Publications

Category: Banking, insurance and finance

Eduardo Castro, Flávia Ferraz, Melissa Moreira and Tathiana Bussab

In addition to the Annual Census of Foreign Capital in Brazil, legal entities and investment funds incorporated in Brazil must report to the Central Bank of Brazil the investments in their quotas and/or shares held by foreign investors, or the outstanding short term trade debts due to them, in order to comply with the Quinquennial Census of Foreign Capital in Brazil, which relates to the years terminated in 0 or 5.

The reporting under the Quinquennial Census must be submitted to the Central Bank by:

1. Legal entities incorporated in the country, with direct ownership held by non-resident investors in their capital stocks, regardless of the amount, on December 31, 2020;

2. Investment funds having their quotas directly held by non-resident investors on December 31, 2020; and

3. Legal entities incorporated in the country, with an outstanding balance in short-term trade debts (due within 360 days), granted by non-resident lenders, equivalent to or above USD 1 million on December 31, 2020.

The reporting obligation mentioned above does not apply to the following persons and administrative bodies:

• individuals;

• direct administrative bodies of the Federal Government, states, the Federal District and municipalities;

• legal entities that are debtors under on-lending foreign credit transactions granted by institutions headquartered in the country; and

• not-for-profit entities maintained by the contribution of non-residents.

The Quinquennial Census reporting must be electronically submitted to the Central Bank through the website www.bcb.gov.br from July 1^st, 2021, through 6 PM of August 16, 2021.

The manual containing detailed information on the content and requirements of the reporting is available on the website www.bcb.gov.br.

Those responsible for this report must store the documentation that supports the information provided for five years and make them available to the Central Bank upon request.

Failure to submit the report (or submitting it without complying with the applicable regulations) subjects the violator to a fine of up to BRL 250,000.00, under article 60 of BCB Circular No. 3,857, of November 14, 2017.

Sources: Law No. 4,131, of September 3^rd, 1962; BCB Circular No. 3,795, of June 16, 2016; BCB Circular No. 3,857, of November 14, 2017.

Category: Real estate

The Municipality of Rio de Janeiro published, at the beginning of the year, Decree No. 48,378/21, creating an accessory tax obligation for IPTU taxpayers of properties located in the city. From the fiscal year 2021, it would be mandatory, according to the standard, the presentation of the Annual Register Data Statement (DeCAD) of all residential and non-residential urban properties that, in principle, should be submitted until the last business day of June of each fiscal year.

The measure, which aims to create an updated database and facilitate changes in registration data of real estate properties in the city of Rio de Janeiro, could not be implemented in a timely manner for taxpayers to meet the deadline initially set for the current fiscal year. As a consequence, Decree No. 48,985/21 was published in June, which, in addition to establishing new deadlines for the presentation of DeCAD, provides for the following main changes:

• Optional character: The presentation of DeCAD is no longer mandatory and became a faculty of the owner of the property, avoiding the application of the penalties previously provided for in Article 8 of Decree No. 48.378/21 in case of non-compliance with the deadline for filing the declaration.

• Tax benefits: Article 5 of Decree No. 48,985/21 suggests that the presentation of DeCAD allows the application of tax benefits. Although the standard did not specify what such benefits would be, the municipal Secretary of Finance and Planning reported in an official communication vehicle of the municipality that those who provide the information updated spontaneously will be able to benefit from a 5% discount on the IPTU for the following financial year.

• form: the DeCAD form, which would previously be made available on the website of the Municipal Department of Finance and Planning, can now be accessed through the Carioca Digital portal, on the Internet.

The intention of the Municipal Department of Finance and Planning is to encourage Rio's taxpayers to make the declaration spontaneously. Thus, those who did not update their information with the tax will have the opportunity to regularize their registration without being penalized or suffer retroactive charges, except in the case of proven falsehood, insufficiency, or inaccuracy of any declared information.

The IPTU taxpayer must confirm the following information regarding his properties in the city of Rio de Janeiro: current real estate property registration number, full address, taxpayer data, clarification about his legal link with the property, fiscal exercise to which refer the information provided at DeCAD, whether the property is built or not, built area and nature of use (whether residential or non-residential), including specifying the nature of the specific use of the property and its typology and constructive characteristics.

