IDB Invest is set to make a significant impact on water and sanitation services in the State of Rio de Janeiro, Brazil, through a generous long-term local currency loan package of up to BRL 1,500 million (approximately $300 million). This funding will be directed towards the Águas do Rio 1 and Águas do Rio 4 concessionaires, collectively known as Águas do Rio, with support from PROPARCO, contributing a BRL 500 million (about $100 million) guarantee crucial for securing long-term funds in local currency from other development financial institutions (DFIs).

The concessions, operated by the Aegea group, Brazil's largest private sanitation company, represent a significant investment in the water and sanitation sector. Specifically, Águas do Rio 1 is expected to benefit around 3 million people, while Águas do Rio 4 will reach an additional 7 million individuals, collectively impacting 10 million people across 27 municipalities in the State of Rio de Janeiro, including vulnerable communities.

The projects encompass a broad scope, including the rehabilitation, maintenance, and expansion of sanitation infrastructure and water distribution, involving the installation of new water and sewage pipelines. Aiming to achieve universal sanitation services by 2033, in line with the new sanitation legal framework, these initiatives strive to provide 99% of the population with access to drinking water and 90% with sewage collection and treatment, a significant increase from the initial estimates during the bidding process.

This ambitious financial endeavor is a collaborative effort between IDB Invest and PROPARCO, bringing forth innovative solutions to support water and sanitation initiatives in Brazil. IDB Invest will provide local currency solutions in Brazilian reais, while PROPARCO will share the project's risk. This collaboration is anticipated to unlock the potential of other DFIs by mobilizing resources in U.S. dollars and euros for local currency projects in Latin America.

Furthermore, this financial support from IDB Invest and PROPARCO is complemented by contributions from BNDES, private banks, and the Brazilian debt capital market, totaling a fully funded investment cycle of BRL 24 billion (approximately $4.8 billion) for Águas do Rio. Additionally, the projects will receive performance-based incentives of up to $15 million from the United Kingdom Sustainable Infrastructure Program (UK SIP), aiming to encourage greenhouse gas (GHG) mitigation outcomes through specific investment and operational milestones.

Beyond financial implications, Águas do Rio is poised to make a positive environmental impact. The projects will contribute to the depollution of Guanabara Bay, the Guandú River spring, and the Rodrigo de Freitas lagoon, directly affected by irregular sewage disposal. Moreover, they will enhance environmental sustainability by reducing physical and commercial water losses from around 60% to a targeted 25% by 2035, ensuring a more efficient use of water resources.

In alignment with the commitments of IDB Invest and PROPARCO to enhance people's quality of life while addressing climate change and social inequality, these projects are classified as 100% climate finance and adhere to the Paris Agreement. They bring about climate mitigation co-benefits by reducing GHG emissions and minimizing the risk of waterborne illnesses. Notably, the initiatives are also aligned with seven United Nations' Sustainable Development Goals (SDGs), including Good Health and Well-Being, Clean Water and Sanitation, Decent Work and Economic Growth, Resilient Infrastructure, Cities and Communities’ Sustainability, Climate Action, and Partnerships for the Goals.