Overview

The Brazilian infrastructure sector is comprised of railways, ports, highways, airports, water resource management, wastewater, sanitation and solid waste, with opportunities for U.S. firms providing design and construction equipment, solutions, and project operations. The Government of Brazil (GOB) has pursued a large privatization effort through a pipeline of concession auctions and regulatory reforms aimed at attracting financing to help narrow the largest infrastructure funding gap in Latin America. Ministry of Infrastructure (MInfra) activities have included virtual roadshows for foreign audiences to showcase concession opportunities in railways, airports, highways, and ports. The Ministry of Regional Development (MDR) and the Investment Partnerships Program (PPI) have promoted the projects globally to compete for infrastructure project investment. In August 2022, then Brazilian Minister of Economy Paulo Guedes noted that the GOB had collected over $24 billion in concession fees, and more than $96 billion in committed investments.

Transportation

The Brazilian transportation sector can be segmented into cargo rail, passenger rail, logistics infrastructure, roads, ports, public transportation, urban mobility, and smart transportation systems. According to the World Bank’s most recent Logistics Performance Index for 2018-2019, Brazil ranks 56th out of 160 countries in the quality of its infrastructure.  Trucks are still the primary method of cargo transport, which makes logistics more expensive and contributes to the “Custo Brasil” concept, that high operational expenses are part of the cost of doing business in Brazil.  Logistics costs account for around 12.7% of Brazil’s GDP (4% more than in the United States), reflecting an inefficiency that results from poor transportation infrastructure. This represents $845 million in extra logistics costs for Brazilian companies, when compared to companies operating within the United States.  According to the World Bank, logistics bottlenecks in Brazil add up to 7% more than the costs of exports.

Opportunities

The GOB has been working to increase private investments in railways, especially for cargo, and has a portfolio of concessions in the pipeline over the next few years.  One major ongoing project is the privatization of the Santos Port Authority (SPA), which is the largest and busiest port in Latin America.  The SPA public auction was planned for Q4 of 2022, with the expectation that private sector port management players will generate a greater flow of investments, improve port activity and optimization, help modernize infrastructure and ultimately improve service. The first port privatization under this new concept was CODESA, located in the State of Espírito Santo. The auction was held in March 2022, with investment fund Quadra Capital winning with a bid of $20 million, plus $63 million for shares in CODESA. While it is a much smaller operation when compared to other large public ports in Brazil, expected expansion and improvement investments are $163 million for the 35-year lease term­­. The CODESA auction has been considered by GOB and industry experts as a trial run to gauge investor interest ahead of the SPA auction.

In December 2021, the GOB passed new rail legislation that allows for the use of an authorization model whereby private players can Design-Build-Operate (DBO) under the program called Pro-Trilhos. As of October 2022, there were 89 new requests to build and operate short lines, which represents more than 22,000km of new railways around the country with estimated private investment of $49.6 billion. The GOB expects that this DBO authorization model format will increase private sector participation resulting in an expansion of 40% to the rail cargo transportation matrix in Brazil in 30 years.

Note: Brazil held presidential elections in November 2022, with the new administration officially taking office on January 1st 2023. The Ministry of Infrastructure was then divided into two new ministries: Ministry of Transport and Ministry of Ports and Airports. New stats and projects shall become available in the following months.

Industry Contacts

Ministry of Infrastructure (MINFRA) - https://www.gov.br/infraestrutura/pt-br

Investment Partnership Program (PPI) - https://www.gov.br/economia/pt-br/orgaos/seppi

National Confederation of Transportation - https://www.cnt.org.br/

Brazilian Association of Infrastructure (ABDIB) - https://www.abdib.org.br/

National Agency of Land Transportation - https://www.antt.gov.br/

National Agency of Railway Operators -https://www.antf.org.br/

Water and Wastewater Subsector

Opportunities in the Brazilian water and wastewater sector will likely continue to grow in the coming years. The sector is expected to undergo increased privatization, injecting new capital into projects and utilities. Additionally, Brazil has recently witnessed several years of drought and low reservoirs levels, highlighting the need to reduce water loss and improve water conservation.

