Revealed: Canadian pension funds invested nearly $1B in Bolsonaro-led water privatization scheme, A deal championed by the far-right Brazilian President and financed by two Canadian funds is “illegal,” say unions challenging it in court by Jesse Freeston & Martin Lukacs May 24 2021, Breach Media
Two of Canada’s biggest pension funds have invested in a major sell-off of public water services in Brazil led by far-right President Jair Bolsonaro, which Brazilian labour unions and human rights groups are challenging in court after they say it was rammed through in violation of national laws.
The privatization deal is being financed by approximately $900 million from the Canada Pension Plan Investment Board (CPPIB) and Alberta’s pension fund investor AIMCo, according to their corporate filings and latest press statements in Brazil.
The push to sell off the country’s largest and most profitable public water utility, which serves 30 municipalities with a population of 13 million in the state of Rio de Janeiro, has also been backed diplomatically by the Canadian government. 
Prepping to give America unlimited export of Canada’s fresh water via Site C Dam?
Labour unions say they expect the privatization will lead to higher water prices, poorer service in impoverished neighbourhoods, and the layoff of 3,500 public sector workers.
A large section of the water utility was purchased at auction in April by private Brazilian company Iguá Saneamento, whose bid was bolstered by investments from CPPIB in March and AIMCo in 2018 that left the Canadian funds with a combined 85 percent ownership-stake.
Bolsonaro, whose popularity has crashed as Brazil’s covid deaths have risen to the highest per capita in the western hemisphere, personally banged the gavel to close the disputed auction.
“This moment will mark Brazilian history,” he announced from the podium at the Sao Paulo Stock Exchange, after arriving accompanied by armed soldiers.
Since coming to power in 2019, Bolsonaro has made privatization a centrepiece of his political agenda, targeting all publicly owned enterprises and public infrastructure, including Brazil’s network of water services.
Last year, he championed a law that forces municipalities to put water services up for sale in cases of new or renewed contracts, a move Canada’s trade commissioner in Brazil lauded for creating “a promising market for Canadian companies.”
Neither Global Affairs Canada nor Canada’s Trade Commission returned a request for comment.
Bolsonaro was flanked at the Stock Exchange by Economy Minister Paulo Guedes, the architect of his privatization agenda and a former member of the notorious “Chicago Boys”. This group of right-wing economists advised the murderous Augusto Pinochet dictatorship in Chile on its privatization of state companies through the 1970s and 1980s.
Latin America’s largest investment bank BTG Pactual, which was co-founded by Guedes and is being prosecuted for the corrupt acquisition of public assets under the Bolsonaro government, represented the Canadian-owned company as a broker at the auction.
“I want to thank the investors for their trust in the program,” Guedes told the Stock Exchange. “And I want to thank the Governor for having the courage to launch the first major privatization in our program of social transformation.”
Just hours before, the legislative assembly of Rio de Janeiro State had voted to stop the auction, but Interim Governor and Bolsonaro ally Clàudio Castro overruled the decision by decree and ordered it to continue.
“We believe the deal is illegal,” said Maximiliano Garcez, a lawyer representing the Brazilian union of water workers in Rio de Janeiro and the union of state engineers, who are challenging the sale in the courts. “It’s not only a violation of the right to proper water and sanitation, but the rule of law as well.”
“It’s really shocking that countries that consider themselves progressive would try to benefit from the demise of democracy in Brazil,” Garcez said. Who thinks Canada is a progressive country? It hangs way back in the cave, dark, dirty, stinky, corruption oozing everywhere, including in our lying sneaky courts.
The CPPIB manages several hundred billion dollars in pension funds on behalf of 20 million Canadian retirees, but has been criticized for financing projects that fuel the climate crisis and human rights abuses.
Last year NDP MP Alistair MacGregor introduced a bill into the House of Commons to add ethical investment guidelines to the CPPIB mandate, but the bill was defeated by the Liberals and Conservatives in March.
“I believe that clean water and sanitation is a human right, and as such needs to be kept in public hands,” MacGregor said after learning about the Brazilian investment. “I think if my bill had passed it would have been difficult for the CPPIB to go ahead with this.”
A spokesperson with the CPPIB declined to answer questions from The Breach, but provided a written comment.
“The opportunity to invest in a company that can address the high demand for improved water and sanitation services in Brazil is a good fit with our diversified global infrastructure portfolio,” he said. “With the benefit of outside investment, Brazil can extend and improve the quality of its sanitation and water services much faster, serving many communities in need.”
The United Nations special rapporteur on water rights said last year that privatization of vital services like water “prices out the poor and may result in violations of human rights.”
Previous CPPIB investments have provoked protests, including stakes in two US companies that were operating private immigrant detention prisons under Donald Trump. The pension fund quietly sold its stake in 2019 following public outcry.
“CPPIB has only one mandate, to maximize the rate of return on their portfolio, with no restrictions on how,” said Kevin Skerrett, a pension plan researcher with the Canadian Union of Public Employees, which has called on the pension plan to divest from the Brazilian scheme.
“The eight largest pension funds in Canada currently manage $1.75 trillion in investments in global markets, and while we might not look at pension funds with the same suspicion that we reserve for Goldman Sachs, they are operating no differently at all.”
Pennsylvaia Senate Committee Approves Bill Promoted By Privately-Owned Water Companies To Set Up Publicly-Owned Water/Wastewater Systems For Takeovers by David E. Hess, May 26, 2021, PA Environment Digest
On May 25, the Senate Consumer Protection and Professional Licensure Committee reported out legislation pushed by privately-owned water/wastewater companies to set up publicly-owned water and wastewater systems for easier takeover by private systems.
