Loan to Tackle Critical Water Scarcity in Sao Paulo, Brazil

May 4, 2010

WASHINGTON, May 4, 2010 - The World Bank approved today a US$ 64.5 million loan to the State of São Paulo, Brazil, in support of the Water Recovery Project - Reágua. The project will increase clean water availability in critical watersheds of the State, benefiting 27 million people, including 4.3 million people subject to high or extremely high social vulnerability. 

The project will pilot on a large-scale an innovative results-based approach that aims to increase the quantity and quality of clean water as well as improve the efficiency of the State’s water supply and sanitation infrastructure. Under this approach, utilities and service providers will be paid against agreed and independently verified outputs, explicitly linking State funding to the achievement of agreed goals. It will also prioritize the sustainability of these interventions as the full payment will only be made upon evidence of meeting sustainability conditions.

“The provision of water supply and sanitation is essential to improving people's lives, preserving the environment and preparing our cities for the future generations. Increasing the efficiency of water supply and sanitation systems will ensure the basic conditions for quality of life in the future,” said Alberto Goldman, Governor of São Paulo.

The project will help increase clean water availability in São Paulo’s five watersheds that suffer extreme water scarcity (Piracicaba/Capivari/Jundiaí; Alto Tietê; Sapucaí Mirim/Grande; Mogi Guaçu; and Sorocaba/Médio Tietê), prioritizing the poor in each area. The results-based approach will focus on:

  • increasing the quantity of available water by controlling and reducing real water losses, promoting the rational use of water in public schools and reusing treated wastewater in selected public activities;
  • enhancing the quality of water by connecting households to wastewater networks as well as building new and upgrading existing wastewater treatment plants; and
  • increasing the efficiency of São Paulo’s water sector by developing institutional and technical capabilities to improve the State’s water supply and sanitation sector and supporting the utilities and service providers in the design, operation, and maintenance of the programs and facilities.

“Water is crucial to sustain São Paulo’s continued growth and development, and Reágua is a key part of the State’s water strategy. It involves crucial investments in water quality and quantity, but most importantly it seeks to boost the efficiency of the State’s water supply and sanitation sector,” said Makhtar Diop, World Bank Brazil Country Director.

Water scarcity and environmental degradation are critical constraints on the State’s economic growth, competitiveness and social and environmental sustainability. The poor are also the most vulnerable to low water availability and water pollution, as this exposes their families to negative health, environment and socio-economic impacts. The State faces these problems due to the low availability of raw water, the high demand for this scarce resource and the lack of wastewater treatment. Eleven of the twenty two watersheds in São Paulo are in critical condition, with the Metropolitan Region in the most serious situation, with a demand/availability ratio of 442 percent. Moreover, within the State, almost one million people lack access to safe drinking water, 9.7 million people are not connected to a public sewerage network and 5 million lack adequate sanitation. Approximately 15.7 million people have sewage collection but no treatment.

“The innovative results-based approach will sharpen the focus on achieving efficient, transparent results, ensuring effective public expenditure and accountability, and improving the overall provision of water supply and sanitation services. It will also increase coverage levels, primarily for the poor, and it may grow into a valuable instrument for defining São Paulo’s future water strategy,” said Carlos Velez, Project Manager for the World Bank. “The Bank is proud of its long term partnership with the State in the water supply and sanitation sector.”

This is a US$ 64.5 million, IBRD Flexible Loan with a variable-spread in US dollars, with a 5 year Grace Period, and 30 years of final maturity with all conversion options. Since the first loan in 1952, the World Bank has invested approximately US$ 4.8 billion in São Paulo (including today’s loan).

Media Contacts
In Brasília
Mauro Azeredo
Tel : +55-61-3329-1059
In Washington
Gabriela Aguilar
Tel : (+1 202) 473-6768