Economic Effect Of Investments In Basic Sanitation

In July 2020, the Brazilian government approved the new legal framework in the basic sanitation sector, which facilitates the participation of private companies in the sector and foresees an investment of R$ 700 billion.


The main goal is to universalize access to basic sanitation (sewage collection for 90% of the population) and the supply of potable water to 99% of Brazilian residents by 2033.


The new framework also determines that all contracts go through a public bidding offer without preference to public companies, as was the case in the past.


The Trata Brasil Institute published a study on the 2 years of this change in Brazil's sanitation law [1].


As the study reaffirms the benefits of sanitation impact on income and employment rates, and on the other hand as harm, we can mention health debts and diseases.


Using the national input-output (MIP) model, the potential economic gains derived from increased investments and improved sanitation rates were verified.


In the directly affected industries, an increase in sanitation demand is expected, which in turn should increase the need for labor and increase the generation of jobs. With the generation of jobs, families are expected to consume more due to the increase in purchasing power, which generates a chain effect, with an investment shock estimated at R$36.2 billion for 67 sectors of the matrix.


This shock-chaining scheme has 3 types of effects

Thus, the R$ 36.2 billion, according to the study, induces the national industry, job creation, tax collection and the country's growth (GDP) upwards, where the effect of R$ 117 billion in production (more than 3x more than the initial investment) and expected generation of 851 thousand jobs.

According to the Brazilian Senate, 35 million people living in the country do not have access to treated water – using a sample of the 100 largest cities in the country, without considering smaller cities – while 100 million people do not have access to sewage collection, 50% of which is handled in Brazilian territory. This number equates to 5,300 Olympic-sized swimming pools of untreated sewage dumped into the oceans daily [3]. Comparing these data, in 2019 31 million people across Europe did not have access to basic sanitation while 48 million did not have running water in their homes [4]. While in the US 2 million Americans did not have access to running water, plumbing in their homes or wastewater services [5].


Thus, the intention of the new legal framework for basic sanitation is confirmed as a positive move towards, on the one hand, universal access to basic sanitation, drinking water and sewage treatment and, on the other hand, the normalization of companies and opening of competition for private companies compete with government companies and bring better results to the population. We also see that even countries with greater technology and money power also have important gaps in improving this sector. For Brazil and other countries that still have high numbers of people without access to sanitation, every investment made will bring benefits in scale and domino effect, for the scope of employment, income, health and education, starting to generate better results in the medium and long term.

 

Sources

[1]: https://tratabrasil.org.br/images/estudos/Marco_Legal_do_Saneamaneto/RELATORIO_COMPLETO_-_Novo_Marco_-_2022.pdf

[2]: https://blogs.worldbank.org/voices/could-investment-taps-and-toilets-be-key-unlocking-developing-economies#:~:text=Research%20by%20Vivid%20Economics%20for,bn%20in%20wealth%20a%20year.

[3] https://www12.senado.leg.br/radio/1/conexao-senado/2022/03/22/100-milhoes-de-pessoas-nao-tem-coleta-de-esgoto-no-brasil#:~:text=Mais%20de%2035%20milh%C3%B5es%20de,na%20natureza%20todos%20os%20dias.

[4] https://sdg.iisd.org/news/who-and-unicef-find-inequitable-access-to-water-and-sanitation-in-europe/#:~:text=Thirty%2Done%20million%20people%20in,defecation%2C%20mainly%20in%20the%20countryside.

[5] http://uswateralliance.org/sites/uswateralliance.org/files/publications/Closing%20the%20Water%20Access%20Gap%20in%20the%20United%20States_DIGITAL.pdf

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