According to article 34 of the National Tax Code (CTN), the taxpayer of the IPTU is the owner of the property, the owner of its useful domain or its owner in any capacity. By owner, it is understood that he has the option of using, enjoying, and disposing of the property (art. 1.228 of the Civil Code). The useful domain covers the rights of the foreiro, of use and disposition in relation to the emphytêutico building. As for ownership, it is understood that only the possessor with Domini animus, i.e. a definitive spirit of dominance, may be a contributor to the IPTU. The lessee, for example, does not qualify as a taxpayer, as he only holds direct ownership of the property, without Domini animus. Therefore, in the case of leased properties, the obligation to submit to DeCAD will, as a rule, be the lessor.

If it is necessary to correct the DeCAD already transmitted, the taxpayer may submit a rectifying declaration in accordance with the deadlines established by Resolution SMFP No. 3.245/21, being delayed the presentation of rectifier related to exercises prior to the declaration.

In view of the decree entered into force on the date of its publication, June 17, 2021, IPTU taxpayers from the AP1 and AP2 are to be scheduled to broadcast DeCAD by July 31, 2021. At the end of this article, we present a table with the geographic areas of the municipality of Rio de Janeiro and the dates for the transmission of DeCAD (the neighborhoods of each area can be found in the Annex V of Complementary Law No. 1/11).

As it is perceived, the Institution of DeCAD intends to transfer to taxpayers an instrumental tax burden of self-declaration of the information necessary for the municipal tax office to calculate the IPTU due. This is undoubtedly another measure that increases the already high tax cost of taxpayers, not to mention the operational difficulties that many of them will face in fulfilling this instrumental duty.

If the taxpayer chooses to submit to DeCAD and has the 5% discount on the IPTU of the following year, it will be necessary to do so within the deadline established for your neighborhood.

Category: Environmental

Two themes that have been effervescent in the industrial sector and in corporate world are green hydrogen and ESG (acronym for Environmental, Social and Governance, which, in Portuguese, corresponds to Ambiental, Social and Governança). Quite different at first glance, these two issues relate in a unique way and bring opportunities and advantages for entrepreneurs and investors, especially in Brazil.

Although the adoption of a business strategy based on the environmental, social and governance aspects and implications has been debated for some time, it is undeniable that this theme has gained greater relevance recently, when many companies and governments had to restructure and adapt to changes imposed by social isolation measures to contain the Covid-19 pandemic.

The health crisis on a global scale revealed the weaknesses of economic strategies currently adopted, highlighting the need of reviewing modes of production, consumption and, mainly, the relationship of people, companies, leaders and nations with the environment. Nowadays, much is said about economies’ "green recovery" and " stakeholder capitalism", in opposition to "shareholders capitalism". It is time for nations and corporations to take advantage of the crisis and the efforts undertaken in economic recovery and (re)affirm commitments and agendas in favor of sustainability.

The recent announcement of green hydrogen production initiatives and investments in Brazil and the imminent edition of a National Hydrogen Program, which should be approved by the end of 2021^[1] by the National Congress, revived discussions on the feasibility of hydrogen and opportunities related to its use in various markets and sectors.

Hydrogen is one of the main industrial insums,^[2] with wide application and aptitude to optimize several processes and products, but the high production cost has limited its use in the country. Obtaining hydrogen mostly involves using polluting energy sources such as oil, natural gas, or coal. The green variety corresponds to hydrogen produced by using energy from renewable sources (such as wind, solar and biofuels) and applying electrolysis to separate hydrogen from oxygen on water molecules.

However, the consortium of large-scale renewable energy generation projects with green hydrogen plants has proven to be an increasingly feasible way to overcome the obstacles to production and use of this element on a large scale, especially in face of the continuously price rising of fossil fuels and consequential increase in the competitiveness of alternative energy sources. In this context, Brazil has a frank and undeniable competitive advantage to this important global energy transition tool, with his 80% renewable sources composed energy matrix.

Green hydrogen, especially on energy sector, may be the key to guarantee Brazil’s protagonism on economical restructuring based on ESG strategies, assuming the role of a fundamental component of the Brazilian energy matrix.

As an environmental corporate strategy, green hydrogen is an important tool for decarbonization of the economy, industrial processes and transportation sector by reducing greenhouse gas (GHG) emissions and serving as a very interesting tool for achieving Sustainable Development Goals (SDGs)^[3] and other sustainability goals, especially if positive aspects of reducing carbon emissions and the potential credit of renewable energy are observed.

