Waste management under public-private partnerships in Brazil: towards a new regulatory framework

What challenges is Brazil facing in terms of waste management?

James Miralves – In August 2010, the Brazilian Parliament adopted Law 12.305 on Solid Waste in order to improve its management nationwide. This law is based on the “3Rs”: reduction, reuse and recycling. Landfilling is only considered for non-recoverable waste. The objective set by the national policy is to achieve a recycling rate of over 30% of solid waste by 2030.
 

Only 2 to 5% of waste is recycled
 

Today, it is estimated that only 2 to 5% of waste is recycled. It should be noted that the exact rate is unknown, as the collection and sorting were delegated to cooperatives of street recyclers, the catadores, in the 2000s. It has often been the preferred model in emerging countries to promote social inclusion and employment, but it has not been organised to provide information on the recycling rate.

Nevertheless, based on this estimate, it means that at least 95% of household waste is not recycled, which is enormous. Furthermore, half of it is disposed of in non-compliant landfills, meaning they are not authorised and/or do not respect the environmental protection standards (weighing system for incoming waste, recovery of the gases they emit…). The other half is treated in landfills that comply with regulations, therefore without direct damage to the environment and health, but it is not recycled. This is the whole issue: ten years after its adoption, the law is not respected.

How do you account for the fact that this law is not respected?

James Miralves – There are two main reasons: the lack of a budget and the lack of a binding regulation. In Brazil, municipalities are responsible for waste management. But in the context of an economic crisis which has persisted since 2015, these municipalities are indebted. With no household waste tax, they find it difficult to finance the necessary infrastructure and even sometimes to pay the related operating costs. This is because the waste service, which is financed from the general budget, is not a priority with respect to spending on health, education and water treatment.
 

The Government wanted to mobilise private investments through PPPs

To address this situation, which shocks many Brazilians, the Federal Government wanted to mobilise private investments through public-private partnerships (PPPs) to overcome the existing technical and financial difficulties. It is not up to the Government to award these PPP contracts for the 5,570 Brazilian municipalities, but it must oversee their practices by providing them with a regulatory framework to comply with when they sign a PPP contract. The role of the study we conducted under Franco-Brazilian cooperation, which was initiated via the project to support the development of public-private partnerships in Brazilian municipalities, was to make recommendations for the creation of this framework.

What is the purpose of this regulatory framework for public-private partnerships (PPPs) in terms of waste management?

James Miralves – For a PPP, mobilising private investment does not mean privatisation: it involves a delegation of the public waste management service. In other words, the service continues to be controlled by the public authority. But this requires rules, a framework.

The scheme we propose clarifies the roles between the delegating authority (the municipality), the service provider (who the waste management is delegated to) and the regulatory agency. More specifically, the municipality is responsible for defining the project, conducting the consultation, choosing the service provider and monitoring the implementation of the contract by the service provider selected. The regulatory agency verifies compliance with procedures and the achievement of the objectives set out in the contract through performance indicators which the service provider must achieve.
 

Bringing an entrepreneurial vision to the public waste management service

This organisation also brings an entrepreneurial vision to the public waste management service, with the aim of attracting private investments. Regulation needs to strike a balance between the economic interest of companies, which must be sure to be remunerated, and the general interest, in particular by not shifting all the risks onto the municipalities. It is this vision of government that we have tried to give shape to. We have also worked in a constructive climate with our partners at federal level, who feel very concerned about waste management.

The study mobilised French expertise in waste management. What was the interest in it?

James Miralves – At the beginning of the study, we saw that there was a difference between France and Brazil in terms of the vision and practice of regulation. In France, PPP contracts precisely define the rules for the service (expected performance, remuneration of the operator, tariff review clause, sanctions…) and the regulatory authority verifies their compliance via the indicators. In Brazil, the contracts are less specific and, consequently, the regulatory agency is more involved in the day-to-day management and control of services, which is not always effective.  
 

Gaining a better understanding of ‘French-style’ public service delegation

The study visit organised in France in March 2019 has helped build consensus on the role of regulation. During this week-long visit to Paris and the Alpes-Maritimes region, the Brazilian delegation was able to discuss with public actors responsible for regulating or supervising waste management. This gave them a better understanding of “French-style” public service delegation. The delegation also met companies which are currently delegated with waste management in France. This gave it a better understanding of their expectations and allowed them to see their expertise by visiting waste treatment facilities.

Will this be enough to improve waste management in Brazil?

James Miralves – By mobilising private investment under well-defined contractual conditions, significant progress can be made relatively quickly. Regulation is not, of course, a cure-all. Many municipalities are faced with a lack of legal and technical expertise to assess the feasibility of a PPP project: this raises the issue of strengthening their competences, as it is a complex area. There is also the issue of the remuneration of operators responsible for waste management. Our suggestion for this is to establish a direct relationship between the citizen and the company, so that the company is remunerated via the payment of a fee, without depending on the municipality’s budget.
 

Our recommendations will be tested in a pilot project

Our recommendations, which were presented during a seminar in early March 2020, will be tested in a pilot project: alongside our study, the Brazilian Government has launched an assistance procedure for local authorities, by financing the preliminary studies of 5 “pilot projects” for PPP waste management (which includes assistance in drafting the consultation documents). This will lead to the selection and development of a pilot project which will show whether the solutions we are proposing are adapted to the needs of municipalities in Brazil.

James Miralves graduated as an engineer and has been specialised in environmental services for over 25 years. He has held many senior positions at Veolia. He left for Brazil to head a subsidiary of Veolia and ended up staying over 12 years, specialising in the development of waste recovery projects.