The Regulatory Impact Assessment Gap in Brazil’s Executive Decrees

By Dr. Márcio Alcântara, Brasília, October 3, 2024

The enactment of Decree 10,411/2020 was a milestone for regulatory governance in Brazil. It established the framework for Regulatory Impact Assessment (RIA), requiring federal public administration bodies and entities to conduct a prior assessment before issuing generally applicable regulations affecting economic agents or users of public services. [1][2] But the same decree expressly excludes draft decrees and regulatory acts to be submitted to the National Congress. Four years later, that exclusion applies to some of the highest-impact rules issued by the Executive Branch.

In Brazil, a presidential decree is a rule issued directly by the President of the Republic. It has a higher normative rank than rules issued by ministries and regulatory agencies and is often used to establish a framework that those bodies will later implement in greater detail.

Since 2021, RIA has been mandatory, first for regulatory agencies, the Ministry of Economy, as it was then known, and Inmetro, Brazil’s National Institute of Metrology, Quality and Technology, beginning in April, and then for other federal bodies beginning in October. The bodies in the first group already had some experience with this tool. In the others, its application has been uneven. In many cases, RIA is waived on grounds such as urgency or low regulatory impact, which reduces how often it is used. Although legal, these waivers often raise doubts about the effectiveness and transparency of regulatory decisions.

Decree 12,068/2024, which regulates the tendering and extension of electricity distribution concessions, is a clear example of this reality. [3] No RIA was published for the decree, nor did one have to be: because it is a decree, it falls outside the scope of Decree 10,411/2020. Much of the subsequent regulatory detail was delegated to the Brazilian Electricity Regulatory Agency (ANEEL), which will be responsible for developing rules on key issues, such as efficiency and service-quality criteria for distribution concessionaires, using RIA in its subsequent rulemakings.

In the case of Decree 12,068, substantial responsibility was assigned to ANEEL, which will oversee and regulate continuity of supply and the economic and financial management of distribution concessionaires. This includes the responsibility for carrying out annual technical assessments based on specific indicators, as well as regulating issues such as grid modernization and the introduction of rate incentives. In this way, the decree assigns ANEEL responsibility for the detailed regulatory process. The text itself acknowledges this by requiring that any additional criteria established by the agency be preceded by public consultation and regulatory impact assessment, with a minimum three-year lead time before additional criteria or stricter requirements begin to be measured.

The absence of RIA in the context of Decree 12,068/2024 raises questions about the consistency and efficiency of regulatory practices in the Executive Branch. The decree did not break any rule. The problem lies in the rule itself: by excluding decrees, Decree 10,411/2020 leaves precisely rules like this one without prior assessment. It is important to reflect on the effects of delegating regulatory assessment entirely to agencies such as ANEEL after such significant rules have been issued. The lack of an RIA before the decree weakens transparency and regulatory accountability, because the rule’s effects on the market and society are not assessed ex ante.

This practice suggests that the Executive Branch has not yet fully adopted RIA in its rulemaking, except where directly required by law. Although ANEEL can fill this gap later by carrying out its own regulatory analyses, the need for a full RIA for high-impact decrees such as Decree 12,068 should be given more emphasis, including reconsideration of the exclusion established by Decree 10,411/2020. Carrying out an RIA should not be seen as an optional step, but as an indispensable tool to ensure that regulatory decisions are based on evidence and careful consideration.

The government recently launched the Regula Melhor Strategy, Brazil’s national strategy for better regulation, which aims to improve regulatory quality and make rulemaking more efficient. [4] This initiative reflects the growing need to make RIA a systematic and comprehensive process across the public administration, reducing the risk that rules are adopted without adequate analysis of their economic and social impacts. REGULA MELHOR reinforces the importance of applying RIA rigorously, including where it is not required today, to ensure that regulatory decisions are well founded and sustainable in the long term. Commitment to this strategy could be a significant step toward strengthening the transparency and legitimacy of the Executive Branch’s actions.

References

1. BRAZIL. Decreto nº 10.411, de 30 de junho de 2020 [Decree 10,411 of June 30, 2020, governing regulatory impact assessment]. Art. 1, § 3; Art. 4; and Art. 24. Available at: https://www.planalto.gov.br/ccivil_03/_ato2019-2022/2020/decreto/d10411.htm.
2. BRAZIL. Lei nº 13.874, de 20 de setembro de 2019 [Law 13,874 of September 20, 2019, the Economic Freedom Law]. Art. 5. Available at: https://www.planalto.gov.br/ccivil_03/_ato2019-2022/2019/lei/l13874.htm. BRAZIL. Lei nº 13.848, de 25 de junho de 2019 [Law 13,848 of June 25, 2019, on regulatory agencies]. Art. 6. Available at: https://www.planalto.gov.br/ccivil_03/_ato2019-2022/2019/lei/l13848.htm.
3. BRAZIL. Decreto nº 12.068, de 20 de junho de 2024 [Decree 12,068 of June 20, 2024, on electricity distribution concessions]. Art. 5, § 2. Available at: https://www.planalto.gov.br/ccivil_03/_ato2023-2026/2024/decreto/d12068.htm.
4. BRAZIL. Decreto nº 12.150, de 20 de agosto de 2024 [Decree 12,150 of August 20, 2024, establishing the National Strategy for Regulatory Improvement]. Available at: https://www.planalto.gov.br/ccivil_03/_ato2023-2026/2024/decreto/D12150.htm.

The opinions and analyses expressed in this article are personal and do not represent the positions, decisions or institutional views of the Brazilian Electricity Regulatory Agency (ANEEL).