Brazil still has a long way to go in terms of basic sanitation. In 2019, we still had 35 million people without access to drinking water and almost half of the population without access to sanitation, according to data from the Ministry of Regional Development. These numbers are unacceptable. Thus, when approved, the new sanitation milestone was widely celebrated.
The changes are so many that the new framework will certainly move the sector – and, in fact, it already does. Among the changes imposed by the new law, we highlight the need for operators to present plans for the universalization of services; encouraging the regionalized provision of services; and greater legal certainty for the privatization of state-owned companies.
With regard to universalization targets, the standard determines that sanitation contracts establish service targets of 99% in water and 90% in sewage collection and treatment, numbers to be reached by 2033. In addition to creating a plan that provides for the In order to achieve this goal, water supply and sewage service operators must prove their economic-financial capacity to carry it out.
In relation to regionalized provision, the objective is to gain scale, attracting more investments. Thus, those municipalities that wish to join together in offering sanitation services must form regional blocks, for which a single service contract may be established, enabling efficiency gains. It is in this format that large sanitation auctions have gained prominence in recent months, attracting weighty investors. This was the case in the auctions that took place last year, in Rio de Janeiro (whose investment to be made is almost R$ 30 billion) and in Alagoas (with an estimated investment of R$ 2.5 billion), as well as in the case of auctions that should happen in the coming months, such as Amapá (with an estimated investment of R$ 3.0 billion) and Ceará (estimated investment of R$ 6.4 billion), which are expected to happen in 2021 yet¹.
The new framework also brought greater legal certainty by centralizing regulation in a single agent, the National Water and Basic Sanitation Agency (ANA) and by vetoing the so-called program contracts, which occurred when municipalities decided to grant water and sewage services to the state provider, thus the bidding process is not necessary. As a result, the attractiveness for private companies to participate in concession processes increases and, consequently, tenders become more competitive. In competitive markets, the winner is the user, who is able to receive higher quality services at lower prices.
In short, the new legal framework brought several changes that should bring new companies to the sector and improve the precarious situation of sanitation in many cities in the country. Improvements are already starting, but there is still a long way to go. Thus, new players, innovations and practices that help in the development of the sector are more than welcome, they are expected
¹Data released by BNDES, responsible for the economic-financial modeling of the projects.