According to the latest data published by the GOB, 84.1% of the Brazilian population has access to the potable water network, 55% to the sewage system, and just 50.8% of wastewater generated is treated. Additionally, Brazilian cities lose more than 40.1% of the water produced between the water refinery and the faucet due to a variety of factors including leaks in the system and theft. Only 28.8% of Brazilian cities monitor their water resources, while 67.6% have not yet mapped areas of potential risk, and only 15.1% have flood warning systems in place. Almost 4% of all households monitored are located in flood zones and 18 municipalities have more than 50% of households in flood zones.

Brazil’s sanitation regulatory framework, (Law 14.026/2020) states that, by 2033, 99% of the population must have access to clean water and 90% to sewage treatment. It also requires each Brazilian state group its cities into regions for water and wastewater service provision. This regionalization will enable states and cities to access federal financing resources and will make smaller municipalities financially attractive for investment in network expansion. Since 2020, more than 18 water and wastewater municipal services were awarded to the private sector resulting in more than $15.2 billion in investments, and expanding by 31% the number of municipalities served by private water companies. An additional 28 concessions, valued at nearly $5 billion, are expected in 2023.

According to the Brazilian Association of Private Water Companies (Abcon Sindcon), Brazil will need a total of $178.6 billion in investments to universalize water and wastewater services by 2033 – mostly in the civil construction industry, followed by network infrastructure, equipment and machinery, and others. These investments will increase the country’s GDP by $280 billion in twelve years and represent an expansion of 2.7% of GDP by 2033. As far as opportunities for U.S. suppliers, Sabesp, which is Brazil’s largest water and wastewater company, lists the following as priority focus areas for the sector:

• climate change
• new technologies for water treatment
• smart water grid
• water loss detection and reduction
• fraud detection and combat
• intelligent water measurement and loss reduction
• new technologies for wastewater treatment
• industrial and urban reuse, wastewater system control and measurement
• wastewater odor control
• circular economy and automation

In the private sector, the Brazilian Association of Private Water and Wastewater Concessionaires (ABCON) also has a list of member needs which includes equipment for sludge management, removal and treatment, lifters, systems for sewage and effluent treatment, systems for odor control, measurement and control equipment for color, chlorine, turbidity, pipes, valves, ozone equipment, water meters, and others.

Aegea Saneamento, the largest privately-owned water company in the country, recently invested in the mapping and digitalization of its water infrastructure using BIM smart 3D virtual modelling and drones. In 2020, private water treatment company Aguas do Brasil invested over $154,000 in automated water treatment station operations and remote water sensor systems. Aguas do Brasil is also implementing AI and IoT systems to identify potential invisible leakages and losses in the system. GS Inima invested more than $3.2 million to construct a 75,000 square foot solar sludge drying system, a pioneer solution in Latin America, that has been active since 2021.

The Brazilian government launched Brazilian Waters, a program to promote investments to improve water infrastructure, productive development, and watershed restoration to guarantee water supply to the population. The program has approved 38 projects thus far, including the restoration and conservation of the Sao Francisco River basin, which serves most of the northeast region. The Sao Francisco River water transfer, when concluded, will bring water to 12 million people in 390 municipalities and the federal government predicts over $50 million in investments.

There is also high demand for retrofit and renovation of water and wastewater treatment plants in utilities all over Brazil. The “New Pinheiros” is a river clean-up project in the city of Sao Paulo, which requires onsite sewage treatment solutions. The river pollution is mostly due to sewage disposal.  Several areas of the city are informally occupied and are not accessible to the traditional wastewater collection network, creating a major pollution problem. The program has already achieved noticeable results and has utilized U.S. technology to treat water in the river.

Solid Waste Management

According to the Brazilian Association of Public Cleaning and Waste Management Companies (Abrelpe), the amount of urban solid waste generated in Brazil in 2022 was approximately 81.8 million tons, of which approximately 93% was collected. Also in 2022, 75.1% of Brazilian municipalities had selective waste collection initiatives, primarily in the south and southeast regions, however many did not affect the regions’ entire populations. In Brazil, 61% of urban waste went to landfills whereas 39% went to open dumpsites.

