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Brazil auctions Rio water concession for $4 bn in win for Bolsonaro

·3-min read

Brazil raked in a larger-than-expected $4 billion Friday auctioning the operating rights to the Rio de Janeiro water and sewer system, a win for President Jair Bolsonaro and his privatization agenda.

The far-right leader attended the auction in Sao Paulo, which garnered 22.7 billion reais -- more than double the minimum price -- and came after a political battle that nearly saw the concession sale canceled.

Bolsonaro, who has struggled to implement the privatization plans he campaigned on in 2018, called the auction "historic."

"This is a government that believes in the free market, that believes in winning investors' confidence," he said.

It was the biggest-ever water-treatment auction in Brazil.

"The result is in: confidence in Brazil," said ultra-liberal Economy Minister Paulo Guedes.

"Brazil is going to return to growth. We are going to get through both waves," he added, referring to the hit that Latin America's biggest economy has taken from the coronavirus pandemic.

Rio's troubled public water company, Cedae, has faced criticism in recent years for the city's sometimes cloudy, smelly and earthy-tasting water.

The auction divided the company's system up into four lots by region -- one of which failed to sell.

In all, Cedae serves 13 million people, including the greater metropolitan area.

The winning bidders gain 35-year concessions to their portions of the system, which they will be tasked with overhauling and operating.

Brazilian firm Aegea, a leader in the water sector, won two of the blocs with backing from a sovereign fund in Singapore.

The third went to consortium Igua, in which Canadian pension fund CPP Investments holds a 45-percent stake.

Under the program, the operators are due to invest another 30 billion reais over 35 years in the iconic beach city of 6.7 million people, Brazil's second-largest city after Sao Paulo.

Projects are slated to include a massive clean-up of Rio's Guanabara Bay and infrastructure for impoverished favela neighborhoods.

Brazilian state development bank BNDES has pledged to finance up to 55 percent of those investments.

Officials said the concessions were expected to directly or indirectly create 26,000 jobs in Rio.

- Politically charged -

The event was nearly called off when the Rio state legislature voted Thursday to suspend it.

Lawmakers who voted in favor argued the heavily indebted southeastern state could not auction Cedae until it finalizes a new aid package from the federal government.

The auction had been a bargaining chip in the aid negotiations.

But interim governor Claudio Castro, a Bolsonaro ally, issued a last-minute decree ordering the auction to go ahead.

That did not put an end to the controversy, however,

The auction was held to a soundtrack of dozens of anti-Bolsonaro demonstrators loudly protesting outside.

Critics argue water should be a public and not a private good, and fear price increases under the concessions.

Around 35 million of Brazil's 212 million people do not have access to potable water, and 100 million -- half the country -- are not connected to sewage infrastructure.

Congress passed a law last June making it easier for private firms to participate in water and sanitation projects, aiming to bring potable water and sewage service to the full population by 2033.

lg/jhb/mdl