Case 2. Control of Water and Coastal Pollution: an Appraisal for Espirito Santo, Brazil

The State Government is spearheading a multi-million dollar project to build water and sewerage treatment plants in the state of Espirito Santo of Brazil. This ambitious project is a classic example of the challenge facing the public sector in rapidly expanding urban areas where there is a need for public services, despite very scarce public resources. This project is expected to bring significant benefits to the residents of the state by meeting the rapid growth in demand for clean drinking water while reducing pollution and preventing water-borne diseases and other health hazards. Such projects in Brazil have typically required government subsidies and loan guarantees because they have been financially not viable. Many of the benefits to society are either intangible or not directly tied to the operation of the treatment plants. Hence, Government support may be needed to finance the investment. The project evaluated here includes one water treatment and supply plant and one sewerage collection and disposal plant. Together, the two plants comprise a R$ 30 million investment. 1 The water supply plant is expected to serve new customers by establishing new connections and expanding the capacity of the water supply to meet the concurrent increase in demand. This component of the project accounts for 34% of the total investment costs. The wastewater collection-and-treatment plant is designed to restore the quality of water sources in the region by installing 36,000 new connections for collecting an estimated 11 million cubic meters of sewerage per year. In addition to providing basic water and sewerage services, the