Paths to universalize water and sewage services in Brazil: The role of regulatory authorities in promoting efficient service

• We analyze the performance of regulatory authorities in promoting the efficiency.
• We detected significant inefficiencies in Brazilian water/sewage service providers.
• The mean for pure technical efficiency was higher among unregulated providers.
• We found productivity gains, but with a decrease in the providers' pure efficiency.
• Regulatory activity has not ensured that providers achieve better performance.

The 2007 institution of a regulatory framework established ways to overcome deficits in Brazil's sanitation services, including economic efficiency. This study analyzes the performance of regulatory authorities in promoting the efficiency of water and sewage service providers in Brazil. The study was developed in three stages: analysis of efficiency with Data Envelopment Analysis (DEA) for 2006 and 2011; assessment of productivity using the Malmquist Index (MI); and document analysis of regulatory standards. Among the results, significant inefficiencies were detected and the mean for pure technical efficiency was higher among unregulated providers both for 2006 and in 2011. The MI showed gains in productivity from 2006 to 2011. The decomposed analysis of the index indicated a shift in the efficiency frontier to a higher level, but with a decrease in the providers' pure efficiency. From the analysis of the regulatory activity, we identified regulators that had not issued regulatory standards related to the promotion of allocative or productive efficiency. Analysis of the results shows that the regulatory performance has not ensured that providers achieve better performance.