In the social aspect, the production of green hydrogen on a commercial scale and the production, storage and distribution chains structuring in the country will demand large investments, resulting in thousands of new jobs and greater income generation.

Considering Brazil’s energy potential, especially the one concentrated in North and Northeast regions and focused on clean energy (wind, solar and hydro) production, the implementation of green hydrogen related initiatives can imply on an important economic development of these regions, with greater investment, better income distribution and the reduction of social inequalities. In addition, green hydrogen is expected to promote the unification of the fuel, industrial and electric markets, given its versatility and multiple application.

From the point of view of governance, while the production and distribution of green hydrogen in Brazil is moving towards becoming a reality, government institutions and instruments must prepare legal, economic and regulatory scenarios conducive to the integration of the green hydrogen chain to Brazilian energy policy, involving civil society and business sectors, as well as directing efforts and resources towards an economic restructuring integrated with the ideals and agendas aligned with the issue of sustainability.

It is necessary, therefore, to closely monitor the Brazilian regulatory scenario and the mobilization of its authorities to establish the National Hydrogen Program, as well as be open to the numerous opportunities of green recovery tied to green hydrogen as an important strategy to strengthen the ESG aspects and decarbonization initiatives of Brazilian economy.

^[1] Regarding this theme, Resolution No. 6 of April 20, 2021, of the National Energy Policy Council, determined that Ministry of Mines and Energy submit a proposal of National Hydrogen Program guidelines within 60 days (counted from this resolution publication, which took place on May 17, 2021).

^[2] Used in the food, agribusiness, petrochemical, mining, technology and energy industries.

^[3] The Sustainable Development Goals are a global agenda agreed by the 193 United Nations (UN) member countries composed of 17 objectives and 169 goals to be achieved by 2030, with commitments aimed at eradicating poverty, food security, health, education, gender equality, reducing of inequalities, energy, water and sanitation, sustainable patterns of production and consumption, climate change, sustainable cities, protection and sustainable use of oceans and terrestrial ecosystems, inclusive economic growth, infrastructure, industrialization and others.

Category: Institutional

Responsibility, ethics, listening capacity, appreciation of the other, strategic vision, innovation and broad legal knowledge. The list includes some of the qualities common to people who work in traditional leadership positions in the legal world. Let us add to them factors such as the unequal struggle to be successful, the permanent state of alertness caused by the increased collection related to unconscious biases, the awareness of being an exception and the role of inspiring and transforming reality. We will have, with a reasonable margin of reckoning, a black leadership.

Although such differences should not exist 133 years after Brazil was the last country to formally abolish slavery in the Americas, these have been common characteristics to black people in leadership positions in the judiciary and in large Brazilian law firms.

According to Brazilian Institute of Geography and Statistics (IBGE), 56% of the country's population declares itself brown and black. Despite this percentage, throughout the history of the Supreme Federal Court (STF), for example, only three blacks joined the court: Ministers Joaquim Barbosa, between 2003 and 2014; Hermegenildo de Barros, appointed in 1919 and retired in 1937; and Pedro Lessa, minister between 1907 and 1921. As for black women, so far none have been part of the Supreme Court – a reflection of our culture permeated by racism and sexism that is often unrecognized.

Already in the higher courts - Superior Court of Justice (STJ), Superior Labor Court (TST), Superior Electoral Court (TSE) and Superior Military Court (STM) –, only 1.3% declare themselves black and 7.6%, brown, according to the Judicial Census conducted in 2018 by the National Council of Justice. In the Public Prosecutor's Office, blacks are only 2% according to IBGE.

In the midst of the low representation of black leaders, we found, exceptionally, professionals committed to the change of scenery, such as the prosecutor Lívia Sant'Anna Vaz, who works in the Public Prosecutor's Office of the State of Bahia and was Recognized as one of the 100 most influential people of African descent in the world for the MIPAD award – Most Influential People Afro Descendent - Law & Justice Edition.

