Water down investment, top up returns - The pitfalls of financing Basic Sanitation in Brazil
The Brazilian people are subsidising the privatisation of water resources that, before Bolsonaro’s sanitation law, were publicly owned.
Large companies are using loans that benefit from federal tax incentives — theoretically intended for infrastructure investments — to finance privatisations.
This is revealed in a new report from CICTAR and Sindae-BA, a sanitation union in Bahia, which closely examines BRK Ambiental, a private sanitation company controlled by the Canadian asset manager Brookfield.
BRK is accumulating billions in debt, with only a fraction being allocated to investments.
Meanwhile, the population is paying increasingly expensive rates, and the improvements promised by privatization have yet to be fulfilled. In other words, the people are paying a second time for water that, until a few years ago, was ours.
Will Brazil end up paying a third time if the private system fails and the public sector has to bail it out, as has already happened in other countries?
“R$5 in every R$10 raised used for companies’ own benefit”
According to the study, private companies used R$ 5 of every R$ 10 raised on the B3 stock exchange through a government-backed incentive — created to bring water and sewage services to 84 million Brazilians who lack access — for their own benefit.
Companies issue debt securities, receive tax breaks, but most of the money raised through these operations in the capital market goes to finance or refinance payments for acquiring new concessions, rather than investing in the services they already provide.
The winners of sanitation auctions have been using the funds obtained from the tax benefit not to carry out essential works, but rather to purchase other concessions and increase their control over Brazil’s basic sanitation sector.
Through the issuance of incentivised debentures — debts issued by companies in the market that come with government tax breaks — they raised R$ 38.9 billion in the last decade, of which R$ 21.1 billion (54.3% of the total) was primarily or secondarily used to fully or partially pay the fees for sanitation auctions. A “fee” (outorga) is the formal permission granted by the government to operate the service.
These figures are part of the study “Water down investment, top up returns - The pitfalls of financing Basic Sanitation in Brazil”, conducted by CICTAR (Centre for International Corporate Tax Accountability and Research) in partnership with SINDAE-Bahia (Union of Water, Sewage, and Environmental Workers in the Brazilian State of Bahia). The National Confederation of Urban Workers (CNU), the Public Services International (PSI), and the Observatory of Water and Sanitation Rights (Ondas) are supporting the report.
Created by the federal government in 2011 under Law 12,431 to attract funds for strategic infrastructure projects across various sectors (from energy to urban mobility), incentivised debentures work like loans that sanitation companies can take from investors in the capital market. Until 2024, these debentures were exempt from income tax on returns. With Law 14,801/24, the benefit shifted to the issuing company itself, allowing it to deduct an amount equivalent to the interest paid on this “loan” from the taxes it owes.
“The change could further increase the capacity of private companies to finance the purchase of Brazilian basic sanitation concessions, since they can now deduct the interest paid on the debentures from their income tax.”
She added that this situation could be avoided if the government prohibited the issuance of incentivised debentures for the payment or refinancing of fees in new auctions, especially in lots in the South and Southeast of the country, where returns are more profitable, but not necessarily where improvements to sanitation services are most urgently needed.
“The practice of paying large sums to the government to win a sanitation concession auction has already led to cases of corruption and high fees for consumers around the world, so much so that France banned this practice in 1995. In Brazil, not only are we not prohibiting it, we are encouraging it with public funds.”
The case of BRK Ambiental
To illustrate this process, the study analysed the case of BRK Ambiental. Controlled by the Canadian private equity fund Brookfield, it is the eighth largest sanitation company in Brazil. From 2017, when it was founded, until today, BRK has doubled its revenue. It was once valued by its shareholders at around R$ 10 billion, but has recorded modest financial results or even losses due to its high debt.
This is because investors know that the concession-holder operates subsidiaries in over 100 municipalities with average profit margins close to 10%, even though the parent company had an average loss of -0.1% from 2020 to 2024. In just these four years, BRK issued R$ 18.3 billion in debt, mainly debentures, against only R$ 7.8 billion in investments.
BRK’s largest expansion occurred in 2020, when it purchased the concession for the Metropolitan Region of Maceió for R$ 2 billion. To finance this, it raised R$ 3.7 billion in debentures, of which R$ 1.9 billion were in tax-incentivised securities. However, in the first three years of the concession, investments totalled only R$ 409 million, according to publicly available data from 2020 to 2023. The company claims a higher amount of investments between 2021 and 2025, totalling R$ 904 million. To fulfil the agreement made with BNDES and the government — R$ 2 billion in investments by 2026 — the company would need to invest R$ 1.1 billion in 2026 alone, more than it invested in the concession over the past five years combined.
