Investor Presentaiton
PANORAMA OF THE PRIVATE SECTOR'S PARTICIPATION IN SANITATION 2021
A NEW SOCIAL AND ECONOMIC FRONTIER FOR BRAZIL
The rule for transition
Concession and PPP contracts preceded
by bidding or those that are the subject of
studies already contracted by federal finan-
cial institutions prior to the publication of
Decree 10,588/2020 - will not be restricted
to the allocation of federal public funds and
financing arrangements using Federal re-
sources if they do not make arrangements
for regionalized provision.
GRAPH 2
In these cases, restriction of access to oner-
ous and non-onerous capital for sanitation
remains in force until the aforesaid munic-
ipality has been inserted in a regionalized
provision. In other words, if the decision to
join up with a regionalized structure occurs
after 31 March 2022, the restriction shall be
lifted and the municipality shall once again
be eligible for the allocation of Federal re-
sources for sanitation.
Deadline for formal establishment of regionalized
provision and its consequences
From 03/31/2022
Municipalities that:
•
•
•
do not formally set up a regionalized
structure for service provision;
have no concession contracts or
PPPs in place;
or do not have a project with
financial structuring by BNDES
or FEP (Support Fund for the
Structuring and Development of
Concession Projects and Public-
Private Partnerships of the Union, of
the Caixa Econômica Federal)
Will have NO access
to onerous feder-
al public resources
(BNDES, CEF, etc.) and
non-onerous resourc-
es (like those from
the Ministry of Re-
gional Development).
Important: The concession, PPP or financial structuring must have already been in
progress on the date of publication of the Decree. Thus, if any municipality wants to
perform a PPP on its own after the publication of the Decree, it will not have access to
federal public resources as from April 2022.
Modeling
One of the guidelines for regionalization are If the targets cannot be met
the so-called services of common interest,
which imply infrastructure shared by two or within the new deadline, then
more municipalities inserted in a metropoli- this regionalized provision is
tan region, urban agglomeration or microre-
gion. In these cases, participation is com- NOT FEASIBLE and needs to
pulsory and the modeling of these blocks be restructured.
needs to take into account the relations of
interdependence among the municipalities.
One example of regionalized modeling was
the creation of blocks of municipalities by
the BNDES for the Cedae auction in Rio de
Janeiro, in which the participation of munic-
ipalities was achieved through associated
management instruments or the approval of
the metropolitan body - in the case of the
Metropolitan Region. To allow economies of
scale, technical feasibility and economic at-
tractiveness, the state was divided into four
blocks of municipalities, with each of these
blocks including a region of the capital.
When studies for the bidding process for
the provision of regionalized services sug-
gest the economic and financial unfeasi-
bility of universalization by 2033, the law
allows targets to be postponed until 1 Jan-
uary, 2040, provided prior consent has been
granted by the regulatory body that, in its
analysis, should observe the principle of
sliding scale tariffs.
As set out in Decree 10,588/2020, the Union
may provide technical and financial sup-
port for the transition to the regionalized
provision model, provided service holders
comply with the steps provided for in Law
14,026/2020, as set out in Article 13.
There is no established recipe for the mod-
el based on regionalized service provision.
Each location has its own characteristics
and challenges that need to be well looked
into. It is worth looking into good examples,
such as the CEDAE project in the Greater
Maceió Metropolitan Region, and other
projects being structured by BNDES.
In addition to technical and financial aspects,
there are also political issues that need to be
observed. Dialogue among public managers
is key to the success of this model.
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