For Livia, although they represent 56% of the population, black people in Brazil are not represented in public and private institutions and in the spaces of power and decision, and this has a direct impact on the way the justice system offers its services to citizens. According to the jurist said in an interview given to the authors of the article, "the struggle is unequal, because black bodies cause strangeness even today, in spaces of power, especially the body of the black woman, an instrument that speaks before even opening the mouth". She believes that, only through alliances between institutions, there can be a strengthening that allows to overcome this solitary and exceptional condition in leadership spaces.

the lawyer and doctor of law at Harvard University in the United States, Adilson José Moreira, author of "Recreational Racism", states in interview to lexlatin portal that "the legal world, the Brazilian faculty is made up of white people. Today, 80% of Brazilian law professors are upper-class heterosexual white men. These people have never suffered discrimination in their lives, so on the contrary, they are systematically privileged by racism."

Published by the National Council of Justice (CNJ) in 2018, the latest report Sociodemographic Profile of Brazilian Magistrates, which seeks to identify who the Brazilian magistrates are in terms of demographic, social and professional characteristics, points out that only 14% of the magistrates are black, 64% of whom are white and the other classified as brown.

In the state of Bahia, a federal unit with one of the largest black populations in the country, only 5% of the magistrates are black, which reinforces the finding that the Judiciary, being an instrument for combating injustices, can and should expand the space of representativeness when it comes to afrodescent in leadership positions.

In private enterprise, when we look at a work published by IBGE in 2019, we have the following cutout: "Despite the fact that the black or brown employed population is higher than the white population, the proportion in management positions shows a significant majority of white people – 68.6% versus 29.9% in 2018. Such under-representation of black or brown employed people in this matter occurs in the five Great Regions of the country. Although in the North and Northeast regions there is a higher proportion of black or brown people than white people in managerial positions (respectively 61.1% and 56.3%), these percentages are lower than those observed in the general occupied population, in 2018 (respectively, 78.0% and 74.1%), characterizing the under-representativeness also in these regions."

Although blacks are the majority in public universities (50.3%), IBGE data show that they occupy only 30% of the leadership positions in the country.

With regard to lawyers, the Brazilian Bar Association (OAB) currently has more than 1.2 million registered. However, there are no data on the percentage of browns and blacks, as there has not been a census for racial analysis so far

Demonstrating the growing importance of the debate on institutional racism, however, in 2020 the I National Conference for the Promotion of Equality.

In line with the racial diagnosis made in law firms, the Center for the Study of Labor Relations and Inequalities (Ceert) conducted a survey in 2018 that showed the existence of less than 1% of black lawyers in large Brazilian law firms. The survey was conducted in partnership with the Legal Alliance for Racial Equity and analyzed nine newsstands in São Paulo.

We have made progress since then, but a coherent reading of the data provides us with the perspective that affirmative policies, although long publicized as essential for the development of a society that seriously seeks historical redress in relation to the black population, are still incipient and there is much to improve.

It is not just about reparation and justice: Brazil's development can be proportional to its wealth of diversity.

Research conducted by McKinsey, a global management consulting firm, revealed that companies with greater ethnic diversity in their executive teams are 33% more likely to profitability.

In order to achieve these goals that in everything prove beneficial, it is enough to stimulate a factor that at some point permeates the lives of all leaders, regardless of whether they are black or white: opportunity.

It is in this space of creating opportunities that some offices, like Machado Meyer, have stood out implementing internal policies aimed at minorities. The initiative aims to boost careers of black people through mentoring, educational incentives such as language courses and undergraduate studies, support for projects such as Include Law, and encourage the admission of black employees to management positions and white professionals engaged in anti-racist actions. This makes it possible not only to increase the number of black people in the staff, but also reaffirms the importance of the representativeness of these people in leadership positions.

The racial and social inequalities that have been open in the last year due to the covid-19 pandemic and the debates on racism make the adoption of actions to solve this historical-cultural situation even more pressing.

One of the ways to achieve a more responsible legal world on this issue is planning to expand the number of black leaders in the corporate world.