According to the CICTAR study, the consequences of this indebtedness fall on workers, public coffers, and consumers. FI-FGTS, which owns 30% of BRK Ambiental Participações, received only 1.43% of the dividends that the subsidiaries paid to the parent company over the past five years. The company’s salaries and working conditions did not keep pace with revenue growth, and the taxes paid were minimal: in 2024, BRK paid only R$ 52.2 million, compared to R$ 1.2 billion by competitor Aegea, which earns three times as much.
For users, services have become more expensive and flawed: the company’s average tariff rose 71% between 2017 and 2024, a rate well above inflation. Complaints against the company are also common, ranging from illegal sewage discharge and breach of contracts to interruptions in water supply, resulting in R$ 50 million in fines across Brazil, as well as two parliamentary inquiries in Tocantins and Blumenau.
“The case of BRK illustrates how the logic of sanitation concessions concentrates assets, inflates company valuations for future resale, and generates chronic debt, without ensuring improvements in service quality or the expansion of the sewage network in Brazil.”
The report recommends that the federal government urgently review the policy on incentivised debentures, prohibiting their use for the payment or refinancing of concession fees. The analysis also suggests that institutions such as Caixa Económica Federal, which manages the FGTS, and BNDES (responsible for structuring the auctions) stop supporting private conglomerates and instead use these resources to directly finance the expansion of sanitation, with transparency and social oversight. The report also demands explanations from BRK Ambiental regarding its high debt and low contribution in taxes and dividends, emphasising that the Canadian parent company Brookfield cannot treat basic sanitation in Brazil as merely an asset in its profit-driven investment portfolio.
Press contact
For Brazil: Agência Pauta Social
Adriana Souza Silva (11) 98264-2364 | [email protected]
International: [email protected]
Response from the company
Ahead of this report’s publication, CICTAR sent a detailed list of our findings to Brookfield and BRK Ambiental. In response, a BRK spokesperson said:
”This report distorts data, presents outdated information about the investments made by BRK, and ignores the reality of a regulated sector, with strict rules, continuous oversight, and targets set by public authorities. BRK is managed by Brookfield, a responsible steward of businesses which is investing in and driving focus on the provision of best-in-class service levels to municipality stakeholders within a regulated industry. Over the past three years, BRK has invested approximately BRL 4 billion in structural works, expanding access to water supply and sanitation networks for more than 564,000 homes across Brazil.
The criticism of the use of debentures is unfounded: it is a legitimate instrument, provided for by law, supervised by the Brazilian Securities and Exchange Commission (CVM), and essential to enable the investments that are transforming sanitation in Brazil. This mechanism was created by the public authorities precisely to allow long-term infrastructure funding — a sector that requires capital-intensive investments and returns over decades.
It is completely false to claim that interest payments compromised BRK’s investments or workforce. Between January 2024 and mid-2025, the company hired, promoted, and recognized thousands of employees. BRK maintained an average annual CAPEX of approximately BRL 1 billion, concrete proof of our commitment to expanding services and delivering results. The recent higher volume of interest payments results from the increase in the basic interest rate in the domestic market — a macroeconomic factor affecting the entire Brazilian economy and beyond the control of the company’s management.
It is worth highlighting that most of BRK’s assets are still in the ramp-up phase, a stage that requires large investments primarily financed through debt. In this context, it is natural that dividend distribution occurs only when services have been universalized, and not during the early phases of operations. Both the reinvestment of dividends and the issuance of debentures received the unanimous approval of shareholders Brookfield and FI-FGTS, long-term investors in the company, engaged with BRK’s strategy and the sanitation sector.
The municipalities served by BRK rank among the best evaluated in the country, according to the main sanitation rankings in Brazil. Based on the 2025 National Sanitation Ranking, prepared by the Trata Brasil Institute, Limeira (State of São Paulo) achieved second place nationally and first among cities operated by private companies, with universalized services. Aparecida de Goiânia (State of Goiás) climbed 12 positions to reach sixth place, standing out among the municipalities that invested the most in sanitation. In Tocantins, the 46 cities operated by BRK have 100% water supply, and Palmas (State of Tocantins), with universalized water and sewage services, is the highest-rated capital in the Northern Region. In the Metropolitan Region of Maceió (State of Alagoas), for example, more than BRL 770 million has already been invested — a figure higher than that mistakenly reported in the report — ensuring significant progress. A robust schedule of works is underway, in line with the contractually established targets.
Finally, it is essential to highlight that private investments have accelerated the transformation of sanitation in Brazil. Since the approval of the Legal Framework, between 2020 and 2023, the private sector’s share in investments grew from 15.1% to 27.3%, reaching BRL 6.7 billion in 2023. In this period, 6.3 million households gained access to treated water and another 6.1 million were connected to the sewage system, representing the greatest transformation in the sector’s history.”