CG/LA Predicts Strong Privatization Growth in Brazilian Water

WASHINGTON, Jan. 24 -- CG/LA Infrastructure today released the latest report in its series on Latin American water and wastewater markets, "Making Money in the Brazilian Water Market." The privatization market in Brazil is estimated to be approximately $15 billion, according to CG/LA's 60-page Strategic Market Review. The Review identifies the state water companies of Manaus, Bahia and Pernambuco as the first to be privatized. CG/LA's Water and Wastewater Advisory Service is an annual subscription service in which a majority of the world's water and wastewater firms participate. The service addresses the daily and strategic needs of executives through a series of bundled products, including weekly briefings (analysis and strategy), strategic market reviews, enquiry privileges with the firm's analysts, and access to the firm's data bases.According to Anand Hemnani, Director of CG/LA's Brazil office, "We expect the process to move quickly once a regulatory framework is in place primarily because of the overwhelming need for investment in Brazil's water sector -- a need that the states cannot meet." Revenues in Brazil's public water industry in 1999 surpassed $6.5 billion and spending on services and equipment topped $2.2 billion. Under privatization these figures would double in five years, according to Hemnani.The market's valuation is low relative to other markets in the region, attracting all of the key international players. "Whereas the per connection bid prices in Chile have so far been in the $700-800 range (assuming a 100% stake), we believe that Brazilian prices will be much lower, around $300 per connection," says Anjali Duva, CG/LA's senior water analyst. The report finds that competition will be fierce for these utilities, but that there will not be a repeat of last year's overpayments seen in Argentina and Chile. "Brazilian water utilities are not in very good shape; the political necessity of extending the network of connections has led to years of neglect on the maintenance side" remarked Duva.The three main sections of the review are designed to provide hard-to-find market analysis for leading industry participants, according to Norman Anderson, President and CEO of CG/LA. "We have put together a comprehensive description of the marketplace, and are making this available to clients over the internet so that they have updated information at their fingertips." Perhaps the most important contribution of the document, according to Anderson, is a rigorous evaluation of all of the state water companies according to a key set of metrics. "We spent a tremendous amount of time making sure that we had the most useful metrics for our clients' critical decision-making — including water loss rates, tariff rates, payment ratios, workers per thousand connections, profitability and other critical information that is organized into easy to use tables."SOURCE: CG/LA Infrastructure