Government evaluates removing the lock for PPPs in state-owned sanitation contracts

The government of President Luiz Inácio Lula da Silva (PT) is considering expanding the presence of public-private partnerships (PPPs) in sanitation contracts. The idea is to change the lock created by the Jair Bolsonaro (PL) government, which established a limit of 25% of the contract value of state-owned companies to close partnerships with the private sector in the PPP model.

That is, the partnership cannot exceed 25% of the value of the concession contracts in the sector.

“We made progress in the conversation about removing the 25% limit on the PPP. In this, public and private companies converge. And this could be by decree, without changing the sanitation framework. What happened was a lock by decree of the previous government , which we already understood was not necessary”, said Percy Soares, executive director of the Brazilian Association of Private Concessionaires of Public Water and Sewage Services (Abcon).

The rule is included in one of the regulatory decrees from the sanitation milestone, approved in 2021. The Lula government now plans to publish a decree with changes —the change being the consensus between public and private entities in the sector that participate in conversations with the Planalto Palace.

Members of the Brazilian Association of State Sanitation Companies (Aesbe) and Abcon had a meeting at the Civil House, with the presence of minister Rui Costa and executive secretary, Miriam Belchior.

Aesbe defended that some program contracts (signed directly between municipalities and state water and sewage companies, without bidding) be extended. One of the arguments is that the extension of deadlines is necessary in some cases because obligations and targets have been included.

The legal framework for sanitation, sanctioned in 2020, set 2033 as a goal for its universalization —that is, providing water for 99% of the population and sewage collection and treatment for 90%.

People who were present at the meeting classified it as very positive. According to palace assistants, in this first phase, the government collects information from the sector, awaits a consensus proposal and must then arbitrate. The goal is to reach the goal of universalization.

The first point of consensus, according to reports gathered by the report, is to review the PPP lock in state-owned sanitation contracts.

According to Soares, from Abcon, who was at the meeting, the government’s idea is not to change the sanitation framework, but only the decrees edited by the previous administration.

The next meeting should take place next week, also in Planalto. Palace assistants expect the entities to arrive with new points of convergence.

During the transition of government, the then-nominee for the Civil House, Rui Costa, already said that the government’s plan was to accelerate concessions and partnerships with the private sector, especially in areas such as basic sanitation, based on changes in regulations on theme.

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

In an attempt to reverse the low rates of access to treated water and sewage, the Bolsonaro government had an assessment that, without the participation of private companies, it would not be possible to achieve the goal of universalizing sanitation services by 2033.

The proposal had broad support in Congress.

Therefore, the Bolsonaro government sent a project to replace program contracts with concession contracts, which require competition with the private sector. This exchange, however, was made more flexible (extending the deadline for some cases) in Congress.

A report by the Trata Brasil Institute, released last year, mentions that in 2021, “there was a change in behavior on the part of Brazilian states and municipalities”, causing the country to move BRL 42.2 billion in auctions for services in several locations.

Data from the SNIS (National Information System on Sanitation) indicate that last year, throughout the country, 55% of the population had access to the sewage network and 84.1%, to service with the water network.