6. Regulatory policy at sub-national level in Brazil

The 2012 Recommendation of the Council on Regulatory Policy and Governance of the OECD focuses on better regulation in sub-national administrations through two key aspects: regulatory coherence throughout government levels and the development of capacities in states and municipalities. A way to encourage coherence is by identifying cross-cutting regulatory issues, resulting in similar regulatory approaches and avoiding duplication of or conflicting regulations. In addition, the Recommendation invites countries to work on developing regulatory management capacities and performance in sub-national governments (OECD, 2012[1]).

Sub-national governments have a key role in delivering public policy objectives through regulations. States and Municipalities may have the legal authority to issue and enforce regulations within their own domains. On the other hand, they may have to implement and enforce regulations issued by higher levels of government, through secondary regulation, such as bye-laws, manuals or guidelines, combined with actions to ensure the enforcement and compliance of the regulations (OECD, 2021[2]).

The 2021 OECD Indicators of Regulatory Policy and Governance (iREG) emphasise that some countries have made progress on regulatory improvement at sub-national level. Some OECD countries have established a body at sub-national levels of government with the task of overseeing regulatory policy. The indicators also show that governments promote the use of mechanisms to collect feedback from stakeholders at local level to help strengthen regulatory policy at sub-national and federal level. Figure 6.1 shows the most common mechanisms that OECD countries have to encourage the development of management capacities and performance in their sub-national governments.

Brazil is a Federal Republic. The Constitution of the Federative Republic of Brazil —Articles 22, 23, 24 and 30 — establishes the competence and limitations of the federal, state and municipal levels of government to issue regulations. Each state and municipality has the authority to issue regulations on matters that are not covered by the general rules of the Federal Constitution and the Federal Laws. The common competence of the Federal, State and Municipal governments relates to collective issues, such as guarding the Constitution, health, environment and promoting culture, among others.

Article 22 of the Constitution lists the subjects on which only the Federal Government is competent to legislate. However, it also establishes that complementary laws may authorise the states to legislate on specific issues on these matters. Among them are: civil, commercial, criminal, procedural, electoral, agrarian, maritime, aeronautical, space and labour law; social security; public registries; general bidding and contracting norms for public administration, independent agencies and foundations of the Federation, states, Federal District and municipalities; and commercial advertising (Presidency of the Republic of Brazil, 1988[3]).1

Article 23 states the competences common to the three levels of government. The complementary law shall establish norms for co-operation among the Union and the States, the Federal District and the Municipalities, aiming at a balanced development and welfare at national level. Some common competences are: public health and assistance; protecting the environment and fighting pollution; promoting the improvement of housing conditions and basic sanitation; fighting the causes of poverty and factors leading to marginalisation; and registering, monitoring and overseeing the granting of rights to research and exploit water and mineral resources within its territories.

The states are responsible for matters of regional interest. In the Constitution there is no express provision defining each of their competences, making them residual. Article 24 of the Constitution consolidates the list of subjects for which the Federal government and the states have concurrent legislative competence. In these cases, it falls to the Union to establish general rules, while the states may establish specific rules. However, the competence of the Union to legislate on general rules does not exclude the states’ supplementary competence and, in the absence of federal law on general rules, the states will exercise full legislative competence to meet their needs. Among the topics subject to state competence are commercial registries; tax, financial and economic laws; protection of the environment; social security, health protection and defence; the protection of the historical, cultural, artistic, tourist and landscape heritage. On these topics, the competence of the Federal government should be limited to establishing general rules. The supervening federal law on general rules suspends the effectiveness of the state law insofar as it is contrary to it.

Finally, Article 30 of the Constitution states that it is the duty of municipalities to legislate on matters of local interest and to supplement federal and state legislation where appropriate. Municipalities are responsible for matters of local interest, such as urban transport, land apportioning, land use planning, providing local health services and promoting the protection of local cultural and historic heritage. Moreover, municipalities can institute and collect taxes within their own competence, as well as apply their revenue.

