The Senate passed on June 6 a bill laying down a new regulatory framework for sanitation in Brazil. It is Bill No. 3,261 drafted by senator Tasso Jereissati (PSDB-CE). The passing of this bill comes after two unsuccessful attempts to regulate the matter through two Provisional Measures – both of which not converted into Law. Bill No. 3,261 – whose language is very much like the original languages of the two previous Provisional Measures – is now pending in the House of Representatives.
Generally speaking, the purpose of the bill is to increase the number of players in this market by giving access and promoting entrance to the private sector. This will improve competition and allow for an increase in size of basic services – to which only half the Brazilian population has access.
The new regulatory framework covers three relevant topics: (i) changes to no-bid contracts, (ii) transfer of regulatory powers to the National Water Agency (local acronym ANA), and (iii) creation of groups of cities.
With respect to no-bid contracts[1], the original language drafted by Tasso Jereissati provided for the complete discontinuance of this type of agreement in the sanitation sector. However, in response to pressure from state governors and the opposition, a provision keeping and extending – only once – already existing contracts has been added to the bill. This addendum displeased both the public sector – for which keeping all such contracts indefinitely would be the best option – and the private sector – that wished for the end of this type of contract once and for all. So, both had to compromise. The solution was to change the original language, which provided for the prompt termination of all no-bid contracts.
The bill also transfers to the ANA all regulatory powers pertaining to the sanitation sector. With this, the ANA will be in charge of supervising regulation, issuing rules and laying down technical criteria for the sanitation sector. The bill as currently drafted has no such provision; transferring regulatory powers is a prerogative of the President of the Republic. The federal government has, nonetheless, promised to submit a new addendum reflecting such change, which will be attached to the version of the bill as approved by the Senate. One of the advantages of this change is that sanitation projects will not have to wait in line alongside projects from other sectors – such as the chemical sector, for example.
Another very relevant point concerns the creation of groups of cities to be served by one single service provider. Each group will be formed by large, economically attractive cities as well as smaller cities that lack any technical, economical and legal resources to implement such complex projects. The groups of cities will be created by the States – and by the federal government on a subsidiary basis – in up to 3 years. Setting groups of cities is a useful and efficient way to replicate and broaden the scope of sanitation projects.
The new bill will come into force on the date of its publication and will repeal several provisions of the Sanitation Act (Law No. 11,445/07). Analyses from the relevant House of Representatives commissions are still pending. Eight addenda may still be added to the bill. In the end, what is expected is a bill that gives more access to the private sector
Our firm has a team specialized in the Infrastructure sector, which is ready to represent clients in court as well as to provide legal advice on all fields of the sector, including public or private contracts, bidding procedures and sanitation concessions.
