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Sao Paulo water crisis adds to Brazil business woes

By Ruth Costas
BBC Brasil Business and Economics correspondent, Sao Paulo

image captionRenato Soares is struggling to run his laundry business without a constant supply of water

Renato Soares has seen all sorts of problems in the 33 years he has been running a small laundry in a middle-class neighbourhood in Sao Paulo.

But with Brazil's biggest city facing potential water rationing, he thinks his biggest headache may be about to arrive.

"We have survived recession, hyperinflation, arbitrary changes in legislation and a complex bureaucracy and tax system," Mr Soares says.

"We were also robbed twice. So at this point I didn't think a day would come in which I would seriously think about closing my business.

"But how can I operate a launderette without water?"

Poor planning

Sao Paulo, the economic heart of Brazil, has been suffering its most severe drought in eight decades, and critics say poor planning has made a bad situation worse.

image copyrightAFP
image captionThe south-eastern states have been hardest hit by the drought

And it is not just Sao Paulo that is suffering - the situation is also acute in the south-eastern states of Rio de Janeiro, Minas Gerais and Espirito Santo.

Recent rainfall has helped a little and widespread rationing may have been averted for the time being, but the worst is far from over.

Mr Soares's story is just one example of how the water crisis is affecting the lives of Brazilians.

Early start

For weeks, the district where his laundry is located has had only six hours of water supply per day, starting at 07:00.

For the moment, he has managed to keep his business open by asking his employees to arrive earlier.

image captionMr Soares has asked his employees to come in earlier, but it means some of them have to get up at 04:00

His biggest fear, however, is that local water authority Sabesp may adopt a radical plan to ration water.

One option recently put forward suggested city districts could have their water turned off for five days out of seven.

"Frankly, we wouldn't cope with this system and what is at stake here is not only my business but the jobs of the laundry's eight employees and their families," warns Mr Soares.

Rationing plan

A survey conducted by research institute Datafolha suggests 71% of the population of Sao Paulo and 36% of Brazilians have experienced problems with the water supply in the past month.

image copyrightAP
image captionSome Sao Paulo residents have been buying water tanks to prepare for potential rationing

The possibility of leaving the largest metropolis in South America - Greater Sao Paulo is home to 20 million people - without water five days a week seems to be the worst-case scenario envisioned by Sabesp.

Sao Paulo Governor Geraldo Alckmin says no decision has been taken so far on how rationing would work, if it were to be imposed.

But most analysts fear that unless there is a "downpour of Biblical proportions", a co-ordinated system of water supply restrictions will have to be implemented in the coming weeks.

Inventive solutions

Some firms are already finding their own solutions. Apart from laundries, car washes and hairdressers are among the worst affected.

image copyrightAFP
image captionBrazil is heavily reliant on hydroelectric power and the drought could cause power bills to go up

Even top restaurants and bars are using plastic cups to cut down on the amount of dishes they have to wash. And a few are even resorting to plastic plates.

Small businesses are buying extra water tanks to cope with an unreliable supply and universities are considering suspending classes if rationing is adopted.

To make matters worse, 60-70% of the country's energy is created by hydroelectric dams. Low water levels could also increase the risk of electricity rationing and higher electricity bills.

In 2001, during another drought, the government ordered a 20% cut in energy consumption.

Economic consultants Tendencias estimate consumers could be forced to reduce the use of electricity by 10% this year, which in turn would have a negative impact on Brazil's GDP.

Running dry

The drought was caused by what was an unusually low level of rainfall.

At one point the Cantareira System, a reservoir that supplies six million people in Sao Paulo, fell to almost 5% of its capacity.

image copyrightReuters
image captionThe Cantareira reservoir almost ran dry
image copyrightAP
image captionLong-submerged cars and other discarded items were revealed by the falling water levels

Its level has increased slightly in recent days, but is still below 7%.

Many believe more could have been done earlier to find alternative water and energy supplies.

"There was clearly a deficiency of medium and long-term planning," says Guilherme Merces, an economist at the Industry Federation of Rio de Janeiro.

There is also a widespread perception that officials did not publicly acknowledge the issue earlier for political reasons.

Facing reality

Governor Alckmin recently announced eight infrastructure projects to try to address the problem caused by the drought.

But before last October's elections, virtually no major party mentioned the possibility of rationing.

The drought comes as many economic consultancies are predicting Brazil will experience a recession this year. Even the government has warned that things will get worse before they get better.

"Of course, we all would prefer there was no need for water rationing and energy prices were not rising, but that is our reality right now," says Ilan Goldfajn, chief economist of Itau Unibanco, Brazil's largest private bank.

"This will be a difficult year, but we have to tackle each difficulty separately to create conditions for growth in 2016."

A little more rain along the way would certainly help.

Related Topics

  • Brazil
  • Sao Paulo
  • Economics

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