Useful pages on the regulator website
- Homepage: https://www.gov.br/antt/pt-br
Marcelo Vinaud Prado: Acting Director General
Initially, it is relevant to establish the denomination or legal nature of autarchy under special regime. As a matter of fact, it is well known that regulatory agencies in Brazil are classified as ‘special autarchies’. They are part of the indirect public administration but carry with them the attribute of being ‘special’. However, these ‘special’ provisions should only be operational and not exceptional mechanisms.
ANTT has the legal nature of a special autarchy of the Executive Branch. It was created by Law 10,223 of 5 June 2001, to implement the policies formulated by the National Council for the Integration of Transportation Policies and the Ministry of Transportation and regulating or supervising the activities of providing services and exploration of transportation infrastructure, exercised by third parties (Tanaka, Sônia Yuriko Kanashiro (Coord.), Direito administrativo, São Paulo: Malheiros, 2008, p. 156).
The Brazilian Constitution determines that an autarchy can be created only by specific law.
In addition, regulatory agencies have as their primary function the fulfilment of traditional duties of direct administration, as they act in the quality of a granting public authority, in concessions, permissions and authorisations of public services.
What really innovated the legal order is its greater independence from the Executive Branch, despite being part of the indirect public administration.
The legal framework applicable to the administrative contracts signed by the regulatory agencies is regulated by its provisions and by the precepts of public law, being applicable to them principles of general theory of contracts and private law provisions.
ANTT has the prerogative to change them, unilaterally, to better suit the purposes of public interest; to regulate and supervise its execution; to apply sanctions motivated by its partial or total non-execution and; to terminate it.
The economic and financial clauses, however, cannot be changed without the prior agreement of the contracting concessionaires.
The legal basis that forms the foundations of the ANTT are as follows:
- Law 10,233, of 5 June 2001 (published in the Official Gazette (DOU) of 6 June 2001) and its amendments provides for the restructuring of water and land transport;
- Decree No. 4,130, of 13 February 2002 (published in the DOU of 14 February 2002) approves the Regulations and the Statement of Commissioned Positions; and
- Resolution No. 001, of 20 February 2002 (published in the DOU of 20 March 2002) and its amendments approves ANTT's internal regulation and organizational structure.
Autarchies under special regime are distinguished from other autarchies because their founding laws grant them certain prerogatives that are not found in most common autarchic entities.
As a result of the founding law, which is compatible with the constitutional order, the prerogatives and autonomies can vary from one agency to another.
The specific duties of ANTT are that it acts as a regulating and supervising entity in the land transportation sector and as the promoter of policies formulated by the direct administration. The regulation of the sector is supported by broad technical discussions and frequent consultations with society, through public hearings.
Regulatory acts aim to clarify legislation and concession and permission contracts. Decisions are rendered with the aim of ensuring the correct performance of bidding and contractual clauses, as well as to prevent situations that constitute imperfect competition or infringement of the economic order.
To allow the maintenance of some public services, it is necessary to charge fees, under penalty of making their execution unfeasible, since the state does not have unlimited resources. Therefore, the current legal system established the principle of reasonable tariffs, which requires the lowest possible tariffs to be charged. On this basis, we defend the application of the principle of reasonable tariffs as a subjective right of the user of the public service, and as a corollary and instrument for the implementation of the other principles that govern this service, especially that of its continuity.
Whereas Resolution No. 001 and its amendments approve ANTT's internal regulations and organisational structure, Law 10,233 provides for its structure (under articles 52 to 56).
The normative power of regulatory agencies does not encompass the power to regulate laws and, in particular, it cannot innovate in or contradict the legal order. In other words, to innovate would mean to legislate, and this violates the principles of legality (Federal Constitution, article 5, III) and the separation of powers (Federal Constitution, article 2).
Therefore, the rules to be granted should only be operational. Those rules, despite sometimes seeming autonomous, are linked to existing legal provisions. This is the case, for example, with the rules established for bidding in Public Notices (which cannot contradict the rules under Law 8,666/93), the conditions required for concessions or permissions of public service and the aspects that are usually included in the ‘technical autonomy’ of the regulatory agency or technical discretion to define the rules and technical parameters for these activities.
Notwithstanding, this definition of operational and technically discretionary rules cannot contradict legal norms and innovate in the formal legal order.
