Water, Environment and Business for Development

The EU Water Sector in Latin America

 In Blog (en), Uncategorized

The Good, The Bad and The Ugly.

For of those of you that are very familiar with Spaghetti Westerns, you will be
well acquainted with the movie “The Good, The Bad and The Ugly”. The movie, set in the old west, in my point of view, has a number of similarities to European water companies desiring to do business in Latin America.

In the movie, The Good, is a professional gunslinger just out trying to earn a few dollars (this can be our European Water company). The Bad, is a hit man out to take down anyone who he is paid to do so (this is the competition for the European Companies in Latin America). The Ugly, the wanted outlaw who is only trying to take care of his own hide, (for this analogy, this can be our local partner). And the old West? This is our Water Market in Latin America.

In the movie, The Good and The Ugly form a partnership in order to find the pot of gold. But each has specific information (one knows the name of the cemetery, the other knows the name of the grave, where the money is buried), they therefore have to keep each other alive in order to find that pot of gold. The Bad finds out that the two of them are on their way to find that pot of gold and he tries to get there before they do. The end result is a major show down where they all meet to fight over the loot. The Good kills The Bad, with a single shot and then The Good and The Ugly dig up their gold before going their separate ways. (I just saved you all 177min ;-))

The opportunities for business in the water market in Latin America, from my point of view, follows perfectly this storyline.

Latin America is characterised by huge variations in economies, social situations and attitudes towards private investment that make it a market of considerable contrast. There is an unquestionable need for considerable spending on water and wastewater services provision (i.e the loot!).

Opportunities are therefore considerable, but so have been the risks – as historic events can prove. Uprisings against the privatisation in Cochabamba and La Paz in Bolivia in 1999 and 1997 respectively remain a cautionary tale, as does the collapse of the Buenos Aires water concession in Argentina following the crash of the peso (WaterWorld 2013). However, the situation in the region changes fast, and in some countries at least a framework that enables private sector involvement has emerged.

As the director of the SME consulting company “Water, Environment and Business for Development” with offices in Spain and Mexico, we have strong partners in both Europe and Latin America, therefore gathering information on the Latin American water market has been a collective one. According to this collective view, the following are the 8 main issues that need to be addressed in Latin America.

There is a general rural – urban migration where cities are becoming Mega-Cities, for example, Mexico City has 20 million inhabitants and Sao Paolo has 19 Million, therefore the needs in these cities are becoming even greater.

Peoples earning and living standards expectations are increasing and clean potable water and safe convenient sanitation is now a must for many households. This results in enormous potential and opportunities for water companies

Efficiency of potable water systems is vital. Firstly it would be vital to attend to the excessive consumption and to only produce and distribute the necessary amount of water. In very general terms, this point is quite badly managed with high leakage and unaccounted for water (above 40% in some countries) and lots of infrastructure is now obsolete.

Point 3 goes hand in hand with point 4: ICT technology. The opportunities for bringing in control systems, decision support systems and monitoring is immense.

The majority of Peri-Urban areas are still underserved however there are governmental programmes in order to address this, for example in Mexico el “Nuevo plan Hidrologico” is putting 170M€ in its water sector up to 2018 and these programmes are open to international expertise.

There is a need to manage and design systems of sustainable cost recovery and tariff structures
As in all emerging countries there is an extensive need for wastewater treatment. However the construction of these treatment plants has to be accompanied by sustainable financial models and cost recovery as there are many constructed wastewater treatment plants that are newly constructed and abandoned due to a lack of sustainable cost recovery schemes.

Desalination is becoming a popular topic in Latin America, however in the majority of cases there is not a lot of importance put on remineralizacion which can end up causing problems in the distribution network and subsequent taste issues.

The main barriers to the EU water sector doing business in Latin America, can be summarized into 4 main points:

Latin American counties in general terms have an obsession for American Water Technologies, so the competition from these established companies in Latin America is intense.
One of the biggest challenges is the political and economic climate devised by the administrations of each country. Previously the World Bank and the Inter American Development Bank would take leading roles in the political and economic security in Latin America, however, given the social advancement of many LA countries, these points are now down to each country with their respective and specific policies. This has resulted in an increased challenge to EC companies as they now need to have a deeper understanding of each countries specific policies. However, positively, there is more stability now in many countries than there was before. A prime example of this is Columbia.

The strong EU currency results in our financial offers being less competitive.

Many EU countries differ significantly in their work ethic and cultural ways to LA countries, therefore understanding the culture and the way of working is vital to doing business within these countries, EU companies have to adapt their way of working to be successful in LA countries.

In the movie The Good was the quickest draw in the West, he had a clear advantage over his rivals, following this analogy, what advantages do the European Companies in the water sector have?

The disadvantage of the high dependency on American Technologies is also an advantage for European Companies, Latin America pay dearly for these American technologies which then opens the door for European technologies to bring in competitive innovative offers.

Spain and Portugal have a natural advantage of speaking the same language and for being culturally similar.

In Europe we have all sorts of combinations of public private operations, tariff structures, innovative management models, a plethora of innovative technologies for various water types and in different climatic conditions. We come together to share these experience and we collaborate in a unified way. The European Water Technology Platform, the WssTP is a shining example of this. Other single countries do not have this advantage. This experience and knowledge is something that serves us well when looking into markets as diverse as Latin America

However, in Europe, unlike the character The Good (Clint Eastwood), European Companies don’t just want to be The Good, they want to be The Best. How can this be achieved, and where can they improve?

EU companies require better knowledge of the assistance (legal, financial, political, social and cultural) that is available to them. When I first arrived in Mexico, I had no idea who was who in the water sector, it took months of understanding the market and how it worked, the time spent on this can be reduced through greater assistance for EU companies.

They require better knowledge of the funding programmes available to them. There are bi-lateral programmes between individual European countries and Latin American Countries (e.g. Spain – Mexico, France – Mexico etc), as well as the EU and Latin America globally (H2020, EuropeAid etc), but not every company is fully aware of all of these opportunities that are open to them.

Improved connection with key and non-key players in the Latin American Market

The elaboration of Business Innovation Packs. These business packs can include the following information: “Business culture and the way of working, who are the main stakeholders (public and private), the current water needs of that country, strategic research agendas, etc”. These business packs will give a foot up to any new company wanting to enter this market.

Preferential commercial agreements that facilitate the import of our products and services without cost or at low cost, so that the the competitiveness of EU companies can be improved.

The Good and The Ugly had to form a partnership in order to find their pot of gold and of course to fight off The Bad. This is no different when wanting to do business in Latin America. I know of no company doing business here that does so without a local partner or partners. WE&B are partnered with universities, consulting companies and water treatment companies, because you cannot go it alone, you will fail. However, given the nature of working in the EU, most companies are accustomed to forming partnerships.

There is little doubt that future technologies for Latin America will go the way of Europe, membrane technologies, improved control and monitoring, imporved quality with altenative disinfection methods etc, all of which opens the door for public-private partnerships with European Companies

Finally, and probably most importantly is that EU companies do not have to be focused on having the most innovative technologies but they need to be flexible enough to adapt to the needs of the client.

A European water company looking to do business in the water sector in Latin America can take a lot from the movie “The Good, The Bad and The Ugly“. Form a partnership, work together, adapt to the local conditions (which will help you to out-compete the competition “The Bad“) and eventually you will dig up your gold…. Good Luck!

0e169af
Recent Posts

Leave a Comment

one + fifteen =

Contact Us

We're not around right now. But you can send us an email and we'll get back to you, asap.

Start typing and press Enter to search