.7 billion for a controlling 34.04 per cent of the stock in LightRio. Its remaining shares are expected to be sold later, as are those of LightPar.
As a result of these two sales, private sector participation in the electricity industry is estimated to have increased to some 12 per cent. The privatization of other parts of the power sector is likely to take another two or three years.
Several states are transferring electricity utilities to the private sector. In November 1996, the state of Rio de Janeiro, sold 70.2 per cent of the shares of Companhia de Eletricidade do Rio de Janeiro (CERJ) to a consortium with the majority participation of two Chilean companies, ENERSIS and CHILECTRA for US$ 587.3 million. The consortium will invest US$ 500 million in CERJ over the next five years, including US$ 300 million between 1997 and 1998.
Several other state governments are considering transferring, in whole or in part, their electric utilities to the private sector, including those of Bahia, Companhia de Eletricidade do Estado da Bahia (COELBA); Mato Grosso; Minas Gerais, Companhia Energética de Minas Gerais (CEMIG); Rio Grande do Norte; Rio Grande do Sul, Companhia Estadual de Energia Elétrica (CEEE); and Santa Catarina, Centrais Eletricas de Santa Catarina (CELESC). In some cases, the states may retain control and only sell a part of the shares in the companies; some of these companies are expected to be vertically and horizontally restructured prior to privatization.
The federal government is studying ways to facilitate these programmes and BNDES provides technical assistance. One of the proposals is to transfer to the states the funds expected to be raised from the proposed privatizations in exchange for the shares to be sold which will be kept in custody.
The state of SÆo Paulo has recently adopted a privatization programme for its three electricity generation and distribution companies, CESP, Companhia Paulista de Fuerza y Luz (CPFL) and ELETROPAULO. It is currently envisaged that the companies will be restructured into 14 distribution and 6 generation companies with substantial hydroelectric assets which will be transferred to the private sector under concessions. The privatization is expected to begin with the partially completed 1 814 MW Porto Primavera hydroelectric plant owned by CESP. The state government has recently announced guidelines for bidders for consultancy contracts for the privatization of the companies.
Laws þ 8.987 and þ 9.075 are opening new opportunities for private participation in the power sector, including independent power production and self-generation. Under Law þ 9.075, the installation of hydro potentials of 1 MW or less and thermal plants of 5 MW or less requires only a communication. Above these limits a concession is required, which may be granted either through a bidding process or an authorization depending on the capacity to be installed, the mode of generation and the destination of the output.
The legislation also contains provisions related to the concessions and authorizations for electricity generation projects which were either delayed or not initiated. Some of them may be cancelled and auctioned, while others may be completed through partnership schemes with private sector participation. The construction of a US$ 270 million 210 MW hydroelectric generating station at Igarapava, on the Rio Grande, scheduled to begin operations in 1998, affords an example of the application of this legislation.
The concession for the site had been held by CEMIG, the electric utility of the state of Minas Gerais, but it lacked financial resources to develop the site. The plant is being built by a mixed consortium formed by four private companies which hold 50.5 per cent of the project and two parastatals including CEMIG. The power to be generated by the plant will be proportionally shared among consortia participants, some of whom are large consumers. There are other similar projects.
Some unfinished hydroelectric power project are also being privatized through concessions, including Sao Jose and Carapatos, total 37 MW; Campos Novos, 880 MW; Sapucaia, 316 MW; Rosal, 55 MW; and others.
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Agricultural area in 1993 (1 000 ha):
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In Brazil, the private sector has always played a predominant role in the development of irrigation, accounting for over 94 per cent of the total irrigated area. Most of the public irrigation projects are located in northeast Brazil and reflect a mix of production, drought control and poverty alleviation objectives. Outside the northeast, the role of the public sector has been largely limited to supporting private irrigation development through various means including the provision of infrastructure, such as electric power distribution and drainage of flood plains, as well as of credit and technical assistance.
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| Inland waterways : 50 000 km navigable.
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Inland waterways are increasingly important in Brazil. The federal government is responsible for the management of navigable watercourses that cross state boundaries. Rights over state rivers are administered by the respective states.
The most significant current project is the Tietê-Paraná Waterway. Development of the project is being coordinated by the Agência de Desenvolvimento Tietê-Paraná (ADTP), a non-profit public-private partnership created to promote economic and social development in the region affected by the Waterway. The plan involves the extension of the existing waterway from 1 040 to 2 415 kilometres, and the construction of specialized intermodal terminals, storage facilities and other secondary infrastructure. When completed, the scheme is expected to open the waterway to traffic from SÆo Paulo to Buenos Aires and eventually link Argentina, Bolivia, Brazil, Paraguay and Uruguay. Over US$ 1 billion of private capital is estimated to have been invested in the waterway, and parts are already operational.
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