The Economic Freedom Act applies to states and municipalities only when the federal ordinary legislation delegates the public act generating economic activity. Some provisions of the Economic Freedom Act, such as the Federal Licensing Decree (Decree No. 10.178 of December 18, 2019), apply to sub-national entities if the public acts of economic activity authorisation are derived or delegated by ordinary federal legislation. As sub-national governments in Brazil are autonomous, the national decree for RIA (Decree No. 10.411/2020), does not apply to them. Each sub-national government has to generate the regulatory framework for the implementation of better regulation tools (Executive Power of Brazil, 2020[4]).

The 2012 OECD Recommendation of the Council on Regulatory Policy and Governance states that governments, where appropriate, should promote regulatory coherence through the use of co-ordination mechanisms among the supranational, the national and sub-national levels of government. Furthermore, governments should identify cross-cutting regulatory issues at all levels of government, to promote coherence among regulatory approaches and avoid duplication or conflict of regulations (OECD, 2012[1]).

On this subject, national levels of government should guarantee that there are mechanisms in place to ensure that there is regulatory coherence to avoid gaps, overlaps or conflicts in both the contents of the regulatory instruments and the enforcement approaches throughout the levels of government. Sub-national governments are part of the public administration machinery. As such, they should be able to follow principles and apply the appropriate tools to ensure that the regulations they issue are of a high quality. Additionally, they should ensure that they are effective in enforcing and implementing the regulatory framework.

However, this can only be achieved effectively if the guidelines and procedures issued by state and municipal governments are fully consistent with national law. The preparation and publication of secondary regulations would benefit from applying tools on regulatory management to promote regulatory quality such as RIA and stakeholder engagement. This will only be possible if sub-national governments have the capacity to implement and use these tools. The same reasoning applies to states and municipalities responsible for the enforcement and inspections of the regulatory framework (see Box 6.1 for an example of effective co-ordination and collaboration across institutions to ensure effective regulatory delivery).

National governments should focus on designing and establishing appropriate co-ordination mechanisms to develop regulatory policies and practices for all levels of government. This could be done using measures to achieve harmonisation, or by mutual recognition agreements. Such agreements help to harmonise regulation in regional governments and it reduces administrative burdens on citizens and businesses. Figure 6.2 shows the most common mechanisms that OECD countries use to promote regulatory coherence throughout all levels of government. OECD countries have many opportunities to engage in actions with sub-national governments that will benefit the overall effectiveness of the regulatory framework in delivering policy objectives.

Brazil has a similar situation as OECD countries in the implementation of mechanisms to engage with sub-national governments. The Economic Freedom Act focuses on reducing administrative burdens and it covers sub-national governments if regulation is imposing unnecessary costs. However, it does not consider the creation or application of strategies to seek harmonisation of regulation. Redesim is a good national example of a strategy to seek harmonisation in the opening of businesses. As it is described in the Chapter on the Revision of the stock of regulation, Redesim is a network that aims to integrate the business creation registry, process, and legalisation of the three levels of government. The networks encourage co-ordination efforts among different levels of government, with the objective of avoiding overlaps and duplications of documents and information requirements.

Sub-national governments create licences and permits for businesses to start up and operate. Usually, the process to obtain these licences and permits is onerous, as businesses are required to provide a large number of documents and visit several government offices. The tendency of departments to work in isolation results in administrative burdens and inefficiencies, as businesses have to submit the same documents to different government departments. All these elements may result in businesses deciding not to start up at all or to open in a different location. In this sense, Redesim becomes appropriate as a tool to reduce the requirements for obtaining permits and licences. This initiative plays a key role in the vertical (among different levels of government) and horizontal (across sub-national governments) government co-ordination and consistency.

As a way to tackle the burdens arising from licensing, in 2019, Brazil issued the Decree on Licensing 4.0 (Decree No. 10.178/2019). This regulation seeks to define the criteria and procedures for the classification of risk levels according to economic activity. The decree applies to the three levels of government, particularly for cases where a state or municipality do not have specific legislation to define the risk of economic activities.

