WaterSão Paulo water crisis shows the failure of public-private partnerships
São Paulo’s ongoing water crisis has left many of the city’s twenty million or more residents without tap water for days on end. Brazil’s largest metropolis is into its third month of water rationing, and some citizens have even taken to drilling through their basements to reach groundwater. Most commentators agree that the crisis is to blame on multiple factors, but few have questioned the role of the water company in charge: Sabesp. Just like the “natural monopolies” enjoyed by water companies in the United Kingdom, Sabesp has a publicly guaranteed monopoly, yet its profits are part-privatized — earlier this year it paid out R$252 million (US$83 million) in dividends. As is the case with other private companies, when deciding whether to make the necessary investments to prepare for possible water shortages, Sabesp has had to choose whether to safeguard the public supply or increase the value of its shares. As a result, the most essential resource of all has now become a struggle in São Paulo. Responsibility for this crisis lies with Sabesp and two decades of running water supply as a for-profit service. It is a failure of public-private partnership. As climate change and other environmental factors make water crises more likely, we better rethink the way water is managed worldwide.
São Paulo’s ongoing water crisis has left many of the city’s twenty million or more residents without tap water for days on end. Brazil’s largest metropolis is into its third month of water rationing, and some citizens have even taken to drilling through their basements to reach groundwater. Most commentators agree that the crisis is to blame on multiple factors, but few have questioned the role of the water company in charge: Sabesp.
The utility, responsible for water and waste in São Paulo and the surrounding state of the same name, has clearly failed its public service remit. Yet, it’s not even clear whether public service is the highest priority for part-privatized Sabesp, whose directors have just awarded themselves bumper bonuses despite millions of their customers going thirsty. São Paulo’s water will go from crisis to crisis so long as Sabesp prioritizes profits over long-term investment.
Clearly there are human-induced environmental factors at play: climate change, deforestation of the Amazon, pollution, as well as overconsumption. The pressures we put on nature are likely to increase water shortages worldwide, perhaps leading to conflicts and wars.
However, at the same time, there have always been droughts. Historical records going back hundreds of years show how cities and regions have struggled and often coped with extreme water shortages. So, periods without much rain are nothing new. But if that is the case, shouldn’t it be the responsibility of water utilities to plan for such events, putting in place contingency measures to manage possible water shortages?
São Paulo’s extraordinary growth in recent decades has overloaded the Cantareira, the city’s water supply system. But the rapid increase in water usage was hardly a surprise; it’s something that could have been managed and planned for. Sabesp has failed to do exactly that.
A profit-making public monopoly
One of the world’s largest water utilities, Sabesp was founded as a public institution in 1973. Since part-privatization in 1994 the state of São Paulo has maintained at least half of the company’s voting capital, though shares are also traded on the New York and São Paulo stock exchanges.
