TRACKFIN INITIATIVE RESULTS FROM BRAZIL

JOÃO BATISTA PEIXOTO

RABAT, 29TH SEPTEMBER 2014 TRACKFIN INTER-COUNTRY MEETING

PRESENTATION OUTLINE

• Brief overview of the WASH sector and its financing in the country

• Scope of the TrackFin study : what does the study includes/excludes?

• Results from WASH-Accounts: o What is the total expenditure on WASH?

o How are funds distributed to the WASH sector?

o Who pays for WASH services?

o How is funding channelled?

• Lessons learned for the TrackFin Initiative

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1. OVERVIEW OF THE WASH SECTOR IN BRAZIL

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THE WASH SECTOR IN BRAZIL

• Brazilian federation:

o One central government (federal) and ;

o subnational governments (all independents): 26 states, 5,570 municipalities and 1 federal district.

• Water and sanitation service provision:

• Local governments (municipalities and states) are responsible for organizing and providing water and sewerage services in urban and rural areas (directly or indirectly through a delegation

• Ministry of Cities – coordination of federal policy of basic sanitation

• Ministry of Health is responsible for direct provision of WASH to indigenous people, traditional population (ribeirinhos, quilombolas, extrativistas) and sparse population in rural areas.

• 28% of municipalities are directly providing water; and 78% are directly providing sewerage services. However, it is unreliable and of low quality.

• 25 regional providers (at state level) and 1 regional private provider ( under delegation) are providing water to 4,034 municipalities (64%) and sewerage services to 2,214 municipalities (40%).

• 3 public micro regional providers and 3 private companies are providing water to 18 municipalities and sewerage to 13 municipalities.

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THE WASH SECTOR IN BRAZIL

• Level of access to WASH services- Key indicators:

o In 2012, more than 85% of the population has access to water (network) (MDGs at 84%).

o In 2012, more than 78% of the population has access to improved sanitation (network and septic tanks) (MDG at 74,5%)

• Problems: o Low quality and sustainability of services, low capacity of service providers, insuficient

and skilled practitioners, precarious regulation

o Important investments are required for sewage treatment

o High inequality in coverage between urban and rural

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2014

Total population 202,768,562

Urban Rural

% of urban and rural population 84,8% 15,2%

% of access to water 2012 93,9% (80,7%/total) 33,2% (4,6%/total)

% of access to sanitation 2012 85% (73%/total) 33,5% (4,7%/total)

WASH ACTORS AND FINANCIAL FLOWS - URBAN SECTOR

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1. Tarifas por provisão dos

serviços

2. Gastos diretos dos domicílios

em autofornecimento

3. Transferências públicas

domésticas

4. Transferências internacionais

reembolsáveis

5. Transferências voluntárias

6. Financiamentos

reembolsáveis7. Tributos incidentes nas

tarifas

8. Provisão serviços

Dados disponíveis confiáveis

Dados estimados

Fontes de Financiamento (legenda)

Unidades financiadoras

Provedores de serviço

Fonte: elaborado pelo autor

Domicílios, investimentos autofornecimento (parte de Tarifas)

Doadores;

Empresas e

ONGs Nacionais

WASH ACTORS AND FINANCIAL FLOWS – RURAL SECTOR

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1. Tarifas por provisão dos

serviços

2. Gastos diretos dos domicílios

em autofornecimento

3. Transferências públicas

domésticas

4. Transferências internacionais

reembolsáveis

5. Transferências voluntárias

6. Financiamentos

reembolsáveis7. Tributos incidentes nas

tarifas

8. Provisão serviços

Dados disponíveis confiáveis

Dados estimados

Fontes de Financiamento (legenda)

Unidades financiadoras

Provedores de serviço

Fonte: elaborado pelo autor

Domicílios, investim.

autofornecimento

Doadores :

Empresas e

ONGs Nacionais

Min. Saúde,

Integração,

Defesa.

Comunidades Especiais

2. SCOPE OF TRACKFIN STUDY IN BRAZIL

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SCOPE OF THE TRACKFIN STUDY (1)

• Period of data collection: 2010 to 2012 • Data was collected from national information systems (SNIS, IBGE) • The study follows the methodology proposed in the TrackFin Guidance Document,

except on the following points: o It was not possible to collect disaggregated information on the following

categories: • Revenues collected per type of users • Disaggregation of expenditure per type of service uses • Disaggregation of costs between capital expenditure and large capital maintenance

expenditure

o It was only possible to estimate the allocation of expenditure to the categories of WASH services using the total number of users by services.

o No sound information is available on the rural sector, only on domestic public transfers. Thus, estimations are based on partial information.

