Through the years, Latin America’s water and wastewater infrastructure lagged far behind Europe and the United States. In terms of population access, numbers speak for themselves.
56 million inhabitants of the continent do not have access to clean water and 132 million do not have access to drainage systems, according to the World Bank. This context is translated to the industrial sector, where low development levels discourage local and international investments. As a result, expired technologies are still in use.
Complete analysis requires knowledge of the actual situation in Latin America regarding the region’s major markets and water demand industries. When considering the whole region, Frost & Sullivan estimates that the breakdown by industry type is as follows: mining, 22 percent; paper and pulp, 21 percent; chemical and petrochemical, 19 percent; oil and gas, 18 percent; food and beverage, 14 percent, and other minor industries six percent. When compared to Europe, for example, sectors like food and beverages and chemicals have the highest number of water solution projects involved in their strategic planning. This means that two factors driving global growth are reaching Latin American countries: the level of high technology firms and the environmental awareness that includes less water usage to manufacture products. Frost & Sullivan identifies strategic opportunities for water and wastewater projects in the region.
The Latin American scenario can also provide good opportunities: Governments have begun projects based on augmenting population access to water and wastewater infrastructure because of the need to comply with service universalization goals. This is likely to contribute positively to the emergence of water and wastewater solutions and services market in the countries. Moreover, national investment programs and public policies focused on infrastructure are likely to reinforce different initiatives related to human development, particularly education and healthcare conditions and basic infrastructure, such sanitation and transportation. Brazil, for example, presents growth opportunities in this industry not only because it represents the biggest market in the region but also because there are important projects in the food and beverage, mining and petrochemicals’ segment. The Southern Cone presents differences between countries: Chile stands out from the Latin American average with well-developed water and wastewater infrastructures (in tune with international standards). The water and wastewater sector was privatized in the 1990s and most water public companies were in a positive and well-structured financial position. This situation has to be observed carefully after the recent earthquake. Mexico presents problems that involve its highly polluted rivers. But the government is working with The National Water Program in this specific area to implement financial programs and instruments such as Programa de Modernización de Organismos Operadores de Agua (PROMAGUA), which are likely to allow the creation of different mixes of public and private resources to favor the development and self-sufficiency of water utilities and provide better services to the population. The Andean region presents good opportunities but there are enormous legal problems. For example, current Venezuelan legislation favors local companies, and its foreign exchange system (CADIVI) delays payments to international companies investing in the country. Colombia has high bureaucracy dependencies and unclear terms of reference in the municipal water and water treatment infrastructure projects. This uncertain legal framework is replicated in Central America where huge differences exist between drinkable and wastewater systems access in the urban and rural areas.
Given this overview, Frost & Sullivan concludes that private sector projects are in a better position, where companies are becoming aware that investing in water solutions focused on less water usage to manufacture their projects is increasing. In this sense, the food and beverage and petrochemicals segments are the most dynamic sectors.
Nevertheless, different and unclear regulatory frameworks increase the complexity of formulating market strategies in Latin America and somehow delays Foreign Direct Investment regarding water solutions systems, so one alternative is establishing alliances with local stakeholders and taking advantage of green projects, where both private and public sectors are showing high commitment levels to push the market’s growth. It is important also to keep in mind that the Latin America and Caribbean regions have enormous, wealthy natural resources that demand high attendance for water conservation systems. Fossil fuels and biofuels (such as ethanol) represent emerging markets that also demand high water levels. Colombia and Brazil are leading this trend, indicating that water and wastewater treatment projects are a new market in the region. Even though it exhibited low infrastructure investments in the past years, it shows potential with excellent perspectives in Brazil, Chile, Argentina and Mexico.