Brazil’s second wave of sanitation privatizations is harder because the best asset is already gone. Sabesp, privatized in 2024, was the sector’s prime cut: scale, dense urban markets, a strong revenue base and regulatory predictability in a state with solid institutional depth. In one transaction, it bundled nearly everything investors look for when accepting long contracts, diluted returns and permanent political risk.
The next major course, if the government prevails, is Minas Gerais. Copasa represents the country’s second-largest state market and still offers economic mass, capillarity and scope for operational gains. But it lacks São Paulo’s political consensus and territorial homogeneity. Any privatization will demand heavier contractual concessions, deeper negotiation with municipalities and greater tolerance for friction. Goiás may sit in this intermediate tier: a relevant market, some scale and reasonable structuring capacity. Even so, it stands clearly below the two national flagships. Beyond that point, the landscape changes fundamentally.
Most economically significant states have already moved. Rio de Janeiro reorganized sanitation into regional blocks; Rio Grande do Sul, Pernambuco and Paraná also advanced through concessions and restructurings. Together, these deals exhausted much of the stock of large urban assets with relatively predictable returns. What remains is not a second Sabesp, but a fragmented patchwork.
That is where complexity sets in. The remaining states tend to combine smaller municipalities, lower incomes, large sewage deficits and weaker institutions. Water generates cash; sewage absorbs capital long before it appears in earnings. Investors are no longer buying cash flow, but promises. Payback stretches, regulatory risk weighs more heavily and tariff politics move to the centre of the equation.
The financial backdrop has shifted as well. Capital is more expensive and more selective than in 2021. Narrative alone no longer clears the market. Each tender must close on the spreadsheet, with guarantees, rebalancing clauses and, often, meaningful public-sector involvement.
The second wave is harder because Brazil has already sold its champions. What follows requires more engineering, more patience and fewer illusions. The question now is not whether privatization works, but where it still makes economic sense — and how much the state must remain involved for private capital to stay interested.
Leave a Reply