Will bill 3,235/2019 ensure a sustainable water and sanitation universalization in Brazil?

A historical perspective of the water and sanitation governance in Brazil.

By Jennifer Jacobowitz Rae


The access to water and sanitation is a human right that has been discussed  internationally since the 1970s. However, it has always been linked to the right to life,  health, adequate housing, adequate food, and working conditions; a list that can certainly be extended as water takes part in most components of human life. It was only in 2010, however, through Resolution A/RES/64/292, that the UN formally recognized the human right to water and sanitation and further recognized its essentiality for the realization of all other human rights. The resolution calls upon governments and international organizations to provide financial resources, contribute to capacity building and transfer technologies to help countries to ensure safe, clean and accessible drinking water at reasonable costs and sanitation for all. 

Numerous investments in water and sanitation infrastructure and services are needed to ensure access to universalization. Countries, states, and municipalities are not always able to do this on their own, requiring financial inputs from other investors, i.e. the private  sector. Thus, the establishment of an appropriate governance model and effective regulation of the sector is essential to ensure its attractiveness to investors, who can help – in many ways – make universal access, social equity and the efficiency of water and sanitation services viable.


The investments in water and sanitation infrastructure came very late in Brazil. According to Costa (1994), “the expansion of industrialization and the service sector in the 1950s intensified the urbanization process of the main Brazilian cities, generating a considerable demographic increase. However, investments in the infrastructure sector did not happen proportionally. By the mid-1950s, almost 80% of Brazilian municipalities still lacked regular water supplies.” Many municipalities did not have the resources to install the necessary networks, nor even to operate them when they were already in place, requiring the intervention of their respective state and/or the federal government to support them. Thus, in the 1960s, the three levels of the federation were involved in providing these services to the Brazilian population in different local and regional arrangements characterized by widespread institutional fragmentation and indefinite sources of funding. The need to implement urban development policies was evident, which led to the creation of the National Sanitation Plan (Planasa) in 1969. 

The arrangement established by Planasa generated positive political and economic returns that reinforced a trajectory essentially marked by the dominant performance of state water and sanitation companies. During this period, the investments came basically from the revenues generated by the operation of these companies, and from the federal government that provided resources only to state companies and not to municipal ones. 

The dismantling of the authoritarian government in the 1980s made room for the process of political decentralization, which valued municipal autonomy and withdrew from the federal government the role of policy implementation at the local level, thereby strengthening its funding role. The states were able to free themselves from political subordination to the federal government, but in return lost their former sources of power in the face of municipal autonomy. The extinction of Planasa in this new federative conjuncture allowed the free operation of state water and sanitation companies in the sector, which became a valuable powerhouse for governors in a scenario of widespread political weakening of the states (SOUSA; COSTA, 2016). 

Already struggling to develop the water and sanitation sector, in the 1990s, the Brazilian government sought alternatives to attract investments. As a result, in 1989, the Washington Consensus conditioned the Brazilian government’s access to international financing to the fulfillment of a neoliberal-inspired agenda, where the Brazilian state should reduce its participation in the national economy so as not to intervene but to regulate it, making room for private investments in large productive sectors of society (SOUSA; COSTA, 2016). 

In the sanitation sector, the governors of the states were encouraged by the federal government to sell their companies to the private sector to enable the fiscal adjustment of the states with the federal government. Externally, the privatization of these companies would be of interest of international water economic groups, in the exploitation of the Brazilian water market. Despite the support of some governors, the proposal was aborted by the organized action of groups with direct and indirect interests that would be affected by the change in the sector governance mechanism (SOUZA; COSTA, 2011).

For more than a decade, the absence of a new regulatory framework for water and sanitation services created decision-making uncertainty, which affected investments and contributed to the underperformance of the sector during the period. It was not until 2007 that a new law capable of portraying a national strategy was enacted. Law 11,445/2007 is considered the Brazilian Sanitation Regulatory Framework because it brought the guidelines to be observed in the contracts signed between the Government and the private concessionaires or state-owned companies; it dealt with the “public services guidelines of the sector”; and it determined the “exercise of the function by regulatory authorities”. The creation of this law highlighted the importance of the sector for public infrastructure and attracted investors’ attention to the opportunities in Brazil. 

The Sanitation Regulatory Framework has created a trusted environment for investors and lenders. Organizations such as the World Bank, Inter-American Development Bank (IDB), Global Environmental Facility (GEF), Japan Bank for International Cooperation (JBIC), among others, have given more credibility to the municipalities that were structured and followed the guidelines of Law 11,445/2007, facilitating the financing of projects at lower interest rates. The law also allowed the expansion of the number of private concessions, currently in force in more than 300 municipalities in the national territory (Brazil has 5,570 municipalities in total). 

