Cutting corners: The bureaucratic bottlenecks caused by chronic underfunding of Brazil's regulators

Regulatory agencies in Brazil are suffering from lack of employees and inefficient structures, impacting companies and projects in many sectors of the economy.

In recent months, several strikes have been carried out by regulators' employees demanding that the government improve working conditions and increase staffing levels with new hires. 

Brazil created more regulators in the 1990s in parallel with a process of privatizing state-owned companies. There are now 11 regulatory agencies, but they are only considered having 65% of the workforce necessary to perform their main duties, which range from monitoring private sector activities to collecting taxes for the government.

Fabio Rosa, president of labor union Sinagências, which represents over 11,000 civil servants in the regulators, talks with BNamericas about the current state of the watchdogs and the reasons for the employees' discontent.

BNamericas: What explains the current state of Brazil's regulatory agencies?

Rosa: In recent years, Brazil has experienced a generalized reduction in public services. We haven’t conducted public hiring, a mandatory process to contract new civil servants, undertaken any career restructuring or implemented salary increases.

This has been driven by a persistent belief that public servants are merely an expense for the government. Consequently, efforts to strengthen regulatory agencies have been undermined, leading to increased costs for companies and a deterioration in regulatory services.

BNamericas: What is the current structure of Brazil’s regulatory agencies?

Rosa: Brazil has 11 regulatory agencies with a total of 11,352 civil servants, who are facing numerous challenges. On average, these agencies are staffed at only 65% of the legally required levels. It’s important to note that the relevant legislation was enacted about 20 years ago and since then the needs have increased, making the current staffing levels even more insufficient than the numbers suggest.

Since 2008, regulatory agencies in Brazil have lost one employee per day due to retirements without replacements. Additionally, inadequate salary adjustments have led many employees to seek better-paying positions either in other government sectors or in private companies. The lack of sufficient budget and the devaluation of careers is contributing to this brain drain from regulatory agencies.

BNamericas: Are some regulators in a more difficult situation than others?

Rosa: The national mining agency [ANM] is in the most critical situation, with only 30% of the staff it needs as defined by law. This severely impacts the areas of registration and the feasibility of new investments in the country.

Although the ANM is particularly affected, the situation is similar across other regulatory agencies, with low budgets and deteriorating career conditions being common issues.

BNamericas: Besides the workforce, is there other pressure to improve the structures of regulatory agencies?

Rosa: Several business entities in various sectors, including pharmaceuticals, oil and gas, and electricity, have supported our call for improved regulatory agencies. These businesses have directly appealed to the government to bolster regulatory agencies, as they’re experiencing delays and complications in their sectors due to the staff shortages.

BNamericas: Will government budget restrictions have an additional impact?

Rosa: We’ve recently faced budget contingencies and we’re in talks with the government about this. Unfortunately, these restrictions will likely affect the budgets of regulatory agencies. Although the government acknowledges our concerns, fiscal constraints make it difficult for them to address our requests for increased funding.

BNamericas: How important are the regulators?

Rosa: We’ve made significant efforts to highlight the importance of regulatory agencies, both economically and socially.

Economically, regulatory agencies generate substantial revenue for the government. They’re responsible for collecting taxes and contribute approximately 100 billion reais [US$17.9bn] annually, while their operational costs amount to 5bn reais per year. An increase in their budget by 2-3bn reais could address many issues and still yield a surplus for the government. Currently, only the country’s tax authority surpasses regulatory agencies in revenue collection.

Socially, regulatory agencies are crucial for monitoring and ensuring fundamental rights, such as the adequate supply of water, fuel, energy and technology.