The question we all ask ourselves is: how can we accelerate the expansion of the black leadership contingent? The answer, as already pointed out in the article Structural racism is, "we need to act!". There are many actions that need to be taken, including:

• Racial literacy: the need to deconstruct ways of thinking and acting that have been naturalized – such as the logic of the Eurocentric perspective guided by white privilege – to implement actions to combat the structural racism present throughout Brazilian society and to curb any type or attempt of physical, psychological and intimidating violence.
• Debates on racial equality so that more blacks can report their difficulties and help raise employee awareness of the issue.
• Anti-racist protagonism of companies: commitment of companies and employees to racial equality through the adoption of anti-racist policies and practices such as:
  • Acceleration of entry programs through specific training and training to provide internal reception and awareness of the entire organization
  • Increase in the number of blacks in decent positions and salaries in companies to have conditions of education for themselves and their
  • Training of black professionals so that they are more prepared and companies can maintain them at all levels and sectors of their staff, offering professional improvement, mentoring programs and international experiences
  • Hiring blacks for the top management of organizations
  • Encouraging the indication of black professionals
  • Insertion in the labor market of black professionals already qualified and not absorbed by large companies
  • Participation in forums that provide guidelines for advancing the theme of racial equity
  • Promoting a culture in which employees help, encourage, and boost their black colleagues
  • Adhering to programs aimed at racial change, such as the Legal Alliance for Racial Equity, the^[1] and the Include Law project, an initiative of the Center for the Study of Law Firms (Cesa) to contribute to reducing inequalities and discrimination, promoting the inclusion of black students in the legal universe through an agreement with supporting offices and universities

The above initiatives are no longer isolated and have been implemented by several companies, as pointed out in the book The anti-racist company: how CEOs and senior leaders are acting to include blacks and blacks in large corporations.^[2]

The trajectory of black leaders, in addition to breaking stereotypes and racial unconscious biases, also opens up space and encourages blacks to achieve their goals and reduce inequalities.

The intention of this article is not only to point out the causes of inequality or to highlight the status of a minority of the black race, even though this discussion has the utmost importance and is necessary in many layers of Brazilian society lacking information in several aspects. The article, written by three black lawyers in an exceptional position in an office that respects our place of speech and is willing to propagate our voices, aims to demonstrate that changes are urgent and it is essential that those in a position of privilege educate their gaze to observe that skills exist in all human beings , regardless of skin color.

Machado Meyer is part of the Legal Alliance for Racial Equity and reinforces, through ID.Afro, the Diversity and Inclusion Committee and all its members, the commitment to anti-racist initiatives.

REFERENCES

"Half the population, blacks are only 1% of the lawyers of the big offices," Conjur, 12/6/2020, https://www.conjur.com.br/2020-jun-12/negros-sao-somente-advogados-grandes-escritorios

"With the blackest capital of the country, Bahia wins free application for registration of complaints against racism and religious intolerance", G1, 19/11/2018, https://g1.globo.com/ba/bahia/noticia/2018/11/19/com-a-capital-mais-negra-do-pais-bahia-ganha-aplicativo-gratuito-para-registro-de-denuncias-contra-racismo-e-intolerancia-religiosa.ghtml 

"Social inequalities by color or race in Brazil", IBGE, Studies and Research - Demographic and Socioeconomic Information, no. 41, 2019, https://biblioteca.ibge.gov.br/visualizacao/livros/liv101681_informativo.pdf

"The top has color: blacks are still a minority in leading positions in the food industry," The tares and wheat, 29/10/20, https://ojoioeotrigo.com.br/2020/10/o-topo-tem-cor-negros-ainda-sao-minoria-em-cargos-de-lideranca-da-industria-alimenticia/ 

"Black Women's Leadership Survey", Restless, 04/29/21, https://inquietaria.99jobs.com/pesquisa-mulheres-negras-na-lideran%C3%A7a-3E6DFB5CCA95

"Ambev, Carrefour and other giants create project of R $ 45 mi against racism", UOL, 08/06/21 https://economia.uol.com.br/noticias/redacao/2021/06/08/mover-empresas-se-unem-em-movimento-por-equidade-racial.htm?cmpid=copiaecola 

"Launch of the Legal Alliance for Racial Equity", FGV, 03/21/19,  https://direitosp.fgv.br/evento/lancamento-alianca-juridica-pela-equidade-racial

"Black Consciousness Day: is the law sector inclusive?", Folha OAB, 20/11/20, https://folhadirigida.com.br/oab/noticias/politica-e-mercado-oab/dia-consciencia-negra-setor-advocacia-inclusivo 

