In the midst of the Covid-19 pandemic, Brazilian federal government enacted Law No. 14.026/20, establishing a new regulatory framework for basic sanitation in Brazil. It is true that some 35 million Brazilians (more than 16% of the population) simply cannot stay at home and wash their hands to decrease their contamination's risk, as they do not have piped water supply… More than that, approximately 100 million Brazilians (47%) do not have access to a treated sewage system and dispose their domestic liquid effluents in the nature. The Brazilian underdeveloped sanitation system affects the quality of life, hygiene, public expenses, health, environmental protection, but the Brazilian government has not been able to satisfy the needs of the country's growing population.
Under the recently-enacted Law No. 14.026/20, by 2033, the residencies of 90% of the Brazilian population shall have treated water supply and sewage.
To achieve this rather ambitious goal despite the current lack of public resources, the federal government's priority is to enhance its ongoing privatization's trend (ie, there are already a number of privatization projects). It is true that 94% of the providers of piped water and sewage are entities controlled by state or municipal governments that have been facing financial difficulties for years. Probably for this reason, close to 20% of the current investments in sanitation come from the private entities who operate only 6% of the network.
The provisions of Law No. 14.025/20 eliminate the almost monopolistic dominance of state owned service providers who may face a real competition in any bid concession and may even be more subject to privatization. By increasing the competitiveness of the market and consolidating the legal scenario with more stable regulations, the Brazilian government wants to increase the number of PPPs – Public Private Partnerships – and to attract large multinational players, as well as private equity funds.
To complete its required infrastructure plan, Brazil will need investments exceeding R$700 billion until 2033. It will not be an easy task! To attract new investments, Law No. 14.025/20 strengthened drastically the ruling powers of ANA – Agência Nacional de Aguas, the Brazilian national water agency. To mitigate the instability of the legal system, with a myriad of confusing and unstable rules from different state, municipal and regional authorities, ANA was granted with powers to provide a single and uniform guidance to the sanitation system's development in the whole country.
To avoid new investments to focus only on profitable projects, Law No. 14.025/20 determined that the targets for investments should be a combination of areas where providing sanitation service is likely to be profitable, and others where circumstances raise difficulties for financial benefits.
A number of additional rules should be shortly enacted by ANA and by regional governments following the guidelines of the new sanitation legal framework introduced by Law No. 14.025/20. In this sense, there is no doubt that these new rules will aim at improving the attractiveness of Brazil's sanitation area for private investors from Brazil and specially from abroad.
Originally published 06 August, 2020
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