Regulatory Impact Assessment in Brazil

July 7, 2020

Regulatory Impact Assessment in Brazil

Federal Decree #10,411/2020 new regulation

Brazilian Regulatory Quality

The Regulatory Impact Assessment (RIA) regulation is a milestone for the improvement of regulatory quality from federal public entities in Brazil. RIA is a mechanism for the decision-making process in the Public Administration, it rationalizes and establishes a procedure for public entities.

RIA was introduced in Brazilian regulation in 2016 when the Brazilian National Land Transport Agency (ANTT) published its guidelines on the matter. RIA’s evolution, however, began effectively in 2017. The Federal Government, through Federal Decree #9,203/2017, introduced a new governance policy in the country. The new policy was the trigger for changes in Brazilian regulatory practices. It sets regulatory improvement, liability, and transparency as grounds for all federal administrative acts.

Following the Federal Decree, in 2017, several regulatory agencies issued sectorial rules and RIA guidelines. The Chief of Staff Office published an RIA guideline to standardize the matter in 2018. It was the first major centralized movement for RIA in Brazil.

In 2019, the entry into force of the Brazilian Declaration of Economic Freedom Rights (Law #13,874/2019) and the Regulatory Agencies Statute (Law #13,848/2019) legally introduced RIA as a mechanism for improving regulatory quality in Brazil. Federal Decree #10,411/2020 publication brought to Brazilian Legal System RIA’s detailed regulation. However, the Decree is not in force yet. The following table shows when it’s application will be mandatory in the federal level.

Federal Decree #10,411/2020: Guidelines

The Decree defines RIA as a procedure to be conducted before a new government regulation is introduced. RIA starts from the definition of the regulatory problem by the public administration. The procedure gathers data and information for decision-making, improving the quality of the potential regulation. 

RIA’s new regulation is not applicable in Brazil for the Legislative Branch and for States and Municipalities that may regulate RIA according to its own rules due to federative autonomy. 

Sectoral regulation, as such from Federal Agencies, was the option in the regulatory model chosen by the Government. The Federal Decree only establishes general guidelines for the procedure and does not restrict sectorial regulation of agencies and public entities. Those regulations will be necessary for applying the general guidelines. Other methodologies regarding regulatory quality are also encouraged to be regulated, if the concern with regulatory quality and efficiency in decision-making process is maintained.

The key point of the Federal Decree is to standardize basic steps of RIA’s procedure. It incorporated the structure of the Chief of Staff´s Office RIA Report, defining the minimum content to be presented as the procedure result.

Minimum Content - RIA Report
Executive SummarySummary of the results of the procedure.
Regulatory ProblemIdentification of the regulatory problem and presentation of its causes and its extent.
StakeholdersIdentification of economic agents, users of regulated services and others affected by the identified regulatory problem.
SubstantiationIdentification of the legal basis that supports the entity's action regarding the identified regulatory problem;
GoalsDefinition of the goals. 
Possible alternativesDescription of the possible alternatives to face the identified regulatory problem, considering the options of non-action, normative solutions and, whenever possible, non-normative solutions; comparison of the alternatives considered for solving the identified regulatory problem and its methodology.
ImpactsDescription of the possible impacts of the identified alternatives, including regulatory costs.
Social engagementConsiderations regarding the information and manifestations gathered by the entity on the RIA process in case of social engagement or other process to receiving subsidies from interested parties in the matter under analysis.
International BenchmarkingMapping of international experience regarding the measures adopted to solve the identified regulatory problem.
Risk MatrixIdentification and definition of the effects and risks arising from the edition, amend or repeal of the normative act.
Implementation and MonitoringDescription of the strategy for implementing the proposed alternative, types of monitoring and evaluation to be adopted. When it is possible, provide an assessment of the need to amend or revoke current rules/regulation.

Although the RIA is the rule, there are exceptions provided by the Decree, divided into two categories.

RIA exclusion

The first category lists exclusions. For the acts provided in the second paragraph of the 3rd Article, RIA will not be required. This was a discretionary choice of Federal Government. Sectoral regulation may provide further details on the list, as the acts were generally considered, to adapt the exclusions for each regulated sector.

Those are acts (i) of internal processing of the entities; (ii) concrete effects; (iii) budgetary and financial execution; (iv) exchange and monetary policy; (v) on national security; (vi) that aim to consolidate other rules on specific matters but do not change the merits.

RIA Waiver

The second category is the RIA waiver. RIA procedure could be conducted in the cases provided by the Decree; however, public administration may waive it due to external factors or potential harm in performing the procedure. Sectoral regulation will be important to define broad terms of the Decree, such as "low impact act". 

The waive hypotheses are for: (i) urgent acts; (ii) acts that strictly discipline rights of a higher hierarchical norm, without decision-making space; (iii) low impact acts; (iv) acts that repeal or updating of obsolete rules; without change the merit; (v) acts related to financial matters, to preserve liquidity, solvency or health in the insurance, reinsurance, capitalization and private pension markets; financial, capital and foreign exchange markets; or payment systems; (vi) acts that adapt national regulation to international standards; (vii) acts that reduce requirements, obligations, restrictions, requirements or specifications in order to reduce regulatory costs; and (viii) acts that revise outdated rules to adapt them to internationally consolidated technological development. 

Measuring Regulatory Performance (ARR)

The Decree provides the Measuring Regulatory Performance (ARR) as a complementary procedure for evaluating the impact of regulation and regulatory policy. The mechanism is used to monitor the results of regulatory actions. Even in cases of RIA waiver, ARR has to be conducted within three years, counting from the date the rule comes into force.

Each entity will comply with the criteria proposed by the Decree to conduct ARRs. It considers (i) the level of impact on the country's economy generated by the regulation; (ii) the relevance of the matter; (iii) the existence of problems generated by the regulation enacted; and  (iv) the validity of the regulation (minimum of five years).

ARRs must be public and the procedure documents have to be available on the website of each entity. It aims to guarantee the transparency of administrative performance.

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