• New categories were introduced: o Services : S5 Hygiene activities related to WASH services o Costs : C6 Taxes

• The study also includes the valorisation of Fixed asset stocks.

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FINANCING FLOWS INCLUDED IN THE STUDY

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Financing sources Availability

of data Data availability challenges Methods used to overcome these

challenges

Tariffs for services provided

Obter dados para todos os municípios e dados desagregados do setor urbano e rural.

Estimativa baseada na tarifa média por domicílio do SNIS e na quantidade de domicílios atendidos do censo demográfico e pesquisas populacionais do IBGE.

Households’ expenditures for self-supply

Não existem fontes de informações públicas sistemáticas ou acessíveis

Estimativa baseada no censo demográfico e pesquisas populacionais e na Pesquisa de Orçamento Familiar do IBGE.

Domestic public transfers (central government)

Domestic public transfers, (local governments)

Dados parciais nas fontes disponíveis.

Estimativa baseada nas Demonstrações Financeiras de 15 prestadores regionais e 380 prestadores locais informados ao SNIS

International public transfers (Grants from public donors or multilaterals)

Não houve transferências para/através do Governo Central. Não foi possível rastrear fluxos para governos regionais e locais.

Voluntary contributions transfers (NGOs)

Não se encontrou fontes destes dados. Não há cultura de doação no país.

Repayable financing (Loans)

Dados parciais nas fontes disponíveis. Estimativa baseada em demonstrações financeiras dos prestadores corporativos.

Data available Data partly available + estimates Estimates No data collected

3. HIGHLIGHTS FROM WASH-ACCOUNTS

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1. WHAT IS THE TOTAL EXPENDITURE ON WASH? (1)

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Total expenditure to WASH has been improving in nominal and real terms, following GDP growth.

• WASH sector financing is suficient to cover O&M costs, to repay repayable financing and invest in infrastructure expansion and rehabilitation.

• However these investments are mainly spent on sewerage networks, and are unsufficient to universalise access to sanitation in the medium term

1. WHAT IS THE TOTAL EXPENDITURE ON WASH? (2)

Expenditure to WASH still falls behind that in the health sector.

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Unit 2010 2011 2012

Total expenditure to WASH R$ millions 44.893,49 46.202,53 51.824,24

USD millions 25.518,88 27.619,40 26.534,77

Total expenditure to WASH per capita R$ 235,35 237,77 264,40

USD 133,78 142,13 135,38

Total expenditure to WASH as a % of GDP 1,22% 1,12% 1,18%

Total expenditure to health as a % of GDP 9,01% 8,90% 9,31%

Total expenditure to education as a % of GDP 5,90% 5,90% 5,90%

Total public expenditure to WASH as a % of total public expenditure

5,63% 5,39% 5,54%

Official exchange rate (R$ per US$, period average) (source: World Data Bank)

1,759 1,673 1,953

1. WHAT IS THE TOTAL EXPENDITURE ON WASH? (3)

• There are no national database on WASH fixed stock assets.

• Fixed asset stocks for providers were estimated at their historical value and updated to the 2012 sector prize index to reflect inflation. This was based on average costs of assets per connection taken from SNIS.

• Household assets were estimated based on average replacement costs.

• Assets of municipalitiess for WRM could not be valued.

Estoques de ativos por tipo de fornecedor do WASH - 2012

Provedores WASH P1 P2 P3 P4 P5

Estoque

de ativosR$ milhões

Instituições

governamentais

Fornecedores

corporativos

da rede

Fornecedores

corporativos

fora da rede

ONGs e

organizações

comunitárias

Domicilios

(autofornecimento)Total

AS1Estoques finais de

ativosR$ 51.872,87 R$ 150.018,78 R$ 0,00 R$ 0,00 R$ 18.235,29 R$ 220.126,94

2. HOW IS FUNDING DISTRIBUTED? (1)

WASH Funding by sub-sectors

• WASH expenditure is mostly spent for urban areas: 96% of expenditure, against 4% for rural areas.

• WASH expenditure to rural areas is growing but very slowly considering the needs. • WASH expenditure in supporting costs (higyene promotion) are not expressive and far from

what is really needed in the sector. • Improvements are expected with PLANSAB.

