São Paulo water crisis shows the failure of public-private partnerships
While the Economist and others were keen to point out that Sabesp is “majority-owned by the state government,” this doesn’t tell the whole story. The utility is neither a public organization concerned with providing a public service, nor a private company facing competition from other companies and controlled by regulatory agencies. 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.
São Paulo’s water is just one of many public utilities that have been privatized throughout the world over the past few decades. Governments have followed the ideological belief that, in order to conserve and manage water properly, it is essential to put a price on what used to be a public good. In 1992, the UN adopted the Dublin Principles, declaring that putting a price on water and establishing a “participatory approach” — which is about involving users, planners and policy-makers at all levels — was the best way to reach a sustainable and equitable governance of water. The principles were quickly adopted by Brazil’s government, and implemented first in, you guessed it, São Paulo.
The Dublin Principles call for the establishment of “basin committees,” formed of government, water companies, local residents and civil society. These committees are supposed to be responsible for deciding on water use in a particular watershed. Yet, twenty-three years after this mechanism was supposedly implemented by Law 7663 in São Paulo — and after seventeen years of a similar rule at the national level — we still do not know who participated in these committees. On paper these committees exist, but in practice they are not empowered by state structures.
Dysfunctional governance in São Paulo state has left the part-privatized utility, Sabesp, to mainly follow the principles of the market and the interests of its private shareholders. This inevitably skews its strategy towards the short-term.
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. The company did invest US$4 billion from 2005 to 2013, but that is still not enough. Many of the necessary measures to prevent the current crisis — such as upgrading the Cantareira system — were not implemented because they would be unprofitable to Sabesp’s shareholders.
The company’s lack of transparency since the crisis kicked off highlights its planning failure. For many months Sabesp denied that water was being rationed. Then state governor, Geraldo Alckmin, acknowledged that there was lack of water, but said they were “isolated and private” cases. Then a bonus offered to those who economized water in their daily use, later turned into a fine for those who “waste” water.
The most essential resource of all has now become a struggle in São Paulo. Yet, ever deepening inequality has turned a water crisis into a social and economic crisis — communities on the periphery of the city and slums were inevitably the first to have their water rationed.
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.
Steffen Böhm is Professor in Management and Sustainability, and Director, Essex Sustainability Institute at University of Essex; Rafael Kruter Flores is Lecturer in Administration and Organization Studies at Universidade Federal do Rio Grande do Sul. This story is published courtesy of The Conversation (under Creative Commons-Attribution/No derivatives.
