Brazil - Country Commercial Guide
Infrastructure

This is a best prospect industry sector for this country. Includes a market overview and trade data.

Last published date: 2022-01-23

Overview

The infrastructure sector is comprised of railways, ports, highways, airports, water, wastewater, sanitation and solid waste, with U.S. business opportunities in design & 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. Successful airport and port auction rounds in early 2021 resulted in bids significantly higher than GOB minimums, which has generated enthusiasm for the remaining project pipeline of concession auctions. As a result of efforts from MInfra, the Ministry of Regional Development (MDR) and the Investment Partnerships Program (PPI), Brazilian Minister of Economy Paulo Guedes noted in August 2021 that the GOB has been able to collect over US$ 24 billion in concession fees with more than US$ 96 billion in committed investments.

Major project updates from Brazil’s Ministry of Infrastructure:
Major project updates from Brazil’s Ministry of Infrastructure:
Brazil Transportation
Brazil Transportation Images

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 the primary method of cargo transport, which makes logistics more expensive and contributes to the “Custo Brasil” concept that high operational expenses part of the cost of doing business in Brazil.  Logistics costs account for around 12% of Brazil’s GDP (4% more than in the U.S.), reflecting an inefficiency that results from poor transportation infrastructure. That 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 7% to the costs of exports.

Opportunities

The Government of Brazil 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.  The “BR do Mar” (or “Ocean Highway”) project, which was presented to Congress in 2020, will bring an incentive package for cabotage aimed at opening the market to increase supply, foster competition, lower costs and create new routes.   Another major project still under review is the privatization of the Santos Port Authority (SPA), which is the largest and busiest port in Latin America.  SPA public auction is scheduled for Q3 of 2022, with the expectation that the entry of private sector port management players will generate a greater flow of investments, improve port activity and dynamism, and help modernize and improve service. Another port privatization in the works is CODESA, located in Espírito Santo. While it is a much smaller operation at an expected US$ 150 million investment for a 35-year lease term, the CODESA public auction in Q4 of CY21 will serve as a trial for SPA in 2022.

Brazil Pipeline 2021-2022
Brazil Pipeline 2021-2022

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

Resources

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

  • Investment Partnership Program (PPI) - https://www.ppi.gov.br/
  • National Confederation of Transportation - https://www.cnt.org.br/
  • Brazilian Association of Infrastructure (ABDIB)
  • National Agency of Land Transportation
  • National Agency of Railway Operators

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 recent years of drought and low-levels of reservoirs, highlighting the need to reduce water loss and improve water conservation.

According to the latest data published by the GoB, 83.7% of the Brazilian population has access to the potable water network, 54.1% to the sewage system, and just 49.1% of wastewater generated is treated. Additionally, Brazilian cities lose more than 39% 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 30.3% of Brazilian cities monitor its water resources, while 66% of them have not yet mapped its areas of potential risk and only 16% have flood warning systems in place.

The new sanitation regulatory framework, (Law 14.026/2020) defines that, by 2033, 99% of the population must have access to clean water and 90% to sewage treatment. It also defines that each Brazilian state groups its cities into regions for water and wastewater service provision. This regionalization is a requirement for states and cities to access financing resources of the federal government and its institutions and makes smaller municipalities financially attractive for investments in network expansion. Local experts foresee total investments of US$ 145 billion in network expansion to universalize these services by 2033 only – US$ 96 billion of new investments to expand sanitation infrastructure and US$ 49 billion to restore existing and new assets.

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 and sludge removal, lifters, systems for sewage and effluent treatment, systems for odor control, measurement and control equipment for color, chlorine, turbidity, etc.), pipes, valves, ozone equipment, water meters and others.

Aegea Saneamento, one of the largest privately-owned water companies in the country, recently invested in the mapping and digitalization of its water infrastructure using BIM smart 3D virtual modeling and drones. In 2020, private water treatment company Aguas do Brasil invested over US$ 154,000 in automated water treatment station operations and remote water sensor systems.

The Brazilian government launched the program Brazilian Waters to promote investments to improve water infrastructure, product development, and watershed restoration to guarantee water supply to the population. The program has approved 26 projects thus far, including the restoration and conservation of the Sao Francisco river basin, which serves most of the northeast region.

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 demands 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.

