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Brazil has important gaps in basic sanitation, and closing this gap requires huge investments.

• 51% of the population has no access to sewage collection
• 24% of the population does not have access to treated water
• The average water volume loss in water distribution is 38%
• R$500-700 billion in investments are required to provide universal service across the country

The sector has faced relevant challenges to address those gaps, including:

• Scale of concessions: The Brazilian Constitution stipulates that sanitation is the responsibility of local governments
• Governance model: Should the role of regulator and service provided be embodied by a single entity that constitutes a conflict of interest
• Service improvement: Companies often operate with low operational efficiency with unclear objectives
• Financial capacity: Operator restrictions and limited funding to investment in improving services or making them universal

The new framework attempts to address sector challenges through three pillars: namely regulatory stability, service quality reference and economic sustainability.

Regulatory stability
• Creating a federal agency (ANA) to develop reference regulatory and performance indicators
• Contracting operators requires a public tender
• Defined the basis for incentive-based regulation

Service quality references: Concession agreements with operational targets defined by March 31, 2022:
• Universal service by 2033 (99% potable water and 90% sewage collection and treatment); deadline extended to 2040 if necessary
• Quality of services provided
• Limited waste

Economic sustainability
• To obtain a concession, service providers must prove the economic-financial capability of the expansion
• Cities clustered to meet new requirements