A frequent problem in countries is the existence of overlapping regulations between levels of government. Co-ordination between national and sub-national governments to ensure that regulations among levels of government do not contradict each other or establish similar layers of legal obligations is challenging. Therefore, it is necessary for national governments to develop tools to diagnose regulatory issues that throughout levels of government to identify and reform overlapping regulations. Box 6.2 shows the example of how Yucatan, a State of Mexico, co-ordinates with the national government to seek regulatory coherence.

Even though Brazil has worked on improving its regulatory coherence and co-ordination, these efforts have not been carried out systematically to achieve regulatory coherence. Individual evidence shows that sub-national governments are not formally involved in the process of developing new national regulation. The lack of involvement of sub-national governments in the creation of national regulation generates issues in the implementation as in some cases they do not have the necessary financial or human resources for implementing these regulations.

The 2012 OECD Recommendation by the Council on Regulatory Policy and Governance states that central governments should promote the development of regulatory management capacity and performance at sub-national levels of government. The national government should participate actively in the generation of the necessary capacities at sub-national level to advance the adoption and implementation of regulatory policy tools. By incorporating better regulation tools in the state and municipal rule-making processes, sub-national administrations can develop high-quality rules and reduce administrative burdens on citizens and businesses. Mexico provides a relevant example of how the federal government can engage with sub-national administrations to embed good regulatory practices in states and municipalities. The country has leveraged specific collaboration projects and the local context to introduce practices and tools in states and municipalities. Box 6.3 provides a short summary of Mexico’s experience embedding regulatory policy at the sub-national level.

Governments should support the implementation of regulatory policy and programmes at sub-national level to reduce regulatory costs and barriers at local or regional level, which limit competition and impede investment, business growth and job creation. Regulatory management capacities and the assessment of the performance of sub-national governments contribute to the implementation of regulatory policy tools, such as RIA and stakeholder engagement in the development of regulation, which leads to better quality of regulation and helps in the reduction of administrative burdens.

The fact that Brazil has such a large number of sub-national administrations, over 20 states and more than 5,000 municipalities, inevitably leads to the lack of uniformity in the knowledge and adoption of regulatory policy tools. Stakeholders highlighted this issue during the development of this report, which calls for a systematic approach to encourage the use of regulatory management tools at sub-national level in Brazil.

One of the ways to promote the development of regulatory management capacity and performance at sub-national levels of government is by promoting best practices throughout these governments, and between sub-national and federal levels. The sharing of lessons learned, successful cases, and the “dos and don’ts” in the design, implementation and evaluation of regulatory policy and its tools can be an effective way of promoting their adoption.

National governments have the task of promoting the exchange of information and transparency mechanisms from one level of government to another, to overcome irregularities in information and encourage complementarities within regulations. It is common that the level of development in state and municipal governments varies; some states have a very developed regulatory system and experience, while others lack practice and knowledge. The creation of mechanisms for transparency and sharing of information is crucial for levelling the development of the regions and identifying good regulatory practices. The use of benchmarking practices among jurisdictions also helps the less developed regions to make progress. These mechanisms provide a space for identifying innovative regulation. Figure 6.3 shows the OECD mechanisms to share best practices throughout sub-national governments.

Among the main mechanisms being used by OECD countries for sharing best practices among sub-national governments are the benchmarking of performances, the use of national reports on good practices and lessons learned, as well as workshops, seminars and conferences. These mechanisms, used separately or in some combination, help national governments to keep track of the practices being implemented in the states and municipalities. This facilitates the role of the federal better regulation agency as an entity that promotes the dissemination of good practices and encourages maintaining a standard in sub-national governments. By encouraging the synthesis and dissemination of information, the federal administration can build support and active participation by states and municipalities. Additionally, the exchange of experiences among peers and communities of practitioners can go a long way to increase the awareness of tools such as RIA and administrative simplification, among others.

Mexico has a relevant example of a mechanism in place for sharing good practices among sub-national governments. Box 6.4 describes Mexico’s National System and National Observatory on Better Regulation, which comprises the three levels of government in the country.