Solid Waste Management

The latest data available shows that the amount of urban solid waste generated in Brazil in 2019 was approximately 79 million tons, of which about 59.5% were disposed in sanitary landfills and 17.5% in garbage dumps.  An industry contact envisions business opportunities in transforming the numerous dumps into small sanitary landfills. This would result in an increase in demand for small equipment, capable of processing about 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 aftersales services. Municipalities and states have also been looking for technologies for solid waste valuation, including composting organic residue to produce fertilizers for agribusiness use.

Although Brazil has a National Policy for solid waste, the country recycles only 2.1% of collected waste, and 13.5% of the total urban solid waste generated in Brazil is composed 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. 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 work formally. 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 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. There are currently around 4,000 Brazilian municipalities not charging for urban solid waste management and unable to maintain a landfill. ANA’s new standard should encourage these cities to discuss and implement their own fee for service. There are currently only 49 active concessions and PPPS in waste management operated by Brazilian municipalities.

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 Environmental 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 an increased interest in waste-to-energy technologies in Brazil, as some sanitary landfills are reaching full capacity.

The program is also expected to stimulate the recycling market, as some of the actions included the signature of the sectoral agreement on lead acid batteries, lubricant oil and electronics. According to industry experts, there are business opportunities for operating the 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 requirements

Resources

Trade Events

Airports

Since 2012, the government of Brazil has privatized 23 of the country’s busiest airports. The funds generated by auctioning these airports will be reinvested in the modernization of 50 regional airports. In 2021, Brazil concluded a round of airport concessions that presents exciting opportunities for U.S. companies interested in participating in the expansion of the country’s system of airports. While most of the large international airport concessions have already taken place, many opportunities in regional airport development are still available. The Brazilian Civil Aviation Secretariat (SAC) predicts that domestic passenger traffic will increase by 200% over the next 20 years from its current base of 107 million passengers per year. The airport concession program presents a remarkable opportunity for U.S. suppliers of airport products and services.

Brazil’s airport concession program aims to attract investments to expand and improve airport infrastructure, and consequently promote enhancements in air transport services.  The service quality levels determined for these airports, based on international standards, are contained in concession contracts managed and supervised by Brazil’s Civil Aviation Agency (ANAC). Airport concessions were mainly motivated by the need to expand and improve the infrastructure of Brazilian airports, which became insufficient to properly meet past demand growth over the previous decade. As a result, private companies are granted concessions to implement airport modernizations that speed-up much needed renovations and upgrades by transferring to the private sector improvements and commercial exploration responsibilities that were previously managed by he Brazilian Airport Infrastructure Company Infraero.

Despite the current challenges brought by COVID-19, Brazil plans to continue its privatization efforts through the public airport concession program. The next request for proposals to privatize 22 airports Infraero is scheduled for the first quarter of 2022.  ANAC estimates that 19 airports will be auctioned in the seventh round with an anticipated BRL$ 5.28 billion (US$ 996 million) in investments across three blocks: Rio de Janeiro - Minas Gerais (7 airports), North Two (7 airports) and São Paulo - Mato Grosso do Sul (5 airports). This final round will include two of Brazil’s most profitable airports: São Paulo - Congonhas and Rio de Janeiro - Santos Dumont, with BRL$ 3.5 billion (US$ 660 million) in forecasted investment.

The Brazilian government launched a regional aviation development plan at the end of 2012. At the time, the initial plan called for investments in about 800 small and medium airports, but that number ended up being reduced to 53 regional airports and heliports. The new plan will require BRL$ 2.4 billion (US$ 452 million) in investments in these 53 airports over the next decade with funding from the National Civil Aviation Fund.

Opportunities

As a result of Brazil’s airport privatization program, airport infrastructure presents significant business opportunities for U.S. companies as the winners of airport concessions upgrade existing infrastructure. In addition to design and 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.

Resources

  • SAC – Civil Aviation Secretariat – https://www.gov.br/anac/en
  • ANAC – Brazilian Civil Aviation Agency – https://www.gov.br/anac/en
  • ANEAA - Brazilian Association of Private Airports Concessionaires
  • ABAG – Brazilian Association of General Aviation
  • ABEAR – Brazilian Airlines Association
  • IBA – Brazilian Aviation Institute

Trade Events

Contact Information:

For more information, please contact the US Commercial Service Industry Specialist at Fabiola.Rios@trade.gov, Genard.Burity@trade.gov , Thales.Demarchi@trade.gov.