ASCOLA Competition Law series
Edited by Josef Drexl and Vicente Bagnoli
Chapter 7: The competition policy dimension of the regulation of water and sanitation services in Brazil
The objective of this chapter is to discuss the competition policy dimension of the water and sanitation services in Brazil. It presents the basic sanitation situation in Brazil, with an emphasis on the sector’s regulation. It estimates the timeline of the universalization of water supply and sanitation in Brazil, explaining the need to increase investment and productivity. It is argued that good regulation could stimulate competition within the sector. This article indicates that the elimination of the enormous infrastructure bottlenecks in the emerging countries depends on a pro-competition regulation and not on the elimination of competition under the pretext of the existence of a natural monopoly. Regulation is essential in the water and sanitation sector due to the natural monopoly characteristics, high unrecoverable costs (sunk costs) and positive externalities on health and the natural environment, among other factors. This does not mean however that there is no competition in the sector. The presence of a pro-competitive regulation is paramount for the quality of the services supplied. This study is organized in six sections. Besides this introduction, Section 2 presents the basic sanitation situation in Brazil. Section 3 contains an estimation of the investment needs for different universalization goals. Section 4 touches upon sanitation regulation aspects in Brazil. Section 5 contextualizes sanitation service regulation, highlighting the competitive dimension that exists in this sector. A final section contains the major conclusions.
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