PPP arrangements in the Brazilian water sector: a double-edged sword

Abstract

Public-private partnership (PPP) arrangements have been used all over the world to develop infrastructure and provide public services. The principle of this procurement option seems sound. It consists of obtaining a (private) partner who makes the upfront initial investments, manages the infrastructure that will be paid for during its lifespan and assumes all of the corresponding responsibilities. However, the empirical world has proven that frequently results are different from those expected and that the price to pay for service is greater than predicted and sometimes even greater than when traditional public works are involved. With respect to the use of PPP projects, Brazil is no exception. Currently, it is making one of the biggest PPP investments in the world. This paper discusses the use of the PPP model in the Brazilian water sector, its pros and cons and the existing dangers. It also makes some recommendations to improve these contracts. Although the balance seems positive, this research provides some evidence of room for improvement because preliminary studies and procurement documents are seldom well prepared, there is little competition, the risk matrix is unbalanced, favoring renegotiations and the private sector, and contract management is inadequate.