OECD Reviews of Regulatory Reform: Brazil 2008

Strengthening Governance for Growth

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The debate on a market-based economy has now entered a new phase in Brazil, addressing the broader context of quality regulation and the reduction of regulatory risk. The improved macroeconomic situation and the progress made by the sectoral regulatory agencies have paid off, and there is also wider social participation in the improvement of the regulatory framework with a stronger consumer engagement. But Brazil still needs to further improve its capacities for regulatory quality and increase transparency and accountability in the system to reinforce regulatory performance.

This review analyses the challenges of strengthening regulatory governance in Brazil to improve economic growth, with appropriate regulatory frameworks for core infrastructure sectors. Improved institutional capacities would also enhance support for regulatory policy across various government areas. Setting up an appropriate architecture for sectoral regulatory agencies and balancing autonomy with accountability will contribute to improved governance. Challenges include consolidating the autonomy and status of Brazilian regulatory authorities, reinforcing the strategic organisation for planning and decision making, increasing social accountability mechanisms, and improving co-ordination with competition authorities. Regulatory reform will help Brazil boost growth opportunities, and improve the quality and value of core services provided to its citizens.

Brazil requested this broad review by the OECD of its regulatory practices and reforms. The review presents a general picture of the overall frameworks to assure high quality regulation with a special focus on four core infrastructure sectors: power, private health insurance, land transport and telecommunications.


The Telecommunications Sector

The telecommunications sector is characterised by the mutual interaction between rapid technological change and a constantly evolving regulatory framework. In the case of Brazil, the strategy for the sector was to implement a “big bang” restructuring in the mid- 1990s: dismantling the former TELEBRÁS state-owned system, liberalising the market, allowing entry of additional players, expanding the existing network and supporting fast emergence of additional communication paths, while also setting up a state-of-the-art regulatory authority. On the whole, the Brazilian reform process was exemplary and has enabled the sector to signal the country’s commitment to open trade and investment policies while expanding its telecommunications network. Today Brazil accounts for 43% of all telephone lines in Latin America and has the highest teledensity (OECD, 2007). Thus, at the current stage, transition to a private system has already been accomplished. While from a comparative perspective the Brazilian regulatory structure followed international best practice in general terms, the hurdles of implementation in a large middle-income country facing macroeconomic crises and significant external exchange rate fluctuations were significant. The definition of universal service goals remains at the heart of the policy debate, because the regulatory framework has not fully caught up with technological advances such as the diffusion of broadband Internet and the rapid expansion of access to mobile phones. While the structure of the regulator is relatively solid, the pathway to transition highlights complex socio-political challenges derived from rapidly fluctuating exchange rates and a certain lack of attention to consumers’ concerns. Hence, ANATEL currently faces a situation where additional regulatory action is needed in order to prevent and solve market bottlenecks, facilitate universal access in the context of modern technologies, and better integrate the consumer perspective.


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