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Drinking water for all: the work of Águas do Rio in Brazil
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Private Sector & Development #42 - Access to water and sanitation: the private sector at the source
This magazine is dedicated to the role of private sector in the access to water and sanitation. A major issue at a time when more than 2.2 billion people worldwide still do not have access to safe drinking water in their homes and 3.5 billion people lack adequate sanitation.
As part of the programme to privatise water and sanitation services in the State of Rio, the private company Águas do Rio - supported by IDB Invest and Proparco - was awarded management of two concessions in 2021, covering areas where almost 10 million people live. Connection to a reliable water network, managed using leading-edge technology, has revolutionised the lives of local residents, mainly in a number of Rio’s favelas. Report.
A city within a city. With its steep alleyways and passageways, the working-class district of Mangueira seems to have been built like a huge labyrinth, cut off from the rest of Rio de Janeiro. Perched on one of the many hills (morros) that characterise the city’s topography, just a stone’s throw from the Maracanã football stadium, this favela is home to more than 30,000 people, one of the highest population densities in Rio. “Living here has always been difficult. These are the slums of Rio”, explains Carlos Da Costa Silva (73), a native of Mangueira. The local residents – most of whom live in informal housing made out of bricks and tin – “manage as best they can”, says this former security guard and fervent supporter of the local Vasco da Gama football club. “There are very few local services and amenities, and job opportunities within the favela are rare.”
CLEAN WATER IN MANGUEIRA FAVELA
Over the past three years, the area has undergone a real transformation, in terms of both health and social amenities. Virtually all the homes in Mangueira are now connected to the official water network – managed by private operator Águas do Rio (8,000 employees), a subsidiary of the Aegea Group – which provides access to safe, high-quality services. “It’s a huge change,” explains the old man. “We used to be supplied via a rudimentary system”. There was a lot of waste and the quality of the water was very unstable. “We used to repair leaks ourselves, in the middle of the wastewater. We had to lift heavy concrete slabs to access the underground network. It was very dangerous.”
The residents of Sinimbu Road, in the west- ern part of the favela, have still not abandoned these old habits. There, the very last of the neighbourhood’s 400 homes are waiting to be connected to the network in a few months’ time. Meanwhile, countless haphazardly connected pipes, most of which are continuously leaking, have to be repaired. Large containers have been set up everywhere, filled to the brim and used as a reserve when the pipes run dry. “With this system, the water is frequently cut off”, explains Clayton Guilherme Da Silva, a Mangueira native and sales representative for Águas do Rio. “The installations are completely outdated, but soon, every family here will have its own meter.” And consequently, an individual account; a boon that allows the inhabitants of these working-class neighbourhoods to exercise their rights. With official proof of their address, they can access social services that would otherwise be una- vailable to them. Once they are connected to the water network managed by Águas do Rio, these favela residents benefit from a ‘social’ tariff, which is lower than that charged in the more affluent areas of this Brazilian megalopolis.
The objective of the Brazilian Federal government – which approved a “specific new legal framework" in 2020 – is to ensure that 99% of the country’s population has access to drinking water and 90% to wastewater collection and treatment by 2033 (compared with 84% and 55%, respectively in 2023). Total investment required under this new legal framework is estimated at BRL 500 billion (around €80 billion).
COMPLEMENTARITY OF THE PUBLIC AND PRIVATE SECTORS
In total, Águas do Rio supplies almost 10 million people in 27 municipalities in the State of Rio via a clean reliable water network - through two concessions (numbered 1 and 4) that it has been managing since 2021. The private operator’s work has already provided 621,000 people with regularized access to drinking water. “Three years ago, the federal authori- ties approved a new legal framework aimed at providing universal access to water and sanita- tion throughout Brazil by 2033”, explains Sinval Andrade, Águas do Rio’s Institutional Director.
To achieve this goal, they decided to privatise water distribution and sanitation services in the State of Rio, which was previously managed by public operator, Companhia Estadual de Aguas e Esgoto (CEDAE), by dividing the territory into 4 concessions. “We were awarded two of them for a 35-year period”, adds the Director, highlighting the substantial investment planned by Águas do Rio over the period in question: BRL 19 billion (around €3.4 billion). “Since 2021, we have spent BRL 3.5 billion (around €650 million) repairing the existing water and sewage network”, points out the Director, for whom this association between the private sector (Águas do Rio) and public sector (CEDAE) is a particularly virtuous development. “Neither has the resources needed to make the necessary investments on its own. These different players complement each other.”
To support this development plan, IDB Invest (a member of the Inter-American Development Bank Group) and Proparco teamed up with Águas do Rio in 2023. IDB Invest granted a long-term loan in local cur- rency - better suited to its needs than a loan in foreign currency - for a maximum amount of BRL 1,500 million (around €282 million). Proparco has given IDB Invest a guarantee on part of this amount (BRL 500 million, or around €94 million).