Menezello, in his turn, teaches about the limits of the normative function that, in the proposal for new standards, agencies must clearly explain determinant reasons of each of the regulation proposals, so that regulated agents can also evaluate the reasonableness and proportionality of the proposal.
Hence, federal agencies must also comply with Federal Complementary Law No. 95, issued on 26 December 1998, which provides for the drafting of Laws and Federal Decree No. 4,176 of 28 March 2002, ‘which establishes rules for drafting normative acts within the competence of the bodies of the Executive Branch, considering the need to control the legality and legitimacy of this normative acts’.
The provisions of this Law and Decree are binding, which obliges the agencies to comply fully (Menezello, Maria D’assunção Costa, Agências reguladoras e o direito brasileiro, São Paulo: Atlas, 2002, p. 130).
There are legal provisions that impose limits on the normative function of ANTT under Federal Complementary Law No. 95, article 24.
Confirmation of tax compliance is established in ANTT’s Resolution No. 1,166/05, which regulates the provision of interstate road transportation services. The edited rule is supported by Law No. 10,233/01, which granted the Agency the power to authorise the provision of land services to companies that meet the technical, economic and legal requirements established by ANTT itself.
The Agency's normative decisions do not overlap, in form or content, with the relevant federal legislation, neither to users nor to economic agents; however, they must necessarily have the same direction, so that the purposes of regulation are achieved through the protection of regulatory law. In addition, the proposed rules should be limited to the agency's specialization, valuing transparency to inform the reasons that underlie such proposal (Menezello, op.cit., 2002, p. 130).
Provision of public railway passenger transportation services
The National Agency of Land Transportation – ANTT is responsible for managing the rail transportation services provided by the approved rail network between Brazilian ports and national borders, or that cross state or territory borders.
Provision of railway passenger transportation services can be characterized as regular or non-regular. Regular railway transportation, also called ‘regular or regional train’, is granted through concession, while non-regular railway transportation, also called ‘touristic, cultural and commemorative train’ is granted through authorisation.
Road transportation: exploration of road infrastructure
An implementation process started in 1995 with the concession by the Ministry of Transportation of 858.6km of federal roads. Following the termination of some assignment agreements by the state government of Rio Grande do Sul, the extent of the federal concessions increased from the initial 858.6km to 1,482.4km.
The partnership between federal and state governments could continue the process of decentralising state activities in the area of transportation, enabling the state to allocate more funds for social activities, which cannot be delegated.
Provision of road passenger public transport
The interstate and international road passenger transport services in Brazil are accessed by 140 million users per year.
The National Agency of Land Transportation (ANTT) is the competent body for granting and inspecting permits and authorisations for the operation of those services, through companies legally incorporated for the purpose.
In 2008, regular road transport, compared to air transport, accounted for around 71% of all interstate and international passenger traffic. Its share in the Brazilian economy is significant, with annual revenue estimated at more than 3 billion reais. Currently, there are 166,404 buses authorised to provide regular services by permit holders and authorised companies under a special regime (Resolution Nos. 2,868 and 2,869/2008). In chartered transportation, there are 22,870 licensed vehicles, which transport more than 11 million passengers annually and represent more than 734 million reais annually in revenues for the relevant companies.
For a country with a road network of approximately 1.7 million kilometres, of which 186,000km (on federal and state roads) are asphalted. The existence of a stable road passenger transportation system is vital, hence ANTT’s active role in ensuring the provision of an adequate service.
In addition to the long-distance road network, ANTT is also responsible for the management and control of semi-urban interstate transport, which includes a maximum of 75km beyond the borders of the state or Federal District.
Currently, the operation of interstate and international road passenger transport services is under the aegis of Law No. 10,233, of 5 June 2001, Law No. 8,987, of 13 February 1995, and Law No. 9,074, of 7 July 1995, which are regulated by Decree No. 2,521, of 20 March 1998, and by rules approved in Resolutions by the ANTT Collegiate Board of Directors.
The sector's regulatory and inspection activities are permanent in nature and aim to adapt routines and procedures for the effective operation of Law No. 10,233/2001, which created ANTT.
