ENVIRONMENT-BRAZIL: Water, New Factor of Competition in Industry

By Mario Osava Reprint | | Print |

Mario Osava

RIO DE JANEIRO, Oct 14 1999 (IPS) - Scarcity has put a high price tag on water in some parts of Brazil, the country with the greatest abundance of rivers in the world, and made it a new factor of competitiveness for industry.

The alarm was first sounded among industry in the state of Sao Paulo, until recently considered the engine of national development.

The Brazilian government of Fernando Henrique Cardoso is preparing to create a National Water Agency (ANA), which will be in charge of administering water resources, currently considered a public asset. In the future, the use of water will depend on concessions by the state and the payment of fees.

Sewerage and water companies presently charge only for distribution and installation services and maintenance of the pipes, but not for water in and of itself. Companies and irrigation projects freely help themselves to water from rivers.

It is natural for the price of water to be higher where it is scarce and disputed by industry, agriculture, local residents and power companies, partly in an aim to stimulate more rational use, said Horacio Lafer Piva, president of the Federation of Sao Paulo Industries.

But, he added, if fees are charged for the water consumed, that could lead many factories to leave Sao Paulo and set up shop in other states, where the abundance of rivers means water remains free of charge.

Water could become another factor in the dispute over investment in the industrial sector, as is already occurring with the “fiscal war” over the concession of tax breaks, said the businessman.

Industry has increasingly fled the metropolitan region of Sao Paulo this decade, in search of cheaper labour power and more favourable business conditions in cities in the interior of the state and in other states.

On the outskirts of Sao Paulo, large car assembly plants, for example, pay average monthly salaries of 770 dollars, compared to half that in Betim, in the eastern state of Minas Gerais, and less than one-third in Resende, 170 kms from Rio de Janeiro.

Metalworkers started last month to hold weekly 24-hour sit-down strikes, rotating by city, demanding a nationwide metal-workers contract aimed at reducing the gap in wages, which entices companies to move to other cities to cut costs.

Greater Sao Paulo, which has been experiencing an exodus of companies due to its higher labour costs and heavy traffic congestion, is also at a disadvantage due to the scarcity of water.

In that respect, Brazil’s largest city, home to 16 million, has one basic problem: it is located on a high plain, where the sources of rivers are located, which means it has scarce water resources.

And to compound the problem, the rivers are polluted by people living and companies operating along the banks.

If steep rates are charged for water, that could spur companies to pull out and move to other states, acknowledged Environment Minister José Sarney Filho.

The cost of water would necessarily differ between areas where it is scarce, like Sao Paulo and the impoverished northeast, and areas of abundance, such as the Amazon jungle region, according to Jerson Kelman, a consultant to the Environment Ministry, signalled as the most likely candidate for the presidency of the ANA.

But many companies in Sao Paulo today already pay high costs to make the dirty water they pull out of rivers fit for use. Moreover, since there is no administration of water resources, “the law of the jungle” reigns, with water free of charge but closely disputed – while it is polluted by all, said Kelman.

Businesses will understand that paying fees is more advantageous in the end than allowing things to stand as they are, he maintained. And the money collected by the ANA will go towards cleaning up rivers and other sources of water.

Furthermore, water will be directly administrated by “river basin committees,” on which business representatives will sit, said Minister Sarney.

The ANA will also help create better conditions for the privatisation of sewerage companies as well, a bid that has failed, largely due to the lack of clear jurisdiction over water, which has generated conflicts between state and municipal governments.

Sewerage is a 30 billion dollar business in Brazil, Sarney pointed out. Eight billion dollars will go towards the treatment of waste water in large cities alone over the next three years, he added.

Sao Paulo, meanwhile, is attempting to clean up the Tieté river running through the city, which is highly polluted and clogged by sedimentation. The ambitious project highlights the need to take environmental costs and the exhaustion of natural resources into consideration in any assessment of costs, said Sarney.