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2. HOW IS FUNDING DISTRIBUTED? (2)

WASH expenditure by type of expenditure in 2012

• OM expenditure prevails (60% of total costs). Capital expenditure is the second cost (19,5%

of total costs). Capital costs represents 14,3% of expenditure.

• Capital investments includes households invesments ( xx% of capital investments)

• In the present situation of coverage, O&M expenditure is sufficient, proportionally to investments.

• Investments are insuficient to universalise service coverage in the medium term.

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3. WHO PAYS FOR WASH SERVICES? (1)

• WASH expenditure by type of financing unit

o Tariffs: 60% of financing

o Resources allocated by the Federal Government and public funders (CAIXA + BNDES) were bigger than service providers spending capacity – service providers deficit on implementing – 50% federal funds not used

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4. HOW IS FUNDING CHANNELLED?

• Resources allocated by the central government to service providers are channelled to subnational governments.

• Direct expenditure of Central Government is channelled to rural sector and water resources management.

• 80% of resources allocated by corporate providers and local authorities to provide WASH services are financed by tariffs from users (mainly domestic).

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4. LESSONS LEARNED FOR TRACKFIN

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LESSONS LEARNED FROM TRACKFIN PROCESS IN BRAZIL (1)

• The experience was positive for the country contexto (PLANSAB)

• TrackFin process and methodology are adapted to answer to the country need of better financial data on the sector. But more time is needed for a deeper study of the data.

• The main challenge was the resources contraint. Had to work with a reduced team.

• The national stakeholder group demonstrated interest and commitment in obtaining results. However, more internal meetings would be required to deal with the special technical issues.

• The piloting allowed to map and assess the country data base.

o The existence of national database (SNIS) and availability of data was a key factor of success.

o But there remain some data gaps:

• Need to improve informational systems (data items collected, data collection methods and how they are organized and made public – within and outside government)

• Need to improve statistics surveys and their focus on financial data;

• Have surveys to collect data on NGOs and international public donors expenditure

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FEEDBACK ON THE METHODOLOGY (1)

• All classifications and categories proposed are alreadgy used in Brazil and were adopted in the piloting (S, U, P, FU, FS and C). Few terminology adjustments are required – translation issue

• Proposal to add 2 new categories to the methodology:

• S5 – Hygiene related to water and sewerage services

• C6 – Taxes

• When revising the methodology, need to:

• Analyse the usefullness of keeping S5- hygiene for further exercices in the short term.

• Reduce the scope of categories used, ecourage countries to break categories regarding national characteristics. i.e.:

• U4, U6: Brazil does not consider self provision for industrial and comercial uses.

• FU6: Brazil´s regulators are not mandated to finance the sector.

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FEEDBACK ON THE METHODOLOGY (2)

• Rethink concepts

• Revise the need of mapping fixed stocks assets as a financing assesment of the WASH sector.

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THANK YOU FOR YOUR ATTENTION!

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João Batista Peixoto (jbpconsult@uol.com.br)

Marta.litwinczik@cidades.gov.br Marta.czik@gmail.com

ANNEX1 - SUMMARY OF RESULTS

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Units 2010 2011 2012

Total expenditure to WASH (millions) R$ 44.893,49 46.202,53 51.824,24

USD 25.518,88 27.619,40 26.534,77

Total expenditure to WASH per capita R$ 235,35 237,77 264,40

USD 133,78 142,13 135,38

Total expenditure to WASH as a % of GDP 1,22% 1,12% 1,18%

Total expenditure to health as a % of GDP 9,01% 8,90% 9,31%

Total expenditure to education as a % of GDP 5,90% 5,90% 5,90%

Total public expenditure to WASH as a % of total

public expenditure 5,63% 5,39% 5,54%

Total expenditure on urban WASH as a % of total

WASH expenditure 96,85% 96,02% 95,31%

Total household expenditure as a % of WASH

expenditure 1,95% 2,29% 2,19%

Total government domestic transfer expenditure

and as a % of WASH expenditure 6,00% 6,16% 8,66%

Total international transfer expenditure and as a %

of WASH expenditure 0,00% 0,00% 0,00%

Total operating and maintenance costs as a % of

total WASH expenditure 63,60% 65,79% 60,53%

Official exchange rate (R$ per US$, period average) )(source : World Data Bank)

1,759 1,673 1,953