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Brazil Environmental Export Market Plan
II. Legal and Regulatory Baseline

A basic legal and regulatory framework for environmental protection does exist in Brazil. It is based on a no less a source than the Federal Constitution of 1988. On the federal level, it consists of a broad array of legislation, presidential decrees and resolutions, and regulations and rules from federal environmental bodies. These are supplemented by legislation and regulations at the state level. As might be expected, the state of São Paulo has implemented the most broad ranging set of environmental regulations.

Federal Legal and Regulatory Structure
The Federal Constitution of Brazil (1988) is a long, complex document that explicitly deals with many more specific areas of economic and social concern than does the U.S. Constitution. Recognizing that the 1988 Constitution reserved too broad a role for the federal government in the economy, Brazil is currently in the midst of deliberating a series of constitutional amendments to reduce the scope of that role. Article 225 specifically establishes the right to “an ecologically balanced environment,” and empowers the federal government “to defend and preserve it for present and future generations.” Furthermore, the government is called upon to establish legislation which will require an environmental impact study for any project or activity which can potentially cause significant environmental degradation; in addition, any conduct considered harmful to the environment will subject the infractors to penal and administrative sanctions, independent of their obligation to repair the damage caused.
As is typical for legislation in a civil law country, Brazilian environmental laws are general and bestow far greater administrative authority on various government agencies and bodies than is the case with U.S. environmental legislation. In addition, the President of Brazil has considerable authority through presidential decrees to determine the exact jurisdiction and composition of the various administrative bodies. Constitution of the Federative Republic of Brazil (October 5, 1988), Title IV (“Concerning the Organization of Powers”), Chap. II (“Concerning the Executive Power”), Section II.
Unlike the U.S. legal approach with its separate legislation for each environmental medium or even Mexico’s broad General Law of Environmental Equilibrium, Brazilian federal environmental legislation simply establishes the relevant agencies and bodies and empowers them to take specific action in the various relevant areas. Among the more significant pieces of legislation over the past 15 years are the following:

1. Law No. 6,938 (August 31, 1981, as revised on July 18, 1989 and April 12, 1990), establishing a National Environmental Policy, its purposes and implementing mechanisms (including the establishment of the National Environmental Council, CONAMA).
2. Law No. 7,347 (July 24, 1985, as revised on September 11, 1990 and June 11, 1994), providing for the recovery of monetary compensation for harm to the environment.
3. Law No. 7,735 (February 22, 1989, revised April 12, 1990), creating the Brazilian Institute of the Environment and Renewable Natural Resources (IBAMA).
4. Law No. 7,797 (July 10, 1989, revised April 12, 1990) creating the National Environmental Fund whose object is to develop projects concerning rational and sustainable use of natural resources.
5. Law No. 8,490 (November 19, 1992, revised December 9, 1993), reorganizing the various federal ministries and creating the Ministry of the Environment and the Amazon. On July 27, 1995, Provisional Measure No. 1,063 expanded the environmental ministry to include hydraulic resources and renamed it the Ministry of the Environment, Hydraulic Resources and the Amazon.
There are three main federal bodies concerned with the environment. At the top is the Ministry of the Environment, Hydraulic Resources and the Amazon, whose principal functions are the following: planning, coordination, supervision, and control in environmental matters; formulation and execution of national environmental policy; lead ministry when inter-ministerial action on the environment is required; and preservation and rational use of renewable natural resources. Law No. 8,490 (November 19, 1992; revised December 9, 1993), Chapter II, Section II, Art. 16.
CONAMA has broad ranging jurisdiction over environmental matters. Established on August 31, 1981, it is described in the enabling legislation as a “consultative and deliberative” body with the power to advise, study, and propose governmental environmental policy and to deliberate and determine environmental regulations. An examination of the regulations it has promulgated indicates that it deals with both procedural matters (for example, procedural rules for environmental licensing and rules for public participation in licensing hearings) and substantive matters (for example, classification of all fresh water bodies by class, rules for the handling of PCBs, and establishing maximum permissible emission limits for all combustion sources).
This extremely important body is composed of a board and technical advisory groups. The board includes the Secretary of the Environment; the President of IBAMA; a representative of each of the federal ministries; a representative from each state, named by the respective governor; and a representative from each of the following entities: the National Confederations of Industry, Commerce and Agriculture; the National Confederations of Workers in Industry, Commerce and Agriculture; the Brazilian Steel Institute; the Brazilian Association of Sanitary Engineering; and the Brazilian Foundation for Nature Conservation. In addition, the President of Brazil chooses two representatives from private environmental protection groups, while the Secretary of the Environment appoints other nongovernmental representatives. Decree No. 99,274 (June 6, 1990; as revised June 27, 1990 and August 1, 1994), Title I, Chapter II, Section I, Article 5.
IBAMA was created on February 22, 1989. It serves as the main executive agency in the hierarchy of environmental bodies. For example, the President of IBAMA serves as executive secretary to CONAMA and can call on technical support from other federal, state, and even local government agencies to assist CONAMA in its duties. The regulations issued by IBAMA to date have included registration and recordkeeping requirements for hazardous waste and fee calculation standards for environmental licenses.
While IBAMA has legal authority to enforce federal environmental laws, decrees, and regulations, it has not historically had a strong enforcement presence. However, this situation appears to be changing, and IBAMA has increased the number of inspectors and enforcement personnel. In early August, it began publicizing its aggressive enforcement campaign “Operation Penalty.” Over a four-month period in 1995, IBAMA personnel identified 112,000 environmental infractions all over the country for which it plans to seek fines of approximately $87 million. Notifications have already been made for close to 40,000 violations. The largest single fine is for $2.3 million against a timber company in the northern state of Pará.