Despite these positive changes, it is noticeable that only municipalities with technical and financial resources were able to meet the requirements of Law 11,445/2007, preparing their Municipal Sanitation Plans and creating a transparent independent regulatory agency with administrative, budgetary and financial autonomy; which attracted investments or better financing alternatives for their water and sanitation needs. The vast majority of municipalities have not been able to organize themselves and remain without access to these resources. hey are unable to provide legal stability to those interested in investing in their water and sanitation infrastructure. 

The value of regulating the activity of strategic sectors such as water and sanitation aims to provide legal certainty to investors. Due to the Brazilian political tradition, it is necessary to provide this security through specific and detailed provisions in the legislation that, at a minimum, prevent sudden changes in policies in these sectors. For Galvão Junior (2009), proper regulation of the sector can make an important contribution to the universalization of access to water supply and sewage services: 

“In the pursuit of universalization, regulation can play many roles. One of them is to enforce, through regulatory policies, the macro-definitions established in the sectoral public policies decided within the executive and legislative powers. Another role would be to develop mechanisms that encourage the efficiency of service providers, so that more resources can be channeled into infrastructure expansion. In addition, regulation provides a more stable environment for public and private investments in the sector.” 

According to a study by the National Confederation of Industry (CNI), the economic crisis in the country generated the need for cost containment and led the federal, state and municipal governments to paralyze important infrastructure projects. Thus, after a few years of economic recession, with empty public coffers and sanitation coverage rates worsening year after year due to lack of investments, the need for private investments to develop the sector remained clear. 


It is incorrect to state that private companies offer better services than public companies, or that public companies offer better services than private companies. In the water and sanitation sector, each case is unique and should be studied individually considering numerous factors, i.e. political moment, economic scenario, citizens’ preferences, robust regulation, well-structured concession contracts, etc. Additionally, research conducted by prominent institutes has concluded that, for the population, no matter who provides the service. Most important is to have access to quality service at a fair price.

In Brazil, there have been successful and unsuccessful cases of water and sanitation privatization. The case of the state of Tocantins, for example, is a well-known case of privatization failure. Due to the poor quality of services and lack of investments of the private concessionaire, the Legislative Assembly of the Brazilian State of Tocantins ended the private concession over water and sanitation services in 79 of the state’s 139 municipalities in March 2010 and created the Tocantins Sanitation Agency (Agencia Tocantinense de Saneamento – ATS), a public company, to provide the services for these municipalities. The city of Itu, in the state of São Paulo, is another example of privatization failure, where after ten years of poor performance by private operators, including severe construction delays, non-transparent management, water rationing and tariff hikes, the ownership and control of water and sanitation services were returned to public hands in early 2017.

In contrast, there are many successful cases of water and sanitation privatization in Brazil. Two notable cases are in the city Uruguaiana, in the state of Rio Grande do Sul, and In the city Palestina, in São Paulo state. Uruguaiana water and sanitation services were privatized seven years ago and, since the beginning of its operations, the private concessionaire has expanded the sewage assistance from 9% to 94%. The impact of these investments can be seen directly in health statistics of the 115,000 inhabitants of the city. The number of acute diarrhea cases registered fell from 3,002 to 106 during the 7-year sanitation development period that elapsed from 2012 to 2018, a 28-fold decrease. In the case of Palestina, a municipality with 11,000 inhabitants in the interior of the state of São Paulo, the privatization of water and sanitation services happened in 2007 and was based on fair tariffs and regulated contracts. The concessionaire has taken its management capacity and technological innovation to universalize sanitation services, combining contractual safety, good governance, transparency, and respect for the population and the environment. A popular opinion poll showed that 92% of the population of Palestina approves the services provided by the private concessionaire. 


Although the Sanitation Regulatory Framework has been instituted and some modest private investments have been done, Brazil has not yet been able to overcome numerous difficulties in applying Law 11,445/2007’s fundamentals and ideals, remaining in the risk zone for most investors and lacking heavy investments to ensure universal access to water and sanitation to its population. Currently, only 80% of the Brazilian population receives piped treated water at home; and 50% of the population still lacks sewage collection services. In addition, not all the sewage collected is treated before being disposed of in natural water resources, demonstrating total disregard for the environment and representing risks to public health. 

Aiming to promote better governance and configure more legal stability for investors, in 2018, Provisional Measure 844/2018 was created to “update the legal framework for basic sanitation and amend Law 9,984 of July 17, 2000, to grant jurisdiction to the National Water Agency to create national reference standards on sanitation services, (…), and Law 11,445 of January 5, 2007, to improve the structural conditions of basic sanitation in the country”. This provisional measure expired later the same year before being voted by the National Congress, and a new provisional measure (MP 868/2018) was created still in December 2018 for the same finality. In June 2019, this second provisional measure also expired before being voted by the National Congress and a few days later, given the urgency of the matter, Bill 3,235/2019 was proposed using mostly the same text of Provisional Measure 844/2018, and is currently under consideration by a special committee in Congress. 