Currently, the adoption and implementation of better regulation tools at sub-national governments in Brazil are voluntary. Moreover, there is room to introduce mechanisms to share appropriate practices and exchange lessons learned among levels of government. For instance, mapping and sharing good practices identified at the sub-national level can help bring the better regulation agenda closer to states and municipalities. Bridging the gap in the adoption of better regulation tools can benefit citizens and businesses significantly. Brazil has not yet set up yet a system to identify and map good practices on better regulation among sub-national governments. As a result, the federal government’s capacity as an information broker is somewhat limited when it comes to disseminating and promoting relevant practices that exist throughout the country. This kind of mechanism could allow states and municipalities to pull ahead to ease the adoption of regulatory policy tools and policies.

In 2021, SEAE took the lead in the development of a tool to promote the adoption of good regulatory practices and administrative simplification measures by Brazilian municipalities. The Municipal Competition Index (Índice de Concorrência dos Municípios) gives an outline of the municipalities’ practices and will allow the design of studies and programmes intended to improve the performance of sub-national governments and close the gap among municipalities in the adoption of good practices. The Index is composed of three pillars: Access to the local market, Competition with agents already established, and Acting within a framework of integrity and fairness. Table 6.1 lists the main components of the Index by pillar (SEAE, 2021[6]).

The indicator builds on the findings of the pilot phase that comprised 15 municipalities and from the views of stakeholders that engaged with SEAE during the public consultation process. These two activities helped improve the questionnaire, which will be gradually distributed. This means that municipalities with greater populations will be in the first wave of data collection. In the first phase, SEAE expects to include municipalities with over 500 000 inhabitants, representing approximately 34% of the Brazilian population (SEAE, 2021[7]).

Some states and municipalities in Brazil have started to use better regulation tools, the most common one being administrative simplification, through the clearing out of the regulatory stock and the use of information and communication technology (ICT) tools. The adoption of RIA is in the early stage; however, some sub-national governments are taking actions to encourage the use of evidence in decision-making. In particular, the review team focused on the use of regulatory management tools by the states of Ceará and Minas Gerais.

In Ceará, regulatory policy powers are allocated to several institutions. The Casa Civil supports the development of state regulations and policies and promotes the collaboration and articulation with other sub-national and federal entities. The Regulatory Agency of Ceará (ARCE) is an autarchic institution connected the state’s Attorney General’s Office. ARCE regulates the public services of electricity, piped gas, basic sanitation and urban public transport. Finally, the Secretariat of Economic Development, in collaboration with the Secretariat of Modernisation, is in charge of issues related to improving the business environment in the state.

Ceará is in the early stages of adopting better regulation tools. While the state does not have a formal requirement for RIA, stakeholder engagement or administrative simplification, it has an informal system of public consultation. The latter is activated whenever a regulation has a direct impact on users. The invitations to participate are published in the official gazette and social networks, and the entire process is open to the public. Stakeholders can submit documents, comments, studies or requests.

Minas Gerais has introduced several regulatory management initiatives aimed at improving the regulatory framework in the state. While most of the efforts focus on the reduction of administrative burdens and barriers to business development, Minas Gerais is laying down the foundations for the use of RIA and public consultation for the development of regulations.

The Programme Minas Free to Grow (Minas Livre Para Crescer, MLPC) is a state initiative to reduce bureaucracy, business promotion, and competitiveness (Decree No. 47.776/2019). Additionally, the Programme builds on the provisions set forth in the Economic Freedom Act (Act No. 13.874/2019) and regulates it at state level (Decree No. 48.036/2020). The issue of Decree No. 48 036/2020 led to a series of measures aimed at copying and going beyond the elements introduced at federal level. In particular, Minas Gerais has taken steps to (Minas Gerais, 2021[8]):

  • Use risk-based criteria to classify economic activities in the state. In 2021, Minas Gerais had classified more than 700 economic activities as low risk operations, which facilitates the licensing process and eliminates the need for pre-market inspections.