The federal government enacted several executive orders in 2022 setting goals to modernize solid waste management in Brazil in the next 20 years, including closing all dumpsites in the country in the next two years and substituting them with landfills.  There is also a target goal of recycling or recovering up to 50% of solid waste – today, this rate is approximately 4% according to the International Solid Waste Association (ISWA). Industry contacts envision potential business opportunities for U.S. suppliers given this context, including an increase in demand for small equipment, capable of processing around 100 metric tons of solid waste per day. The Brazilian subsidiaries of Caterpillar and Komatsu are currently the leading suppliers of sanitary landfill equipment (crawler tractors, compactors, excavators, etc.) but there is room for smaller equipment suppliers if they can offer attractive financing terms and in-country post-sale services. Municipalities and states have also been seeking technologies for solid waste valuation, including composting organic residue to produce fertilizers for agribusiness use.

Nearly 13.5% of the total urban solid waste generated in Brazil is made up of plastic particles, ranking Brazil as the fourth largest plastic waste producer in the world. Only 145,000 tons (1.28%) of this plastic is recycled and reinserted in the supply chain. According to the Abrelpe, approximately two million tons of solid waste from Brazil goes into the sea every year, primarily composed of plastics (47.7%), paper and cardboard (19%), and polystyrene (8%). In 2019, the Ministry of Environment launched the National Sea Waste Combat Plan and in March 2020, Brazil signed the Basil Convention to improve its international plastic trade and operations.

There are over 800,000 waste collectors (“catadores”) active in the country, mostly in streets and dumps, but only 100,000 of these are in formal work environments. Experts claim that regulations around the recycling supply chain must improve to increase its competitiveness when compared to the raw recycling material.

In June 2021, the National Water Agency (ANA) approved its first regulatory reference standard with the new sanitation framework, establishing the structure and parameters for municipalities to charge a solid waste service fee.  Currently, 1,851 municipalities charge a specific solid waste fee and are able to maintain a landfill. ANA’s new standard should encourage these cities to discuss and implement their own fee for service. According to ABRELPE, more than 300 solid waste concessions and PPPs were promoted in Brazil, however only 49 of them resulted in signed contracts and projected investments of $230 million in the next 20 years.

The new legislation also demands that states create regions to include both large and small cities to assure that municipalities with lower socioeconomic indexes are attractive to receive investments.  In the context of the Environment Ministry “Zero Garbage Dump program,” the Ministries of Environment and Energy issued Ordinance 274/19 in May 2019, on Energy Recovery of Solid Waste, regulating the sector and providing the necessary legal security to attract private investors. 

There is also increased interest in waste-to-energy technologies in Brazil as some sanitary landfills are reaching full capacity and local industry is constantly seeking to learn about the U.S. experience in this area.

The program is also expected to stimulate the recycling market, as the legislation included the signing of a sectoral agreement on lead acid batteries, lubricant oil, and electronics. According to industry experts, there are business opportunities for operating reverse logistics systems, which demand waste tracing technologies, as well as improvements in product manufacturing in line with the circular economy concept, and the increase in investors seeking to comply with ESG (environmental, social, and governance) requirements for more sustainable practices.

Industry Contacts

ANA – National Sanitation and Water Agency

ABCON – Brazilian Association of Private Water and Wastewater Companies

Abrelpe – Brazilian Association of Private Solid Waste Management Companies

MMA – Ministry of Environment

MDR – Ministry of Regional Development

Sabesp – Sao Paulo State Water and Wastewater Company

Trade Events

FENASAN – Annual International Water and Wastewater trade show and congress

FITABES – Biannual trade show promoted by the Brazilian Association of Sanitary Engineering

Waste Expo Brasil – Annual International Solid Waste Management trade show and congress

Airports

Airport concessions aim to attract investments to expand and develop Brazilian airport infrastructure, promoting improvements in air transport services. Levels of service quality are based on international standards and provided in concession contracts, which are managed and supervised by the National Civil Aviation Agency (ANAC).

