Concession x Privatization

WE ARE A CONCESSION at the service of the Public Administration for the community.


"Concession is to use and then to return, to privatize is to sell", Nelson Barbosa


Nelson Henrique Barbosa Filho is an economist and Brazilian professor. He was Executive Secretary of the Ministry of Finance from 2011 to 2013. He was State Minister of Planning and State Minister of Finance of Brazil.


"Concession is not synonymous with privatization. When you sell a property for example, it is as if you privatize the property, you sold the property and it never comes back to you, it is not yours anymore! The concession is as if it were a rent, the person will pay a monthly payment during a period and at the end of that period is obliged to return the house under the previous or better conditions" added Nelson Barbosa.




Concession and regulation

The concessions model has the objective of guaranteeing fair prices, quality, expansion and improvements in the services provided, with contractually compromised goals, where the private partner should be remunerated for the services and investments made.


The concession system is not a private system. It is the agreement of wills between the Public Administration and a Private Entity, whereby the former transfers to the latter the execution of a public service for it to exercise in its own name, at its own risk and for a fixed term, at a rate paid by the user.


Concession contracts must be regulated / audited by Regulatory Agencies, which may be federal, state or municipal. These agencies have the purpose of guaranteeing the smooth progress of the concession contract, the reaching of the goals, investments, quality of the services provided, and tax adjustments. Some examples of agencies: Anatel, Aneel, ARSESP, ARES-PCJ basin committee, among others.


What is the main difference between concession and privatization?


Privatization sells the assets of the state enterprise, the public assets, and transfers the exploitation of the state's economic activity to private capital. Privatization is nothing more than transferring to the private sector the ownership and management up to that point belonged to the Public Administration. The concession, by contrast, provides that the goods and services to be provided will be returned to the Public Administration at the end of the contract.


In general terms, privatization is defined as the sale of state-owned companies or entities to the private sector, usually through public auctions. In the concession, the transfer is temporary and the company has defined deadlines, which may or may not be renewed, as well as rules for operating the service.


What will happen after the end of the concession?


When the concession contract is ends, the water and/or sewage treatment plants and all other operational units are again controlled by the Public Administration. But, if necessary and timely, these contracts may be renewed.