Privatization pathways in Brazilian water utilities: The role of financial standing

Since the 2020 reform of Brazil’s water supply and sanitation (WSS) sector, private provision of these services has expanded sharply. Major cities such as São Paulo and Rio de Janeiro are now served by private operators, primarily following the privatization of their state-owned companies, either by share sale or through concession contracts. Brazil is thus one of the most prominent markets for private WSS provision in the world. The objective of this study is to investigate the main factors associated with WSS privatization in Brazil, focusing on utility-level variables. While previous research has emphasized municipal-level factors such as fiscal health, economic efficiency, and party ideology, utility-level effects remain understudied. Drawing from the literature on privatization motivations, we hypothesize that municipalities served by utilities with greater investment needs, lower efficiency, and poorer service quality are more likely to privatize. Using a dataset covering 5397 municipalities from 2012 to 2023, we apply discrete-time duration analysis to account for time-varying factors. We find little evidence supporting our hypotheses. Instead, utility-level financial indicators emerge as the most relevant, suggesting privatization is more likely when its financial standing is strong. Our findings also confirm the importance of municipal-level factors. Using Kingdon’s Multiple Streams Framework, we argue that privatization in Brazil is more likely when there is a convergence of political, technical, and financial conditions, alongside private sector interest.