New Sanitation Framework: Important Points of the Bill Approved in the Senate

The Brazilian Federal Senate approved Bill No. 4,162/2019, known as the “Sanitation Legal Framework”, which now goes for sanctioning by the President of the Republic.

In general, the Sanitation Legal Framework aims to stimulate the development of the sector, mainly by attracting private investment. Therefore, the proposed measures seek, among other aspects, to provide greater legal certainty to the sector’s partnership contracts.

The Framework addresses sensitive and long-awaited issues, with emphasis on: (i) the standardization of sanitation services regulation at the federal level; (ii) the possibility of regionalizing the provision of services from “blocks” of municipalities; and (iii) the extinction of the “program contracts”, instituting the mandatory bidding procedure and the consequent signing of the concession contract.

The attribution of competence to the National Water and Basic Sanitation Agency (“ANA”) to regulate and regulate the basic sanitation service is highlighted. In this way, ANA may, for example, standardize the sector’s technical and tariff regulation across the country. The agency will also be responsible for establishing quality and universalization goals, as well as tariff rules that guarantee the financial balance of the contracts.

The approval of the Framework will also remove obstacles to the privatization of state-owned companies that currently manage sanitation services at the state and municipal levels. Privatization projects for companies such as CEDAE (Rio de Janeiro); COSANPA (Pará); CASAL (Alagoas), are already being structured by the National Bank for Economic and Social Development (BNDES) and should be bid on in the coming years.

Demarest’s Infrastructure and Project Finance practices are available to for clarification on this and other matters.