This transaction has a twofold advantage: it enables IDB Invest to increase the amount of its loan to Águas do Rio, as part of the risk is guaranteed by Proparco. It also allows Proparco to be involved in arranging the financial oper- ation thanks to an effective partnership with IDB Invest.
AFD Group mobilising to provide access to water and sanitation services in Brazil
AFD Group is one of Brazil’s key partners in deploying its universal access to water and sanitation objectives. With over one billion euros in cumulative commitments, AFD prioritizes the reduction of inequalities in access to resources and services, helping operators to improve their performance and making the sector more resilient in the face of climate risks. The Group is especially well positioned to meet the needs of public and private players in the sector. While AFD works with governments, municipalities, public operators and public financial institutions involved in the sector, Proparco can deal with private companies. The Group’s other entities and instruments can provide equity financing for concessions (STOA), technical expertise (Expertise France) and support innovative projects with a major environmental impact (FGEF).
The opportunities in the sector and the soundness of certain partners are encouraging AFD Group to ramp up its investments, for example by launching a range of guarantees and loans in local currency, or by partnering the issue of sustainable bonds. These innovative instruments will continue to be deployed on a case-by-case basis over the coming years.
SATELLITE TRACKING OF LEAKS
From the Company’s operations centre, located in a former industrial warehouse in the heart of the city, several dozen engineers and technicians take it in turns to analyse the state of the water network covered by the Águas do Rio conces- sions in real time. Three giant screens display satellite images of the water circuits running through all the districts concerned. “Thanks to minute quantities of chlorine contained in the water we distribute – which our software detects and distinguishes from groundwater – we can spot leaks in real time,” explains data analysis specialist Thaissa Chemzariam. And on a map of central Rio, she shows around twenty leak points in the Ipanema area, where technicians
- equipped with geophones - are carrying out repair work. “We are also installing over 250 smart valves that will enable us to remotely monitor leaks and water pressure more effec- tively”, explains Sinval Andrade. The stakes are high, both economically and ecologically. The operator estimates that these leaks in its network – estimated in billions of litres each month – would allow it to supply drinking water to an additional 4 million people if they were eliminated. “We currently lose 50% of the water we distribute, usually as a result of structural problems linked to the state of the network. Our objective over the next 10 years is to reduce this to 25%”, concludes Águas do Rio’s Institutional Director. Before adding confidently: “And we’ll meet that target too!”
Saving Guanabara Bay
Águas do Rio’s action has improved the health and environmental performance of Rio de Janeiro’s celebrated bay.
A picture postcard and jewel of biodiversity in the heart of Rio de Janeiro: Guanabara Bay, which extends over 400 km² – and around which the Brazilian megalopolis has grown – is both a marvel and a unique ecosystem in Brazil. This enormous basin – which opens onto the Atlantic Ocean and extends inland for some 30 kilometres – contains some 130 islands and hosts 250 marine species, including seahorses, turtles and no less than seven different types of ray!
“But it’s a fragile treasure, severely damaged by water pollution”, explains biologist Ricardo Gomes, who founded Instituto Mar Urbano, an environmental protection NGO in 2017. “For a long time, the Bay was the city’s sewage system”. During the 2016 Rio Olympics, the situation, – remarked on by the world’s media – greatly complicated the organization of the nautical events. At the time, it was estimated that the rivers that flow into the Bay - including the Rio Carioca, the city’s main river - were discharging the equivalent of 18,000 litres of wastewater every second. Staggering!
60 consecutive days of bathing
“But the situation is improving”, insists the scientist. On board his Institute’s zodiac boat, this keen diver surveys the marine fauna along the whole the bay and, since 2022, he has been running an environmental education programme called ‘Expedição Águas Urbanas’, sponsored by Águas do Rio. “New varieties of fish are appearing, while turtles, a species that we observe closely, are now reproducing in greater numbers”. The Cariocas (i.e., the inhabitants of Rio), can finally enjoy the Bay’s beaches. Long unfit for bathing, Flamengo Beach - whose sandy stretches face the iconic Sugarloaf - had been open to the public for more than 60 consecutive days by the end of September 2024. A new record!
At the heart of this metamorphosis: the clean up by Águas do Rio of a nine-kilometre-long tunnel, which collects a large part of the wastewater from southern Rio de Janeiro and transports it to the Parafuso pumping station as far as the underwater piping system at Ipanema, four kilometres off the coast. Around 3 thousand tonnes of waste have been collected in this way. ‘Even though there is still lots to be done, the appearance of the site has been completely transformed,’ says Ricardo Gomes. “The future of the bay belongs to the Cariocas. It’s up to them to take care of it.”