In the first four rounds, airports were granted individually and, as of the fifth round, concessions were made through regional clusters. Indicated below are the airports and clusters that were already granted since 2011, followed by information concerning the concessions in progress.  In the seventh round of airport concessions, 15 airports grouped in 3 clusters were offered to the private sector, following the example of the bidding processes of the fifth and sixth rounds.

The auction for the seventh round of airport concessions involved 15 Brazilian airports and guaranteed investments of approximately R$7.3 billion over the next 30 years. The winners were Aena Desarrollo Internacional, XP Infra IV Fund for Investment in Infrastructure Participation, and the Novo Norte Aeroportos consortium.

Recognized for the large number of passengers and high potential for profitability, Congonhas Airport (SP) was one of the highlights of the round promoted by the Ministry of Infrastructure, through ANAC. The expectation is that R$ 3.3 billion of the R$ 5.8 billion will be invested in the São Paulo aerodrome alone.

The airports of Galeão and Santos Dumont, in Rio de Janeiro, will be auctioned to a single concessionaire in 2023-2024.

Regional Airports

Brazil boasts 2,890 private aerodromes and 721 public airports (28 exclusively for military use). Of these, few are still managed by their owner, Infraero, and the remainder belong to states and municipalities.

Regional aviation is extremely important in Brazil due to the country’s extensive land mass of more than 8.5 million square kilometers, of which more than half is covered by the Amazon rainforest. As a result, regional air transport is vital to economic development and mobility. In addition, Brazil has one of the largest government fleets in the world, with approximately 2,100 aircraft and a strong aviation industry.  The International Air Transport Association (IATA) has calculated that the domestic Brazilian aviation market will soon be the third largest in the world.

In addition to partnerships with the private sector, the Federal Government has invested in the modernization of Brazilian airfields through the expansion of passenger terminals and runways, signaling, and other interventions. In total, around R$ 1.1 billion was invested in regional aviation, increasing connectivity and the country’s development, especially in municipalities where there was pent-up demand in the airport segment.

The Brazilian government launched its plan to invest in regional airports throughout the country through a new Regional Aviation Plan. The goal is to restructure Brazil’s regional aviation network, expanding air cargo transport supply and passenger routes, improving the quality of airport services for Brazilians residing outside of the largest cities. The distribution of funds across the region of Brazil generally corresponds to the location of airports and public aerodromes with landing runways throughout Brazil.

Brazil’s airport privatization program presents significant business opportunities for U.S. companies as the winners of airport concessions upgrade existing infrastructure. In addition to consulting services, opportunities exist in areas such as passenger bridges, docking systems, baggage handling systems, handling equipment, check-in conveyors, x-ray integration, baggage claim carousels, x-ray machines and other safety and security equipment.

Companies with know-how in the areas of airport management and operations are welcome to establish partnerships with local Brazilian companies and are encouraged to participate in future privatization auctions. To succeed in Brazil, U.S. companies must either be established in the country or have a well-informed local representative. Much like in other sectors in Brazil, it is important to have a distributor or system integrator that can offer after-sales maintenance services, replacement parts and repairs.

Whether introducing a product to the market independently or entering with an existing local partner, it is necessary to have a coherent market entry strategy to penetrate the Brazilian airport industry.

Industry Contacts

SAC – Civil Aviation Secretariat –  https://www.internationalairportreview.com/organisations/national-civil-aviation-secretariat-sac/

ANAC – Brazilian Civil Aviation Agency – https://www.anac.gov.br/en/safety

ANEAA - Brazilian Association of Private Airports Concessionaires - https://www.airportnm.com/en/aneaa

ABAG – Brazilian Association of General Aviation –https://www.abag.org.br/

ABEAR – Brazilian Airlines Association – https://www.abear.com.br/

IBA – Brazilian Aviation Institute – https://www.institutoaviacao.org/

Trade Events

LABACE - Latin America General Aviation Show - https://labace.com.br/

AirConnected - Airport - https://www.airconnected.com.br/