Aracajú, Brazil, October 6, 2010.
IFC, a member of the World Bank Group, will provide 18.9 million Brazilian
reais (US$11 million equivalent) to Companhia de Saneamento de Sergipe
(DESO), a water and sewage company, to help the company improve its operational
efficiency and optimize use of water resources. This is IFC’s first subnational
financing in Brazil without a sovereign guarantee.
IFC’s investment will help improve water services for 1.5 million people
in Sergipe, a state where 65 percent of the households live with less than
one minimum wage per person. IFC’s local currency-linked loan to DESO
will provide the required long-term financing to mitigate water losses
and improve water distribution systems. This includes installing and replacing
water meters, re-registering consumers, standardizing connections, purchasing
operations equipment, and upgrading equipment for administrative functions.
Nearly half of all the water brought to the city from the São Francisco
River 100 kilometers away is lost. However, DESO estimates that about 20
percent of water currently categorized as lost is in fact consumed but
not billed. With consumption measured accurately, the high loss areas will
be identified and the problem addressed.
Max Montalvão, President of DESO, stated: “IFC’s financing will be vital
in accelerating our operational and commercial improvement program. It
will also help increase the availability of water in a water scarce region,
benefiting the local population. At the same time this loan demonstrates
the improvement of the company’s management towards sustainable modern
“This transaction shows IFC’s commitment to identify innovative ways
to support projects in Brazil that increase access to services and opportunities
for the population. IFC’s financing will support a lasting improvement
in financial sustainability of the company, which will allow further investments
to improve services and broader access to water and sanitation,” said
Loy Pires, IFC Country Manager for Brazil.
IFC’s financing complements a $117.1 million integrated water resources
management project that the World Bank is preparing with the State of Sergipe
to improve water resources management, strengthen water related institutions,
increase water use efficiency and reduce water pollution through wastewater
collection and treatment services in municipalities of the Sergipe river
Makhtar Diop, World Bank Director for Brazil, said: “This innovative World
Bank/IFC subnational facility loan will help the state further its pioneering
efforts to achieve an integrated and sustainable water sector strategy.
Sergipe has made important advances in the past few years in bringing
safe and reliable water at affordable prices to its population, especially
the poorest. This initiative will greatly strengthen these efforts
and open the door for similar operations in other Brazilian states, particularly
in the country's drought-prone Northeastern region. It also demonstrates
the close coordination between IFC and the World Bank operations in Brazil,
through joint strategic dialogue and complementary loans following similar
development objectives under distinct financial conditions.”
IFC’s strategy in Brazil’s water sector has focused on helping both public
and private utilities expand services, particularly in underserved and
frontier areas, while also conserving water and energy resources.
IFC’s loan to DESO is made under a subnational finance business line,
jointly developed by IFC and the World Bank, which provides financing without
sovereign guarantees to well-run local governments and public enterprises
for essential infrastructure investments. Projects are identified
and appraised jointly by World Bank and IFC teams, and build upon the World
Bank’s long standing engagement with Brazil’s sub national sector.
IFC, a member of the World Bank Group, is the largest global development
institution focused on the private sector in developing countries. We create
opportunity for people to escape poverty and improve their lives. We do
so by providing financing to help businesses employ more people and supply
essential services, by mobilizing capital from others, and by delivering
advisory services to ensure sustainable development. In a time of global
economic uncertainty, our new investments climbed to a record $18 billion
in fiscal 2010. For more information, visit www.ifc.org.
Established in 1969, DESO operates water and sewage systems in the State
of Sergipe, located in the Northeast region of Brazil. The company provides
water and sewage services to a broad range of residential, commercial,
industrial and governmental customers in 73 of the 75 municipalities in
the state. For more information visit http://www.deso-se.com.br/.