June 25, 2020 / 11:54 AM / 12 days ago

Brazil lawmakers approve new sanitation bill, opening room to privatizations

BRASILIA/SAO PAULO (Reuters) - Brazil’s Senate late on Wednesday approved a new sanitation bill, in a move that is expected to prompt states and municipalities to privatize water and sewage companies, luring investors.

The bill, which needs President Jair Bolsonaro’s approval to become law, foresees the universalization of sanitation services by 2033, which would require 700 billion reais ($131.72 billion) in capital expenditure, according to Banco BTG Pactual SA’s estimates.

“The approval is a huge step in the improvement of the precarious condition of our basic sanitation system, where 16% of Brazilians - almost 35 million people - don’t have access to clean water and almost half of our population don’t have access to sewage collection,” BTG’s analysts wrote in a note to clients.

Still, analysts at UBS Group AG say the sanitation sector may take up to two years to unlock value, as new regulations are needed.

Analysts see state-run Sabesp and Copasa as the companies with the highest chances of being privatized soon, as the governors of Sao Paulo and Minas Gerais states have already revealed plans to do so.

Despite the approval of the bill, shares in utility companies Sabesp, Copasa and Sanepar were underperforming the Bovespa stock exchange index, down 0.98%, 0.68% and 1.4%, respectively, in midmorning trading, after weeks of gains on the prospect of the bill’s approval.

Reporting by Maria Carolina Marcello, in Brasilia, and Carolina Mandl, in Sao Paulo, writing by Carolina Mandl; Editing by Toby Chopra and Jonathan Oatis

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