Environmental Licensing
Presidential Decree No. 99,274 (June 6, 1990) establishes an environmental licensing system which involves CONAMA, IBAMA, and state environmental protection agencies.
The proponent of any project which involves the construction, installation, expansion, and operation of any polluting or potentially polluting activity or any activity capable of causing environmental degradation is required to secure a series of permits from the respective state environmental agency. In addition, any such activity requires the preparation of an environmental impact report, or RIMA (Relatório de Impacto Ambiental), prior to issuing a permit.
Three types of permits are required. First is a preliminary permit (Licença Previa or LP) issued during the planning phase of the project and which contains basic requirements to be complied with during the siting, construction, and operating stages. Second is a construction permit (Licença de Instalação or LI), and third is the operating permit (Licença de Operação or LO). While the state agency grants the license, it is CONAMA which establishes the duration of the permit. Moreover, the state, together with IBAMA, determines, if necessary, what steps will be required to reduce pollution generating levels.
IBAMA can delegate to the states, on a case-by-case basis, the authority to exercise inspection and enforcement activities. Absent this delegation, inspection and enforcement is a joint IBAMA-state activity.

State Regulatory and Legal Structures
In Brazil’s federalist structure, the states have significant political and legal authority. As noted earlier, in the environmental field the states have broad permitting powers, regulation setting authority, and enforcement authority. As is to be expected, there is considerable variation in the capabilities of the various state environmental agencies, but there is a consensus that CETESB in São Paulo and Fundação Estadual de Engenharia do Meio Ambiente (FEEMA) in Rio de Janeiro are the leaders. In addition to the state environmental agencies, it is important to point out that the Brazilian states have their own state-owned water and sanitation companies which provide potable water and sewer services to a varying percentage of the municipalities within the respective state.
Many of the states, reflecting the federal government approach, have their own complex administrative structures for environmental matters. It is typically headed by a secretariat for the environment and consists of several state agencies dealing with its own area of responsibility: preservation of parks and natural areas; environmental education; environmental planning; research; issuing permits; and regulation writing and enforcement. The secretariat sets overall policy and relies on the various agencies to implement the policies. For example, the São Paulo Secretariat for the Environment has set the following areas as its top ten priorities for the next four years: 1) the consumer and the environment; 2) solid and hazardous waste; 3) environmental pollution control; 4) environmental education; 5) decentralized environmental management; 6) bio-diversity; 7) support for non-governmental organizations; 8) hydraulic resource preservation; 9) prevention of the destruction of the ozone layer; and 10) preservation of the Atlantic Forest.
The picture is further complicated by the fact that many of the large regional water cleanup projects are being managed not by the respective state secretariat for the environment or even by one of the state environmental protection agencies, but by the state-owned water company or, in the case of São Paulo and the Tietê River cleanup, the Secretariat of Hydraulic Resources together with the state owned water company, Companhia de Saneamento Basico do Estado de São Paulo (SABESP).
Among the administrative and legal problems which plague state environmental agencies are budget shortages, personnel turnover, outdated legislation, and gaps in legislative/regulatory coverage. For example, São Paulo’s basic environmental law (No. 997) was enacted in 1976.

