Economic regulators play an important role in ensuring the affordability, quality and accessibility of essential services, such as water and sanitation, as well as promoting the sustainable use of resources to ensure their continued availability. The stakes are high: regulators’ actions affect market outcomes and can have strong social and environmental implications. Exogenous shocks, such as the climate crisis, and a fast-changing political, economic and social environment make balancing these outcomes even more challenging. Regulators are expected to provide stability and to design regulations that protect the public interest without impeding innovation. Good governance is essential to ensure the effectiveness of the regulator and support better outcomes, especially in times of change.
Enhancing water resilience and improving the coverage of water supply and sanitation services are high priority issues in Brazil, where over 200 million people rely on hydropower generation for electricity, and nearly 100 million people lack sewage collection and treatment services. Brazil’s National Agency for Water and Basic Sanitation (Agência Nacional de Águas e Saneamento Básico, ANA) plays a central role in addressing these challenges.
This report applies the OECD Performance Assessment Framework for Economic Regulators (PAFER) to ANA, at the request of the Agency. The OECD developed the PAFER framework to support regulators in assessing and improving their organisational performance and governance structures. The framework, based on the OECD Best Practice Principles on the Governance of Regulators, analyses regulators’ internal and external governance, including their organisational structures, behaviour, accountability, processes, reporting and performance management, as well as role clarity, relationships, and distribution of powers and responsibilities with other government and non-government stakeholders.
ANA has a strong track record in water resource management but now faces the challenge of meeting a mandate that extends to water supply and sanitation, where it will develop national reference standards. To effectively take on these new duties, the review recommends that ANA clarify its role, address misalignments between its mandate, mission and regulatory powers in the water supply and sanitation sector, build its economic analysis capability in water and sanitation, and advocate for reforms that would relieve various external constraints affecting the agency.
This review builds on existing OECD work on the water sector in Brazil, most recently a study in 2022 on fostering water resilience, led by the OECD Centre for Entrepreneurship, SMEs, Regions and Cities (CFE), as well as the OECD’s Review of Regulatory Reform of Brazil. This PAFER review is the second review of its kind concerning a Brazilian regulatory authority, following the review of Brazil’s federal electricity regulatory agency (ANEEL) in 2021.
This report is part of the OECD work programme on the governance of regulators and regulatory policy, led by the OECD Network of Economic Regulators and the OECD Regulatory Policy Committee, with the support of the Regulatory Policy Division of the OECD Directorate of Public Governance. The report was presented to the OECD Network of Economic Regulators for comments at its 21st meeting in December 2023 and declassified by written procedure by the Regulatory Policy Committee on 4 March 2024. It was prepared for publication by the Secretariat.