Provision of cargo road service
The fields of ANTT’s operations include the provision of road freight services, which comprises the National Registry of Cargo Road Transportation, the provision of electronic freight payment, the regulation of mandatory toll voucher use, appointment and inspection of dangerous products and the regulation of international road cargo transportation.
Pipeline transportation: registration of pipelines
ANTT has among its responsibilities to promote surveys and organise records relating to the pipeline system in Brazil and to companies that have equipment and facilities for transportation by pipeline, namely:
- oil pipelines, principally petroleum, fuel oil, gasoline, diesel, alcohol, liquefied petroleum gas, kerosene and naphtha, among others;
- ore pipelines, to transport rock salt, iron ore and phosphate concentrate; and
- gas pipelines, to transport natural gas.
This has proved to be one of the most economical forms of transportation for large volumes, mainly of oil, natural gas and derivatives, especially in comparison to road and railway modes.
ANTT communicates with the entities in this sector with the aim of creating a National Registry of Pipelines, in an efficient and safe way, which serves to guide its actions and projects.
Multimodal transportation: qualification of the multimodal transportation operator
Law No. 9,611, of 19 February 1998, defines not only the operation of multimodal cargo transport, but also the responsibilities of the agents involved. Multimodal cargo transportation uses two or more categories of transportation. Services are the sole responsibility of a single multimodal transportation operator (MTO) and are governed by a single contract.
MTO is defined as the legal entity, carrier or not, hired as the main entity to carry out multimodal cargo transportation, from origin to destination, by its own means or through third parties. The MTO assumes responsibility for the execution of these contracts, for any damages resulting from loss, for damage to or malfunctions of the cargos in its custody, as well as for those resulting from delays in delivery when there is an agreed term.
Its activities include, in addition to transportation, the services of collection, unitisation, removal of cargo from containers, consolidation, deconsolidation, movement, storage and delivery of cargo to the receiver.
The exercising of an MTO’s activities depends on prior authorisation and registration at ANTT. In the case of multimodal international cargo transportation, an MTO will benefit from the special customs transit regime for cargo clearance. To do so, it must be licensed by the Federal Revenue of Brazil.
The Certificate of Multimodal Cargo Transportation highlights the multimodal transportation contract and governs the entire transportation operation, from receipt of the cargo to delivery at its destination.
Reporting and disclosure obligations
Since its creation, ANTT’s experts have sought to understand all aspects of the exploration business carried out by permission holders and concessionaires, in order to reduce the lack of uniformity in information between the regulatory agency and the entities it regulates.
It was necessary to establish economic and financial follow-up actions and to undertake inspections of accounting and funding activities of concessionaires and permission holders to ensure the validity of procedures and the fulfilment of obligations provided for in the bidding notices and contracts, adopting an unusual practice for the grants of the land transportation sector.
The published regulatory acts establish the required timelines and forms for grantors to send financial statements to ANTT and the rates observed for monitoring and verifying data during inspections. Through these inspections, the ANTT started to gather an extensive economic and financial database of regulated agents.
Further, ANTT collects information published in the press by specialist information services, other agencies and government agencies, as well as users, in a permanent monitoring process with the aim of adopting preventive actions.
The Agency has made progress in reducing information asymmetry with the development of an important regulatory project, using World Bank’s resources to standardise not only the list of accounts with which the permitted agents are required to register their operations but mainly to establish how each record should be made.
ANTT also develops inspection programmes in the modals, which aim to verify the conditions of compliance of the legal, administrative, economic-financial and operational aspects of the concessionaires and/or permit holders with what is established in the respective bidding notices and contracts.
Monetary sanctions and recent behaviour
In 2014, ANTT issued Resolution No. 3,651/11, of 7 April 2011 (amended by Resolution No. 4,339/2014), which approved the Marginal Cash Flow methodology to restore the economic and financial balance of the federal road concession contracts for the first stage, the second stage - Phase I and Polo Pelotas, as a result of new investments and services.
This normative conceptualises the methodology as the hypothesis of ‘recomposition of the contractual balance, in the hypothesis of inclusion, after the publication of this resolution, of investments or services not foreseen in the initial proposal, through the adoption of a Marginal Cash Flow, projected by reason of the event that gives rise to recomposition’.
For this purpose, the flows that will be used are (i) marginal expenditures resulting from the event that gave rise to the reconstitution, and (ii) marginal revenues resulting from the reconstitution of the economic-financial balance.