  • Introduce the silence-is-consent rule.

  • Mandatory use of Regulatory Impact Assessment. Starting in January 2021, the entities of the state Executive are required to carry out a RIA for the drafting and modification of regulations.

  • Reduction in bureaucracy and administrative simplification. The MLPC Programme encourages citizens and businesses to suggest formalities, procedures and regulations that are obsolete or that could be improved. By 2021, the state had revoked 561 normative acts.

  • Support municipalities to align their regulations to the provisions of the Economic Freedom Act. The relationship between the state and the municipalities is supported by the initiative Municipality Free to Grow (Município Livre para Crescer) and the Municipal Guidelines for Economic Freedom (Minas Gerais, 2021[9]). At the time that this report was being prepared, more than 200 municipalities (out of 853) in Minas Gerais had issued a decree to regulate the state’s Economic Freedom Act at municipal level.

The Secretariat of Economic Development of Minas Gerais has set up a dashboard where progress of the programme can be followed.

In 2018, the state of Minas Gerais introduced the State Policy on Simplification and Digital Government (Decree No. 47.441/2018). The initiative aimed at overhauling the way the state provides services to its citizens and businesses; and encouraged improved efficiency in the manner that the administration manages formalities and procedures. To attain these objectives, the policy stated that services had to be user-oriented and the back office had to improve by increasing the exchange of information and data throughout administrative areas, mainly by using ICT tools. The policy is co-ordinated by the Secretariat of Planning and Management, which also provides capacity building and guidance to other entities in the state and municipal governments.

The Simplification Network (Rede de Simplificação) plays a key role in the implementation of the elements of the Policy. Approximately 300 officials from various institutions and administrative areas of the state administration compose the Network. Around half of the members of the Network are Simplification Agents (Agentes de Simplificação), who are responsible for the simplification and improvement efforts in their institution. The other half of the members are content editors (Editores de conteúdo), who are in charge of posting the information onto the government’s website. The site www.mg.gov.br offers information on the services that businesses and citizens can request. The information available in the website is presented in a standardised format based on the specifications included in the Guidelines that the Secretariat of Planning has defined and that content editors use as reference.

Moreover, in 2021 Minas Gerais reviewed the decree that set the foundations for the Policy on Simplification to include specifications regarding the use of simple and clear language for the drafting of regulations and on communication between the citizens and the administration. The Secretariat of Planning published guidelines to support this new requirement (Minas Gerais, 2021[10]).

As in the case of the Minas Free to Grow Programme, a dashboard called Map of Digital Transformation of Services (Mapa de Transformação Digital de Serviços), enables progress to be tracked on the implementation of some aspects of the Policy on Simplification and Digital Government. This tool is publicly available on the website of the Minas Atende Programme (https://www.mg.gov.br/pagina/minas-atende).

The Secretariat of Planning has identified the following actions as the next steps to advance the administrative simplification strategy in Minas Gerais:

  • Eliminate the requirement to present documents issued by the State when requesting public services.

  • Hold workshops and capacity building activities with the simplification agents, the content editors, and other officials on the use of simple and clear language (Linguagem Simples).

  • Use the information available in the Map of Digital Transformation of Services to monitor the elimination of unnecessary requirements and support the institutions in charge of the services and formalities.

  • Continue with and strengthen the capacity-building programme for Simplification Agents (Programa de Desenvolvimento dos Agentes de Simplificação).

Apart from actions taken as part of the programmes mentioned above, Minas Gerais has passed specific legislation to eliminate obsolete regulations. In 2019, the State Decree No. 47.732/2019 revoked 137 decrees that were inconsistent with the existing regulatory framework or that were outdated. On the other hand, the State Secretariat of Infrastructure and Mobility has opened communication channels to receive the views of stakeholders on the norms that regulate the transport of passengers. The objective is to receive information on regulations that should be reviewed or simplified.

