Lula’s first actions in sanitation generate confusion in the sector, which sees threats to the landmark

Associations linked to basic sanitation will participate heavily in the inauguration of the Minister of Cities, Jader Filho (MDB-PA), this Tuesday (3), to take a stand in defense of the sector’s legal framework after the recent publication of measures by the government of President Luiz Inacio Lula da Silva (PT).

Entities such as Abcon, the association of water and sewage concessionaires, and Abdib, the association of basic industries, want clarification on the minister’s plan for the legislation that opened the market to greater private participation from 2020.

Under current rules, city halls and states are required to open competition —for public and private companies—for contracts for the provision of water, sewage and waste collection services.

For entities, the government has given mixed signals in recent days by signing the transfer of ANA (National Water Agency) to the Ministry of the Environment. In addition, Lula created the National Secretariat for Environmental Sanitation in the Ministry of Cities — to define the rules for operating this market.

The transfer of the agency took place through the provisional measure that restructured the ministries and the decree that modified the Ministry of Cities, both signed this Sunday (1st).

The measures taken by Lula so far do not bring significant changes in practice. But they raised suspicions that the new government might carry out the recommendations of the transition team for the sector.

As reported to Sheetthe report by the Transition Cities Working Group proposed the creation of a new legal framework, barring concessions or privatizations, and emptying the power of the ANA —whose functions related to basic sanitation would be transferred precisely to a National Secretariat for Environmental Sanitation (as the one created now).

Shortly after the publication of the team and transition report, eight associations sent a letter to the elected government in which they point out risks of a setback in the sanitation framework starting this year.

For them, the opening of the market to the private sector may suffer a setback during Lula’s new term.

Private entities also fear 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 hired by city halls without bidding.

The current framework prevents 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.

With the withdrawal of the ANA’s role from the sanitation process, the execution of these contracts would be subject to the political interests of the federal administration due to its linkage to the Executive, say the entities.

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 measures, however, do not deplete the agency’s power with regard to basic sanitation.

“The rules are not clear,” said Percy Soares Neto, Abcon’s executive director. “There is a lot of confusion. Just to give you an idea, with this provisional measure [da reestruturação do governo] ANA is linked to three ministries. The government will have to review this and the minister needs to make it clear what he intends to do.”

new guidelines

The new government has given mixed signals about sanitation —sometimes defending the revision of the legal framework, sometimes preaching partnership with private companies.

The Minister of the Civil House, Rui Costa (PT), said in early December that the plan is to accelerate concessions and partnerships with the private sector, especially in areas such as basic sanitation, based on changes in regulations on the subject.

“Brazilian states have been successful in this PPP modeling [Parceria Público-Privada]. It will be our focus, seeking to increase the number of concessions and PPPs”, he said.

The new legal framework for sanitation was a trigger for the development of partnerships with the private sector. According to Costa, the Lula government will “look fondly” at the approved regulation. For him, the format was “plastered”.

“We haven’t seen the explosion of investment in sanitation,” declared Costa last month. The future head of the Civil House added that the idea is to “make adjustments” to the framework.

The expectation for the expansion of partnerships had already been mentioned by Fernando Haddad before he became official as Minister of Finance.

“PPP is something that will happen a lot in the next government. We intend to launch a PPP policy, especially in the area of ​​infrastructure”, he said.

Haddad also signaled changes in legislation, but to encourage partnerships. “[Queremos mudar] some details in the legislation that have stopped [as PPPs]making it difficult to endorse the National Treasury and making it difficult for the Union to participate in state and municipal projects”, he said.