"I National Conference for the Promotion of Equality, National OAB, 19 and 20/11/21" https://centraleventos.oab.org.br/event/291/i-conferencia-nacional-de-promocao-da-igualdade

"Video of the 1st National Conference for the Promotion of Equality, OAB Nacional, 19 and 20/11/21"

https://www.youtube.com/watch?v=88PhOVT80Ls

"IBGE: 64% of the unemployed are black and informality reaches 47%," Brazil in fact, 11/13/19, https://www.brasildefato.com.br/2019/11/13/ibge-64-dos-desempregados-sao-negros-e-informalidade-alcanca-47

"CNJ research: how many black judges? How many women?", CNJ News Agency, 3/5/18,

https://www.cnj.jus.br/pesquisa-do-cnj-quantos-juizes-negros-quantas-mulheres/

 "Racial literacy: a challenge for all of us, Portal Geledés, 28/10/17, https://www.geledes.org.br/letramento-racial-um-desafio-para-todos-nos-por-neide-de-almeida/

"Black jurists and the struggle for spaces in the world of law", Folha de Pernambuco, 09/07/20, https://www.folhape.com.br/noticias/juristas-negras-e-a-luta-por-espacos-no-mundo-do-direito/146536/

"Sociodemographic Profile of Brazilian Magistrates", CNJ, 2018, https://www.cnj.jus.br/wp-content/uploads/2011/02/5d6083ecf7b311a56eb12a6d9b79c625.pdf

^[1] The movement aims to work on three pillars: leadership, employment and training and awareness. In the first, the signatory companies commit to create a total of 10,000 new positions for black people in leadership positions (such as supervisors, coordinators, managers and directors) by 2030. In the pillar of employment and training, the planned actions aim to generate opportunity for three million people, through the offer of courses and network of relationships with black entrepreneurs. In the last pillar, the movement proposes to be a tool to support awareness of racism. The initiative aims to carry out advertising campaigns on the theme [...] - See more in https://economia.uol.com.br/noticias/redacao/2021/06/08/mover-empresas-se-unem-em-movimento-por-equidade-racial.htm?cmpid=copiaecola 

^[2] PESTANA, Mauritius. The anti-racist company: how CEOs and senior leaders are acting to include blacks and blacks in large corporations. 3rd ed. Rio de Janeiro: Agir, 2021

Category: Banking, insurance and finance

Eduardo Castro, Flávia Ferraz, Melissa Moreira and Tathiana Bussab

Legal entities and investment funds incorporated in Brazil must submit a report to the Central Bank of Brazil, detailing investments in their quotas and/or shares held by foreign investors, or the outstanding short-term trade debts owed to non-residents, on December 31 of the previous fiscal year, in the following situations:

1. Legal entities must submit this report when, on December 31, 2020, they had a net worth equivalent to or above USD 100 million and, simultaneously, any direct ownership held by non-resident investors in their capital stock, regardless of the amount;

2. Legal entities must submit a report concerning their current liabilities with non-resident lenders through debt instruments when, on December 31, 2020, they had an outstanding balance in short-term trade debts (due within 360 days) equivalent to or above USD 10 million, regardless of any foreign equity ownership in their capital stock; and

3. Investment funds must submit a report when, on December 31, 2020, they had a net worth equivalent to or above USD 100 million and, simultaneously, quotas directly held by non-resident investors, regardless of the amount.

The reporting obligation mentioned above does not apply to the following persons and administrative bodies:

• individuals;

• direct administrative bodies of federal, state, Federal District, and municipal governments;

• legal entities who are debtors in the transfer of foreign loans granted by institutions headquartered in Brazil; and

• nonprofit entities maintained by the contributions of non-residents.

The report must be electronically submitted to the Central Bank through the website www.bcb.gov.br between July 1, 2021, and August 16, 2020, at 6 PM.

The manual containing detailed information on the content and requirements of the report is available on the same website.

Those responsible for this report must store the supporting documentation for five years (counted as of the base date of the report) and make them available for submission to the Central Bank upon request.

Failure to submit the report (or submitting it without complying with the applicable regulations) subjects the violator to a fine of up to BRL 250,000.00, under article 60 of BCB Circular No. 3,857, of November 14, 2017.

The Census of Foreign Capital in Brazil aims to compile statistics of the external sector, especially the International Investment Position, to subsidize the development of the economic policy and support the activities of the economic researchers and international agencies.

