New basic sanitation framework in Brazil

New basic sanitation framework in Brazil

Published last July 9th at the Federal Official Gazette (D.O.U), Provisional Measure # 844/2018 aims at updating the legal framework for basic sanitation in Brazil by proposing amendments to Law # 9984/2000 (which provides for the organization of the National Water Department – “ANA”); Law # 10768/2003 (which provides for ANA’s staff); and Law # 11445/2007 (which provides for national guidelines for basic sanitation). The purpose of the measure, according to the Government, is to create a scenario of greater legal certainty for investments in the sector by standardizing regulatory rules. 

One of the main amendments proposed by MP 844/2018 is the allocation of responsibilities to ANA, including the progressive creation of national reference rules to regulate the provision of basic sanitation utility services, which shall have to be complied with by municipalities as a condition for access to Federal public fund or to financing arrangements with federal resources or funds managed or operated by federal public administration entities.

The Provisional Measure further provides for significant amendments to Federal Law #  11445/2007, reaffirming the municipalities’ ownership over basic sanitation services and, in the event of common interest, allowing such ownership to be exercised by an inter-federal committee for metropolitan areas or by means of associated management instruments, pursuant to article 241 of the Federal Constitution.

Among the main amendments made to the regulatory framework, we point out the following: 

  • an exception to the rule set forth by article 13, paragraph 6, of Federal Law #  11107/2005, establishing that in case of privatization of the state utility company, program agreements executed by these companies will not be terminated; 
  • provision for prior public call to execution of program agreements in those events in which public bids are waived, with a view towards attracting the most efficient and beneficial expression of interest proposal for decentralized services delivery;
  • possibility for total or partial subcontracting of the contracted scope in the event services are provided under a program agreement;
  • priority in the allocation of non-burdensome federal funds to services provided by associated management or relative to municipalities with larger service deficit and population with ability to pay incompatible with the services economic and financial feasibility; and, finally
  • whenever necessary, creation of additional forms of remuneration to ensure the economic and financial sustainability of sanitation services, including subsidies or grants.

The Provisional Measure is a legal instrument adopted by the President of the Republic and is subject to approval by the National Congress in order to be definitively turned into law. It shall be effective for sixty days, renewable once for the same period. The above mentioned amendments are relevant for the completion of legal models that may arise to restructure the sector with greater participation from private entities. 

The infrastructure team at Azevedo Sette Advogados is at your disposal to clarify any doubts on the matter. Our experience encompasses two decades of thorough review of sanitation regulation, implementation of legal models and advice to important players in the sector.