The first two will be measured at market costs, for which the concessionaire may use the values contained in the road costs system (Sicro), while the latter will be calculated according to a demand projection, to be carried out by ANTT.
A discount rate based on the weighted average cost of capital would be applied to these amounts for rebalancing purposes.
In a nutshell, the aforementioned concept is intended to provide investors with an equal or comparable return (in terms of risk) to others that could be realised with the same available resources. In short, the aim is, through methodology, to pay the investor at the ‘opportunity cost’.
The validity of such a mechanism and the benefits brought by it have already been expressly recognised by the Federal Public Finance Court, which stated that ‘obtaining the discount rate to be used in expenditure flows and marginal revenue, so that only discount rate used is the Weighted Average Cost of Capital’.
Non-monetary sanctioning powers and behaviour
It is important to note that if there is an imbalance in favour of the concessionaire, a road concession contract may be rebalanced through the following measures: (i) increase or decrease in the value of the basic toll tariff; (ii) extension of the concession contract; (iii) payment to the concessionaire, by the granting authority, of an amount corresponding to the investments, costs or additional expenses they have incurred or of an amount equivalent to the loss of revenue effectively suffered, taking into account the effects calculated within the Marginal Cash Flow itself; (iv) modification of the concessionaire's contractual obligations provided for in the Marginal Cash Flow itself; or (v) establishing or removing blocking cabins, as well as changing the location of toll stations.
In a nutshell, the Marginal Cash Flow criteria are those by which the economic-financial balance is measured, taking into account the economic moment when the concessionaires are required to make new investments.
More specifically, it takes place, as far as new investments can be made many years after the concession contract comes into force and it is possible that there have been substantial changes in the macroeconomic context of the project, which justifies the observance of current costs, not past ones.
We can understand the Marginal Cash Flow in the application of a financial flow proper to each new event, which arose during the contractual execution, considering, separately, the investments not foreseen in the original contract, both in relation to expenses and to additional revenues, amounts respectively referred to as ‘marginal revenues’ and ‘marginal expenditures’.
Therefore, to face the new obligations, the controller will use a market rate prearranged by the contractual instrument and by the dimensioning of operating costs and current investment to rebalance the economic rationale of the concession contract.
This is a methodology that does not use the information presented by the concessionaire in its business plan, for the purpose of recomposing the concession contract. This was because it was found that the concessionaire’s business plan presented at the time of the bidding process did not handle the transformation of the concession contracts, nor was it liable to accurately portray the costs incurred in providing the service.
First, there is an asymmetry of information between the granting authority and the concessionaire, owing to the expertise that the latter has in operating in a given market. What can matter, if the data presented in the business plan are binding, is the establishment of costs higher than the market.
Second, because, in addition to the risk that the values of the costs presented by the concessionaire are not reliable, the road concession contract, as it is a deferred term agreement, may experience a variation in the costs of its supplies, which may not correspond to the information provided for in the concessionaire's business plan.
In addition, this binding guarantee, during the entire execution of the concession contract, at a fixed profitability rate for the concessionaire, removes the incentives for efficient management of the commitment.
And, finally, this linkage would have the effect of transforming the ‘performance obligations’ of the concessionaire into ‘investment obligations’. This is because the contract becomes linked to the execution of the construction and not to the adequate provision of public service.
Recent and upcoming developments
The National Land Transport Agency has the legal nature of a special autarchy of the Executive Branch. Its objectives are to implement the policies formulated by the National Council for the Integration of Transport Policies and the Ministry of Transportation and to regulate or supervise the activities of service provision and exploitation of transportation infrastructure, performed by third parties. It is part of the indirect federal administration, it is subject to the special autarchic regime and it is linked to the Ministry of Transportation, with administrative independence, financial and functional autonomy which seeks to make it capable of remaining independent and free from interference in its spheres of activity.
However, the special autarchic regime granted to ANTT cannot be interpreted as a regime of benefits granted to the Agency. The Ministry of Transportation, however, owing to a lack of legal provision, will not be able to review or inspect the Agency's own activity. It will only review non-compliance with due administrative process.
Notwithstanding, if the flaws or illegalities are found in the regulation itself, which will indirectly cause damage to the administration in general and to the service user in particular, the regulatory agency may be jointly liable with the provider or, as the case may be, directly liable.