State Agency Successes
Notwithstanding budgetary and other administrative problems, certain state environmental agencies have recorded major success stories. The two case studies here illustrate 1) CETESB’s success in addressing a horrific environmental situation in the coastal city of Cubatão and 2) FEEMA’s success in structuring an environmental cleanup at the country’s largest steel company, Companhia Siderurgica Nacional.

Case Study: City of Cubatão
The city of Cubatão (162 square kilometers; 90,000 people) is located on the coast approximately 44 kilometers from São Paulo. Cubatão is a classic case of a rapidly industrialized city with no planning. The city lived through many years of extremely poor air quality, including many episodes of air pollution emergencies. This situation was caused by unrestrained industrialization with no environmental controls and an unfortunate geographic condition- the city is surrounded by hills and low mountains on three sides.
The results of this mismanaged growth have been remedied over the last ten years by an aggressive corrective and enforcement program implemented by CETESB.
A brief descriptive chronology of events follows:
1950s- COSIPA (iron works) and PETROBRAS (petrochemical) began operations.
1960s- Twenty-three highly polluting companies (chemical, petrochemical, and fertilizer) began production.
Cubatão was designated a National Security Zone by the post-1964 military government.
The São Paulo state government is not allowed to intervene, and environmental concerns were not raised or considered during this period.
1970s- Cubatão was considered by many environmental groups as the most polluted city in the world; however, no direct corrective action or remedial plans for its environmental problems were undertaken.
Average particulate concentration occasionally reached µg 1,000 per cubic meter over 24 hour periods. (Acceptable levels are below 240 µg per cubic meter.)
Birth defects and other serious health problems raised international and nationwide attention.
1983- Military control ended.
Recovery of the city began with the state, led by CETESB.
Three hunderd twenty-three individual sources of pollution were identified within the city.
1980s- Gradual improvements to the environment were made despite a limited budget and political pressures opposing such actions by large industrial groups.
PROCOP, a rotating loan from the World Bank to CETESB, is approved for 10 years to improve Cubatão. The Bank of the State of São Paulo, BANESPA, is the financial agent. (This loan is in the process of being reapproved.)
Today- Ninety percent of the pollution is under control.
The city has an emergency alert system which shuts down certain industries when pollution levels reach critical stages.
Replanting and restoration of the local fauna has been made possible with a new pallet technology developed by CETESB.
Increased public awareness helps guard against recurrent environmental abusive actions.
This case study illustrates both the lack of attention to environmental standards which prevailed for many years, and Brazil’s ability to implement an extensive cleanup campaign. CETESB has an extensive enforcement network and uses state of the art technology which enables it to be effective.

Case Study: Companhia Siderúrgica Nacional (CSN)
CSN is Brazil’s largest steel producer and 14th largest company overall with 1994 sales of $2.653 billion. Since it was privatized in 1991, it has become one of the most environmentally conscious companies and is often referred to by Brazilian environmentalists as a major environmental success story. This reputation is all the more striking because the company was formerly known as one of the country’s largest polluters.
CSN’s main operations are located in the city of Volta Redonda (population 220,000), state of Rio de Janeiro. For the initial step towards improving its environmental record, the company opened up a clear and effective line of communications with FEEMA, the state of Rio’s environmental agency. It established a working partnership with FEEMA and invited the agency’s inspectors to visit its facilities to identify all existing pollution sources and propose corrective measures. A formal agreement to implement the agreed upon measures (Termo de Compromiso para controle da poluicão) was signed between CSN and FEEMA in September 1994. Considered a pioneer undertaking, it serves as a national model of effective industry-state cooperation.
A detailed examination of all pollution problems has been undertaken and feasibility studies have either been completed or are under way. The company is projecting expenditures of approximately $83 million, over a five-year period. This is part of a $1.1 billion investment program for overall modernization. A March 6, 1995, progress report indicated that the environmental program is on schedule. FEEMA and CSN envision the company achieving first world environmental standards within five years.
CSN has also taken pains to develop good relations with the city of Volta Redonda. Pursuant to an agreement called the Environmental Quality Program for Sustainable Development, the company is committed to providing basic community services such as health care and infrastructure development projects. The program, begun in January 1995, calls for the expenditure of $17 million over the next two years.

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