Associations warn of the end of the sanitation framework under Lula 3

Eight associations sent a letter to the elected government in which they point out risks of a setback in basic sanitation starting in 2023. For them, the opening of the market to the private sector may suffer a setback during the new term of Luiz Inácio Lula da Silva ( PT).

Although the subject was not dealt with in the final balance of the transitional government, the changes were recommended by the Cities group, which had the participation of historic PT members, such as Jilmar Tatto and José de Filippi Junior.

The main recommendation is to create a new legal framework for basic sanitation, barring concessions or privatizations. The matter should be discussed between Lula and the future Minister of Cities.

There would also be a repeal of provisions of the law through decrees to guarantee, primarily, the possibility of so-called program contracts —in which state sanitation companies are contracted by city halls, without bidding. The deadline for this initiative to be implemented, according to the transitional government, would be up to one hundred days.

The current framework prevents the receipt of federal transfers to city halls that opt ​​for this type of contract, a way to encourage concessions and avoid political use and poor provision of the service.

The transition team’s justification for the change is that the current framework discriminates against public companies in bidding processes.

In the manifest, sent on December 20, the organizations claim that the law did the opposite: it stimulated competition, without barring public companies from participating in bidding processes so that city halls “select the best service provider and have structured contracts so that regulators can better monitor the provision of services”.

The signatories also claim that the new government intends to empty the ANA (National Water Agency). Today, the role of the agency is to create the norms that will come into effect in all spheres of public administration —municipal, state and federal.

The idea is to transfer this competence to a new department linked to the Executive Branch, the National Secretariat for Environmental Sanitation.

For them, the proposal is a step backwards and repeats the formula of the past of allowing inefficient state-owned companies to obtain contracts with city halls through political connections.

Without the ANA, the execution of these contracts would be subject to the political interests of the federal administration due to its linkage to the Executive, they say.

At the agency, whose directors have a mandate, the rules have to be complied with under penalty of a fine for the concessionaire and, at the limit, cancellation of the contract.

The leaders of Abdib (Brazilian Association of Infrastructure and Base Industries), Abemi (Brazilian Association of Industrial Engineering), Abimaq (Brazilian Association of Machinery and Equipment Industry) sign the letter; Sindesam (National System of Industries of Equipment for Basic and Environmental Sanitation), Abcon and Sindcon (National Association and Union of Private Concessionaires of Public Water and Sewage Services); Apecs (São Paulo Association of Sanitation and Environment Consulting and Services Companies), Abce (Brazilian Association of Engineering Consultants) and Sinaenco (National Union of Consulting Architecture and Engineering Companies).

“We cannot go back on the previously observed regulatory and legal advances, the result of broad debates in the National Congress and sector agents, the foundations of investments already made and contracted and those yet to be made, which already provide access to treated water and sewage to millions of people”, said Percy Soares Neto, executive director of Abcon.

Approved in June 2020, the framework defined guidelines for the universalization of the service. At that time, about 16% of the Brazilian population did not have access to drinking water and 45% were not served by sewage, according to data released by Snis (National Information System on Sanitation).

With the new legislation, 99% of the Brazilian population should have access to drinking water and 90% to sewage collection and treatment by 2033.

For this, the law established competition as a way to boost investments. According to Abcon, in just two years, 21 concession auctions were held in 244 municipalities to serve 24 million people.

Abcon also says that there were concessions and PPPs (public-private partnerships) in Amapá, Rio de Janeiro (Cedae), Alagoas (metropolitan region of Maceió and in Agreste do Sertão, in the Mata zone), Ceará (in the great Fortaleza and in Cariri), Espírito Santo (Cariacica and Viana) and Mato Grosso do Sul (sewage). Contracted investments totaled R$ 82 billion.

The participation of the private sector in serving the population increased from 14% in 2019 to around 23% in 2022.

Rural area with Funasa

The Lula government 2 (2007 to 2010) had already approved a regulatory framework for basic sanitation, setting the goal of universalizing the service. The project was being carried out, basically, with public money. According to the transition team, between 2003 and 2015, BRL 200 billion was invested in the area. However, from 2016 onwards, the planned budget resources came to represent 20% of what was executed in 2013 —which would have led to a paralysis.

For 2023, the budget forecast is 5% of the resources planned for 2022, which had already been reduced.

To get around this situation, the members of the transition proposed boosting the Saneamento para Todos Program, giving special attention to rural areas and small municipalities. Funasa (National Health Foundation) would become the specific operating agent for this public.

The project would rely on the annual FGTS budget, with no limits or restrictions on taking out new lines of credit.

Another initiative of the transition group is to extinguish the possibility of Caixa Econômica Federal structuring concession projects for sanitation with resources from the FEP, a fund that pays for services, later reimbursed by the winner of the auction.

This line of business gave rise to a queue of mayors interested in working with Caixa. More than R$ 13 billion in private investments have already been secured for city halls across the country through PPPs and concessions, according to the bank.