Senate Bill 597 (Stefano-R-Fayette) would impose conflicting and expensive requirements on small water and wastewater systems for no benefit to their customers and if they can’t comply they would come under the regulation of the Public Utility Commission.
The bill was changed in Committee with a gut and replacement amendment to move the entire contents of the bill to Title 66 related to the Public Utility Commission which leaves no doubt about its intent.
The bill also gives the Public Utility Commission authority to adopt temporary regulations to implement the provisions of the legislation WITHOUT going through public comment periods or a review by the Independent Regulatory Review Commission.
The bill is now on the Senate Calendar for action.
Background
The legislation is being pushed by Aqua America Water who employs Sean Schafer, former chief of staff for Sen. Tommy Tomlinson (R-Bucks), Majority Chair of the Committee, as a contract lobbyist and PA American Water which employs Michael Ward, Senate Majority Leader Kim Ward’s (R-Westmoreland) son as a contract lobbyist.
The legislation is opposed by PA Rural Water Association, the PA Municipality Authorities Association, the Water Works Operators’ Association of PA, the PA State Association of Township Supervisors, PA State Association of Boroughs and the PA Municipal League.
The amendment added in Committee made the bill worse and did not change the positions of these groups.
The PA Rural Water Association said in its letter, “This Bill appears to have the primary purpose of driving municipalities and small private entities out of the water and wastewater business through new unnecessary regulatory requirements and costs.
“SB 597 has language requiring that community water and wastewater systems develop an asset management plan and other distribution system requirements that go far beyond the requirements of the federal Safe Drinking Water Act and may even result in conflicting requirements with the SDWA and the federal funding associated with it.
“Additionally, SB 597 places enforcement of The Water Quality Accountability Act under the Public Utilities Commission, effectively placing water and wastewater system operation and maintenance under 2 different state regulatory agencies.
“This will create significant conflicts and overreach with no significant gains to systems or the general public. SB 597 would require significant additional staff hiring at PUC at a time when the PADEP has many unfilled SDWA positions. It doesn’t make sense.”
Click Here for a copy of their letter.
The PA Municipal Authorities Association said, “The legislation clearly creates a pathway for municipal and municipal authority operated water and sewer systems to become PUC [Public Utility Commission] regulated entities.
“The consequences of this will be devastating and expensive for these systems and will result in increased costs to the citizens served.
“The consumer would see little if any benefit and the likely outcome would be massive rate increases, especially as unemployment is high and municipal systems work to assist customers who are struggling financially.
“The immediate implementation of these approaches will result in significant rate increases to citizens in many communities across Pennsylvania, while the benefit of these approaches has not been examined or quantified in any way.
“A more appropriate approach for asset management requirements would be to follow existing regulatory protocols established by DEP to promulgate new regulations and accept public input and technical advice from industry experts prior to finalizing such requirements, followed by a compliance schedule and small systems technical support to achieve compliance.
“This legislation bypasses this established process and will result in a myriad of unintended consequences for water and sewer utilities across the Commonwealth.”
PMAA represents 700 municipal authorities across the Commonwealth, the vast majority of which provide drinking water and wastewater treatment services to more than six million of its citizens.
Click Here for a copy of the PMAA letter.
The Water Works Operators’ Association of PA said, “WWOAP supports the development of rules and regulations governing water systems operations that have improved the safety and reliability of community drinking water systems.
“These rules and regulations, either promulgated by the Pennsylvania Department of Environmental Protection (DEP) or by the US Environmental Protection Agency (EPA) advanced through a regulatory process that included stakeholder input, public input and Advisory Committee review and comment.
“Unfortunately, SB 597 is proposing by statute to impose requirements on water and wastewater systems which have not been vetted through a similar review process.
“WWOAP does not support the changes to the operations of community water systems proposed in SB 597.
“The proposed requirements in SB 597 do not conform to existing regulations or to regulations currently in the Final Regulatory stage such as the EPA Federal Revised Lead and Copper Rule or the Cybersecurity requirements in the America’s Water Infrastructure Act (AWIA).
“The differences between existing regulations and the proposed requirements in SB 597 will create a compliance conflict for community water systems.”
The group pointed to specific concerns about each of the main provisions of the bill, including those related to cybersecurity which are now covered by other federal and state requirements.
“WWOAP vigorously opposes Senate Bill 597 (and Rewrite SB 597) as burdensome, redundant regulation that will not improve community water systems but will impose significant financial burdens on these systems, particularly the medium, small and very small systems.
“Therefore, we suggest that SB 597 be revised to remove the requirements for public water systems which are and will continue to be addressed and regulated by PA DEP.
“Water and wastewater systems already pay permit and annual fees to PA DEP for oversight, so requiring redundant oversight and regulation to an already highly regulated utilities will unnecessarily and substantially increase costs and further burden the customers/consumers.”
Click Here for a copy of the Association’s letter.
Click Here to view a video of the Committee meeting.
Sen. Tommy Tomlinson (R-Bucks) serves as Majority Chair of the Consumer Protection Committee and can be contacted by calling 717-787-5072 or sending email to: email hidden; JavaScript is required. Sen. Lisa Boscola (D-Lehigh) serves as Minority Chair and can be contacted by calling 717-787-4236 or sending email to: email hidden; JavaScript is required.
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