Brazil's water watchdog to focus on regulations to attract private investment

Brazil’s water and sanitation watchdog ANA will focus on reviewing new regulations and guidelines for the segment, which are considered key to provide more predictability and legal certainty for investors in the sector, after new legislation was approved by congress.

Congress approved last year a new framework for the segment that is likely to trigger investments of more than 700bn reais (US$125bn) in the coming years, mainly from the private sector which will be allowed to play a bigger role in water and sanitation.

Water utilities controlled by state governments currently handle around 75% of revenues in the sector, with municipal firms responsible for approximately 20% and private companies the rest.

However, ANA must still clarify various points of the legislation.

"One of the priorities that investors need to know is how the projects will be in terms of scale, as some concessions will involve multiple small municipalities," André Luiz Freire, a lawyer specialized in infrastructure at law firm Mattos Filho, Veiga Filho, Marrey Jr e Quiroga Advogados, told BNamericas. "We need to have that clear about who will be the awarder, if it will be a consortium of municipalities or any other model and it also needs to be clear what happens if during a contract a municipality wants to leave the group." 

"We are attentive to the regulation of the sector because we want to participate in the next concession auctions," said Waldo Leskovar, CFO of Brazilian infrastructure group CCR, during a recent webcast. CCR currently holds highway, urban transport, airport and waterway concessions.

Another key point for potential investors is the political influence in such contracts, as the sector, contrary to what happens in the electric power and oil and gas industries, depends on municipalities and that could put in doubt the real power of ANA to act as a national regulator.  

"One way to solve this problem may come from the federal government forcing municipalities to follow ANA's rules, with the penalty for municipalities being the cutting off of resources for sanitation from the federal government," said Freire. "Another way could be via banks only providing financing for projects if the rules determined by ANA are followed."

The regulator will evaluate the new regulations and guidelines until the second half of 2022.