Although the publication of a regulatory agenda is not mandatory for state government entities in Minas Gerais, some institutions are taking the lead in this regard. For instance, the State Secretariat of Infrastructure and Mobility (Seinfra-MG) issued its Regulatory Agenda for 2021-2022. In addition to the topics that would be regulated during the two-year period, the document emphasised the importance of an adequate institutional structure and the technical capabilities of the public officials to achieve better outcomes in terms of the safety and quality of the decisions (Seinfra-MG, 2021[11]).

Another example of regulatory planning in the state is the case of the Regulatory Agency of Water Services and Public Sanitation of Minas Gerais (ARSAE-MG). In 2021, the Agency defined six topics to be covered during the year and provided a list of the points that would be considererd under each topic. For instance, on matters regarding tariffs, one aspect to discuss as part of the regulatory process are the methodologies and estimation of operational costs (ARSAE-MG, 2021[12]).


[12] ARSAE-MG (2021), Agenda Regulatória, http://www.arsae.mg.gov.br/agenda-regulatoria/ (accessed on 9 March 2022).

[5] Congreso del Estado de Yucatán (2019), Decreto 134/2019 por el que se emite la Ley de Mejora Regulatoria para el Estado de Yucatán, Diario Oficial del Estado de Yucatán, http://www.yucatan.gob.mx (accessed on 20 February 2022).

[4] Executive Power of Brazil (2020), Decree Nº 10.411, https://www.in.gov.br/en/web/dou/-/decreto-n-10.411-de-30-de-junho-de-2020-264424798 (accessed on 21 February 2022).

[9] Minas Gerais (2021), Guia Municipal da Liberdade Econômica, https://portalamm.org.br/wp-content/uploads/Guia-da-Liberdade-Econo%CC%82mica-com_decreto.pdf (accessed on 8 March 2022).

[10] Minas Gerais (2021), Linguagem Simples na Gestão Pública, https://www.planejamento.mg.gov.br/sites/default/files/documentos/gestao-governamental/guia_de_linguagem_simples.pdf (accessed on 9 March 2022).

[8] Minas Gerais (2021), Minas Livre para Crescer, http://www.desenvolvimento.mg.gov.br/application/projetos/projeto/1062 (accessed on 8 March 2022).

[2] OECD (2021), OECD Regulatory Policy Outlook 2021, OECD Publishing, Paris, https://doi.org/10.1787/38b0fdb1-en.

[1] OECD (2012), Recommendation of the Council on Regulatory Policy and Governance, OECD Publishing, Paris, https://doi.org/10.1787/9789264209022-en.

[3] Presidency of the Republic of Brazil (1988), Constitution of the Federative Republic of Brazil, http://www.planalto.gov.br/ccivil_03/constituicao/constituicao.htm (accessed on 20 February 2022).

[7] SEAE (2021), Índice de Concorrência dos Municípios, https://www.gov.br/economia/pt-br/acesso-a-informacao/reg/indice-de-concorrencia-dos-municipios-brasileiros-icm/sobre/documento-base-indice-de-concorrencia-dos-municipios.pdf (accessed on 17 March 2022).

[6] SEAE (2021), Índice de Concorrência dos Municípios, Guía de Preenchimento, https://www.gov.br/economia/pt-br/acesso-a-informacao/reg/indice-de-concorrencia-dos-municipios-brasileiros-icm/sobre/20210920-manual-de-preenchimento-v05.pdf (accessed on 17 March 2022).

[11] Seinfra-MG (2021), Agenda Regulatória, Biênio 2021-2022, http://www.infraestrutura.mg.gov.br/images/documentos/agenda-regulatoria/Cartilha_Agenda_Regulatria_Seinfra.pdf (accessed on 9 March 2022).


← 1. Other matters considered in Article 22 of the Constitution: Water, energy, information technology, telecommunications and broadcasting; monetary system and measures, securities and metal guarantees; credit policy, currency exchange, insurance and transfer of values; ports and navigation; transit and transport; deposits, mines, other mineral resources and metallurgy; indigenous populations; organisation of the national employment system; national statistical, cartographic and geological systems.

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