The Bill proposes a new legal framework for basic sanitation in Brazil and is a historic breakthrough. Much more than a legal framework, the Bill can reach a new civilizing milestone. Finally, the country could move to a new stage of human development as it proposes important advances for the water and sanitation sector. 

Bill 3,235/2019 creates better and fairer conditions for the participation of private companies in the sector and, because there is no perfect standard model to ensure a successful and sustainable privatization of water and sanitation services, the Bill seeks to mitigate the risks of privatization through its requirements. A key part of the privatization process is a sound regulatory framework, setting obligations, commitments, deadlines, tariff policies, etc.

One of the most relevant demands of the new Bill is that, no matter the concessionaire (public or private), water and sanitation contracts must set universalization targets to supply 99% and 90% of the population with drinking water and sewage collection and treatment, respectively, by December 31, 2033 (ongoing contracts will have one year to adapt to this demand).

The Bill establishes equal conditions of dispute between public and private companies, and determines the opening of bidding processes with the participation of both sectors to compete for the provision of water and sanitation services. This measure extinguishes the preemptive right of state-owned companies to win these contracts. In this sense, the Bill also prohibits the execution of the so-called “program contracts”, which are struck directly between the service holders and the service providers with no competition, and is widely used by state-owned companies in the provision of services to municipalities.

Nevertheless, aiming to ensure that sanitation companies have their assets valued in the case of a sale, the Bill also paves the way for state-owned companies to extend “program contracts” currently in force after the new legislation is published, provided that they include the universalization targets in their contracts within one year of the law’s publication. 

In order to prevent small cities from being neglected and unassisted due to their potentially financial unattractiveness in the eyes of investors, the bill creates the “blocks” figure, making it possible to associate highly profitable municipalities with less profitable ones. In these cases, the supply of water and sanitation services should be provisioned to the entire block by the company that wins the bid. Adherence to a block by municipalities is optional, but the Bill creates incentives for them to enter the blocks, such as, for example, conditioning access to public resources to this adhesion. 

Bill 3,235/2019 also establishes the National Water Agency (ANA) as the body that formulates regulatory guidelines for the sector. Its objective is to centralize in ANA the development of reference standards to be adopted by the regulatory agencies and holders of the sanitation service. The Bill, which amends ANA’s founding law, defines that it will be up to the agency to establish, among others, reference rules on tariff regulation of basic sanitation services in order to promote “adequate provision, the rational use of natural resources, economic-financial balance and universalization of access to sanitation”; reference rules on quality and efficiency standards in the provision, maintenance and operation of sanitation systems; and standardization of business instruments signed between the service holder and the delegate. With ANA leading the sector’s regulatory standards and pricing rules, it will be possible to have greater control over the quality of the services delivered and investments made for expansion by the concessionaires. If the company does not comply with the contractual clauses, the concession can be canceled. 

Lastly, in order to ensure access to clean water and sanitation services for the poor, the new Bill ensures the maintenance of the social tariff and companies are obliged to provide subsidies to the poor so that they can afford the access to clean water and sanitation. 


Among so many priorities, a particular one has plagued Brazil for years: the need for more investment in sanitation. Investments were never up to the demands of a Brazil in need of health, social welfare and environment care. The country has not improved the coverage of sewage collection and treatment offered to the population during the past 30 years. The recent fiscal crisis has deepened the serious financial situation of states that do not have resources to invest in priority areas. In cases where states, through state sanitation companies, assist more than 70% of their municipalities, the sector’s situation becomes even more precarious. The choice of partnership with the private sector becomes even more essential for Brazil to obtain the necessary resources – not only financial resources, but also planning, technology and management – for the expansion of sanitation. 

The deficiency of these services leads to undesirable situations and affects the well-being and the health of the population, as well as the environment. Without sanitation, a considerable part of the Brazilians – most of them low income people facing other difficulties in access to public health and education – are subject to water-borne epidemic diseases and complications arising from poorly treated water and lack of sewage treatment. 

The legal framework of sanitation has been the subject of discussions in the National Congress since mid-2018, when the Executive Branch forwarded to the Legislative Branch a proposal as a Provisional Measure to update and modernize the guidelines governing the sector. After some bureaucratic and political barriers, and two expired provisional measures, Bill 3,235/2019 was proposed and is currently under consideration by a special committee in Congress. The Bill aims to reformulate the water and sanitation legal framework, and is paramount in ensuring the legal certainty of the sector, which attracts investors and creates new opportunities for private investment, in addition to promoting regulatory consistency and efficiency in the provision of services. Bill 3,235/2019 tries to balance the interests of the municipalities, the public operators, the private investors and operators, and – more importantly – of the citizens. It presents innovative clauses that seem to be fair with all stakeholders of the sector. Brazil urges for changes in the sector to be able to keep developing socioeconomically, and this Bill provides tools for the country to address its needs. 


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