More than a thousand cities may no longer have state-owned companies at the forefront of sanitation

BRASÍLIA – More than a thousand municipalities may no longer have state-owned companies as providers of sanitation because public companies have not been able to prove that they have the capacity to achieve the goals of the new legal framework for the sector. The scenario opens space for private companies to compete for Water and Sewer sanitary services in these cities, which will need to provide new operators while contracts with state-owned companies are terminated.

The survey was carried out by the consultancy FT Economics, based on cross-referencing data from the segment, including National Water and Sanitation Agency (ANA). This stage of the legal framework was designed to remove providers that would not be able to afford the investments necessary for the universalization of the supply of water and sewage in the country.

Currently, state-owned companies are the main operators in the sector. This model, however, was not able to inject enough resources to serve the population. Today, almost half of Brazilians live without access to a sewage system and almost 16% are not served with a water network. According to the goals of the law, by 2033, companies must guarantee that 99% of the population will have drinking water and 90% of sewage collection and treatment.

According to the study, 28% of the total number of municipalities where state companies operate will no longer be served by these companies. Faced with this new scenario, the legal framework encourages municipalities to promote auctions to hire a new operator. The national secretary of Sanitation of the Ministry of Regional Development, Pedro Maranhão, said that the federal government works for a transition period in these places, so that the populations are not left unattended. “These public companies, for better or worse, provide services. And it’s usually bad, so much so that they haven’t proven ability. But you cannot take the risk that tomorrow she will suspend work,” he said.

reasons

Capital of Bahia and fourth most populous city in the country, savior is among more than a thousand municipalities that may have to find a new way of providing water and sewage services. The Bahian capital is served by Empresa Baiana de Águas e Saneamento (Embasa), but the contract with the state-owned company has already expired. According to the new legal framework for sanitation, in these precarious situations, municipalities must seek a new operator.

To the Estadão/Broadcast, the city government stated that the Municipal Integrated Basic Sanitation Plan is being prepared and that the future of the provision of sanitation services in the Bahian capital is under discussion. “After the conclusion of its elaboration, the plan will be forwarded to the City Council as a bill for the vote of the Legislative which, after promulgation, will regulate the sanitation services in the municipality. Therefore, the topic is still under discussion. Embasa was also contacted, but did not respond.

The case of Salvador exemplifies one of the reasons that should lead state public companies to lose participation in the sanitation sector. Among other reasons, there is the disapproval of contracts by regulatory agencies in the process of proving economic and financial capacity and the decision of some state-owned companies to give up part of their business.

For Felipe Tavares, a partner at the consultancy FT Economics and responsible for the study, the context of abandonment is the result of errors by the state companies themselves, which would have neglected the activities over time and made the universalization account “too expensive”.

There are still other reasons that open the way for municipalities to seek new operators, such as the Basic Sanitation Company of the State of São Paulo (Sabesp). In the state, nine municipalities served by Sabesp will be able to embark on the search. To the Estadão/Broadcastthe state-owned company stated that the cities will continue to be served by it until they decide on the “possible bidding” of the activities.

No interruptions

The sanitation company also highlighted that the condition of these municipalities does not imply automatic interruption of the service, and the city can maintain the provision through the current provider for the “period necessary for the effective termination of the contract and for the transfer of the service to a new provider”, said the state-owned company, which seeks “compensation” for investments already made.

Two reasons led the nine municipalities to this situation. In the case of Águas de Santa Bárbara, Bofete, Dourado, Nova Guataporanga and Socorro, the cities were not part of the process of proving the state-owned company’s capacity for not being part of the regional sanitation unit served by Sabesp. The bloc was created by law last year, along with three others, in compliance with the rule of regionalization of services imposed by the legal framework. The law brought together 370 of the 375 municipalities served by the state-owned company in Sao Paulo in a single block. The remaining five were distributed to other units.

The other four affected municipalities (Agudos, Campo Limpo Paulista, Laranjal Paulista and Quintana) became part of Sabesp’s economic and financial verification process, but the municipalities decided not to sign the amendments for incorporation or adaptation of universalization targets.

There are also cities that will no longer be served because the state-owned companies have not even presented the documents proving their capacity, a list anticipated by the Estadão/Broadcast in January. In this case, all contracts for municipalities operated by the companies are in a precarious situation. It is the case of cities in Acre, amazon, maranhão, Piauí, Roraima and Tocantinsfor example.

According to the National Sanitation Secretary of the Ministry of Regional Development, Pedro Maranhão, the government will make contact with the city halls to help in the resolution and definition of how a new operator will enter the city. “We are going after the municipalities to find out how we helped in this problem. To see if a bloc, a consortium is formed”, quoted Maranhão.