In Rio, a proposed law could prevent the sale of Cedae and even generate profit for the state.

The proposal envisions using funds from the Kandir Law that the federal government owes to the states; privatization is criticized by experts.

Deputies from the Legislative Assembly of Rio de Janeiro (Alerj) presented a bill last week that could prevent the privatization of the State Water and Sewage Company (Cedae) and also generate more resources for the state's public coffers over the next few years.

Bill 2706/2020, authored by Representatives Gustavo Schmidt (PSL), André Ceciliano (PT), Zeidan (PT), Luiz Paulo (PSDB), and Lucinha (PSDB), proposes that the state's loans from the Union under the Fiscal Recovery Regime be repaid with resources from the Kandir Law.

On the 20th, the Supreme Federal Court (STF) ended a stalemate that had lasted more than 20 years between the Union, the Federal District and the states, and ratified an agreement for R$ 65.6 billion to be transferred to the states as compensation for uncollected Value Added Tax (ICMS).

Created in 1996, the Kandir Law aimed to stimulate the competitiveness of Brazilian products abroad by exempting them from taxes. Since the tax was a state tax, the states suffered a loss in revenue, and therefore there was an agreement that the federal government would compensate, but this transfer never occurred.

Now, the Rio de Janeiro State Legislative Assembly (Alerj) proposes that the compensation from the Kandir Law, which will go into the state's public coffers, be used as a substitute for the privatization of Cedae, which was the guarantee for the payment of loans with the Federal Government under the Fiscal Recovery Regime.

In an interview with the newspaper Monitor Mercantil, the former president of Cedae and engineer Wagner Victer stated that the sale of the state-owned company is "completely inopportune and will not bring the alleged benefits; on the contrary, it will bring operational problems."

“Even from a financial point of view, this [Alerj bill] would be an exceptional action for the State of Rio, because what Cedae will profit in the next 17 years, which is the credit period for these resources, will be something on the order of, based on the average annual profit, equivalent to R$ 20 billion, which is a value at least five times greater than what was given as collateral in the bank transaction,” argues Victer.

In an interview with Brasil de Fato, Ary Girota, an employee of Cedae and president of the Union of Workers in the Water Purification and Distribution Industries and in Sewage Services of Niterói and Region (Sindágua-RJ), criticized not only the timing of Governor Wilson Witzel's (PSC) implementation of the company's privatization, but also attacked aspects of the proposal.

"We are in the midst of the Covid-19 pandemic, with a rising curve of infections and deaths. How can a public notice like this be issued, with two public hearings in the coming months, but which will actually be virtual hearings? Who benefits from this process of handing over water distribution in 65 municipalities?", questioned Girota.

The Cedae employee highlighted the fact that the company has an annual profit of around R$ 1 billion and that private companies do not make the necessary investments in sanitation, as the state is obligated to do. Ary said that privatization processes for water and sewage treatment have failed in several countries.

"In Paris, Berlin, New York, Buenos Aires, in several municipalities in Tocantins, and in more than 240 cities worldwide, the water and sewage treatment service has been re-nationalized because the companies that manage it only want profit and don't want to invest. And so, the State had to reabsorb it. In our case, it's even more serious because Cedae is a company that generates profit," he argues.

Notice

In addition to the concession tender, the state government and the National Bank for Economic and Social Development (BNDES) opened a public consultation this week, which will run until July 8th, where the public can make suggestions to the project. According to Ary Girota, the tender contains inaccurate information about the company's management.

"The tender calls for an investment of R$ 2.4 billion in the first two years. With that amount, you could start the sanitation works in Rocinha and Complexo do Alemão and not finish. Cedae can invest much more than the R$ 30 billion that the tender assumes will be made by the private sector," comments Girota.

The representative of the Cedae workers pointed out that the tender proposes the privatization of distribution services, which are less costly and more profitable, but that the state retains the most expensive part of the water collection, production, and treatment process. "The distribution is already in place, while production, due to the high pollution levels in the river basins, has a much higher cost."

Ary Girota also said that Witzel lacks a state policy because he fails to consider that "in the private sector, first you separate the shareholders' profit share, then you look at what is invested in the service" and does not take the population into account, since "where the system was privatized, the sanitation problem was not solved and the rates are 40% more expensive than Cedae's".

The union leader asserted that Witzel's proposal has not been well received in the Rio de Janeiro State Legislative Assembly (Alerj) and that more than 50% of the state parliament opposes privatization. "The BNDES figures do not reflect reality. And anyone with a minimum of awareness and strategic vision realizes that this concession is incredibly irresponsible," he criticized.

Edited by: Mariana Pitasse and Raquel Júnia

Source: Brasil de Fato