Are Brazilian water auction prices affordable for vulnerable families?

Abstract

A recent regulatory framework reform implemented in Brazil aims to universalize water and sanitation services by 2033. For financing and speeding up the construction of infrastructure, the new law encourages private sector participation through auctions promoted with the support of the Brazilian National Development Bank. However, the first auctions, with billions of dollars in price and investment effects, have raised concerns among practitioners over the impact on vulnerable families. We analyze the concessions in Alagoas and Rio de Janeiro states in Brazil to demonstrate how low-income families will struggle to pay their bills based on auction prices via the tariff, which may invite discontent. This research can inform subsequent water and sanitation auctions by highlighting that awards should not be based exclusively on auction prices, and affordability assessments should be mandatory.