An analysis of operating indicators of 36 water supply and sewerage companies in Brazil indicates that there are important economies of scale in the operation of water supply and sewerage systems. This conclusion is supported by data from other Latin American countries, Western Europe, U.S.A. and Canada.
Large companies are in a better position to capture the economies of scale present in the construction of large works (water intakes, water and sewerage treatment plants, etc.).
| Moreover, the data indicated that while operational costs per connection decreased with the size of the company, average salaries rose. Large companies, therefore, are able to attract more competent personnel, which in turn allows them to operate at a higher efficiency level to offset larger unit labour costs.
There is strong evidence that drinking water supply and sewerage services in communities with population of less than 150 000 to 200 000 (20 000 to 40 000 water
| connections) can be provided more efficiently and at a lower cost if they are managed and operated by regional companies.
Large and centralized national organizations are not an optimal solution. Experience during the 1960's and 1970's in Argentina, Colombia, Mexico and other countries indicates that central agencies stretched managerial capacity to the point where gross service inefficiencies were readily observable.
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