(BCB Circular No. 3,795, of June 16, 2016, Law No. 13,506, of November 13, 2017; and BCB Circular No. 3,857, of November 14, 2017.)

Category: Environmental

On February 26, the government of Minas Gerais published State Decree No. 48,140/2021, the second of a set of three decrees to regulate State Law No. 23,291/2021, which instituted the State Dam Safety Policy (Pesb). The initiative seeks to strengthen the rigor of dam safety in the territory of Minas Gerais.

The first decree - State Decree No. 48,133/2021 - had the objective of changing the wording of Articles 11 and 24 of State Decree No. 48,078/2020, which regulated the procedures for the analysis and approval of the Emergency Action Plan (PAE).^[1] The most significant modification refers to paragraph 2 of article 24. Originally, the Military Office of the Governor/State Civil Defense Coordination (GMG/Cedec) was assigned the role of coordinating public meetings on preventive actions. The new wording established that the meetings should have the participation of a representative of the public authorities, with procedures to be defined in a specific act, apparently without any coordination function. In addition, State Decree No. 49,190/2021 also brought about minor changes to the original text of State Decree No. 48,078/2020, especially with regard to the deadline for the adaptation of the PAE to current state standards. Originally scheduled to take place within one hundred and eighty days from the entry into force of State Decree No. 48,078/2020, the deadline for adaptation of the PAE must now respect the timetable provided for in Article 20, according to the new wording brought in by State Decree No. 49,190/2021, according to criteria that take into account the degree of potential risk of the structures.

The second decree - State Decree No. 48,140/2021 - regulated the provisions of the Pesb and established measures to implement Article 29 of State Law No. 21,972/2016.^[2] It applies particularly to entrepreneurs who have dams in Minas Gerais subject to risk classification, inspection, and monitoring by the State System of Environment and Water Resources (Sisema) until possible decommissioning.

The purpose of this second decree is to standardize mechanisms of:

1. classification of dams by risk category and associated potential environmental damage;
2. stages of the decommissioning of dams raised by the upstream method;^[3]
3. providing information on the volume of the reservoir, characteristics of the material disposed of, and monitoring of water and soil quality; and
4. works and emergency interventions to reduce or eliminate serious risk to human lives and the environment, among others.

Regarding the risk classification, State Decree No. 48,140/2021 provides that the dams will be classified according to the information provided by the entrepreneur himself, considering:

1. category of risk and associated environmental damage potential, taking into account the physical aspects of the structure (which may influence the possibility of accidents);
2. potential for loss of human lives and economic, social, and environmental impacts resulting from its potential rupture (existence of a community in the flood spot, service and urban infrastructure, water sources, or water reservoirs, etc.); and
3. storage capacity of the reservoir, according to the standards of the State Environmental Policy Board (Copam).

If the entrepreneur does not present the information necessary for the risk classification of the dam or does not present a technical justification considered valid by the State Environmental Foundation (Feam), the maximum risk score will be assigned. Before that, however, the entrepreneur will receive a notice for him to resolve any irregularities or omissions of information within ten days.

State Decree No. 48,140/2021 also contemplated the need to conduct technical audits for safety assessment in dams classified by Sisema. The technical person responsible for the audits must necessarily be accredited by Feam and may not have an employment relationship or have provided services of a similar nature to entrepreneurs and/or their subsidiaries or affiliates within the three years preceding the audit.

The requirement aims to ensure the independence and impartiality of the process. The decree also establishes that the costs related to the hiring of the auditor by Feam, the performance of audits, and the preparation of reports will be at the sole expense of the entrepreneur.

According to the mandate conveyed by Pesb, all dams in Minas Gerais built by the upstream method should be decommissioend by February 2022,^[4] and National Mining Agency (ANM) Resolution No. 13/2019 established specific deadlines and conditions at the national level (September 15, 2022, to September 15, 2027), taking into account the volume of the dam.^[5]

The legislation of Minas Gerais, however, provides for specific steps and criteria for decommissioning of upstream dams involving structural safety factors, protocols to reduce the impacts resulting from disruption during the decommissioning works, and plans to mitigate environmental impacts caused by these works.^[6]

These provisions are contained in Chapter IV of State Decree No. 48,140/2021. It establishes the steps that must be fulfilled and funded by the entrepreneur for the decommissioning process, according to criteria defined in the reference sheet – approved and made available by Feam – which establishes the minimum requirements of a project for the decommissioning of dams raised by the upstream method in Minas Gerais.