Owing to the importance of the interests involved, the proper functioning of the regulatory agencies is crucial for the Brazilian population and should be a constant target for improvements and institutional strengthening by the government. Therefore, a significant problem arises: the effective degree of autonomy of regulatory agencies, remembering that autonomy must be achieved in two main directions - in relation to the government and in relation to the regulated sectors. (Torres, op.cit., p. 102).
Interacting with the regulator
According to the second paragraph of article 21 of Law 10,233, ‘the special autarchic regime conferred on ANTT and ANTAQ is characterised by administrative independence, financial and functional autonomy and a fixed mandate for its officers’.
Therefore, if there is any problem relating to the legality of the administrative process, it will be possible to review it by the ministry to which ANTT is linked. But can the Ministry of Transport review or supervise the Agency’s own activity? For this to occur, there must be a legal provision expressed in the law for the creation of agencies, which does not occur in the case of Law 10,233, which creates the National Agency of Land Transportation.
Ordinarily, when judging certain situations and specific problems, agencies exercise a judicial function, especially in view of the fact that their decisions are technical and final in the administrative sphere (Torres, Marcelo Douglas de Figueiredo, ‘Agências, contratos e Oscips: a experiência pública brasileira’, Rio de Janeiro: Editora da FGV, 2007, p. 98).
However, in the face of a new category of administrative acts (of regulation or regulatory) arising from the regulatory power of regulatory agencies, the question also arises: can these administrative regulatory acts be subject to control by the judiciary? If so, what aspects of these acts may be subject to judicial review?
Moraes brings an important point regarding the ‘judicial’ power of the agencies, in the following terms:
It is unacceptable in a constitutional state for the existence of acts practised by the Executive Branch that cannot be the object of assessment by the Judiciary Branch . . . . Add to this that the principle of unfeasibility of the assessment by the Judiciary is inscribed in article 5, subsection XXXV, of the Federal Constitution.
(Moraes, Alexandre de (Org.), ‘Agências reguladoras’, São Paulo: Atlas, 2002, p. 163).
However, Celso Antônio Bandeira de Mello points out that there are aspects of the discretionary act that should remain immune to judicial investigation:
The purely subjective field of appreciation - whether it is contained within the actual possible meanings of a fluid and imprecise legal concept, or it can be said with the simple convenience and opportunity of an act - remains exclusive to the administrator and inaccessible by the judge, without that there would be a substitution of one for the other, in other words, an invasion of functions that would interfere with the very principle of the independence of branches, enshrined in article 2 of the Constitution.
We conclude this topic with Torres' cautious recommendation:
As there is the principle of unity of jurisdiction in Brazilian law, at any time the Judiciary can be called upon to decide on the most varied issues related to the role played by regulatory agencies. Therefore, to avoid institutional conflicts between the Executive and the Judiciary, the agency's area of operation must be very well defined
(Torres, op.cit., p. 98).
Notes for foreign investors
Other regulators it works closely with
To increase the supply and improvement of services, the federal government put into practice actions for the privatisation, concession and delegation of public transportation services to states, municipalities and private initiatives.
Law No. 8,031/90, of 4 December 1990, and its subsequent amendments, created the National Privatisation Programme, which is composed of two main agents: the National Privatisation Council (Conselho Nacional de Privatização (CND), the decision-making body, and the National Bank for Economic and Social Development (Banco Nacional de Desenvolvimento Econômico e Social (BNDES), as manager of the National Privatisation Fund.
The aims of the project are to (i) discharge the state, (ii) improve the allocation of resources, (iii) improve operational efficiency, (iv) promote the development of the transportation market and (v) improve the quality of services.
In addition to the Federal Railway Network (Rede Ferroviária Federal, SA (RFFSA)) and the Vale do Rio Doce company, ANTT is responsible for the following concessions:
- Northern Brazil Railways (Ferrovias Norte Brasil SA (FERRONORTE));
- Rio do Norte Mining Railway (Estrada de Ferro Mineração Rio do Norte);
- Trombeta Railway (Estrada de Ferro Trombeta);
- Votorantim Railway (Estrada de Ferro Votorantim); and
- East Paraná Railway (Estrada de Ferro Paraná Oeste SA (FERROESTE)).