Eduardo Leite prepares privatization of sanitation amid legal dispute and threat of strike

Despite the suspense until the day before due to a contrary injunction, the Government of Rio Grande do Sul should receive, this Thursday (15), the purchase proposals of Corsan (Companhia Riograndense de Saneamento), a state public company that provides services of water supply and sanitation to 317 of the 497 municipalities in Rio Grande do Sul.

On Wednesday afternoon (14), the Court of Justice reconsidered the suspension of the process that had been obtained on the initiative of the union of workers in the sector, Sindiágua-RS. Thus, the auction scheduled for December 20 at B3, in São Paulo, is scheduled. The announcement provides for the sale of a single lot of 630 million shares for a minimum amount of R$ 4.1 billion.

If the auction is confirmed, Sindiágua threatens to go on strike, which could compromise supply services between Christmas and the New Year. Even if the auction takes place, the signing of the contract can only be signed after the judgment of the union’s appeals by the Justice.

Since the election campaign, Governor Eduardo Leite (PSDB) has argued that Corsan —as well as the already privatized CEEE-D, for electricity, and Sulgás, for natural gas— is one of the companies whose “privatization was imposed on the state” by be unable to meet legal obligations to provide service and investment.

In the case of Corsan, they are provided for in the Basic Sanitation Regulatory Framework, a 2020 law that determines that, by the end of 2033, 90% of the population will have sewage collection and treatment. According to the Government of RS, this number for the municipalities served by Corsan is around 20% and, to reach the target, R$ 13 billion in investments would be needed.

By failing to meet the targets, the state-owned company would be subject to breaches of contract with city halls, further damaging the company’s financial health.

“In the last government, we expanded from 16% to about 20% of treatment. That is, the attestation that the goal is unattainable with the company’s investment capacity comes from one of the governments that invested the most”, declares the Secretary of the House Civil, Arthur Lemos Júnior, who will be maintained in the second Leite government and leads the process.

Another complication of the framework for the search for investments, according to the government, is the impossibility of public companies to seek financing from agents such as the BNDES.

Sindiágua-RS, the entity that filed a lawsuit against the auction and had the injunction overturned on Wednesday (14), contests the scenario presented by the State Government.

According to the union, Piratini’s numbers ignore works in progress or planned, partnerships and programs already designed by Corsan in past governments —such as the implementation of individual septic tanks in distant locations— which could reach 77% of treatment by 2033. The target 90%, therefore, it would be feasible if there was a search for investments.

“What we are seeing is a state-owned company being packaged to sell and build cash to finance a successful mandate. The future of providing water distribution and treatment services, as well as the exploration of a natural resource in the state are completely in second place. plan”, says Arilson Wunsch, president of Sindiágua.

The union also warns of a potential stampede of city halls that are Corsan customers today, who would be just waiting for the privatization to be completed to justify the terminations with the state-owned company and seek new partners in the private sector themselves. According to the union, there are at least two consortiums of municipalities —in the regions of the North Coast and in the Middle Plateau— articulating joint post-privatization negotiations.

In order to keep Corsan attractive to potential buyers, the state offered the company’s customer municipalities an extension of the contract period by giving the company’s own shares on the eve of its sale in exchange. 76 contract amendments were signed. The number is small compared to the more than 300 municipalities currently served by Corsan, but they correspond to cities responsible for 52% of the company’s current revenues and include nine of the 10 largest municipalities served by the state-owned company.

According to the union, even the additives are subject to challenge in court, given that they would not have been approved by the city councils of the cities in question. Sindiágua further alleges that privatization puts inevitable tariff increases on the horizon.

The company would no longer enjoy the tax exemption and would no longer be able to use tools such as the “cross-subsidy”, when the most expensive tariff paid per user in an easier region to be served subsidizes another, whose service is more difficult and burdensome. The government disagrees.

“The tariff calculation has nothing to do with the service being provided by a public or private company. [sobre a tarifa], but the efficiency of the company. It will be able to offer a better rate because it is more efficient, especially in management, and the government will have the obligation to charge for the good execution of the service”, says Lemos Júnior.