Brazil is the largest environmental technologies market in Latin America, totaling an estimated $2.5 billion for 1995. Growth projections for equipment sales range between 5 percent to 10 percent per year, and 10 to 15 percent per year for the sales of environmental services, including consulting. Growth will persist as the Brazilian economy stabilizes and living standards increase.
Between 80 and 90 percent of the market is supplied by domestic producers. U.S. companies retain only approximately 3 percent of the overall market as estimated by the U.S. and Foreign Commercial Service. Other key international players are companies from France, Germany, Japan, Britain, and Canada.
Brazil presents significant opportunities in many environmental submarkets. In descending order of importance these are: water and wastewater, industrial and hazardous waste treatment, solid waste disposal, and air pollution control. Pollution prevention is a potentially large market, but is only in its formative stages.
The principal market drivers are: adherence to international norms, specifically to the forthcoming ISO 14000 standards; stricter enforcement on the part of the government; and unmet needs in basic water supply and sanitation services.
Brazilian federal environmental legislation establishes agencies and bodies and empowers them to take specific actions in their respective domains. This legislation is supplemented by regulations at the state level. The legislative framework is in the process of being developed, with increased flexibility to include the private sector in the country’s environmental technologies.
A new modality for structuring large municipal wastewater projects is expected to be a major trend over the next five years. The method which will be implemented is the build-operate-transfer (BOT) or concession mode. However, large traditional multilateral development bank funded projects will continue.
Market Subsectors Among all the environmental submarkets, potable water, municipal sanitation services (sewer systems and wastewater treatment plants), and industrial wastewater treatment offer the best opportunities for U.S. firms. Drinking water supplies are available to only 73.4 percent of Brazilian homes according to the Pan American Health Organization. According to the state water company SABESP, only an estimated 10 percent of total sewage receives any form of treatment, although significant disparities exist between states. These are municipal responsibilities, and services are usually contracted out to the states, though a trend is to privatize these services. Further potential lies in the re-use of wastewater for industrial and/or agricultural process.
A promising new growth area lies in the management and beneficial re-use of sludge generated by municipal wastewater treatment plants. In metropolitan São Paulo alone, 55,000 tons per year of domestic sludge are produced, of which less than 10 percent is treated.
Industrial wastewater treatment is a growing market due to the increased number of river basin cleanup projects. Such projects will require industrial facilities to treat their wastewater prior to discharge into the river.
Fixed-source air pollution control equipment is not a large market despite serious local problems (certain cities in São Paulo and Minas Gerais), since 90 percent of urban air pollution is caused by automobiles rather than industrial pollution.
Municipal solid waste handling and disposal in Brazil are seriously deficient. Approximately 88 percent of the collected waste is disposed of in dumps or uncontrolled sites. Design and construction of environmentally safe landfills are an opportunity if municipal governments are prepared to invest in remedying this scenario. Recycling and composting are a growing trend.
Hazardous waste treatment, storage, and disposal is a potential market, but daunting siting and permitting issues have discouraged U.S. firms from trying to develop this market. However, a Chase Manhattan led project appears close to success. Hazardous waste remediation work exists, although there is no systematic, widespread remediation program in place.
Pollution prevention will grow as companies increasingly look beyond traditional “end of pipe” solutions and seek other cost-saving mechanisms. The advent of ISO 14000 standards will drive Brazilian exporting companies and multinationals located in Brazil to seek pollution prevention measures.
Critical Success Factors
In-country presence (either by direct presence or by local partnering) is imperative. Besides keeping pace with the rapidly evolving market, this approach is consistent with local business practice, where personal contact is very important.
Due to the shortage of affordable financing sources within the country, a complete financing package can be of great help in operating effectively in Brazil. Such packages should include consulting services and financing, in addition to equipment supply.
Visits and educational exchanges expose Brazilian buyers to specific company products and helps build personal relationships.