Sanitation: SP launches program to unlock concessions – 07/14/2023 – Market

The government of São Paulo plans to launch next Tuesday (18th) a program to try to increase the adherence of municipalities to the sanitation blocks provided for in the sector’s legal framework.

According to Semil (Secretary for the Environment, Infrastructure and Logistics), the implementation of UniversalizaSP is one of the measures to bring forward the deadline for the universalization of water supply and sewage collection and treatment.

Under the program, the state government must provide technical support to municipalities that operate basic sanitation services —through autarchies or municipal services— to structure projects for which municipalities anticipate universalization goals.

It should also help the municipality to regionalize the provision of services, to encourage the definition of tariffs that allow an accessible service to users and to serve rural areas and informal urban centers, structuring new concessions or PPPs (public-private partnerships).

The announcement was announced this Friday by the ministry’s secretary, Natália Resende, to the newspaper O Estado de S. Paulo and confirmed by the Sheet.

She also said that the state government does not rule out helping municipalities with any guarantees. The state foresees, for this year, a mapping that will verify the need and reorganize three sanitation blocks that failed in São Paulo (only 3% of the cities that could integrate the blocks adhered).

The plan still needs to be made official by decree by the governor of São Paulo, Tarcísio de Freitas (Republicans).

Regionalization is considered one of the pillars of the sanitation regulatory framework, in which the states must group municipalities into regions, through state law and with their own governance.

The goal is to gain scale and share infrastructure, making cities with less resources have the support of nearby municipalities with higher revenues.

UniversalizaSP is not the first movement made by the state government in the sector. In May, Freitas signed a decree authorizing the contracting of studies to assess the feasibility of privatizing Sabesp (Basic Sanitation Company of the State of São Paulo), which is expected to be ready in 2024.

According to Sabesp data, the company serves 375 of the 645 municipalities of São Paulo, which correspond to 64% of the state’s population.

Percy Soares Neto, from Abcon (National Association and Union of Private Concessionaires of Public Water and Sewage Services), says that the sanitation framework had a device imposing that the states create the blocks in six months or the Union would do it.

“There was a euphoria with the approval, but it was a perverse mechanism that forced the states to run without carrying out the due political process of dialogue with the municipalities. The governors ended up having to do it from the top down, and São Paulo defined that a region would belong to Sabesp and the rest needs to be arranged. But there were difficulties all over the country.”

He believes that São Paulo is trying to invert the process, organizing it “from the bottom up”, with the participation of municipalities and offering support in modeling. “It is not trivial, it is necessary to carry out an engineering study (to assess the costs), another legal study (to see the best contract model) and an economic study (to define the rate to be charged).”

In this type of concession, the interested party can take more than a decade to recover the investment, and many smaller municipalities do not have the resources to structure attractive contracts.

In this way, concession contracts usually have a term of 30 years, from the signature, and the final date of the contract varies from one municipality to another.

According to data from September 2022 from the IAS (Institute of Water and Sanitation), 17 states have approved regionalization laws, 3 have bills in their respective legislative assemblies for more than a year, 3 have gone through recent processes of regional concessions and 3 are still did not consolidate bills.

Of the 645 municipalities in São Paulo, 149 do not have universal water supply and another 226 do not have a universal sewage system.

Critics of the framework claim that the universalization discourse was a media strategy to increase support for the approval of the legal framework.

Last August, the general coordinator of Ondas (National Observatory of the Rights to Water and Sanitation), Renata Furigo, told Sheet that the main objective of the law is the privatization of water and sewage services, and not the universalization of services.

Another recent report also pointed out that the lack of sanitation in isolated rural areas hinders universalization goals.

On the last 13th, President Lula’s government (PT) published two decrees with new rules that change the sanitation framework, after agreement with the Senate. In one of the texts, there was a loophole that did not require bidding for state-owned sanitation companies.