These demands may delay the deadline for decommissioning, especially because it requires a formal response from Feam so that the structure can be considered decommissioned.^[7]

The dam will only be considered decommissioned after formal response by the competent body, when it will be deregistered from the Feam database - without, however, exempting the entrepreneur from the civil responsibilities associated with environmental aspects and the maintenance of safety of the areas where the dam was located.

If the upstream dam presents a serious or imminent risk to human lives and the environment in its surroundings, it is incumbent on the entrepreneur to adopt the emergency measures necessary, immediately, regardless of prior environmental licensing or authorization for intervention.

Pursuant to Article 25 of State Decree No. 48,140/2021, however, the measures considered to be emergencies will depend on:

1. prior and justified communication to the responsible state environmental agency;
2. the submission of monthly periodic reports indicating the interventions carried out and the measures taken to mitigate the associated risks; and
3. final report proving the cessation of the emergency situation.

In cases of intervention in which the emergency issue is not found or in the absence of compliance with the requirements set out in article 25 mentioned above, the enterprise will be subject to the application of the appropriate administrative sanctions, and the fact must be reported to the Public Prosecutor's Office for it to take the measures it deems necessary.

Any extraordinary expenses incurred by the government in response to emergencies caused by accidents or disasters should be reimbursed by the entrepreneur within 30 days, counted from the final and unappealable administrative decision handed down in the record of the separate administrative proceedings, which will be opened by Feam.

Last are the inclusions made in State Decree No. 47,383/2018 by State Decree No. 48,140/2021.^[8] Article 80-A establishes new criteria for calculating the fines imposed on entrepreneurs, according to the potential for environmental damage of the dam and the economic capacity of the offender. In the inclusion of paragraphs 6 to 8 to article 113, we highlight the mandate to allocate 50% of the amounts collected as administrative fines to the municipalities affected by the dam rupture. 

As stated, State Decrees No. 48,133/2021 and No. 48,140/2021 aim to regulate the Pesb's provisions. It will be incumbent on the entrepreneurs to adapt to the new regulations established for the dams located in Minas Gerais proactively and within the deadlines established.

The expectation is that a third decree related to the socioeconomic aspects of State Law No. 23,795/2021, which instituted the State Policy for Persons Affected by Dams in Minas Gerais (Peab) will be issued. Issues such as the hiring of independent technical advisory services for affected persons (article 3, VIII), definition of other beneficiaries of Peab (article 6, paragraph 1), and duties of the representative committee to monitor the actions provided for in the Peab (article 7).

From a joint analysis of the state standards mentioned herein, published since mid-2019, one perceives an increase in rigor in the requirements of public environmental agencies, in the means of supervision, and in the penalties applied to entrepreneurs who possess dams, especially those built by the upstream method. The motivation seems to be nothing other than an attempt by the state executive branch to respond to the events that occurred in recent years in Minas Gerais involving ore dams.

^[1] The obligation to prepare and approve the PAE by the competent state agency was established in Article 9 of State Law No. 23,291/2019, which instituted the State Dam Safety Policy.

^[2] State Law No. 21,972/2016 deals with the State System of Environment and Water Resources (Sisema) and provides for other measures. For the purposes of this article, Article 29 provides that: "Among the environmental control measures determined for the environmental licensing of an activity or enterprise that may endanger human lives or the environment, characterized as such by the competent environmental agency, the entrepreneur shall be required to develop and implement an Emergency Action Plan, Contingency Plan and Risk Communication Plan."

^[3] That in which the raising of massifs rely on the tailings or sediment previously released and deposited.

^[4] As set out in Article 13, paragraph 2, State Law No. 23,291/2019.

^[5] Article 8, III, of ANM Resolution No. 13/2019.

^[6] Forecast brought in the arts. 18 to 21 of State Decree No. 48,140/2021.

^[7] According to Art. 22 of State Decree No. 48,140/2021.

^[8] Establishes standards for environmental licensing, typifies and classifies violations of environmental and water protection standards, and establishes administrative procedures for the supervision and application of penalties.